<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 13, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
DELTAGEN, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 8731 94-3260659
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
DELTAGEN, INC.
1003 HAMILTON AVENUE
MENLO PARK, CALIFORNIA 94025
(650) 752-0200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
----------------
WILLIAM MATTHEWS, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DELTAGEN, INC.
1003 HAMILTON AVENUE
MENLO PARK, CALIFORNIA 94025
(650) 752-0200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
COPIES TO:
<TABLE>
<S> <C>
CAMEO F. JONES, ESQ. PHILIP J. BOECKMAN, ESQ.
WILLIAM A. HINES, ESQ. CRAVATH, SWAINE & MOORE
PILLSBURY MADISON & SUTRO LLP WORLDWIDE PLAZA
50 FREMONT STREET 825 EIGHTH AVENUE
SAN FRANCISCO, CALIFORNIA 94105 NEW YORK, NEW YORK 10019
(415) 983-1000 (212) 474-1000
(415) 983-1200 (FAX) (212) 474-3700 (FAX)
</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>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.001 par value...................... $100,000,000 $26,400
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 13, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PROSPECTUS
SHARES
[DELTAGEN LOGO]
DELTAGEN, INC.
COMMON STOCK
---------
We are selling shares of our common stock. We have granted the
underwriters a 30-day option to purchase up to an additional shares of
common stock to cover over-allotments.
This is an initial public offering of our common stock. We currently expect
the initial public offering price to be between $ and $ per share.
We have applied to have our common stock included for quotation on the Nasdaq
National Market under the symbol "DGEN."
The underwriters have reserved for sale, at the initial public offering
price, up to shares, or % of our common stock, to be sold in
this offering to our directors, officers and employees, as well as to clients,
vendors and individuals associated with us. An additional shares, or
% of our common stock, to be sold in this offering will be offered to our
existing Series C preferred stockholders.
--------------
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 8.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------- --------------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discounts $ $
Proceeds to Deltagen, Inc. (before expenses) $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 2000.
--------------
SALOMON SMITH BARNEY ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
, 2000.
<PAGE>
[DESCRIPTION OF ARTWORK]
[DELTAGEN SYMBOL] DELTAGEN
TECHNOLOGY FOR DETERMINING GENE FUNCTION
The mouse is the model system most relevant to humans.
[CHART SHOWING GENOME SIZES OF BACTERIA,
YEAST, WORM, FRUITFLY, MOUSE AND HUMAN]
FROM SEQUENCE TO FUNCTION
Reducing the cost and time - bypassing traditional target validation strategies
<TABLE>
<CAPTION>
STANDARD APPROACH GENETIC APPROACH DELTAGEN'S APPROACH
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
V V V
V V V
Identity Gene Choose Lower Organism, Identify Gene
V e.g. Fly or Worm V
V V V
Isolate Gene V Mammalian Studies
V Mutate Organism V
V V V
Find Where Gene is Active V Validated Drug Target
V Identify Mutated Gene and
V Function
Cell-based Experiment V
V V
V Find Equivalent Gene in
Mammalian Studies Mammal
V V
V V
Validated Drug Target Mammalian Studies
V
V
Validated Drug Target
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 8
Information Regarding Forward-Looking Statements............ 22
Use Of Proceeds............................................. 23
Dividend Policy............................................. 23
Capitalization.............................................. 24
Dilution.................................................... 25
Selected Financial Data..................................... 26
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations................................. 27
Business.................................................... 32
Management.................................................. 45
Relationships And Related Party Transactions................ 54
Principal Stockholders...................................... 56
Description Of Capital Stock................................ 60
Shares Eligible For Future Sale............................. 65
U.S. Tax Consequences To Non-U.S. Holders................... 67
Underwriting................................................ 70
Legal Matters............................................... 72
Experts..................................................... 72
Where You Can Find Additional Information................... 72
Index To Financial Statements............................... F-1
</TABLE>
--------------
Until , 2000, all dealers that buy, sell or trade our common
stock, whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY DOES NOT CONTAIN ALL OF THE INFORMATION YOU SHOULD CONSIDER BEFORE
BUYING SHARES IN THIS OFFERING. THEREFORE, YOU SHOULD READ THIS ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION AND OUR FINANCIAL
STATEMENTS AND THE RELATED NOTES.
OUR COMPANY
We have developed technology to convert raw genetic data into mammalian gene
function information to help pharmaceutical and biotechnology companies expedite
the drug discovery process. Our technology enables us to select genes with
therapeutic potential and delete, or knockout, these genes in mice. We then use
an extensive, integrated analysis program to assess the function and potential
pharmaceutical relevance of these genes. We believe that our technology allows
us to knockout genes in mice on a larger scale and at a faster rate than has
been previously possible. To promote more efficient use of our data, we have
developed DeltaBase, a proprietary, searchable database that will provide
immediate access to gene function information and potential targets for drug
discovery. Our goal is to be the leading provider of data on the function, role
and disease relevance of mammalian genes.
OUR OPPORTUNITY
Pharmaceutical and biotechnology companies are continually challenged to
develop and market increased numbers of drugs. Historically, only approximately
500 genes served as the basis for drug development. Recent advances have led to
the identification of approximately 140,000 genes of which 3,000 to 10,000 may
have potential as drug targets. These discoveries have resulted in a competition
among pharmaceutical and biotechnology companies to identify genes that
represent commercially viable drug targets. We believe traditional target
discovery methods are likely to be insufficient to accurately evaluate such a
large number of genes as potential drug targets. Consequently, we believe
pharmaceutical and biotechnology companies would benefit from a more rapid,
scalable and high-volume approach for the selection of genes that represent
valid drug targets.
OUR APPROACH
We have developed a fully integrated system to validate drug targets. We
believe that our approach moves from gene identification to the determination of
gene function in a mammalian organism more rapidly than other currently
available approaches. Additionally, we pursue patents to protect our
intellectual property rights that we generate relating to gene function. To
commercialize our technology, we have developed the following programs:
DELTABASE-our proprietary database that we designed to provide our customers
with immediate access to target validation information on genes that we have
selected for their relevance to the drug discovery process. This searchable
database enables our subscribers to make decisions regarding the selection of
drug targets and pursue only those targets they consider to have the highest
degree of commercial relevance. In addition, subscribers to DeltaBase will have
the right to access our intellectual property on gene function. By providing
early access to extensive mammalian gene function information, we believe that
we can improve the efficiency of the drug discovery process by allowing
subscribers to make earlier decisions regarding drug target viability.
DELTASELECT-our target validation program that we provide to potential
DeltaBase subscribers. Under this program, our customers select genes for entry
into our target validation system and receive the resulting gene function
information utilizing the same information technology platform employed in
DeltaBase. We also intend to use DeltaSelect to advance new technology programs
with our customers to facilitate target discovery and validation.
4
<PAGE>
DELTA-GT-our program that provides gene identification and enables the
determination of gene function by knockout analysis. This program specifically
addresses proteins that are secreted in an organism. Examples of secreted
proteins that have already provided successful drugs include insulin, human
growth hormone, and erythropoeitin, or EPO. We believe that our Delta-GT
technology represents a system for developing potential drug candidates.
Currently, our DeltaSelect customers are Merck & Co., Pfizer, Inc., Roche
Biosciences, Schering-Plough Research Institute and Tularik, Inc. While we are
actively marketing our DeltaBase program, we do not currently have any customer
agreements for our DeltaBase product. We are currently not seeking to
commercialize any drug candidates through our Delta-GT program.
OUR STRATEGY
The key elements of our strategy include:
- becoming the most comprehensive source of information on mammalian gene
function and target validation by expanding our proprietary technologies
and developing systems to increase the scale, scope and depth of our
database content;
- focusing on the commercial needs of our customers by delivering valuable
information and facilitating real-time access and searching of DeltaBase;
- continuing to pursue intellectual property rights for what we believe to
be our commercially relevant inventions, products and methods and offering
our customers access to our intellectual property portfolio;
- pursuing early stage development of targets found through our Delta-GT
program; and
- acquiring technologies to meet the target validation needs of our
customers.
--------------
We were incorporated in Delaware in January 1997 under the name
Deltagen, Inc. Our principal executive offices and primary research facilities
are located at 1003 Hamilton Avenue, Menlo Park, California 94025, and our
telephone number is (650) 752-0200.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered................................. ______ shares
Common stock reserved................................ ______ shares of our common stock have been
reserved for sale to our directors, officers
and employees, as well as to clients, vendors
and individuals associated with us and
shares of our common stock are being offered
to our existing Series C preferred
stockholders.
Common stock outstanding after this offering......... ______ shares
Use of proceeds...................................... For expansion of product and technology
development, growth of our sales and marketing
organization, investment in intellectual
property protection, working capital and
general corporate purposes.
Proposed Nasdaq National Market symbol............... "DGEN"
</TABLE>
Unless otherwise indicated, all information in this prospectus:
- assumes no exercise of the underwriters' option to purchase up to
additional shares of common stock to cover over-allotments; and
- reflects the conversion of each outstanding share of our preferred stock
into one share of our common stock automatically upon the closing of this
offering.
The number of shares of common stock to be outstanding immediately after the
offering:
- is based upon 19,025,525 shares outstanding as of March 31, 2000;
- does not take into account 1,117,100 shares of common stock issuable upon
the exercise of options outstanding as of March 31, 2000, at a weighted
average exercise price of $0.77 per share;
- does not take into account 37,713 shares of Series B preferred stock,
convertible into common stock upon the closing of this offering and
issuable upon the exercise of warrants outstanding as of March 31, 2000,
at an exercise price of $1.75 per share;
- does not take into account 400,000 shares of Series C preferred stock,
issuable upon the exercise of warrants issued during March 2000, at an
exercise price of $3.58 per share; and
- does not take into account 8,023 unissued shares authorized for future
awards under our 1998 Stock Incentive Plan.
--------------
Deltagen-Registered Trademark- is our company's registered trademark.
DeltaBase-TM-, DeltaSelect-TM-, and Delta-GT-TM- are our company's common law
trademarks. This prospectus also contains brand names, logos, service marks and
trademarks of other companies.
6
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 28, 1997
(DATE OF INCEPTION) YEARS ENDED
TO DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Contract revenue.......................................... $ -- $ 381 $ 1,240
------- ------- --------
Operating expenses:
Research and development................................ 879 3,360 12,144
General and administrative.............................. 416 638 2,932
------- ------- --------
Total operating expenses.............................. 1,295 3,998 15,076
------- ------- --------
Loss from operations...................................... (1,295) (3,617) (13,836)
Interest income (expense), net............................ 40 265 (11)
------- ------- --------
Net loss.................................................. $(1,255) $(3,352) $(13,847)
======= ======= ========
Net loss per common share, basic and diluted.............. $ -- $ (9.13) $ (14.79)
======= ======= ========
Shares used in computing net loss per common share, basic
and diluted (unaudited)................................. -- 367 936
======= ======= ========
Pro forma net loss per share, basic and diluted........... $ (1.32)
========
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited)........................... 10,507
========
</TABLE>
Pro forma basic and diluted net income per share have been calculated
assuming the conversion of all outstanding shares of convertible preferred stock
as of December 31, 1999 into 9,571,430 shares of common stock as if the stock
had been converted immediately upon its issuance.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 848 $
Working capital............................................. (3,801)
Total assets................................................ 6,774
Capital lease obligations, less current portion............. 22
Loans payable, less current portion......................... 2,233
Redeemable convertible preferred stock...................... 14,447 --
Total stockholders' deficit................................. (15,367)
</TABLE>
The pro forma as adjusted balance sheet reflects this offering and issuance
of the related shares of common stock and the automatic conversion of 9,571,430
outstanding shares of convertible preferred stock as of December 31, 1999 into
9,571,430 shares of common stock as if the stock had been converted immediately
upon its issuance.
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS DESCRIBED BELOW AND THE OTHER INFORMATION
IN THIS PROSPECTUS INCLUDING OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
BEFORE YOU DECIDE TO BUY OUR COMMON STOCK. THE TRADING PRICE OF OUR COMMON STOCK
COULD DECLINE DUE TO ANY OF THESE RISKS, AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
WE HAVE NOT ACHIEVED PROFITABILITY AND EXPECT TO CONTINUE INCURRING SUBSTANTIAL
LOSSES FOR AT LEAST THE NEXT SEVERAL YEARS
We have had net losses every year since our inception in 1997 and, as of
December 31, 1999, had an accumulated deficit of $18.5 million. We had net
losses of $1.3 million, $3.4 million and $13.8 million in 1997, 1998 and 1999,
respectively. Because we anticipate significant additional expenditures for our
research and development programs and for the development, implementation and
support of our gene function database, we expect to report substantial net
losses through at least the next several years. We may never achieve
profitability.
We expect that our expenditures will continue to increase, due in part to:
- continued investment in the research and development of our new and
existing products and our technology, including increased investment for
the development, implementation and support of our gene function database,
our standard and conditional knockout programs and our gene trap programs;
- obligations under existing and future research and development agreements;
and
- our increasing investment in management and other employees, sales and
marketing programs, customer service and operational and financial
controls.
WE ARE A DEVELOPMENT-STAGE COMPANY WITH AN UNPROVEN BUSINESS STRATEGY, AND OUR
LIMITED HISTORY OF OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND PROSPECTS
DIFFICULT
We have had a limited operating history and are at an early stage of
development. Our strategy of offering a gene function database and using
knockout mice to enable our customers to pursue promising candidates for drug
target development is unproven. Additionally, our pricing models for offering
our products and services are unproven. We do not currently have any subscribers
for our gene function database. We have generated only limited revenues from
customers for the development and analysis of knockout mice, amounting to
approximately $1.2 million and $381,000 in 1999 and 1998, respectively. We
recognized no revenue in 1997. Our success will depend upon, among other things,
our ability to enter into licensing and other agreements on favorable terms, our
ability to determine and generate information on those genes which have
potential use as drug targets and the commercialization of products using our
data. Moreover, we have no experience selling our data, and we have never
distributed a gene database before. Our sales force may not succeed in marketing
our database product, and our employees may not succeed in implementing and
operating our database in a manner that is satisfactory to our customers.
Furthermore, the plans for our gene trap and conditional knockout programs are
unproven, and we cannot be sure that we will ever be able to develop these
programs or that any program that we develop will be commercially successful. As
a result of these factors, it is difficult to evaluate our prospects, and our
future success is more uncertain than if we had a longer or more proven history
of operations.
WE CURRENTLY HAVE ONLY FIVE CUSTOMERS AND WILL NOT SUCCEED UNLESS WE CAN ATTRACT
MANY MORE CUSTOMERS
We do not currently have any subscribers to our gene function database, and
we have only five customers for our DeltaSelect knockout program. We expect to
enter into only a limited number of
8
<PAGE>
future DeltaSelect agreements. To succeed we must attract customers for our
database and other programs. Our existing and future agreements may not be
renewed and may be terminated in the event either party fails to fulfill its
obligations under these agreements. Failure to renew or the cancellation of
these agreements by one of our customers could result in a significant loss of
revenues. In 1999, Pfizer accounted for 64% of our revenues and two of our other
current customers each accounted for greater than 10% of our revenues. Our
current customers are Merck, Pfizer, Roche Biosciences, Schering-Plough and
Tularik. Our agreement with Tularik expired in February 2000 and our agreements
with Roche and Pfizer expire in November and December 2000, respectively.
Over the past several years, companies in the pharmaceutical industry have
undergone significant consolidation. If two or more of our present or future
customers merge, we may not be able to receive the same fees under agreements
with the combined entities that we were able to receive under agreements with
these customers prior to their merger. Moreover, if one of our customers merges
with an entity that is not a customer, the new combined entity may prematurely
terminate our agreement. Any of these developments could harm our business or
financial condition.
WE HAVE ONLY RECENTLY BEGUN TO OFFER OUR DATABASE, WHICH WE EXPECT TO BE OUR
PRINCIPAL PRODUCT
We believe the majority of our revenues will be derived from fees under
agreements with our database users. We may also derive revenues from royalties
received from these users. Our database has not been tested by potential
customers, and it may not perform adequately or provide information in a manner
that is useful for our customers. If our database is not acceptable to our
prospective customers, it may not generate revenues and our business and
financial condition will be materially harmed.
We have not entered into any agreements with subscribers to our database,
and we cannot be sure of the terms under which we may enter into any of these
agreements in the future. We may not be able to comply with minimum performance
levels or restrictive provisions or other obligations that may be contained in
any agreements, such as minimum data delivery requirements. In addition, we may
experience unforeseen technical complications in the processes we use to
generate functional data for our gene database and functional genomics
resources. These complications could materially delay or limit the use of our
gene function database, substantially increase the anticipated cost of
generating data or prevent us from implementing our processes at appropriate
quality and scale levels, thereby causing our business to suffer.
NO DRUGS HAVE BEEN DEVELOPED AND COMMERCIALIZED USING GENOMICS-BASED RESEARCH
AND THEREFORE THE FUTURE OF OUR PRODUCTS AND PROGRAMS IS UNCERTAIN
None of the limited number of drugs developed to date using genomics-based
research have reached the commercial market. We cannot assure you that
genomics-based drug development efforts will ultimately be successful. We have
not proven our ability either to identify drug targets with commercial potential
or commercialize drug targets that we do identify. We cannot assure you that a
particular gene function in a mouse will have any correlation to a patient's
response to a particular drug. It is difficult to successfully select those
genes with the most potential for commercial development. Furthermore, we do not
know that any products based on genes that are the subject of our research can
be successfully developed or commercialized. If commercial opportunities are not
realized from genomic-based research, our existing customers could stop using
our products or we could have difficulty attracting or retaining customers.
9
<PAGE>
OUR CUSTOMERS WILL CONTROL THE DEVELOPMENT AND COMMERCIALIZATION OF PRODUCTS
BASED ON GENES THAT WE IDENTIFY, WHICH MAY MEAN THAT OUR RESEARCH EFFORTS WILL
NEVER RESULT IN ANY ROYALTY PAYMENTS OR THIRD PARTY PRODUCT SALES
We intend for our agreements with our customers to provide us with rights to
obtain royalties from the commercial development of compounds or therapeutic
approaches derived from access to our databases, technology or intellectual
property. We may not be able to obtain these rights under future agreements. Our
ability to obtain these rights depends in part on the advantages and novelty of
our technologies, the validity of our intellectual property, the usefulness of
our data and our negotiating position relative to each potential customer.
We will have limited or no control over the resources that any customer may
devote to the development of compounds or therapeutic approaches derived from
our access to our database. These customers may breach or terminate their
agreements with us, and they are not obligated to conduct any product discovery,
development or commercialization activities at all. Further, our customers may
decide not to develop products arising out of our customer agreements or may not
devote sufficient resources to the development, approval, manufacture, marketing
or sale of these products. If any of these events occurs, our customers may not
develop or commercialize any products based on our gene function research,
technologies or intellectual property, we would not receive royalties on product
sales and our results of operations would suffer. Furthermore, our customers may
resist sharing revenue derived from the successful commercialization of a drug
through royalty payments or others may have competing claims to all or a portion
of such revenues.
THERE ARE A FINITE NUMBER OF GENE FAMILIES UPON WHICH PHARMACEUTICAL AND
BIOTECHNOLOGY COMPANIES FOCUS THEIR RESEARCH, WHICH LIMITS OUR POTENTIAL
OPPORTUNITIES
Our current and potential customers traditionally focus their research and
development efforts on a finite number of gene families that they view as
reliable drug targets. Once we provide functional information on these gene
families, our ability to attract and retain subscribers to our database will
depend, in part, on the willingness of our customers to expand their research
and development activities to other gene families. If our customers do not do
this, we may lose existing customers or fail to attract new customers for our
database services, and as a result, our business and financial condition may be
harmed. In addition, we will make significant investments in our database and
knockout programs which we may not recoup if we cannot find additional target
opportunities.
WE MAY FAIL TO MEET MARKET EXPECTATIONS BECAUSE OF FLUCTUATIONS IN OUR QUARTERLY
OPERATING RESULTS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE
The following are among the factors that could cause our operating results
to fluctuate significantly from period to period:
- changes in the demand for and pricing of our products and services;
- the nature, pricing and timing of other products and services provided by
us or our competitors;
- changes in the research and development budgets of our customers;
- acquisition, licensing and other costs related to the expansion of our
operations;
- the timing of milestones, licensing and other payments under the terms of
our customer agreements and agreements pursuant to which others license
technology to us;
- expenses related to, and the results of, patent filings and other
proceedings relating to intellectual property rights; and
- our unpredictable revenue sources as described below.
10
<PAGE>
We anticipate significant fixed expenses due in part to our need to continue
to invest in product development and potential extensive support for our gene
function database subscribers. We may be unable to adjust our expenditures if
revenues in a particular period fail to meet our expectations, which would harm
our operating results for that period.
As a result of these fluctuations, we believe that period-to-period
comparisons of our financial results will not necessarily be meaningful, and you
should not rely on these comparisons as an indication of our future performance.
OUR REVENUES WILL BE UNPREDICTABLE AND THIS MAY HARM OUR FINANCIAL CONDITION
The amount and timing of revenues that we may have from our business will be
unpredictable because:
- the timing of our DeltaSelect program agreements and potential database
licenses and installations are determined by our subscribers;
- whether any products are commercialized and generate royalty payments
depends on the efforts, timing and willingness of our customers;
- we do not expect to receive any milestone or royalty payment under
licenses and other arrangements for a substantial period of time, if ever;
- we have not to date entered into any customer agreements for our database
and may not enter into any such agreements;
- the time required to complete custom orders for our database programs can
vary significantly; and
- our sales cycle is lengthy, as described below.
As a result, our revenue may significantly vary from quarter to quarter and
our quarterly results may be below market expectations. If this happens, the
price of our common stock may decline.
WE EXPECT THAT OUR SALES CYCLE WILL BE LENGTHY, WHICH WILL CAUSE OUR REVENUES TO
BE UNPREDICTABLE AND OUR BUSINESS TO BE DIFFICULT TO MANAGE
Our ability to identify and obtain subscribers for our gene function
database product and other services depends upon whether customers believe that
our products and services can help accelerate drug discovery efforts. Our sales
cycle will be lengthy because of the need to educate potential customers and
sell the benefits of our products and services to a variety of constituencies
within potential subscriber companies. These companies are large organizations
with many different layers and types of decision-makers. In addition, each
database subscription and development program or services agreement will involve
the negotiation of unique terms and issues which will take a significant amount
of time. We may expend substantial funds and management effort with no assurance
that a subscription program or services agreement will result. Actual or
proposed mergers or acquisitions of our prospective customers may also affect
the timing and progress of our sales efforts. Any of these developments could
harm our business or financial condition.
WE MAY HAVE CONFLICTS OR BE IN COMPETITION WITH OUR CUSTOMERS, WHICH WILL HURT
OUR BUSINESS PROSPECTS
We may pursue opportunities in fields such as secreted proteins, that could
conflict with those of our customers. Moreover, disagreements could arise with
our customers or their partners over rights to our intellectual property or our
rights to share in any of the future revenues of compounds or therapeutic
approaches developed by our customers. These kinds of disagreements could result
in costly and time-consuming litigation and could have a negative impact on our
relationship with existing
11
<PAGE>
customers. Any conflict with our customers could reduce our ability to attract
additional customers or enter into future customer agreements. Some of our
customers could also become competitors in the future. Our customers could
develop competing products, preclude us from entering into agreements with their
competitors or terminate their agreements with us prematurely.
WE EXPERIENCE INTENSE COMPETITION FROM OTHER ENTITIES ENGAGED IN THE STUDY OF
GENES, AND THIS COMPETITION COULD ADVERSELY AFFECT OUR BUSINESS
The human and mouse genomes contain a finite number of genes. The majority
of the human genes have been identified and nearly all will be identified within
the next year. Our competitors have identified and will continue to identify the
sequence of numerous genes in order to obtain proprietary positions with respect
to those genes. In addition, our competitors may seek to identify and determine
the biological function of numerous genes in order to obtain intellectual
property rights with respect to specific uses of these genes, and they may
accomplish this before we do. We believe that the first company to determine the
functions of commercially relevant genes or the commercially relevant portions
of the genome will have a competitive advantage.
A number of companies, institutions and government-financed entities are
engaged in gene sequencing, gene discovery, gene expression analysis, gene
function determination and other gene-related service businesses. Many of these
companies, institutions and entities have greater financial and human resources
than we do and have been conducting research longer than we have. In particular,
a significant portion of this research is being conducted by private companies
and under the international Human Genome Project, a multi-billion dollar program
funded, in part, by the U.S. government, which is expected to complete and
release its initial rough draft of the human genome later this year.
Furthermore, other entities have and will continue to discover and establish a
patent position in genes or gene sequences that we wish to study. Significant
competition also arises from entities using standard target identification
approaches, traditional knockout mouse technology and other functional genomics
technologies. These competitors may have intellectual property rights in
functional or other data which are superior to our rights. These competitors may
also develop products earlier than we do, obtain regulatory approvals faster
than we can and invent products and techniques that are more effective than
ours. Furthermore, other methods for conducting functional genomics research may
ultimately prove more advanced, in some or all respects, to the use of knockout
mice. In addition, technologies more advanced than or superior to our gene trap
technology and gene function identification technology may be developed, thereby
rendering our gene trap and gene function identification technologies obsolete.
Some of our competitors have developed commercially available databases
containing gene sequence, gene expression, gene function, genetic variation or
other functional genomic information and are marketing or plan to market their
data to pharmaceutical and biotechnology companies. Additional competitors may
attempt to establish databases containing this information in the future. We
expect that competition in our industry will continue to intensify. We also
believe that some pharmaceutical and biotechnology companies are discussing the
possibility of working together to discover the functions of genes and share
gene function-related data among themselves. The formation of this type of
consortium could reduce the prospective customer base for our gene
function-related business. Moreover, the pharmaceutical industry has undergone
significant mergers and this trend is expected to continue. This concentration
of the industry could further limit our potential customer base and therefore
harm our business.
IF WE FAIL TO PROPERLY MANAGE OUR GROWTH, OUR BUSINESS COULD BE ADVERSELY
AFFECTED
We expect to continue to experience significant growth in the number of our
employees and the scope of our operations, including an increase in the scale of
our mouse knockout program. As of December 31, 1999, we had 113 full-time
employees, and as of March 31, 2000, we had 138 full-time
12
<PAGE>
employees. We expect our number of employees to continue to increase for the
foreseeable future. In addition, we have substantially increased the scale of
our knockout mouse production in the last year and expect to continue doing so
for the foreseeable future. Our overall growth and need to develop many
different areas of our company have placed, and may continue to place, a strain
on our management and operations. If we are unable to manage our growth
effectively, our losses could increase. The management of our growth will
depend, among other things, upon our ability to broaden our management team and
attract, hire, train and retain skilled employees. Our success will also depend
on the ability of our officers and key employees to continue to implement and
improve our operational and other systems. We will also be required to expend
funds to improve our operational, financial and management controls, reporting
systems and procedures.
In addition, we will have to invest in additional customer support
resources. Our potential database subscribers typically have worldwide
operations and may require support at multiple U.S. and foreign sites and in
multiple languages. To provide this support, we may need to open offices in
addition to our Menlo Park, and San Carlos, California facilities which could
result in additional burdens on our systems and resources and will require
additional capital expenditures.
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 transactions of
this sort, the process of integrating an acquired business, technology, service
or product may result in operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of our business. Moreover, we may never realize the anticipated
benefits of any acquisition. Future acquisitions could result in potentially
dilutive issuances of equity securities, the incurrence of debt, contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, which could adversely affect our results of operations and financial
condition.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE, WHICH COULD
ADVERSELY AFFECT OUR OPERATIONS
Our products and services may not produce revenues that, together with our
existing cash and other resources, are adequate to meet our cash needs. Our cash
requirements depend on numerous factors, including:
- our ability to attract and retain customers for our gene function database
and other products and services;
- unexpected expenses in connection with the development of our gene
function database, our gene trap program or other products and services;
- expenditures in connection with license agreements and acquisitions of and
investments in complementary technologies and businesses;
- the need to increase research and development spending to keep up with
competing technologies and market developments; and
- unexpected expenditures as we expand our sales, marketing and customer
service organizations and improve our management, operational and
financial systems.
If we need additional funding, we may be unable to obtain it on favorable
terms, or at all. If adequate funds are not available, we may have to curtail
operations significantly or obtain funds by
13
<PAGE>
entering into arrangements requiring us to relinquish rights to certain
technologies, products or markets. In addition, if we raise funds by selling
stock or convertible securities, our existing stockholders could suffer
dilution.
WE DEPEND ON KEY EMPLOYEES IN A COMPETITIVE MARKET FOR SKILLED PERSONNEL, AND
WITHOUT ADDITIONAL EMPLOYEES, WE CANNOT GROW OR ACHIEVE PROFITABILITY
We are highly dependent on the principal members of our management,
operations and scientific staff, including William Matthews, Ph.D., our
President and Chief Executive Officer, and Mark W. Moore, Ph.D., our Chief
Scientific Officer and Treasurer. The loss of either of their services would
harm our business.
Our future success also will depend in part on the continued service of our
key scientific, software, consultant and management personnel and our ability to
identify, hire and retain additional personnel, including customer service,
marketing and sales staff. We experience intense competition for qualified
personnel. We may be unable to attract and retain personnel necessary for the
development of our business. Moreover, our business is located in the San
Francisco Bay Area of California, where demand for personnel with the skills we
seek is extremely high and is likely to remain high. Because of this
competition, our compensation costs may increase significantly.
PATENTS AND OTHER PROPRIETARY RIGHTS PROVIDE UNCERTAIN PROTECTIONS, AND WE MAY
BE UNABLE TO PROTECT OUR PROPRIETARY INFORMATION
Our business and competitive position depends upon our ability to protect
and exploit our proprietary techniques, methods, compositions, inventions,
database information and software technology. However, our strategy of obtaining
such proprietary rights around as many genes as possible is unproven.
Unauthorized parties may attempt to obtain and use information that we regard as
proprietary. Although we intend for our gene function database subscription
agreements to require our potential subscribers to control access to our
database and information, policing unauthorized use of our database information
and software may be difficult.
We currently have no issued patents or registered copyrights. Patents have
issued to other entities based on claims relating to knockout mice. In addition,
many applications have been filed seeking to protect partial human gene
sequences, many of which are based primarily on gene sequence information alone.
Some of these applications have issued as patents. Some of these may claim
sequences which we have used or may use in the future to generate knockout mice
in our gene knockout program. In addition, other applications have been filed
which seek to protect methods of using genes and gene expression products, some
of which attempt to assign biological function to the DNA sequences based on
laboratory experiments, computer predictions, mathematical algorithms and other
methods. The issuance of these applications as patents will depend, in part,
upon whether practical utility can be sufficiently established for the claimed
sequences and whether sufficient correlation exists between the experimental
results predictions, algorithms and other methods and actual functional utility.
The patent application process before the United States Patent and Trademark
Office and other similar agencies in other countries is confidential in nature.
As each application is evaluated independently and confidentially, we cannot
predict whether applications have been filed or which, if any, will ultimately
issue as patents. However, it is probable that patents will be issued to our
competitors claiming knockout mice, partial human gene sequences and methods of
using genes and gene expression products.
Numerous applications have been filed by other entities claiming gene
sequences and amino acid sequences. Many patents have already issued and we
expect more will issue in the future. In addition, others may discover uses for
genes or proteins other than uses covered in any patents issued to us, and these
other uses may be separately patentable. We may not be able to obtain issued
patents on our
14
<PAGE>
patent applications because our patent applications may not meet the
requirements of the patent office. The holder of a patent covering a particular
use of a gene or a protein, isolated gene sequence or deduced amino acid
sequence could exclude us from using that gene, protein or sequence. In
addition, a number of entities make gene information, techniques and methods
publicly available, which may affect our ability to obtain patents.
Some of our patent applications may claim compositions, methods or uses that
may also be claimed in patent applications filed by others. In some or all of
these applications, a determination of priority of inventorship may need to be
decided in an interference proceeding before the U.S. Patent and Trademark
Office. Regardless of determined outcome, this process is time-consuming and
expensive.
Issued patents may not provide commercially-meaningful protection against
competitors. Other companies or institutions may challenge our or our customers'
patents or independently develop similar products that could result in an
interference proceeding in the U.S. Patent and Trademark Office or a legal
action. In the event any researcher or institution infringes upon our or our
customers' patent rights, enforcing these rights may be difficult and can be
time-consuming. Others may be able to design around these patents or develop
unique products providing effects similar to our products.
Our ability to use our patent rights to limit competition in the creation
and use of knockout mice, as well as our ability to obtain patent rights, may be
more limited in certain markets outside of the United States because the
protections available in other jurisdictions may not be as extensive as those
available domestically.
We pursue a policy of having our employees, consultants and advisors execute
proprietary information and invention agreements when they begin working for us.
However, these agreements may not be enforceable or may not provide meaningful
protection for our trade secrets or other proprietary information in the event
of unauthorized use or disclosure. We also cannot prevent others from
independently developing technology or software that might be covered by
copyrights issued to us, and trade secret laws do not prevent independent
development.
WE MAY BE SUBJECT TO LITIGATION AND INFRINGEMENT CLAIMS WHICH MAY BE COSTLY AND
DIVERT MANAGEMENT'S ATTENTION
The technology we use in our business may subject us to claims that we
infringe on the patents or proprietary rights of others. The risk of this
occurring will tend to increase as the genomics, biotechnology and software
industries expand, more patents are issued and other companies attempt to
discover gene function through mouse gene knockouts and engage in other
genomics-related businesses. Furthermore, many of our competitors and other
companies performing research on genes have already applied for patents covering
some of the genes upon which we perform research, and many patents have already
been issued which cover these genes, as well as genes we may wish to use in the
future.
We believe that we are not infringing on any third party's patent rights,
and no third party has filed a patent lawsuit against us. In 1998, Lexicon
Genetics Incorporated, one of our competitors, informed us that it was a
coexclusive licensee under a patent covering certain isogenic DNA technology
that may be used to modify the genome of a target cell. We have not been
contacted by Lexicon about this matter since their initial letter to us. We may
receive future notices from third parties alleging patent infringement.
We may be involved in future lawsuits alleging patent infringement or other
intellectual property rights violations. In addition, litigation may be
necessary to:
- assert claims of infringement;
- enforce our patents, if any;
15
<PAGE>
- protect our trade secrets or know-how; and
- determine the enforceability, scope and validity of the proprietary rights
of others.
We may be unsuccessful in defending or pursuing these lawsuits. Regardless
of the outcome, litigation can be very costly, can divert management's efforts
and could materially affect our business and operating results. An adverse
determination may subject us to significant liabilities or require us to seek
licenses to other parties' patents or proprietary rights. We may also be
restricted or prevented from selling our products. Further, we may not be able
to obtain the necessary licenses on acceptable terms, if at all.
KNOCKOUT MOUSE AND GENE-RELATED PATENTS MAY NOT BE ENFORCEABLE, WHICH MEANS THAT
OUR INTELLECTUAL PROPERTY MAY NOT HAVE ANY MATERIAL VALUE
One of our strategies is to obtain proprietary rights around as many gene
knockouts as possible. While the U.S. Patent and Trademark Office in the past
has issued patents to others covering function of genes, knockout mice, types of
cells, gene sequences and methods of testing cells, we do not know whether or
how courts may enforce those patents, if that becomes necessary. If a court
finds these types of inventions to be unpatentable, or interprets them narrowly,
the benefits of our strategy may not materialize and our business and financial
condition could be harmed.
OUR RIGHTS TO THE USE OF TECHNOLOGIES LICENSED TO US BY THIRD PARTIES ARE NOT
WITHIN OUR CONTROL, AND WITHOUT THESE TECHNOLOGIES, OUR PRODUCTS AND PROGRAMS
MAY NOT BE SUCCESSFUL
We rely, in part, on licenses to use certain technologies which are material
to our business, including a secreted protein gene trap which we license
exclusively from the University of Edinburgh. We do not own the patents that
underlie these licenses. Our rights to use these technologies and employ the
inventions claimed in the licensed patents are subject to our licensors abiding
by the terms of those licenses and not terminating them. In most cases, we do
not control the prosecution or filing of the patents to which we hold licenses.
Instead we rely upon our licensors to prevent infringement of those patents.
Some of the licenses under which we have rights, such as the license from the
University of Edinburgh, provide us with exclusive rights in specified fields,
but we cannot assure you that the scope of our rights under these and other
licenses will not be subject to dispute by our licensors or third parties.
OUR ACTIVITIES INVOLVE HAZARDOUS MATERIAL AND MAY SUBJECT US TO ENVIRONMENTAL
LIABILITY
Our research and development activities involve the controlled use of
hazardous and radioactive materials and generate biological waste. We are
subject to federal, state and local laws and regulations governing the storage,
handling and disposal of these materials and waste products. Although we believe
that our safety procedures for handling and disposing of these materials and
wastes comply with legally prescribed standards, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. We
may be sued for any injury or contamination that results from our use or the use
by third parties of these materials, and our liability may exceed our insurance
coverage and our total assets. Future environmental regulations could require us
to incur significant costs.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS COULD INCREASE OUR OPERATING COSTS OR
ADVERSELY AFFECT OUR CUSTOMERS' ABILITY TO OBTAIN GOVERNMENTAL APPROVAL OF GENE
BASED PRODUCTS
The Animal Welfare Act, or AWA, is the only federal law that currently
covers animals in laboratories. It applies to institutions or facilities using
any regulated live animals for research, testing, teaching or experimentation,
including diagnostic laboratories and private companies in the pharmaceutical
and biotechnology industries. The AWA currently does not cover rats or mice.
16
<PAGE>
However, the United States Department of Agriculture, which enforces the AWA, is
presently considering changing the regulations issued under the AWA to include
mice within its coverage.
The Department of Agriculture is reconsidering the regulations in response
to a January 1999 petition filed by several parties requesting that mice, rats
and birds be added to the list of animals regulated under the AWA. These parties
also have a lawsuit pending which seeks the inclusion of mice, rats, and birds
in the AWA regulations.
Currently, the AWA imposes a wide variety of specific regulations which
govern the humane handling, care, treatment and transportation of certain
animals by producers and users of research animals, most notably personnel,
facilities, sanitation, cage size, feeding, watering and shipping conditions. We
cannot assure you that the USDA will not decide to include mice in its
regulations and that we will not become subject to registration, inspections and
reporting requirements. Moreover, compliance with the AWA may be expensive, and
current or future regulations could impair our research and production efforts.
Since we develop animals containing changes in their genetic make-up, we may
become subject to a variety of laws, guidelines, regulations and treaties
specifically directed at genetically modified organisms, or GMOs. The area of
environmental releases of GMOs is rapidly evolving and is currently subject to
intense regulatory scrutiny, particularly internationally. If we become subject
to these laws we could incur substantial compliance costs. For example, the
Biosafety Protocol, or the BSP, a recently adopted treaty, is expected to cover
certain shipments from the U.S. to countries abroad that have signed the BSP.
The BSP is also expected to cover the importation of living modified organisms,
a category that could include our animals. If our animals are not contained as
described in the BSP, our animals could be subject to the potentially extensive
import requirements of countries that are signatories to the BSP.
We also are subject to a variety of other federal, state and local laws and
regulations in the U.S. and in other countries pertaining to our facilities, the
shipment, exportation and importation of various articles, safe working
conditions, production practices, environmental protection, fire hazard control,
hazardous substance disposal and other health concerns. There can be no
assurance that we will avoid incurring significant costs to comply with these
laws and regulations or that we will be able to comply with them in the future.
Failure to comply with relevant laws and regulations may have a material adverse
effect on our business, financial condition and results of operation.
Unanticipated changes in existing legal and regulatory requirements or the
adoption of new requirements also could have a material adverse effect on us.
Drugs and diagnostic products are subject to an extensive and uncertain
regulatory approval process by the Federal Drug Administration and comparable
agencies in other countries. Regulatory requirements ultimately imposed on our
products or products developed by our customers could limit our or our
customers' ability to test, manufacture and, ultimately, commercialize products,
including products for which we are entitled to receive royalty payments.
ETHICAL AND SOCIAL ISSUES MAY LIMIT OR DISCOURAGE THE USE OF KNOCKOUT MICE OR
OTHER GENETIC PROCESSES WHICH COULD REDUCE OUR REVENUES
Governmental authorities could, for social or other purposes, limit the use
of genetic processes or prohibit the practice of our gene trap and knockout
mouse technologies. Public attitudes may be influenced by claims that
genetically engineered products are unsafe for consumption or pose a danger to
the environment. The subject of genetically modified organisms, like knockout
mice, has received negative publicity and aroused public debate. In addition,
animal rights activists could protest or make threats against our facility,
which may result in property damage. Ethical and other concerns about our
methods, particularly our use of knockout mice, could adversely affect our
market acceptance.
17
<PAGE>
ALL OUR RESEARCH IS CONDUCTED AT TWO FACILITIES, AND A NATURAL DISASTER AT THESE
FACILITIES IS POSSIBLE AND COULD RESULT IN A PROLONGED INTERRUPTION OF OUR
BUSINESS
We conduct all our scientific and management activities at two facilities in
California. Both locations are in seismically active areas. We have taken
precautions to safeguard our mouse colony including through insurance, storage
of animals off-site at a back-up facility in Massachusetts, the freezing of
sperm and the storing of embryonic stem cells, or ES cells, to allow for the
regeneration of mice. However, a natural disaster, such as an earthquake, fire,
flood or outbreak of infectious disease, could cause substantial delays. This
could interrupt mouse breeding, cause us to incur additional expenses and
adversely affect our reputation with customers.
SECURITY RISKS IN ELECTRONIC COMMERCE OR UNFAVORABLE INTERNET REGULATIONS MAY
DETER FUTURE USE OF OUR PRODUCTS AND SERVICES
We may provide access to our gene function database on the Internet. A
fundamental requirement to conduct our business over the Internet is the secure
transmission of confidential information over public networks. Advances in
computer capabilities, new discoveries in the field of cryptography or other
developments may result in a compromise or breach of the security measures we
use to protect the content in our gene function database. Anyone who is able to
circumvent our security measures could misappropriate our proprietary
information or confidential customer information or cause interruptions in our
operations. We may be required to incur significant costs to protect against
security breaches or to alleviate problems caused by breaches, and these efforts
may not be successful. Further, a well-publicized compromise of security could
deter people from using the Internet to conduct transactions that involve
transmitting confidential information. For example, recent attacks by computer
hackers on major e-commerce web sites have heightened concerns regarding the
security and reliability of the Internet.
Because of the growth in electronic commerce, the U.S. Congress has held
hearings on whether to further regulate providers of services and transactions
in the electronic commerce market, and federal and state authorities could enact
laws, rules and regulations affecting our business and operations. If enacted,
these laws, rules and regulations could make our business and operations more
costly and burdensome as well as less efficient.
WE RELY ON THIRD-PARTY DATA SOURCES, AND WITHOUT THESE SOURCES, OUR PRODUCTS AND
PROGRAMS WOULD BE INCOMPLETE AND LESS APPEALING TO CUSTOMERS
We may rely on scientific and other data supplied by third parties, and all
of our gene sequence data comes from public genomics data. This data could be
defective, be improperly generated or contain errors or other defects, which
could corrupt our gene function database and our other programs and services. In
addition, we cannot guarantee that our sources acquired this data in compliance
with legal requirements. In the event of any such defect, corruption or finding
of nonconformance, our business prospects could be adversely affected.
OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS
The market price of our common stock may fluctuate substantially due to a
variety of factors, including:
- announcements of technological innovations or new products by us or our
competitors;
- developments or disputes concerning patents or proprietary rights,
including announcements of infringement, interference or other litigation
against us or our licensors;
- the timing and development of our products and services;
18
<PAGE>
- media reports and publications about genetics and gene-based products;
- changes in pharmaceutical and biotechnology companies' research and
development expenditures;
- announcements concerning our competitors, or the biotechnology or
pharmaceutical industry in general;
- changes in government regulation of genetic research or gene-based
products, and the pharmaceutical or medical industry in general;
- general and industry-specific economic conditions;
- actual or anticipated fluctuations in our operating results;
- changes in financial estimates or recommendations by securities analysts;
- changes in accounting principles; and
- the loss of any of our key scientific or management personnel.
In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of biotechnology companies,
particularly companies like ours without consistent product revenues and
earnings, have been highly volatile and may continue to be highly volatile in
the future. This volatility has often been unrelated to the operating
performance of particular companies. For example, the stock prices of many
biotechnology companies, even those that would benefit from publicly available
gene sequence information, declined on news of the announcement by President
Clinton and British Prime Minister Blair that, as their respective governments
had each advocated before, gene sequence information should be freely available
in the public domain. In the past, securities class action litigation has often
been brought against companies that experience volatility in the market price of
their securities. Moreover, market prices for stocks of biotechnology-related
and technology companies, particularly following an initial public offering,
frequently reach levels that bear no relationship to the operating performance
of such companies. These market prices generally are not sustainable and are
subject to wide variations. Whether or not meritorious, litigation brought
against us could result in substantial costs, divert management's attention and
resources and harm our financial condition and results of operations.
THE FUTURE SALE OF COMMON STOCK COULD NEGATIVELY AFFECT OUR STOCK PRICE
After this offering, we will have approximately shares of common
stock outstanding, or shares if the underwriters' over-allotment is
exercised in full. The shares sold in this offering, or shares
if the underwriters' over-allotment is exercised in full, will be freely
tradeable without restriction or further registration under the federal
securities laws unless purchased by our affiliates. The remaining shares
of common stock outstanding after this offering will be available for sale in
the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE OF AVAILABILITY FOR SALE
- ---------------- ------------------------------------------------------------
<C> <S>
Immediately after the date of this prospectus
180 days after the effective date of the registration
statement containing this prospectus (subject in some cases
to volume and other limitations)
At various times after 180 days following the effective date
of the registration statement containing this prospectus
</TABLE>
The above table assumes the effectiveness of the lock-up agreements with the
underwriters under which holders of substantially all of our common stock have
agreed not to sell or otherwise dispose of
19
<PAGE>
their shares of common stock. Most of the shares that will be available for sale
after the expiration of the lock-up period will be subject to volume
restrictions because they are held by our affiliates. In addition, Salomon Smith
Barney Inc. may waive these lock-up restrictions prior to the expiration of the
lock-up period without prior notice.
If our common stockholders sell substantial amounts of common stock in the
public market, or the market perceives that such sales may occur, the market
price of our common stock could fall. After this offering, the holders of
approximately shares of our common stock will have rights, subject to
some conditions, to require us to file registration statements covering their
shares or to include their shares in registration statements that we may file
for ourselves or other stockholders. Furthermore, if we were to include in a
company-initiated registration statement shares held by those holders pursuant
to the exercise of their registration rights, those sales could impair our
ability to raise needed capital by depressing the price at which we could sell
our common stock. Please see "Shares Eligible for Future Sale."
INVESTORS IN THE OFFERING WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
We expect the initial public offering price of our shares to be
substantially higher than the book value per share of the outstanding common
stock. Investors purchasing shares of common stock in this offering will incur
immediate dilution in the amount of $ per share based upon an assumed
initial public offering price of $ per share. To the extent outstanding
stock options or warrants are exercised, there will be further dilution to new
investors.
OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS OWN A SIGNIFICANT
PERCENTAGE OF OUR STOCK, AND AS A RESULT, THE TRADING PRICE FOR OUR SHARES MAY
BE DEPRESSED AND THESE STOCKHOLDERS CAN TAKE ACTIONS THAT MAY BE ADVERSE TO YOUR
INTERESTS
Our executive officers and directors and entities affiliated with them will,
in the aggregate, beneficially own approximately % of our common stock
following this offering. This significant concentration of share ownership may
adversely affect the trading price for our common stockholders because investors
often perceive disadvantages in owning stock in companies with controlling
shareholders. These stockholders, acting together, will have the ability to
exert substantial influence over all matters requiring approval by our
stockholders, including the election and removal of directors and any proposed
merger, consolidation or sale of all or substantially all of our assets. In
addition, they could dictate the management of our business and affairs. This
concentration of ownership could have the effect of delaying, deferring or
preventing a change in control, or impeding a merger or consolidation, takeover
or other business combination that could be favorable to you.
OUR INCORPORATION DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER THAT
STOCKHOLDERS CONSIDER FAVORABLE
Our amended and restated certificate of incorporation and bylaws will
contain provisions that could delay or prevent a change in control of our
company. Some of these provisions:
- authorize the issuance of preferred stock which can be created and issued
by the board of directors without prior stockholder approval, commonly
referred to as "blank check" preferred stock, with rights senior to those
of common stock;
- provide for a classified board of directors; and
- prohibit stockholder action by written consent.
In addition, we are governed by the provisions of Section 203 of Delaware
General Corporate Law. These provisions may prohibit large stockholders, in
particular those owning 15% or more of our outstanding voting stock, from
merging or combining with us. These and other provisions in our
20
<PAGE>
amended and restated certificate of incorporation and bylaws and under Delaware
law could reduce the price that investors might be willing to pay for shares of
our common stock in the future and result in the market price being lower than
it would be without these provisions.
WE MAY SPEND THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU DO NOT
AGREE
We have not designated any specific uses for the offering proceeds.
Accordingly, management will have significant flexibility in applying the net
proceeds of the offering. The failure of management to apply the net proceeds
effectively could have a material adverse effect on our business, financial
condition and results of operations.
21
<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
- limitations in the drug discovery process;
- the capabilities, development and marketing of our products and services;
- the benefits of knockout mice programs and, in particular, our technology
and methods;
- the requirements of pharmaceutical and biotechnology companies;
- our future revenues and profitability;
- our estimates regarding our capital requirements and needs for additional
financing;
- plans for future products and services and for enhancements of existing
products and services;
- our patents, patent applications and licensed technology;
- our ability to attract customers and establish licensing and other
agreements; and
- sources of revenues and anticipated revenues, including contributions from
customers, license agreements and other collaborative efforts for the
development and commercialization of products, and the continued viability
and duration of those agreements and efforts.
This prospectus contains statistical data regarding the biotechnology and
pharmaceutical industries that we obtained from private and public industry
publications. These publications generally indicate that they have obtained
their information from sources believed to be reliable, but do not guarantee the
accuracy and completeness of their information. Although we believe that the
publications are reliable, we have not independently verified their data.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"believes," "estimates," "projects," "predicts," "potential" and similar
expressions intended to identify forward-looking statements. These statements
reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties. Given these uncertainties,
you should not place undue reliance on these forward-looking statements. We
discuss many of these risks in this prospectus in greater detail under the
heading "Risk Factors." Also, these forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus.
You should read this prospectus and the documents that we reference in this
prospectus and have filed as exhibits to the registration statement, of which
this prospectus is a part, completely and with the understanding that our actual
future results may be materially different from what we expect. We qualify all
of our forward-looking statements by these cautionary statements.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
22
<PAGE>
USE OF PROCEEDS
We expect that we will receive net proceeds of approximately $ from the
sale of the shares of common stock we are offering, based on an assumed
initial public offering price of $ per share and after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us. If the underwriters exercise their over-allotment option in full, we will
receive net proceeds of approximately $ . We currently intend to use the
net proceeds of this offering as follows:
- to expand product and technology development;
- to grow our sales and marketing organization;
- to invest in intellectual property protection; and
- for working capital and general corporate purposes.
In addition, we also may use a portion of the net proceeds of this offering
for the acquisition of complementary businesses, products or technologies. While
we evaluate these types of opportunities from time to time, there are currently
no agreements or negotiations with respect to any specific transaction.
We have not yet determined all of our expected expenditures, and we cannot
estimate the amounts to be used for each purpose set forth above. Accordingly,
our management will have significant flexibility in applying the net proceeds of
this offering.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock, and
we do not currently intend to pay any cash dividends on our common stock in the
foreseeable future. We expect to retain future earnings, if any, to fund the
development and growth of our business. Our board of directors will determine
future dividends, if any.
23
<PAGE>
CAPITALIZATION
The following table describes our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to the automatic conversion of
9,571,430 outstanding shares of convertible preferred stock as of
December 31, 1999 into 9,571,430 shares of common stock; and
- on a pro forma as adjusted basis to give effect to this offering and
issuance of the related shares of common stock and the automatic
conversion of 9,571,430 outstanding shares of convertible preferred stock
as of December 31, 1999 into 9,571,430 shares of common stock.
You should read this table together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Capital lease obligations, less current portion............. $ 22 $ 22 $ 22
Loans payable, less current portion......................... 2,233 2,233 2,233
-------- -------- --------
Total long-term debt...................................... 2,255 2,255 2,255
-------- -------- --------
Redeemable convertible preferred stock, $0.001 par value:
9,621,430 shares authorized, actual; none authorized, pro
forma and pro forma as adjusted; 9,571,430 shares issued
and outstanding, actual; none issued and outstanding, pro
forma and pro forma as adjusted........................... 14,447 -- --
-------- -------- --------
Stockholders' deficit:
Preferred stock, $0.001 par value: none authorized,
actual; 5,000,000 shares authorized, pro forma and pro
forma as adjusted; none issued and outstanding, actual,
pro forma and pro forma as adjusted..................... -- -- --
-------- -------- --------
Common stock, $0.001 par value: 13,250,000 shares
authorized, actual; 75,000,000 shares authorized, pro
forma and pro forma as adjusted; 1,810,975 shares issued
and outstanding, actual; 11,382,405 shares issued and
outstanding, pro forma; shares issued and
outstanding, pro forma as adjusted...................... 2 11
Additional paid-in capital.................................. 10,695 25,133
Unearned stock-based compensation........................... (7,610) (7,610)
Deficit accumulated during the development stage............ (18,454) (18,454)
-------- -------- --------
Total stockholders' deficit............................... (15,367) (920)
-------- -------- --------
Total capitalization.................................... $ 1,335 $ 1,335 $
======== ======== ========
</TABLE>
The actual, pro forma and pro forma as adjusted information set forth in the
table excludes:
- shares of common stock issuable upon the exercise of the
underwriters' over-allotment option;
- 1,562,309 shares of common stock issuable upon the exercise of stock
options outstanding, as of December 31, 1999, at an exercise price of
$0.35 per share; and
- 37,713 shares reserved for issuance upon the exercise of warrants
outstanding as of December 31, 1999, at an exercise price of $1.75 per
share.
24
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $(920,000), or $(0.08) per share of common stock. Pro forma net
tangible book value per share represents the amount of our pro forma total
tangible assets less total liabilities, divided by the pro forma number of
shares of common stock outstanding assuming the conversion of all shares of
convertible preferred stock outstanding as of December 31, 1999 into 9,571,430
shares of common stock. Pro forma net tangible book value dilution per share
represents the difference between the amount per share paid by purchasers of
shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after completion of this offering on
a pro forma as adjusted basis. After giving effect to the sale of the
shares of common stock by us at an assumed initial public offering price
of $ per share, and after deducting the underwriting discounts and
commissions and estimated offering expenses payable by us, our pro forma net
tangible book value as of December 31, 1999 would have been $ , or
$ per share of common stock. This represents an immediate increase in net
tangible book value of $ per share of common stock to existing common
stockholders and an immediate dilution in pro forma net tangible book value of
$ per share to new investors purchasing shares of common stock in this
offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $
Pro forma net tangible book value per share before this
offering................................................ $ (0.08)
Increase in pro forma net tangible book value per share
attributable to this offering...........................
--------
Pro forma net tangible book value per share after this
offering..................................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing and new
investors purchasing shares of common stock in this offering, before deducting
underwriting discounts and commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 11,382,405 % $ % $
New investors..................
---------- ----- ---------- -----
Total........................ 100.0% $ 100.0%
========== ===== ========== =====
</TABLE>
The tables and calculations above assume no exercise of the underwriter's
over-allotment option to purchase up to an additional shares of common
stock. If the underwriters' overallotment option is exercised in full, the
number of shares of common stock held by existing stockholders will be reduced
to % of the total number of shares of common stock outstanding after this
offering and the number of shares of common stock held by new investors will be
increased to , or % of the total number of shares of common stock
outstanding after this offering.
The information also assumes no exercise of any outstanding stock options or
warrants. As of December 31, 1999, there were 1,562,309 shares of common stock
reserved for issuance upon the exercise of outstanding options at a weighted
average exercise price of $0.35 per share and 37,713 shares of common stock
reserved for issuance upon the exercise of outstanding warrants at a weighted
average price of $1.75 per share. To the extent that any of these options or
warrants are exercised, there will be further dilution to new investors.
25
<PAGE>
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
the financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus. The statement of operations data for the period from
January 28, 1997 (date of inception) to December 31, 1997 and for each of the
two years in the period ended December 31, 1999, and the balance sheet data at
December 31, 1998 and 1999, are derived from the audited financial statements
included in this prospectus, which have been audited by
PricewaterhouseCoopers LLP. The balance sheet data at December 31, 1997 is
derived from audited financial statements not included in this prospectus. The
diluted net loss per share computation excludes potential shares of common stock
(preferred stock, options and warrants to purchase common stock and common stock
subject to repurchase rights that we hold), since their effect would be
antidilutive. See the notes to our financial statements for a detailed
explanation of the determination of the shares used to compute actual and pro
forma basic and diluted net loss per share. Our historical results are not
necessarily indicative of results to be expected for future periods.
<TABLE>
<CAPTION>
PERIOD FROM YEARS ENDED
JANUARY 28, 1997 DECEMBER 31,
(DATE OF INCEPTION) TO -------------------
DECEMBER 31, 1997 1998 1999
---------------------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Contract revenue........................................ $ -- $ 381 $ 1,240
------- ------- --------
Operating expenses:
Research and development.............................. 879 3,360 12,144
General and administrative............................ 416 638 2,932
------- ------- --------
Total operating expenses............................ 1,295 3,998 15,076
------- ------- --------
Loss from operations.................................... (1,295) (3,617) (13,836)
Interest income (expense), net.......................... 40 265 (11)
------- ------- --------
Net loss................................................ $(1,255) $(3,352) $(13,847)
======= ======= ========
Net loss per common share, basic and diluted............ $ -- $ (9.13) $ (14.79)
======= ======= ========
Shares used in computing net loss per common share,
basic and diluted (unaudited)......................... -- 367 936
======= ======= ========
Pro forma net loss per share, basic and diluted......... $ (1.32)
========
Shares used in computing pro forma net loss per share,
basic and diluted (unaudited)......................... 10,507
========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 987 $ 8,635 $ 848
Working capital............................................. 829 7,741 (3,801)
Total assets................................................ 1,958 11,280 6,774
Capital lease obligations, less current portion............. -- 65 22
Loans payable, less current portion......................... -- -- 2,233
Redeemable convertible preferred stock...................... 2,980 14,447 14,447
Total stockholders' deficit................................. (1,213) (4,545) (15,367)
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We were formed in 1997 to discover and provide mammalian gene function
information for use by pharmaceutical and biotechnology companies to expedite
the drug discovery process. Since our inception, we have engaged primarily in
research and development efforts related to our technology which enables us to
select genes with therapeutic potential and delete, or knockout, these genes in
mice. We then use an extensive, integrated analysis program to determine the
function and potential pharmaceutical relevance of these genes. We have a
limited operating history and are at an early stage of development. Our strategy
and pricing models related to offering our products and programs are unproven.
To date we have derived all of our revenue from the development and analysis
of knockout mice under our DeltaSelect program. As of December 31, 1999, we had
an accumulated deficit of $18.5 million. We had net losses of $1.3 million,
$3.4 million and $13.8 million in 1997, 1998 and 1999, respectively. Our losses
have resulted primarily from costs incurred in connection with research and
development activities and from general and administrative costs associated with
our operations. Research and development expenses consist primarily of salaries
and related personnel costs, material costs, legal expenses resulting from
intellectual property filings and other expenses related to the development of
our gene function database, DeltaSelect and our gene trap program. We expense
our research and development costs as they are incurred. General and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and other administrative personnel, professional and other
corporate expenses including business development and general legal activities.
In connection with the development and expansion of our gene function database,
DeltaSelect and our gene trap program, we expect to incur increasing research
and development and general and administrative costs. As a result, we will need
to generate significantly higher revenues to achieve profitability. We expect to
report substantial net losses through the next several years.
We had five DeltaSelect agreements as of December 31, 1999. For most
contracts, revenue is recognized using the contract method of accounting. The
contracts specify milestones to be met and the payments associated with meeting
each milestone. Revenue is recognized on completion of each milestone. Where the
contract does not specify milestones and payment is for completion of the
contract, revenue is recognized based on a percentage of completion method
accounting. The portion of payments received in advance of the completion of
milestones is reflected in deferred revenue. Where revenues are recognized on a
percentage of completion basis, but based on the terms of the contract, the
receivable cannot yet be billed, these unbilled amounts are shown as unbilled
receivables.
We anticipate that the majority of our future revenues will be derived from
fees under agreements with subscribers to our gene function database, however,
we do not currently have any subscribers for our gene function database. We
further anticipate that our future operating results will depend upon many
factors, including the initiation and expiration of subscriptions to our gene
function database and customer agreements and general and industry-specific
economic conditions which may affect pharmaceutical and biotechnology companies'
research and development expenditures. As a consequence, our operating results
have fluctuated in the past and are likely to do so in the future.
We account for stock-based employee compensation arrangements in accordance
with provisions of Accounting Principles Board Opinion No. 25 (APB No. 25),
"Accounting for Stock issued to Employees" and Financial Accounting Standards
Board Interpretation No. 28, "Accounting for Stock
27
<PAGE>
Appreciation Rights and Other Variable Stock Option or Award Plans" and comply
with the disclosure provisions of Statement of Financial Accounting Standards
No. 123 (SFAS No. 123), "Accounting for Stock-Based Compensation."
Under APB No. 25, compensation expense is based on the difference, if any,
on the date of the grant, between the fair value of our stock and the exercise
price. SFAS No. 123 defines a "fair value" based method of accounting for an
employee stock option or similar equity investment. The pro forma disclosures of
the difference between compensation expense included in net loss and the related
cost measured by the fair value method are presented in Note 9 of the notes to
our financial statements.
We account for equity instruments issued to non-employees in accordance with
the provisions of SFAS No. 123 and Emerging Issues Task Force Issue No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."
During 1997, 1998 and 1999, we recorded unearned stock compensation of
approximately $40,000, $9,000 and $10.4 million, respectively. Unearned stock
compensation represents the difference between the exercise price and the deemed
fair market value of our common stock at the date of the grant. These amounts
are being amortized as charges to operations over the respective vesting period
of the individual stock options, generally four years. We recorded amortization
of unearned compensation of $2.8 million for 1999 as compared to $19,000 in 1998
and $17,000 in 1997. As a result of options granted in these years we expect to
record amortization expense for unearned compensation as follows: $4.4 million
during 2000, $2.0 million during 2001, $920,000 during 2002 and $200,000 during
2003.
We may incur additional stock based compensation expense in the future as a
result of both options or other securities granted at below fair market value
and fluctuations in the market value of Deltagen's stock which have a direct
impact on the value of options and warrants held by non employees. Subsequent to
December 31, 1999 the company granted 856,000 incentive stock options to
employees, 93,500 non statutory stock options to non employees and a warrant to
purchase 400,000 shares of Series C preferred stock at $3.58 per share.
We had federal and state net operating loss carryforwards as of
December 31, 1999 and 1998 of approximately $32.0 million and $8.3 million,
respectively. We also had federal and state research and development tax credit
carryforwards as of December 31, 1999 and 1998 of approximately $1.2 million and
$393,000, respectively. The net operating loss and credit carryforwards will
expire at various dates beginning in 2005, if not utilized. Due to the
uncertainty regarding the ultimate utilization of the net operating loss
carryforwards, we have not recorded any benefit for losses, and a valuation
allowance has been recorded for the entire amount of the net deferred asset.
Utilization of net operating losses and credits may be substantially limited due
to the change in ownership provisions of the Internal Revenue Code of 1986 and
similar state provisions. While this offering is not subject to the change in
ownership provisions, certain future sales of our stock could restrict our
ability to utilize our net operating loss carryforwards. The annual limitation
may result in the expiration of net operating losses and credits before
utilization.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Contract revenue increased by $859,000 to $1.2 million in 1999 from $381,000
in 1998. The increase was derived entirely from revenue associated with
agreements for the development and analysis of knockout mice. In 1999, all of
our revenue came from contracts with Merck, Pfizer, Roche and Tularik. Our
contract with Schering-Plough produced no revenues in 1999.
28
<PAGE>
Research and development expenses increased by $8.8 million to
$12.1 million in 1999 from $3.4 million in 1998. The increase was attributable
to continued growth of research and development activities, including
$5.7 million related to increased personnel and laboratory supply costs to
support development of our gene function database, DeltaSelect and our gene trap
program and $1.3 million in higher depreciation and amortization and facilities
expenses related to the addition of a second facility in July of 1999. The
amortization of unearned stock compensation represents $1.6 million of the
increase in research and development expenses. The remainder of the increase was
due to expansion in operating activities.
General and administrative expenses increased by $2.3 million to
$2.9 million during 1999 from $638,000 for 1998. The increase included $408,000
related to compensation for business development, finance and administrative
personnel and $299,000 related to legal and business consulting fees. The
amortization of unearned stock compensation contributed to $1.2 million of the
increase in general and administrative expenses. The remainder of the increase
was due to expansion in operating activities.
Interest income (expense), net changed by $276,000 to net interest expense
of $11,000 in 1999 from net interest income of $265,000 in 1998. This change
resulted from a declining cash and investment balance due to cash used in
operating activities and higher debt balances during 1999. The amortization of
the deferred interest expenses related to the issuance of warrants in 1999
amounted to $37,000.
YEAR ENDED DECEMBER 31, 1998 AND PERIOD FROM JANUARY 28, 1997 (DATE OF
INCEPTION) TO DECEMBER 31, 1997
Contract revenue was $381,000 in 1998 compared to no revenue in 1997. The
entire $381,000 was derived from revenue associated with three DeltaSelect
agreements for the development and analysis of knockout mice.
Research and development expenses increased by $2.5 million to $3.4 million
in 1998 from $879,000 in 1997. The increase of $2.5 million was attributable to
growth of research and development activities, including $2.1 million related to
increased personnel and laboratory supply costs to support development of our
gene function database, DeltaSelect and gene trap programs and $327,000 related
to increased depreciation and amortization and facilities expenses related to
the expansion of our operations. The remainder was due to expansion in operating
activities.
General and administrative expenses increased by $222,000 to $638,000 in
1998 from $416,000 for 1997. The increase of $222,000 included $73,000 related
to compensation for business development, finance and administrative personnel
and $136,000 related to legal and business consulting fees. The remainder was
due to expansion in operating activities.
Interest income (expense), net increased by $225,000 to $265,000 in 1998
from $40,000 for 1997. This increase resulted from increasing cash and
investment balances as a result of additional private equity financing during
1998. Interest expense was $3,000 in 1998 with no interest expense in 1997. This
increase resulted from the addition of debt in 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception primarily through private
sales of common and preferred stock and contract payments to us under our
DeltaSelect agreements and equipment financing arrangements. As of December 31,
1999, we had received net proceeds of $14.5 million from issuances of common and
preferred stock. In addition, from our inception through December 31, 1999, we
received $2.0 million in cash payments from our agreements for the development
and analysis of knockout mice, of which $1.0 million had been recognized as
revenues through December 31, 1999.
29
<PAGE>
As of December 31, 1999, we had $848,000 in cash and cash equivalents, as
compared with $8.6 million as of December 31, 1998. We used $7.2 million for
operating activities in 1999. This consisted of the net loss for the period of
$13.8 million offset in part by non-cash charges of $705,000 related to
depreciation and amortization expenses and $2.8 million related to the
amortization of unearned stock compensation. We used $3.5 million in investing
activities in 1999 which consisted of capital expenditures. We received
$2.9 million from financing activities in 1999, which consisted primarily of net
proceeds from the sale of common stock for $83,000 and $3.3 million in loans
offset by repayments of $457,000.
In December 1998 and March 1999, we entered into loan agreements of
$1.8 million and $1.5 million, respectively, which were fully drawn down during
1999. As of December 31, 1999, the entire $2.9 million outstanding was secured
by property and equipment. Amounts outstanding under these loans accrue interest
at a weighted average rate of approximately 11.2% and are due in monthly
installments through 2003. In addition, as of December 31, 1999, we had $52,000
in capitalized lease obligations outstanding compared to $93,000 at
December 31, 1998.
Our capital requirements depend on numerous factors, including our ability
to obtain gene function database subscriptions and DeltaSelect agreements, the
amount and timing of payments under these subscriptions and agreements, the
level and timing of our research and development expenditures, market acceptance
of our product, the resources we devote to developing and supporting our
products and other factors, many of which are outside of our control. We expect
to devote substantial capital resources to continue and expand our research and
development efforts, to expand our sales and marketing organization, and for
other general corporate activities. We believe that our current cash balances,
which include proceeds from the Series C financing which raised $22.5 million in
January 2000, together with the net proceeds of this offering and the revenues
we believe will be derived from subscriptions to our gene function database and
collaborative research agreements, will be sufficient to fund our operations
through 2001. During or after this period, if cash generated by operations is
insufficient to satisfy our liquidity requirements, we may need to sell
additional equity or debt securities or obtain additional credit arrangements.
Additional financing may not be available on terms acceptable to us or at all.
The sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders. Any debt financing may have restrictive
covenants that adversely affect our operating plans and flexibility. The rights
of any debt or preferred stockholders will be senior to those of our common
stockholders.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We invest our excess cash primarily in U.S. government securities and
marketable debt securities of financial institutions and corporations with
strong credit ratings. These instruments have maturities of twenty-four months
or less when acquired. We do not utilize derivative financial instruments,
derivative commodity instruments or other market risk sensitive instruments,
positions or transactions in any material fashion. Accordingly, we believe that,
while the instruments we hold are subject to changes in the financial standing
of the issuer of such securities, we are not subject to any material risks
arising from changes in interest rates, foreign currency exchange rates,
commodity prices, equity prices or other market changes that affect market risk
sensitive instruments.
We have operated solely in the United States and all sales to date have been
made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
YEAR 2000 ISSUES
In late 1999, we completed our remediation and testing of systems. As a
result of our planning and implementation efforts, we experienced no significant
disruptions in mission-critical information technology and non-information
technology systems and believe those systems successfully responded to
30
<PAGE>
the Year 2000 date change. We are not aware of any material problems resulting
from Year 2000 issues, either with our products under development, our internal
systems, or the products and services of third parties. We will continue to
monitor our mission-critical computer applications and those of our suppliers
and vendors to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB No. 101), "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the Securities and
Exchange Commission. SAB No. 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to revenue
recognition policies. We do not believe SAB No. 101 will have any significant
impact on our financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS No. 133 requires that all derivatives be recognized at fair
value in the statement of financial position, and that the corresponding gains
or losses be reported either in the statement of operations or as a component of
comprehensive income, depending on the type of relationship that exists. SFAS
No. 133 will be effective for fiscal years beginning after June 15, 2000. We do
not believe that the implementation of SFAS No. 133 will have any significant
impact on our financial position or results of operations.
31
<PAGE>
BUSINESS
OVERVIEW
We have developed technology to convert raw genetic data into mammalian gene
function information to help pharmaceutical and biotechnology companies expedite
the drug discovery process. Our technology enables us to select genes with
therapeutic potential and delete, or knockout, these genes in mice. We then use
an extensive, integrated analysis program to assess the function and potential
pharmaceutical relevance of these genes. We believe that our technology allows
us to knockout genes in mice on a larger scale and at a faster rate than has
been previously possible. To promote more efficient use of our data, we have
developed DeltaBase, a proprietary, searchable database that will provide
immediate access to gene function information and potential targets for drug
discovery.
BACKGROUND
OVERVIEW
Pharmaceutical and biotechnology companies are continually challenged to
develop and market increased numbers of drugs. This challenge has led to
increased research and development spending and the development of a new
research focus called genomics-based drug discovery. This new research effort
involves understanding the relationship between genes and the functions they
regulate. An organism's genetic information, or genome, is comprised of
deoxyribonucleic acid, or DNA molecules, and DNA itself is comprised of four
different chemical subunits called nucleotide bases that are strung together in
a precise sequence. Encoded within a DNA sequence are discrete sets of
instructions, or genes, that collectively serve to regulate our biological
processes by producing proteins. Alterations in gene sequence, or mutations,
form the basis of disease.
Understanding the critical role that genes play in regulating biological
processes and disease has led to efforts to obtain information on all the genes
contained within the human genome and the genomes of other organisms.
International public and private genomics projects have generated vast amounts
of data and identified nearly all the genes within the human genome. The first
draft of the complete human genome is anticipated to be released this year. The
human genome is comprised of approximately three billion nucleotide bases that
encode approximately 140,000 genes. Approximately 3,000 to 10,000 of these genes
may have potential as drug targets. This is a significant increase over the
approximate 500 targets that currently are the focus of drug development.
Seeking to capitalize upon the opportunity to discover new drug targets,
pharmaceutical, biotechnology and genomic companies are rapidly pursuing
genomics-based drug discovery programs. We believe that a system that will
enable a more rapid commercialization of these newly discovered genes can be of
significant value to drug manufacturers.
Genomics-based drug discovery generally consists of:
- discovering and identifying DNA sequences that make up the genes within
the genome;
- determining the function of the discovered genes so that their role in
regulating biological processes and disease can be understood;
- using information on gene function and disease relevance to assess the
value of a particular gene or its protein product as a target for drug
discovery; and
- utilizing high-throughput chemistry and other drug discovery methods to
target the relevant gene to produce a commercially viable drug.
Pharmaceutical, biotechnology and academic researchers have made
considerable progress in identifying genes. However, a significant current
impediment to genomics-based drug discovery is the
32
<PAGE>
difficulty of determining gene function. Determining gene function with respect
to a biological process or disease is a complex undertaking that requires
extensive and detailed physiological analysis.
DISCOVERING GENE FUNCTION
The scientific community has attempted to find efficient methods of
determining the functions of individual genes for several decades. This process
is particularly challenging for the pharmaceutical industry because drug
development requires a very precise understanding of potential drug discovery
targets. It is important that a pharmaceutical or biotechnology researcher
understands all the possible ramifications of targeting a gene or its associated
protein with a drug, including any potentially serious side effects of drug
administration. Consequently, before a gene is selected as a candidate for the
expensive and time consuming drug discovery and development process, its
complete functional role should be determined. Determining whether a gene is a
relevant target for drug discovery is a process termed target validation.
Currently, researchers generally use the standard or genetic approaches to drug
target discovery and validation described below.
[GRAPH SHOWING STEPS INVOLVED IN STANDARD,
GENETIC AND DELTAGEN APPROACHES]
STANDARD APPROACH TO TARGET DISCOVERY AND VALIDATION
The objective of the standard approach to target discovery is to sort
through the tens of thousands of gene sequences to find a select few that can be
analyzed using current techniques for determining IN VIVO biology, or the
function of the gene in a living organism. Under the standard approach,
researchers:
- identify a gene sequence;
- isolate and make an operational copy of the gene in order to facilitate
physiological analysis of its function;
- find the tissues where the gene is active, or expressed, which may provide
clues about the potential functional role of the gene;
33
<PAGE>
- perform cell-based, or IN VITRO, experiments using potentially relevant
cell types to define a potential role for the gene; and
- conduct studies in a living mammal, or IN VIVO studies, to determine the
role of the gene in a whole organism, a key step in providing confirmation
of the gene as a validated target for drug discovery.
The standard approach to target discovery is a time consuming, expensive and
multi-staged process in which only a limited number of genes reach the final
steps of the validation process. The lack of IN VIVO data early in this process
can lead to the selection of genes based on criteria that do not necessarily
reflect their functions in a living organism. This can lead to the rejection of
genes that represent valid targets.
GENETIC APPROACH TO TARGET DISCOVERY AND VALIDATION
Since the function of a gene in an animal can vary widely from its function
as determined by IN VITRO studies, it is preferable to obtain IN VIVO data at an
early stage in the drug discovery process. To accomplish this, some
pharmaceutical and biotechnology companies have employed a genetic approach
which initially uses non-mammalian organisms to determine IN VIVO function.
Under the genetic approach, researchers:
- choose a lower organism, such as a fly or worm, based on the compatability
of the organism with the specific organ system or function to be studied;
- create a functional mutation in the lower organism by using chemicals to
produce a permanent genetic alteration that is reflected by an observable
change in the organism;
- identify the mutated gene responsible for the observed change;
- find the equivalent gene in mammals; and
- conduct IN VIVO studies to determine the role of the gene in a whole
organism, a key step in providing confirmation of the gene as a validated
target for drug discovery.
The genetic approach to target discovery is subject to a number of
limitations. Under the genetic approach, researchers randomly mutate the genome.
This may result in the identification of genes with interesting functions;
however, these genes may not become valid drug targets because only a certain
subset of genes are amenable to current drug discovery methods. In addition,
since lower organisms are far less complex than mammals, they do not have many
of the mammalian genes and their corresponding physiological functions. Thus,
while lower organisms can provide information on gene function similarity with
humans, their ability to provide information concerning how genes control
mammalian physiology is limited. As a result, validation typically requires
mammalian studies which are traditionally time-consuming and costly.
DETERMINING MAMMALIAN GENE FUNCTION
During the past decade, the preferred method for determining a gene's
function in mammals has been to disrupt, or knockout, the gene in a mouse, and
to assess the physiological, pathological and behavioral consequences of
removing the gene from the animal. The results of this analysis can determine
the function and disease relevance of a particular gene.
Mice and humans are both higher mammals, and their genomes are similar in
size and gene content. Therefore, performing knockouts of genes in mice has
advantages over studies in non-mammalian organisms for defining the function and
disease relevance of human genes. Additionally, mice are one of the few mammals
for which approaches to genetic manipulation have been established. Because of
the high degree of physiological and genetic similarity between mice and
34
<PAGE>
humans, the mouse gene knockout system has the potential to become an effective
and widely accepted model for target validation studies.
A drawback of this model has been the low-throughput, high-cost and
commercially unfeasible time-frames for production. Traditional approaches to
create mouse knockouts allow a research team to create only a limited number of
knockouts per year. As a result, mouse knockouts have been used as the last step
of the target validation process, if at all.
Despite the time-frame and labor intensive nature of the process, the
academic scientific community has adopted the mouse knockout as a model for gene
function studies. Information from these studies is often publicly available.
However, this information is often fragmentary, difficult to obtain and is
selectively and non-uniformly reported. In addition, when such information is
available, it can be difficult to cross-reference or compare using standardized
medical/scientific vocabulary or to compare with pre-existing models of disease.
Collectively, these limitations have made mouse knockouts difficult to use
as a first-line drug discovery tool despite their utility in determining gene
function.
OUR SOLUTION
We have developed a fully integrated target validation system that provides
gene function information based on mouse knockouts at the earliest stages of
drug target discovery. We believe that our solution is the only system that can
move directly from gene identification to determination of gene function in a
mammalian organism on a commercially viable scale.
We utilize proprietary molecular biology systems to more efficiently
knockout genes in mice on a large scale and conduct a detailed analysis of the
resulting physiological, pathological and behavioral effects in these mice. As a
result, we assess the function of the gene in a mammal that is closely related
genetically and physiologically to humans.
[GRAPH SHOWING STEPS INVOLVED IN STANDARD
AND GENETIC APPROACHES]
35
<PAGE>
We believe our technology platform and approach offer significant advantages
over the standard and genetic approaches, including:
- INCREASING THE SCALE AND SPEED OF GENERATING MAMMALIAN GENE FUNCTION
INFORMATION AND THE DELIVERY OF VALIDATED GENE TARGETS. Based on our
current knockout rates, we expect to be able to target, analyze and
deliver detailed IN VIVO gene function information on approximately 300
different genes per year. This is a significant improvement over
traditional approaches which produced an estimated worldwide total of over
700 reported mouse knockouts between 1991 and 1997. Our proprietary
high-throughput gene knockout and analysis system can be scaled-up to even
greater capacity if we determine additional production is required. We
believe our methods reduce the time involved in the generation of gene
function information and the delivery of validated gene targets when
compared with conventional gene knockout methods.
- REDUCING THE COST OF DETERMINING GENE FUNCTION AND PROVIDING VALIDATED
GENE TARGETS. By providing a fully integrated target validation system as
opposed to a multi-tier process, we believe we can reduce the number of
steps and costs associated with the target validation process and the
number of parties to whom royalties must be paid. Through our database
product, we intend to provide our customers with information on gene
function and the target potential of genes earlier in the drug discovery
process than under the standard or genetic approaches. We believe that
early access to IN VIVO data allows selection of appropriate drug targets,
increases efficiency and reduces costs by allowing our customers to focus
on genes with high potential for successful drug development. This
information allows our customers to eliminate non-viable targets from
potential development earlier in the discovery process.
- PRE-SELECTING COMMERCIALLY RELEVANT MAMMALIAN GENE TARGETS. We have
focused our target validation efforts on gene families that we believe
have the greatest potential for drug development. Worldwide genome
sequencing efforts have identified many new members of the gene families
currently targeted by the pharmaceutical and biotechnology industry,
including approximately 1,000 members that we have initially selected that
may have therapeutic potential.
- ALLOWING OUR CUSTOMERS TO STORE, ACCESS, MANIPULATE AND ANALYZE GENE
FUNCTION INFORMATION THAT WE GENERATE. We have developed a comprehensive,
proprietary information technology infrastructure for the delivery,
maintenance and use of the data we produce. Each year, we expect to
generate approximately one million individual measurements of
physiological, biochemical and behavioral observations, or data points,
relating to gene function in mammalian systems. We organize and will
deliver our data in a manner that we believe will provide simple and rapid
accessibility. Additionally, our data is compatible with standard
computing tools used by the pharmaceutical and biotechnology industries.
- PROVIDING ACCESS TO KNOCKOUT MICE. The preclinical testing, or animal
testing, of drugs has often been impeded by the lack of animal models that
can represent the human disease condition. We believe our fully integrated
target validation system can produce and deliver relevant knockout mouse
models to the pharmaceutical and biotechnology industries. These knockout
mouse models can be used for further research and development relating to
gene function and disease analysis.
- PROVIDING OUR INTELLECTUAL PROPERTY PORTFOLIO ON THE FUNCTIONAL ROLE OF
GENES. We are pursuing intellectual property protection for our gene
function discoveries and plan to grant our customers the right to use our
intellectual property.
In addition to our gene function database, we have a program called Delta-GT
to discover novel, commercially relevant secreted proteins. Secreted proteins
are proteins that play an important role in the formation, regulation, growth
and maintenance of multi-cellular organisms. Examples of well-known secreted
proteins include insulin, human growth hormone and erythropoeitin, or EPO. Using
36
<PAGE>
proprietary technologies, we have developed a program that identifies and
defines the mammalian IN VIVO function of secreted proteins. Specifically, we
have proven genetic technologies that allow us to more rapidly identify and
knockout secreted proteins in mice. We believe that our Delta-GT program
provides a foundation for developing and commercializing proprietary therapeutic
protein products.
OUR STRATEGY
Our goal is to be the leading provider of data on the function, role and
disease relevance of mammalian genes to the pharmaceutical and biotechnology
industries. We believe our data will improve the speed, efficiency and
effectiveness of drug discovery. Additionally, we intend to use our proprietary
genetic technologies to discover novel therapeutic secreted proteins. The key
elements of our strategy include:
- BECOMING THE MOST COMPREHENSIVE SOURCE OF INFORMATION ON MAMMALIAN GENE
FUNCTION AND TARGET VALIDATION. We intend to expand our current
proprietary technologies and develop new programs and systems to increase
the scale, scope and depth of our database content. We believe that we can
continue to discover, refine and deliver information that is relevant to
the drug discovery process.
- FOCUSING ON THE COMMERCIAL NEEDS OF OUR CUSTOMERS. We plan to deliver
valuable information to our customers and allow them to concentrate on the
drug discovery process downstream of target validation. By focusing our
research process on target validation and obtaining functional
information, we believe we provide our customers meaningful time and cost
savings in their drug discovery efforts. We plan to deliver information to
our customers over their proprietary intranets or eventually over the
Internet to facilitate real-time access and searching of our database
product.
- CONTINUING TO PURSUE INTELLECTUAL PROPERTY RIGHTS. We are employing an
intellectual property strategy to secure patent, trademark and copyright
protection for what we believe to be our commercially relevant inventions,
products, and methods. We intend to offer our customers access to our
intellectual property portfolio. We believe that securing patent rights
around gene function and functional utility associated with the
development and commercialization of genes as drug targets may provide us
with licensing and other revenue generating opportunities.
- PURSUING EARLY-STAGE DEVELOPMENT OF TARGETS FOUND THROUGH OUR GENE TRAP
PROGRAM. We plan to continue the development of our gene trap program in
order to provide a pipeline of secreted proteins to serve as potential
drug discovery candidates. We intend to pursue early stage, in-house
development of selected opportunities that arise from this program, and we
may attempt to capitalize on these discoveries through collaborative
arrangements with pharmaceutical and biotechnology companies.
- ACQUIRING TECHNOLOGIES TO MEET THE CONTINUING TARGET VALIDATION NEEDS OF
CUSTOMERS. We intend to acquire and license additional products and
programs, if we determine that these products or programs complement our
existing target validation technologies or augment our existing
information technology platforms.
37
<PAGE>
OUR PRODUCTS AND PROGRAMS
We have developed and plan to continue to develop technologies, products and
programs that determine the function and disease relevance of genes in mammalian
organisms. We have developed and are expanding the following products and
programs:
DELTABASE
OVERVIEW
DeltaBase is our database which provides information, based on knockout
mouse studies, on gene function and validated gene targets for drug discovery.
We created DeltaBase to be marketed to the pharmaceutical and biotechnology
industries to help define the role that genes play in biological processes and
disease. We believe that DeltaBase can become a valuable resource for mammalian
gene function information and validated targets.
At our current rate of production, we expect to provide gene function and
target validation information, through DeltaBase, on approximately 250 different
genes per year. We select genes for DeltaBase based upon their potential to
become useful drug targets. We generate information on these genes by
comprehensively analyzing knockout mice generated through our proprietary, gene
knockout methods. Each knockout mouse undergoes a standardized, detailed and
extensive analysis in order to determine the function and role that a particular
gene plays in the mouse and that gene's suitability as a drug target. We
currently intend that DeltaBase will deliver a total of approximately
one million individual, IN VIVO function, data points per year. We believe that
the body of gene function information delivered under DeltaBase will provide an
advantage to the drug discovery efforts of pharmaceutical and biotechnology
companies by reducing the time required for target validation.
In addition to accessing target validation data, DeltaBase customers will
have access to the mouse knockouts used to generate this data. Access to these
animals will allow DeltaBase customers to more rapidly pursue specific areas of
interest. We believe this will be attractive to smaller pharmaceutical companies
who lack the necessary infrastructure for wide-scale target validation programs.
DELTABASE TECHNOLOGIES
We designed DeltaBase to provide our customers with the ability to compare
resulting phenotypic and gene function data across hundreds of different
mammalian genes from different gene families selected for their potential
commercial relevance to drug discovery. In order to generate, analyze, store,
manipulate and deliver such large volumes of data and information, we have
developed proprietary, high-throughput, scalable, assembly-line methods to:
- SELECT MAMMALIAN GENES AND GENE FAMILIES TO IDENTIFY VALIDATED DRUG
TARGETS. In selecting the gene families for DeltaBase, we targeted those
that have demonstrated their value as drug development targets, have led
to the commercialization of successfully marketed drugs and present
potential additional drug development targets. The current gene families
represented in DeltaBase include the G-protein coupled receptors, ion
channels and proteases. As part of the gene target selection process, we
utilize information technology, statistical analysis and biological
information systems to extract and analyze publicly available data on the
human genome to search for additional genes and gene families with
potential commercial relevance to drug discovery efforts. This application
of statistical and mathematical models to genetics is known as
bioinformatics. To date, our bioinformatics program has focused on an
initial pipeline of approximately 1,000 potential targets for development
under DeltaBase that may be of interest to prospective pharmaceutical and
biotechnology customers.
- RAPIDLY GENERATE LARGE NUMBERS OF KNOCKOUT MICE. We utilize proprietary
molecular biology systems to more efficiently knockout genes in mice on a
large scale. Using our proprietary genetically engineered materials and
methodologies, we have increased the scale and reduced the time and cost
required to identify the IN VIVO function of mammalian genes. We are able
to move directly
38
<PAGE>
from a small amount of gene sequence information straight to the
production of knockout mice and the determination of gene function and
validated targets. Our processes have been scaled-up to produce and
analyze approximately 250 gene knockouts per year for our Deltabase
program, which we believe is a significant improvement over historical,
relatively limited industry production. This high-throughput system can be
readily scaled up to even greater capacity if we determine additional
production is required.
- EXTENSIVELY ANALYZE THE KNOCKOUT MICE GENERATED. We have developed and
employ large-scale assembly-line analysis programs that provide detailed
physiological, pathological and behavioral data. This analysis is
performed on all tissues and organ systems within the mouse. Moreover,
this analysis of the entire organism may provide information on possible
side effects and toxicology profiles associated with each gene and its
function. We are also in the process of developing further analytical
programs in areas such as the central nervous system, cardiovascular
system, infectious disease, inflammation and the immune system. We believe
that the DeltaBase knockout mice can serve as efficient vehicles for the
generation of additional complementary information and data on gene
function.
- ACCURATELY AND EFFICIENTLY CAPTURE, STORE, MANIPULATE AND DELIVER
APPROXIMATELY ONE MILLION INDIVIDUAL DATA POINTS PER YEAR GENERATED FROM
THE ANALYSES OF KNOCKOUT MICE. DeltaBase customers will have the ability
to access, utilize and perform multifaceted analysis on the gene function
data and information contained in DeltaBase. In addition, our proprietary
information technology allows our customers to perform searches of the
gene function analyses contained in DeltaBase, obtain detailed scientific
and pathology summaries of gene function findings and submit inquiries and
questions to DeltaBase through a medical/scientific vocabulary search
engine containing approximately 1.5 million terms. To meet the needs of
DeltaBase customers, the data and information is readily exportable and
can be manipulated by information technology tools and other databases
widely employed in the pharmaceutical and biotechnology industries.
MARKETING AND CUSTOMER AGREEMENTS
We are currently marketing DeltaBase as a multi-year, nonexclusively
licensed subscription database for which we intend to charge a yearly
subscription fee, milestone fees and royalties. Potential DeltaBase customers
also have the right to license the knockout mice, certain genetically engineered
materials and the intellectual property estate that we are pursuing. We do not
currently have any DeltaBase subscribers.
DELTASELECT
OVERVIEW
DeltaSelect is our custom gene knockout program which uses our proprietary
technology employed in our database program. Our DeltaSelect program is
different, however, because our customers select and identify to us the
particular genes that they wish to have knocked out in mice. We provide
customers with access to our gene knockout technologies and the resulting
knockout mice, data and information generated under each DeltaSelect program. To
date, we have limited our DeltaSelect marketing efforts to those particular
pharmaceutical and biotechnology companies that we believe have the potential to
subscribe to our gene function database or to enter into larger scale programs.
DeltaSelect is also offered as a program to provide additional target validation
and gene function information to potential database subscribers.
We have produced customized knockout mice at the direction of our customers
for a limited number of pharmaceutical companies. Currently, we are undertaking
DeltaSelect knockout programs under agreements with Merck, Pfizer, Roche and
Schering-Plough. While our written agreement with Tularik has expired, we
continue to provide knockout mice to Tularik.
39
<PAGE>
DELTASELECT TECHNOLOGY
We are currently developing technologies that can be used to create
conditional knockout mice. Conditional knockout mice are mice in which the gene
of interest is removed under unique conditions in a specific tissue or cell type
at selected and controlled times. We are currently developing conditional
knockout systems for our DeltaSelect program using CRE/LOX and FLP/FRT
recombinase technologies.
MARKETING AND CUSTOMER AGREEMENTS
Under our DeltaSelect program, we receive a payment for each customized
knockout that we produce. We retain ownership of the technology and intellectual
property relating to the generation of knockout mice, and our DeltaSelect
customers own the data and information relating to the knockout mice we
generate.
DELTA-GT
OVERVIEW
Delta-GT is a secreted protein, gene trap program currently under
development that simultaneously identifies and determines the function of
mammalian secreted proteins. We believe this technology represents a tool for
the identification and development of a potential pipeline of new drugs.
Secreted proteins represent proteins that are synthesized for export from the
cell or to the surface membrane of the cell where they play a role in the
communication between cells. These communication roles are essential for the
formation, regulation, growth and maintenance of multi-cellular organisms.
Currently, secreted proteins constitute the majority of successful targets for
drug discovery. Examples of well-known secreted proteins include insulin, human
growth hormone and erythropoeitin, or EPO.
Current pharmaceutical and biotechnology industry methods to identify novel
secreted proteins center on bioinformatics, which is the application of
statistical and mathematical models to genetics, and gene capturing
technologies. These methods are able to identify novel genes representing
secreted proteins but do not have the ability to determine the function of the
identified genes and proteins in mammalian systems. We believe that our Delta-GT
system will have the advantage of being able to both discover and identify novel
genes and to simultaneously inactivate or knockout these genes in mouse
embryonic stem cells, or ES cells. Our technology allows us to produce knockout
mice lacking the gene of interest that can be processed in the high-throughput
functional analysis programs that we employ in our DeltaBase program. We believe
the Delta-GT system will offer an opportunity to discover and develop new
therapeutic proteins that have the potential to become drugs.
DELTA-GT TECHNOLOGY
We are an exclusive worldwide licensee of a secreted protein gene trap from
the University of Edinburgh that identifies genes that code for secreted
proteins and simultaneously enables the production of knockout mice to determine
the IN VIVO function of these genes. This secreted protein gene trap technology
will work in all cell types. However, when the system is employed in mouse ES
cells, the resultant ES cells containing the gene deletion can be used to
rapidly generate knockout mice.
We believe that the benefits of our Delta-GT technology are its ability to:
- identify rarely expressed genes;
- move directly to IN VIVO analysis in the mouse eliminating the need for
cell-based experiments that require protein or antibody production to
define function;
- directly define the role of cell surface receptors and function in all
cell types; and
- identify key secreted proteins in a variety of physiological conditions.
40
<PAGE>
In a mammalian genome, genes are compiled from several regions of DNA termed
exons that are separated from each other by non-coding DNA termed introns. When
a gene is turned on or expressed, the exon segments are brought together to
produce proteins. Gene traps function by introducing DNA into the genome of the
cell and using the cell's own protein producing machinery to make a hybrid
protein. Part of the protein is made from the genome DNA and part is made from
the gene trap DNA that is introduced into the cell. This hybrid DNA causes
disruption of the normal sequence that produces the functional gene code and
results in loss of normal protein production, which effectively knocks out the
gene.
We employ a gene trap system that is incorporated into the DNA of cells and
is designed to specifically hit and identify genes that produce secreted
proteins. Secreted proteins have a distinguishing feature, similar to a zip
code, that instructs the cell to export the newly synthesized protein from the
cell or to the cell membrane. This feature is referred to as a signal sequence.
Delta-GT uses a system that relies upon the presence of the signal sequence to
direct the expression of a detection gene contained within the gene trap DNA.
When this detection gene is activated, cells will stain blue. This allows the
employment of a simple visual inspection to identify cells in which a secreted
protein has been hit by the trap. If the gene trap hits a protein that is not
secreted, the detection gene is not activated and no staining of the cell
occurs. When we introduce our gene trap into mouse ES cells, we are able to
produce knockout mice in which the function of a gene has been disrupted.
COMMERCIALIZATION
We market our products globally through our own internal sales, marketing
and business development organization. Our commercialization strategy is to:
- initially target large pharmaceutical and biotechnology companies for
database subscriptions;
- develop and offer line extensions and other products under our database
program;
- expand and offer our services to smaller pharmaceutical and biotechnology
companies who lack the necessary infrastructure for wide-scale target
validation programs;
- use DeltaSelect for future technology development and to introduce our
customers to our database program; and
- discover, identify and develop secreted proteins for therapeutic use
either by exclusive license or through co-development strategies under the
gene trap program.
Our marketing department is responsible for developing marketing strategy
and pricing policies as well as producing promotional materials. Our marketing
department also works directly with our customers' technology and licensing
officers and facilitates communication between us and our customers' scientists.
We also provide customer support services, including training and education, and
we elicit customer feedback which we consider when developing and improving our
products.
CUSTOMERS
Under our DeltaSelect program, we have entered into arrangements with major
pharmaceutical companies where we produce customized standard, or unconditional,
knockout mice.
We currently perform services under our DeltaSelect program for
Schering-Plough, Merck, Pfizer, Roche Biosciences and Tularik. These customers
accounted for all of our revenues for the year ended December 31, 1999. Pfizer,
Roche and Merck accounted for 64%, 20% and 14%, respectively, of our revenues in
1999. We do not have a written agreement with Tularik, and our agreements with
Roche and Pfizer expire in November and December 2000, respectively.
We currently do not have any customers for our DeltaBase product, and are
not seeking to commercialize any drug candidates through our Delta-GT program.
41
<PAGE>
RESEARCH AND DEVELOPMENT
As of December 31, 1999, we had a total of 100 employees dedicated to
research and development activities. We have spent substantial funds over the
past three years to develop our database and other programs and expect to
continue to do so in the future. We spent approximately $879,000 in 1997,
$3.4 million in 1998 and $12.1 million in 1999 on research and development.
INTELLECTUAL PROPERTY
Our policy is to pursue patent protection around our commercially relevant
products, techniques and methods. We intend to file applications covering all
the knockout mice we produce. We also intend to pursue patent, copyright and
trademark protection with respect to any information technologies, systems or
other products which we believe would benefit from these protections. We cannot
assure you, however, that any of our patent applications will result in the
issuance of any patents, that our patent applications will have priority over
others' applications, or that, if issued, any of our patents will offer
protection against our competitors. Additionally, we cannot assure you that any
patent issued by us will not be challenged, invalidated or circumvented in the
future or that the rights created thereunder will provide a competitive
advantage. Litigation may be necessary to enforce any patents issued to us, to
protect trade secrets or know-how owned by us or to determine the
enforceability, scope, and validity of the proprietary rights of others.
Others may have filed and in the future are likely to file patent
applications that are similar or identical to ours. To determine the priority of
inventions, we may have to participate in interference proceedings declared by
the U.S. Patent and Trademark Office that could result in substantial cost to
us. We cannot assure you that any patent application of another will not have
priority over patent applications filed by us. Our commercial success depends in
part on our neither infringing patents or proprietary rights of third parties
nor breaching any licenses that may relate to our technologies and products.
We have obtained licenses for certain technologies. However, we cannot
assure you that we will be able to obtain licenses for technology patented by
others on commercially reasonable terms, if at all, that we will be able to
develop alternative approaches if unable to obtain licenses or that our current
and future licenses will be adequate for the operation of our business. Our
failure to obtain necessary licenses or to identify and implement alternative
approaches could have a material adverse effect on our business, financial
condition and results of operations.
We also rely upon trade secrets, technical know-how and continuing invention
to develop and maintain our competitive position. We cannot assure you that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets or
disclose such technology, or that we can meaningfully protect our trade secrets,
or that we will be capable of protecting our rights to our trade secrets.
In 1998, Lexicon Genetics Incorporated, one of our competitors, informed us
that it was a coexclusive licensee under a patent covering certain isogenic DNA
technology that may be used to modify the genome of a target cell. We have not
been contacted by Lexicon about this matter since their initial letter to us.
COMPETITION
We face significant competition in the area of genomics-based research from
for-profit companies such as Celera Genomics, Curagen, Inc., DNX (a subsidiary
of Phoenix International Life Sciences, Inc.), GeneLogic, Inc., Human Genome
Sciences, Inc., Incyte Pharmaceuticals, Inc., Lexicon Genetics Incorporated and
Millennium Pharmaceuticals, Inc., among others, many of which have substantially
greater financial, scientific and human resources than we do. In addition, the
Human Genome Project and a large number of universities and other not-for-profit
institutions, many of which
42
<PAGE>
are funded by the U.S. and foreign governments, are also conducting research to
discover genes and their function.
We face, and will continue to face, significant competition in our efforts
to validate drug targets and to attract research dollars. Many other companies
that have or are developing capabilities in the use of living organisms to
define gene function. These competitors include such companies as Lexicon
Genetics Incorporated, Exelixis, Inc., and Devgen N.V. Additionally, many
genomics companies may expand their capabilities to determine gene function.
Further, as we expand our range of products and services, such as our gene trap
program, we will compete with additional companies, some of which may be our
current customers.
Companies focused specifically on other organisms, such as fruit flies,
worms and yeast, use methods of identifying potential drug targets which are
different than ours. In addition, pharmaceutical, biotechnology and other
genomics companies, as well as a number of universities and other not-for-profit
institutions, are seeking to develop competing technologies. Many of these
competitors have substantially greater financial, scientific and human resources
than we do. Many of these competitors also have substantially greater experience
than we do in their respective fields. As a result, our competitors may succeed
in developing products and technologies earlier than we do or in developing
products and technologies that are more effective than ours.
We believe that the principal competitive factors in selling our products
and services are the quality and reliability of the gene function information,
the volume of the gene function information, the features and ease of use of
database products and the cost and pricing of competing products. We believe
that we compete favorably with respect to these factors; however, our market is
rapidly changing and we expect to face further competition from new market
entrants and consolidation of our existing competitors.
GOVERNMENT REGULATION
The Animal Welfare Act governs the humane handling, care, treatment and
transportation of some animals used in U.S. research activities. Mice, including
the mice in our knockout programs, are currently not subject to regulation under
the Animal Welfare Act. Additionally the USDA, which enforces the Animal Welfare
Act, is presently considering changing the regulations issued under the Animal
Welfare Act to include mice within its coverage. The Animal Welfare Act imposes
a wide variety of specific regulations on producers and users of animal
subjects, most notably personnel, facilities and statistical standards, cage
size, feeding, watering and shipping conditions and environmental enrichment
methods. If the USDA decides to include mice in its regulations, we could be
required to alter our production operation for these models, including adding
production capacity, new equipment and additional employees. It is possible that
the USDA's actions will negatively affect our operations. In addition, although
we do not anticipate the addition of mice to the Animal Welfare Act to require
significant expenditures, it is possible that the Animal Welfare Act, when
amended, may be more stringent than we expect and require significant
expenditures. Any future amendments to the Animal Welfare Act or other laws or
regulations may also require significant expenditures by us.
Furthermore, some states have their own regulations, including general
anti-cruelty legislation, which establish certain standards in handling animals.
To the extent that we provide products and services overseas, we also have to
comply with foreign laws, such as the European Convention for the Protection of
Animals During International Transport and other anti-cruelty laws. The Council
of Europe is presently considering proposals to more stringently regulate animal
research.
We currently have no plans to pursue the clinical development of our
validated targets, and, therefore, do not anticipate having the regulatory
constraints typical of many biotechnology and pharmaceutical companies. In the
future, we may decide to pursue pre-clinical development in order to exploit
their validated targets. To the extent any of the validated targets are
appropriate for clinical development, we will pursue corporate partners to
undertake such activities.
43
<PAGE>
Our customers that pursue clinical development of drugs based on our
research will be subject to extensive regulation, especially under the Federal
Food, Drug and Cosmetic Act. This law governs the pre-clinical and clinical
development, manufacturing, distribution, including export, and labeling of
drugs. We are also subject to a variety of other federal and state laws and
regulations in the U.S. and in other countries pertaining to our facilities, the
shipment, exportation and importation of various articles and health and safety
matters. For example, the Department of Transportation and various international
guidelines and regulations govern the transport of different types of materials.
The Bureau of Export Administration of the Department of Commerce exercises
export controls over technology such as our gene database. The Department of
Health and Human Services and USDA both regulate various types of articles that
present the possibility of spreading communicable and other diseases, including
the regulation of vectors, such as animals and articles that present risks of
other harm to plants, human beings and other animals. The Environmental
Protection Agency has responsibility for facility emissions and other
environmental matters, including the regulation of new chemical substances,
which could include gene sequences.
Since we are in the business of developing animals containing changes in
their genetic make-up, we may become subject to a variety of laws, guidelines,
regulations and treaties specifically directed at genetically modified
organisms, or GMOs. The area of environmental releases of GMOs is rapidly
evolving and is currently subject to intense regulatory scrutiny, particularly
internationally. Current laws, guidelines and other requirements typically
include confinement requirements for preventing the spread of GMOs into the
environment. Examples of these guidelines in the U.S. include the National
Institutes of Health "Guidelines for Research Involving Recombinant DNA
Molecules" and the USDA "Guidelines for Research Involving the Planned
Introduction into the Environment of Genetically Modified Organisms". Although
these guidelines typically apply only to federally-funded activities, if we were
to become subject to similar laws in the future, we could incur compliance
costs.
The Biosafety Protocol, or the BSP, is also of particular importance to our
international operations. The BSP, a treaty recently adopted in Montreal, Canada
in late 1999, is expected to be ratified in many countries internationally in
approximately two years. Many industrialized and non-industrialized countries
will be signatories to the BSP. Although the U.S. is not subject to the BSP, if
ratified, the BSP is expected to cover shipments from the U.S. to countries
abroad that have signed the BSP. The BSP is also expected to cover the
importation of living modified organisms, a category that could include our
animals. If our animals are not contained as described in the BSP, our animals
could be subject to the potentially extensive import requirements of countries
that are signatories to the BSP.
EMPLOYEES
As of March 31, 2000, we had a total of 138 full-time employees. Of these,
18 hold Ph.D.s and 12 hold other advanced degrees. None of our employees is
represented by a labor union. We consider our relations with our employees to be
good.
FACILITIES
Our corporate headquarters, principal executive offices and research
facilities are located in Menlo Park, California and in San Carlos, California,
where we occupy a total of approximately 50,000 square feet under leases that
expire in July 14, 2004 and February 29, 2009, respectively. Our facilities
include an advanced mouse animal facility. We believe that our existing
facilities are adequate for current needs and that suitable additional space or
alternative space, if necessary, will be available in the future on commercially
reasonable terms.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table shows information about our executive officers and
directors as of March 31, 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- -------------------------------------- -------- ------------------------------------------------
<S> <C> <C>
William Matthews, Ph.D................ 45 Chief Executive Officer, President and Director
Mark W. Moore, Ph.D................... 41 Chief Scientific Officer and Treasurer
Augustine G. Yee...................... 34 Vice President of Corporate Development, General
Counsel and Secretary
Lars Barfod........................... 40 Vice President of Commercial Development
John E. Burke......................... 39 Vice President of Intellectual Property
Terry Coley, Ph.D..................... 36 Vice President of Information Technology
Brian E. Crowley...................... 32 Director of Finance
Vicente Anido, Jr., Ph.D.............. 47 Director
Philippe O. Chambon, M.D., Ph.D....... 41 Director
Thomas A. Penn........................ 54 Director
F. Noel Perry......................... 47 Director
Nicholas J. Simon..................... 45 Chairman of the Board
</TABLE>
Drs. Anido and Chambon and Messrs. Penn and Perry are members of our
compensation committee. Drs. Anido and Chambon and Mr. Penn are members of our
audit committee.
WILLIAM MATTHEWS, PH.D., a co-founder of our company, has served as our
President since February 1997 and as our Chief Executive Officer since December
1998. Dr. Matthews has served as a director of Deltagen since February 1997.
Prior to founding our company, Dr. Matthews worked at Genentech, Inc., from June
1992 to January 1997 where he established and ran a program in stem cell
biology. Dr. Matthews received his Ph.D. in cell biology from Southwestern
Medical School in Dallas, followed by post-doctoral fellowships at Harvard
Medical School and Princeton University.
MARK W. MOORE, PH.D., a co-founder of our company, has served as our Chief
Scientific Officer and Treasurer since February 1997. Prior to founding our
company, Dr. Moore worked from August 1991 to January 1997 at Genentech, Inc.
where he established and directed Genentech's gene knockout program in mice.
Dr. Moore was a Leukemia Society of America post-doctoral fellow in molecular
and cellular immunology in the laboratory of Dr. Michael Bevan at Scripps
Clinic. Following his post-doctoral work, Dr. Moore served on the faculty of the
Norris Cancer Center at the University of Southern California. Dr. Moore
received his A.B. in biochemistry from Princeton University and his Ph.D. in
biology from Brandeis University.
AUGUSTINE G. YEE has served as our Vice President of Corporate Development,
General Counsel and Secretary since April 1999. Prior to joining us, Mr. Yee was
a patent and intellectual property litigation attorney with the law firm of
Lyon & Lyon LLP from October 1993 to July 1995, and a corporate securities and
technologies attorney with Pillsbury Madison & Sutro LLP from August 1995 to
April 1999, where he represented companies in the biotechnology and information
technology fields. Mr. Yee was formerly a law clerk to the Honorable Edward
Rafeedie, United States District Court, Central District of California, and is
admitted to practice before the United States Patent and Trademark Office.
Mr. Yee received his B.S. in molecular biology from the University of California
at San Diego and his J.D. from Pepperdine University School of Law.
LARS BARFOD has served as our Vice President of Commercial Development since
October 1999. From March 1999 to September 1999, Mr. Barford served as Vice
President, Sales & Marketing at Ciphergen Biosystems, Inc. From April 1997 to
January 1999, Mr. Barfod served as Vice President of
45
<PAGE>
Marketing at Genentech. Mr. Barfod was also a member of Genentech's Product
Development and Commercial Operations committees. Prior to joining Genentech,
Mr. Barfod spent 11 years at Novo Nordisk Pharmaceuticals, Inc., most recently
as Vice President of Sales, Marketing and Business Development. Mr. Barfod
received his Masters degree in marketing from the Royal University of
Copenhagen, Denmark.
JOHN E. BURKE has served as our Vice President of Intellectual Property
since December 1999. Prior to joining us, Mr. Burke was Of Counsel with the law
firm of Pillsbury Madison & Sutro LLP from 1996 to 1999. Prior to that time, he
was a patent and intellectual property attorney with the law firm of Schwegman,
Lundberg, Woessner & Kluth from 1995 to 1996, and served as Corporate Patent
Counsel for Cortech, Inc., from 1993 to 1995. Mr. Burke was also a patent
attorney with the law firm of Morgan & Finnegan from 1990 to 1992. Mr. Burke is
admitted to practice before the U.S. Court of Appeals for the Federal Circuit,
the U.S. Supreme Court, and the U.S. Patent and Trademark Office and is a member
of the California and New York state bars. Mr. Burke received his B.S. in
chemical/ biochemical engineering from Rutgers College of Engineering and his
J.D. from Rutgers School of Law.
TERRY COLEY, PH.D. has served as our Vice President of Information
Technology since September 1999. Prior to joining us, Dr. Coley was co-founder
and CEO of Virtual Chemistry, Inc., from January 1996 to August 1999. At Virtual
Chemistry, Dr. Coley established software teams to engineer custom software for
biotechnology and pharmaceutical companies. Prior to that time, Dr. Coley worked
as a molecular modeling software development project leader at Molecular
Simulations Inc. Dr. Coley received his B.S. in chemistry and computer science
from the University of Illinois and his Ph.D. in computational chemistry from
the California Institute of Technology.
BRIAN E. CROWLEY has served as our Director of Finance since August 1999.
Prior to joining us, Mr. Crowley was the Director of Finance at Polycom, Inc.
from January 1997 to February 1998 and the General Accounting Manager from
November 1994 to January 1997. Prior to that time, Mr. Crowley served as
controller at The LAN Guys Inc. and Conductus, Inc., and as an associate at
PricewaterhouseCoopers LLP. Mr. Crowley received his B.S. from St. Mary's
College of California and his M.B.A. from the University of Notre Dame. He is a
licensed Certified Public Accountant in California.
VICENTE ANIDO, JR., PH.D. has served as a member of our board of directors
since July 1998. Dr. Anido has been CEO and President of CombiChem, Inc., a
combinatorial company, since March 1996. Prior to joining CombiChem, Dr. Anido
was the President of the Americas region at Allergan, Inc., where he was
responsible for Allergan's commercial operations in North and South America from
June 1993 to March 1996. Prior to Allergan, Dr. Anido spent 18 years at Marion
Laboratories. Dr. Anido has also held the position of President and General
Manager of Nordic Laboratories and Marion Merrell Dow. Dr. Anido is currently a
director of Galileo Laboratories, Inc., FeRx, Inc., Adaptive Info.com and
Dochendo, Inc. Dr. Anido received his B.S. in pharmacy and his M.S. in
pharmaceutical sciences from West Virginia University and his Ph.D. in pharmacy
administration from the University of Missouri, Kansas City.
PHILIPPE O. CHAMBON, M.D., PH.D. has served as a member of our board of
directors since July 1998. Since January 1997, Dr. Chambon has been a Vice
President of The Sprout Group, the venture capital affiliate of Donaldson,
Lufkin & Jenrette. Dr. Chambon joined The Sprout Group in May 1995. From May
1993 to April 1995, Dr. Chambon served as Manager in the Healthcare Practice of
the Boston Consulting Group, a management consulting firm. He was formerly an
executive with Sandoz Pharmaceuticals, a subsidiary of Novartis. Dr. Chambon is
currently a director of Variagenics, Inc., PharSight Corporation, Skila Inc.,
and Spotfire, Inc., as well as several other private companies. Dr. Chambon
received his M.D. and Ph.D. degrees from the University of Paris and his M.B.A.
from Columbia University.
46
<PAGE>
THOMAS A. PENN has served as a member of our board of directors since
January 2000. Since June 1998, Mr. Penn has been a partner at Boston Millennia
Partners, a Boston-based venture capital firm. From March 1994 until March 1998,
Mr. Penn served as President and CEO of Tektagen, Inc. Mr. Penn is a director of
various private companies. Mr. Penn received B.S. degrees from the Massachusetts
Institute of Technology in metallurgy and materials science and in industrial
management, an M.B.A. from Stanford University, and a J.D. from the University
of Pennsylvania School of Law.
F. NOEL PERRY has served as a member of our board of directors since
February 1997. Mr. Perry has been a managing director of Baccharis
Capital, Inc., a venture capital firm founded in 1991. Mr. Perry is a director
of several private companies. Mr. Perry received his B.A. from the University of
Rhode Island and holds an M.B.A. from George Washington University. Mr. Perry is
a Chartered Financial Analyst.
NICHOLAS J. SIMON served as a member of our board of directors since June
1998 and Chairman of the Board since April 2000. Since April 2000, Mr. Simon has
been CEO of IO Pharmaceuticals. Mr. Simon also served as Vice President of
Business and Corporate Development of Genentech, Inc., from December 1995 to
March 2000, in which capacity he was responsible for product acquisitions,
strategic alliances, technology venture activities and corporate strategic
planning. Mr. Simon joined Genentech in 1989 as the Director of Business
Development and has over 20 years of experience in the biotechnology and
biomedical industries. Mr. Simon is currently a director of Intermune, Inc.,
Predict, Inc., Genitope, Inc. and IO Pharmaceuticals. He received his B.S. in
microbiology from the University of Maryland and holds an M.B.A. from Loyola
College.
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
We currently have authorized seven directors and there is currently one
vacancy. All directors are elected to hold office until their successors have
been elected. There are no family relationships among any of our directors or
executive officers.
We intend to amend our certificate of incorporation to provide for a board
of directors consisting of seven members, who will be divided into three classes
serving staggered three-year terms:
- The term of our Class I directors will expire at our 2001 annual meeting;
- The term of our Class II directors will expire at our 2002 annual meeting;
and
- The term of our Class III directors will expire at our 2003 annual
meeting.
Our Class I directors will be Messrs. Perry and Simon. Our Class II
directors will be Messr. Penn and Dr. Chambon. Our Class III directors will be
Messr. Anido and Dr. Matthews. The board vacancy will be a member of Class III.
Because we have a classified board, only two of our six board members will be
elected at each annual stockholders' meeting, or three in the case of elections
for our Class III directors, with the other directors continuing for the
remainder of their class terms.
Our board of directors has a compensation committee and an audit committee.
Our compensation committee is responsible for, among other things, determining
salaries, incentives and other forms of compensation for our directors, officers
and other employees and administering various incentive compensation and benefit
plans. Prior to April 2000, we did not have a compensation committee. Our board
of directors established executive compensation levels for 1999. Drs. Anido and
Chambon and Messrs. Penn and Perry are the current members of the compensation
committee. William Matthews, our President and Chief Executive Officer, will
participate in all discussions and decisions regarding salaries and incentive
compensation for all employees and consultants of our company, except that he
will be excluded from decisions regarding his own salary and incentive
compensation.
47
<PAGE>
Our audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
Drs. Anido and Chambon and Mr. Penn are the current members of the audit
committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1999, we did not have a compensation committee and our board of directors
established executive compensation levels for fiscal year 1999. William
Matthews, who is our President and Chief Executive Officer and was a member of
our board of directors in 1999, will participate in all discussions and
decisions regarding salaries and incentive compensation for all employees and
consultants of our company, except that he will be excluded from decisions
regarding his own salary and incentive compensation. Established in April 2000,
our compensation committee is composed of four non-management directors. All
decisions relating to the compensation of our executive officers will be made by
the compensation committee.
DIRECTOR COMPENSATION
Except as we otherwise describe below, we have not paid any cash
compensation to members of our board of directors for their services as
directors.
We reimburse the directors for reasonable expenses in connection with
attendance at board and committee meetings. Directors are also eligible to
receive stock options under our 2000 Stock Incentive Plan. Non-employee
directors will receive annual stock option grants to purchase 5,000 shares of
common stock. A new director will receive a stock option grant to purchase
20,000 shares of common stock. As of the date of this prospectus, we have
granted a total 85,000 options to non-employee directors.
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned, including salary,
bonuses, stock options and other compensation during the fiscal year ended
December 31, 1999 by William Matthews, our President and Chief Executive
Officer, and three of our other four executive officers, each of whose total
annual compensation exceeded $100,000 in 1999. We may refer to these officers as
our named executive officers in other parts of this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND POSITION(S) SALARY BONUS OPTIONS/SARS COMPENSATION
- ------------------------------------------ ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
William Matthews, Ph.D.................... $205,833 $ 52,250 -- --
Chief Executive Officer and President
Mark W. Moore, Ph.D....................... 205,833 42,000 -- --
Chief Scientific Officer
Augustine G. Yee.......................... 124,631 13,125 200,000 78,444(1)
Vice President of Corporate Development,
Secretary and General Counsel
Terry Coley, Ph.D......................... 58,333 -- 150,000 70,000(1)
Vice President of
Information Technology
</TABLE>
- ------------------------
(1) Represents amount provided for relocation expenses.
48
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes the stock options granted to each named
executive officer during the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION -----------------------------
NAME GRANTED(1) FISCAL YEAR 99 PRICE(2) DATE(3) 5% 10%
- ------------------------- ---------- -------------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Matthews,
Ph.D................... -- -- -- -- $ $
Mark W. Moore, Ph.D...... -- -- -- --
Augustine G. Yee......... 200,000 16.8% $ 0.35 05/13/09
Terry Coley, Ph.D........ 150,000 12.6% $ 0.35 09/16/09
</TABLE>
- ------------------------
(1) These incentive stock options are exercisable in full immediately, but the
shares received upon exercise are subject to repurchase by us. Our right of
repurchase lapses as to 25% of the shares covered by the respective options
on the first anniversary of the date of grant, and lapses ratably on a
monthly basis thereafter, with the repurchase right terminating in full on
the fourth anniversary of the date of grant. Under the terms of our 1998
Stock Incentive Plan our board of directors retains the discretion, subject
to specified limitations within the stock plan, to modify, extend or renew
outstanding options and to reprice outstanding options. Options may be
repriced by canceling outstanding options and reissuing new options with an
exercise price equal to the fair market value on the date of reissue, which
may be lower than the original exercise price of such canceled options.
(2) The exercise price for each grant is equal to 100% of the fair market value
of our common stock on the date of grant.
(3) The options have a term of ten years, subject to earlier termination in
certain events related to termination of employment.
(4) The dollar amounts under these columns represent the potential realizable
value of each grant assuming that the market value of our stock appreciates
from the date of grant to the expiration of the option at annualized rates
of 5% and 10%. The 5% and 10% assumed rates of appreciation are suggested by
the rules of the Securities and Exchange Commission and do not represent our
estimate or projection of the future common stock price. There can be no
assurance that any of the values reflected in the table will be achieved and
the actual amount the executive officer may realize will depend on the
extent to which the stock price exceeds the exercise price of the options on
the date of the option is exercised.
49
<PAGE>
AGGREGATED CORRESPONDING OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1999
The following table provides information concerning the number and value of
unexercised options held by the named executive officers at December 31, 1999.
None of the named executive officers exercised any options during the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
William Matthews, Ph.D......................... 240,000 -- $ $
Mark W. Moore, Ph.D............................ 240,000 --
Augustine G. Yee............................... 200,000 --
Terry Coley, Ph.D.............................. 150,000 --
</TABLE>
- ------------------------
(1) The value of unexercised in-the-money options held at December 31, 1999
represents the total gain which an option holder would realize if he or she
exercised all of the in-the-money options held at December 31, 1999, and is
determined by multiplying the number of shares of common stock underlying
the options by the difference between an assumed initial public offering
price of per share and the per share option exercise price. An option
is in-the-money if the fair market value of the underlying shares exceeds
the exercise of the option.
EMPLOYMENT AGREEMENTS
Dr. Matthews is party to an employment agreement dated April 7, 2000. The
agreement will expire on April 7, 2003 but will automatically renew for
additional one-year terms after that date unless either we or Dr. Matthews give
notice to not renew the agreement at least ninety days prior to the expiration
of the then existing term. The agreement provides for an initial annual salary
of $235,000 and accelerated vesting of all of Dr. Matthews' options in the event
of a change in control of our company. In addition, Dr. Matthews is entitled to
an annual bonus to be determined by the board of directors. In the event that
Dr. Matthews is terminated without cause, he will be entitled to receive
severance equal to nine months of his base salary.
Dr. Moore is party to an employment agreement dated April 8, 2000. The
agreement will expire on April 8, 2003 but will automatically renew for
additional one-year terms after that date unless either we or Dr. Moore give
notice to not renew the agreement at least ninety days prior to the expiration
of the then existing term. The agreement provides for an initial annual salary
of $225,000 and accelerated vesting of all of Dr. Moore's options in the event
of a change in control of our company. In addition, Dr. Moore is entitled to an
annual bonus to be determined by the board of directors. In the event that
Dr. Moore is terminated without cause, he will be entitled to receive severance
equal to six months of his base salary.
Mr. Yee is party to an employment agreement dated April 7, 2000. The
agreement will expire on April 7, 2003 but will automatically renew for
additional one-year terms after that date unless either we or Mr. Yee give
notice to not renew the agreement at least ninety days prior to the expiration
of the then existing term. The agreement provides for an initial annual salary
of $175,000 and accelerated vesting of a portion of Mr. Yee's options in the
event of a change in control of our company, unless more than 50% of his options
have already vested. In addition, Mr. Yee is entitled to an annual bonus to be
determined by the board of directors. In the event that Mr. Yee is terminated
without cause, he will be entitled to receive severance equal to six months of
his base salary.
50
<PAGE>
Dr. Coley is party to an employment agreement dated April 7, 2000. The
agreement will expire on April 7, 2003 but will automatically renew for
additional one-year terms after that date unless either we or Dr. Coley give
notice to not renew the agreement at least ninety days prior to the expiration
of the then existing term. The agreement provides for an initial annual salary
of $175,000 and accelerated vesting of a portion of Dr. Coley's options in the
event of a change in control of our company, unless more than 50% of his options
have already vested. In addition, Dr. Coley is entitled to an annual bonus to be
determined by the board of directors. In the event that Dr. Coley is terminated
without cause, he will be entitled to receive severance equal to six months of
his base salary.
BENEFIT PLANS
1998 STOCK INCENTIVE PLAN
In April 1998, our board of directors adopted our 1998 Stock Incentive Plan,
or 1998 Stock Plan. The 1998 Stock Plan has been amended at various times to
increase the number of shares available under the 1998 Stock Plan. A total of
3,756,780 shares of common stock may be issued under the 1998 Stock Plan
pursuant to the direct award or sale of shares or the exercise of options
granted under the 1998 Stock Plan. If any option granted under the 1998 Stock
Plan expires or terminates for any reason without having been exercised in full,
then the unpurchased shares subject to that option will once again be available
for additional option grants.
Under the 1998 Stock Plan, all our employees, including officers and
directors or any subsidiary and any independent contractor or advisor who
performs services for us or a subsidiary are eligible to purchase shares of
common stock and to receive awards of shares or grants of nonstatutory options.
Employees are also eligible to receive grants of incentive stock options, or
ISOs, intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended. The 1998 Stock Plan is administered by the compensation
committee of our board of directors, which selects the persons to whom shares
will be sold or awarded or options will be granted, determines the number of
shares to be made subject to each sale, award or grant, and prescribes other
terms and conditions, including the type of consideration to be paid to us upon
sale or exercise and vesting schedules in connection with each sale, award or
grant.
The exercise price under the nonstatutory options generally must be at least
85% of the fair market value of the common stock on the date of grant. The
exercise price under ISOs cannot be lower than 100% of the fair market value of
the common stock on the date of grant and, in the case of ISOs granted to
holders of more than 10% of the voting power of our company, not less than 110%
of such fair market value. The term of an option cannot exceed 10 years, and the
term of an ISO granted to a holder of more than 10% of the voting power of our
company cannot exceed five years. Options generally expire not later than
30 days following a termination of employment or six months following the
optionee's death or permanent disability.
As of March 31, 2000 we had outstanding options to purchase an aggregate of
1,117,100 shares of common stock at a weighted exercise price of $0.77 per
share. A total of 8,023 shares of common stock were available for future
issuance under the 1998 Stock Plan as of such date.
2000 STOCK INCENTIVE PLAN
The 2000 Stock Incentive Plan was adopted by our board of directors in April
2000 and will be submitted for approval by our stockholders prior to the
completion of this offering. The 2000 Stock Incentive Plan will be administered
by our compensation committee. The 2000 Stock Incentive Plan provides for the
direct award or sale of shares of common stock and for the grant of options to
purchase shares of common stock. The 2000 Stock Incentive Plan provides for the
grant of incentive stock options as defined in Section 422 of the Internal
Revenue Code and the grant of nonstatutory
51
<PAGE>
stock options, restricted shares, stock appreciation rights, or SARs, and stock
units, or units to employees, non-employee directors and consultants.
4,800,000 shares of common stock have been authorized for issuance under the
2000 Stock Incentive Plan. The number of shares reserved for issuance under the
2000 Stock Incentive Plan will be increased on January 1 of each year from 2001
through 2010 by the lowest of:
- 4,000,000 shares of our common stock;
- 5% of our fully diluted outstanding common stock on the day of the
increase; or
- a lesser number of shares determined by our board of directors.
However, in no event may a participant receive SARs or option grants for more
than 750,000 shares in the aggregate per fiscal year, except that in the fiscal
year an individual's services first commence, the individual may receive SARs or
option grants for up to 1,500,000 shares in the aggregate.
The 2000 Stock Incentive Plan will have the following features:
- qualified employees will be eligible for the grant of incentive stock
options to purchase shares of common stock;
- qualified non-employee directors will be eligible to receive automatic
option grants, to be made at the consummation of our initial public
offering and at periodic intervals, to purchase shares of common stock at
an exercise price equal to 100% of the fair market value of those shares
on the date of grant;
- the compensation committee will determine the exercise price of options or
the purchase price of stock purchase rights, but in no event will the
option price for incentive stock options be less than 100% of the fair
market value of the stock on the date of grant; and
- the exercise price or purchase price may, at the discretion of the
compensation committee, be paid in, among other things, cash, cash
equivalents, full-recourse promissory notes, past services or future
services.
The 2000 Stock Incentive Plan includes change in control provisions that may
result in the accelerated vesting of outstanding option grants and SARs. The
committee may grant options or SARs in which all or some of the shares shall
become vested in the event of a change in control of the company. Change in
control is defined under the 2000 Stock Incentive Plan as:
- a change in the composition of the board of directors, as a result of
which fewer than one-half of our incumbent directors are directors who
either:
-- had been directors of our company 24 months prior to the change, or
-- were elected, or nominated for election, to the board with the
affirmative votes of at least a majority of our directors who had
been directors 24 months prior to the change and who were still in
office at the time of the election or nomination; or
- an acquisition or aggregation of securities by a person, as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, as a result of which the person becomes the beneficial owner of
fifty percent or more of the voting power of our then outstanding
securities.
The board of directors will be able to amend or modify the 2000 Stock
Incentive Plan at any time, subject to any required stockholder approval. The
2000 Stock Incentive Plan will terminate no later than ten years from the date
of adoption.
52
<PAGE>
2000 EMPLOYEE STOCK PURCHASE PLAN
The board of directors adopted our 2000 Employee Stock Purchase Plan in
April 2000, to be effective upon completion of this offering. We will be
submitting it for approval by our stockholders prior to the completion of this
offering. A total of 1,000,000 shares of common stock have been reserved for
issuance under our employee stock purchase plan. The number of shares reserved
for issuance under the 2000 Employee Stock Purchase Plan will be increased on
the first day of each of our fiscal years, commencing 2001, by the lesser of:
- 5% of our fully diluted outstanding common stock on the day of the
increase; or
- a lesser number of shares determined by our board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees, including our
officers and employee directors but excluding 5% or greater stockholders, are
eligible to participate if they are customarily employed for more than 20 hours
per week and for at least five months in any calendar year. Our 2000 Employee
Stock Purchase Plan permits eligible employees to purchase common stock through
payroll deductions, which may not exceed 15% of an employee's compensation.
The 2000 Employee Stock Purchase Plan will be implemented during a series of
overlapping offering periods of 24 months' duration, with new offering periods,
other than the first offering period, commencing on January 1 and July 1 of each
year. Our 2000 Employee Stock Purchase Plan establishes two accumulation periods
per year, neither of which will exceed six months. During each accumulation
period, payroll deductions will accumulate, without interest. On the purchase
dates set by the board of directors for each accumulation period, accumulated
payroll deductions will be used to purchase common stock. The initial offering
period will be for a 12 month duration and is expected to commence on the date
of this offering and end on June 30, 2001. The initial accumulation period will
begin on the date of this offering and end on December 31, 2000.
The purchase price will be equal to 85% of the fair market value per share
of common stock on either the last day of the accumulation period or on the last
trading day before the commencement of the applicable offering period, whichever
is less. Employees may withdraw their accumulated payroll deductions at any
time. Participation in our 2000 Employee Stock Purchase Plan ends automatically
on termination of employment with us. Immediately prior to the effective time of
a corporate reorganization, the participation period then in progress will
terminate and stock will be purchased with the accumulated payroll deductions
unless the 2000 Employee Stock Purchase Plan is assumed by the surviving
corporation or its parent corporation pursuant to the plan of merger or
consolidation.
401(k) PLAN
Effective January 1, 1999 we established a tax-qualified employee savings
and retirement plan for which our employees will generally be eligible. Under
the 401(k) Plan, employees may elect to reduce their current compensation and
have the amount of the reduction contributed to the 401(k) Plan. To date, we
have made no matching contributions. The 401(k) Plan is intended to qualify
under Section 401 of the Internal Revenue Code, so that contributions to the
401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by us,
if any, will be deductible by us when made.
53
<PAGE>
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We believe that we have executed all of the transactions set forth below on
terms no less favorable to us than terms we could have obtained from
unaffiliated third parties. It is our intention to ensure that all future
transactions, including loans, between us and our officers, directors and
principal stockholders and their affiliates, are approved by a majority of the
board of directors, including a majority of the independent and disinterested
members of the board of directors, and are on terms no less favorable to us than
those that we could obtain from unaffiliated third parties.
In connection with our founding in January 1997, we sold 666,680 shares of
common stock to each of William Matthews, Ph.D., our President and Chief
Executive Officer, and Mark W. Moore, Ph.D., our Chief Scientific Officer and
Treasurer, at a price of $0.01 per share. In addition, Dr. Matthews and
Dr. Moore both were also granted options to purchase 240,000 shares of common
stock, all of which were exercisable as of March 31, 2000. In addition, they
were granted options in March 2000 to purchase an aggregate number of 450,000
shares of common stock. These options were fully exercised as of March 31, 2000.
From February 1997 through January 2000, we sold shares of our preferred
stock in private financings as follows: 3,000,000 shares of Series A preferred
stock at a price of $1.00 per share in February and May 1997; 6,571,430 shares
of Series B preferred stock at a price of $1.75 per share in February and July
1998; and 6,298,870 shares of Series C preferred stock at a price of $3.58 per
share in January 2000. Of the 6,571,430 outstanding shares of Series B preferred
stock, Tularik, Inc. purchased 428,572 shares in February 1998 at a purchase
price of $1.75 per share in connection with an agreement, whereby we would
produce knockout mice for Tularik, Inc.
Each share of preferred stock will convert automatically into one share of
common stock upon the closing of this offering. The purchasers of the preferred
stock include the following holders of more than 5% of our securities and their
affiliated entities:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
---------------------------------
INVESTOR SERIES A SERIES B SERIES C
- ------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Stipa Investments, L.P.(1).................................. 3,000,000 1,571,429 837,988
Entities associated with the Sprout Group(2)................ -- 4,183,888 1,278,248
Entities associated with Boston Millennia Partners(3)....... -- -- 2,234,636
</TABLE>
- ------------------------
(1) F. Noel Perry, a member of our board of directors, is a Managing Director of
Baccharis Capital, which is the general partner of Stipa Investments, L.P.
(2) Includes shares held by DLJ Capital Corp., Sprout Venture Capital, L.P.,
Sprout CEO Fund, L.P. and Sprout Capital VIII, L.P. Philippe Chambon, a
member of our board of directors, is affiliated with each of these entities.
(3) Includes shares held by Boston Millennia Partners II-A, Limited Partnership
and Boston Millennia Associates II, Partnership. Thomas Penn, a member of
our board of directors, is a general partner of Boston Millennia Partners,
the sponsor of each of these funds.
In 1998, we issued three of our directors options to acquire 325,000 shares
of common stock at an exercise price of $0.35 per share.
Additionally in January 2000, in connection with our sale of Series C
preferred stock, we granted to a group of investors that included entities
affiliated with Stipa Investments, Sprout Group and Boston Millennia Partners
and directors Perry, Chambon and Penn, an option to purchase up to 15% of the
shares offered in this offering.
54
<PAGE>
In March 2000, we loaned $536,700 to William Matthews, Ph.D., and $268,350
to Mark W. Moore, Ph.D., in connection with their exercise of employee stock
options. Each loan was made pursuant to a four-year, full recourse promissory
note bearing interest at the rate of 6.8% per annum (the applicable federal
rate), and was secured by a pledge of the shares purchased.
In March 2000, in connection with a consulting arrangement, we agreed to
issue to Institute Genetique Biologie Moleculaire et Cellulaire, IGBMC, a
three-year warrant to purchase 400,000 shares of our Series C preferred stock at
a price of $3.58 per share. This warrant will vest in its entirety on the four
month anniversary of the commencement date of the agreement. IGBMC, a scientific
foundation, is under the direction of Professor Pierre Chambon, who is the
father of a director of Deltagen, Philippe Chambon. In March 2000 we also
granted to Professor Chambon an option to purchase 25,000 shares of common stock
at a price of $1.79 per share.
The purchasers of the above shares of preferred stock and warrants to
purchase preferred stock are entitled to registration rights. See "Description
of Capital Stock--Registration Rights."
For information concerning indemnification of directors and officers, see
"Description of Capital Stock--Limitation of Liability and Indemnification
Matters."
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Our amended and restated certificate of incorporation and bylaws provide
that we will indemnify each of our directors and officers to the fullest extent
permitted by Delaware General Corporation Law. Further, we have entered into
indemnification agreements with each of our directors and officers.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following tables set forth information about the beneficial ownership of
our common stock on March 31, 2000, and as adjusted to reflect the sale of the
shares of common stock in this offering, by:
- each named executive officer;
- each of our directors;
- each person known to us to be the beneficial owner of more than 5% of our
common stock; and
- all of our executive officers and directors as a group.
Unless otherwise noted below, the address of each beneficial owner listed on
the tables is c/o Deltagen, Inc., 1003 Hamilton Avenue, Menlo Park, California
94025.
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by the footnotes below,
we believe, based on the information furnished to us, that the persons and
entities named in the tables below have sole voting and investment power with
respect to all shares of common stock that they beneficially own, subject to
applicable community property laws. We have based our calculation of the
percentage of beneficial ownership on 19,025,525 shares of common stock
outstanding on March 31, 2000 and shares of common stock outstanding upon
completion of this offering.
In computing the number of shares of common stock beneficially owned by a
person and the percentage ownership of that person, we deemed outstanding shares
of common stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of March 31, 2000. We did not deem
these shares outstanding, however, for the purpose of computing the percentage
ownership of any other person. Asterisks represent beneficial ownership of less
than one percent.
56
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES OF BENEFICIALLY OWNED
COMMON STOCK -------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
- ----------------------------------------------------------- -------------- -------- --------
<S> <C> <C> <C>
Vicente Anido, Jr., Ph.D. ................................. 35,000 *
1621 Bayside Drive
Corona Del Mar, CA 92625
Philippe O. Chambon, M.D., Ph.D.(2) ....................... 5,462,136 28.7%
c/o The Sprout Group
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Thomas A. Penn(3) ......................................... 2,234,636 11.8%
c/o Boston Millennia Partners
20 Valley Stream Parkway, Suite 265
Malvern, PA 19355
F. Noel Perry(4) .......................................... 5,409,417 28.4%
c/o Baccharis Capital Inc.
2420 Sand Hill Road
Suite 100
Menlo Park, CA 94025
Nicholas J. Simon ......................................... 50,000 *
531 Parrott Drive
San Mateo, CA 94402
William Matthews, Ph.D.(5) ................................ 1,206,680 6.3%
Mark W. Moore, Ph.D.(6) ................................... 1,056,680 5.5%
Augustine G. Yee .......................................... 200,000 *
Terry Coley, Ph.D. ........................................ 150,000 *
All directors and executive officers as a group
(9 persons)(7) .......................................... 15,804,549 81.0%
</TABLE>
- ------------------------
57
<PAGE>
(1) Includes, where indicated, shares issuable upon the exercise of options
exercisable within 60 days of March 31, 2000. These options, granted under
the 1998 Stock Incentive Plan, were immediately exercisable for shares
subject to repurchase upon termination of employment. The right to
repurchase terminates, and the shares vest, as to 25% of the shares after
one year of employment and monthly thereafter over the remaining three
years.
(2) Includes 5,056,396 shares held by Sprout Capital VIII, L.P., 22,981 shares
held by The Sprout CEO Fund, L.P., 79,375 shares held by DLJ Capital Corp.
and 303,384 shares held by Sprout Venture Capital L.P., a division of DLJ
Capital Corp., which is the Managing General Partner of Sprout Capital VIII,
L.P., the General Partner of the Sprout CEO Fund and the General Partner of
Sprout Venture Capital L.P. He is also General Partner of DLJ Associates
VIII, L.P., the General Partner of Sprout Capital VIII, L.P. Philippe
Chambon, M.D., Ph.D. is a vice president of the Sprout Group and is a member
of our board of directors. Dr. Chambon disclaims beneficial ownership of the
shares held by these entities except to the extent of his pecuniary interest
in these shares. Excludes a three-year warrant to purchase 400,000 shares of
Series C preferred stock at a price of $3.58 per share granted in connection
with a consulting agreement with Institute Genetique Biologie Moleculaire et
Cellulaire, a scientific foundation, that is under the direction of
Professor Pierre Chambon, who is the father of Philippe Chambon.
(3) Includes 78,225 shares held by Boston Millennia Partners II-A L.P. and
2,156,411 shares held by Boston Millennia Associates II Partnership. Thomas
Penn is a general partner of Boston Millennia Partners, the sponsor of these
investment funds and is a member of our board of directors. Mr. Penn
disclaims beneficial ownership of the shares held by these entities except
to the extent of his pecuniary interest in these shares.
(4) Includes 5,409,417 shares held by Stipa Investments, L.P. F. Noel Perry, a
member of our board of directors, is a managing director of Baccharis
Capital, Inc., which is the general partner of Stipa Investments, L.P.
Mr. Perry disclaims beneficial ownership of the shares held by such entity
except to the extent of his pecuniary interest in these shares.
(5) Includes 240,000 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 2000 and 300,000 shares subject to repurchase as
of March 31, 2000.
(6) Includes 240,000 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 2000 and 150,000 shares subject to repurchase as
of March 31, 2000.
(7) Includes 480,000 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 2000, of which 450,000 shares are subject to
repurchase as of March 31, 2000.
58
<PAGE>
5% STOCKHOLDERS
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
NUMBER OF BENEFICIALLY OWNED
SHARES OF -------------------
COMMON STOCK BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
- ----------------------------------------------------------- ------------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with The Sprout Group(1) .............. 5,462,136 28.7%
3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Stipa Investments, L.P.(2) ................................ 5,409,417 11.8%
2420 Sand Hill Road
Suite 100
Menlo Park, CA 94025
Entities affiliated with Boston Millennia Partners(3) ..... 2,234,636 28.4%
Rowes Wharf
Boston, MA 02110
William Matthews, Ph.D..................................... 1,206,680 6.3%
Mark W. Moore, Ph.D........................................ 1,056,680 5.5%
</TABLE>
- ------------------------
(1) Includes 5,056,396 shares held by Sprout Capital VIII, L.P., 22,981 shares
held by The Sprout CEO Fund, L.P., 79,375 shares held by DLJ Capital Corp.
and 303,384 shares held by Sprout Venture Capital L.P., a division of DLJ
Capital Corp., which is the Managing General Partner of Sprout Capital VIII,
L.P., the General Partner of the Sprout CEO Fund and the General Partner of
Sprout Venture Capital L.P. He is also General Partner of DLJ Associates
VIII, L.P., the General Partner of Sprout Capital VIII, L.P. Philippe
Chambon, M.D., Ph.D. is a vice president of the Sprout Group and is a member
of our board of directors. Dr. Chambon disclaims beneficial ownership of the
shares held by these entities except to the extent of his pecuniary interest
in these shares. Excludes a three-year warrant to purchase 400,000 shares of
Series C preferred stock at a price of $3.58 per share granted in connection
with a consulting agreement with Institute Genetique Biologie Moleculaire et
Cellulaire, a scientific foundation, that is under the direction of
Professor Pierre Chambon, who is the father of Philippe Chambon.
(2) F. Noel Perry, a member of our board of directors, is a managing director of
Baccharis Capital, Inc., which is the general partner of Stipa Investments,
L.P. Mr. Perry disclaims beneficial ownership of the shares held by such
entity except to the extent of his pecuniary interest in these shares.
(3) Includes 78,225 shares held by Boston Millennia Partners II-A L.P. and
2,156,411 shares held by Boston Millennia Associates II Partnership. Thomas
Penn is a general partner of Boston Millennia Partners, which is the sponsor
of each of these investment funds and is a member of our board of directors.
Mr. Penn disclaims beneficial ownership of the shares held by these entities
except to the extent of his pecuniary interest in these shares.
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our amended
and restated certificate of incorporation and our amended and restated by-laws
is a summary. Statements contained elsewhere in this prospectus relating to
these provisions are not necessarily complete, and we refer you to the amended
and restated certificate of incorporation and the amended and restated by-laws
that will be in effect upon the completion of this offering. We have filed
copies of these documents with the Securities and Exchange Commission as
exhibits to our registration statement, of which this prospectus is a part. The
amended and restated certificate of incorporation and the amended and restated
by-laws described below will become effective at the time of completion of this
offering.
Upon the closing of this offering, our authorized capital stock, after
giving effect to the conversion of all outstanding preferred stock into common
stock, and the amendment of our certificate of incorporation, will consist of
75,000,000 shares of common stock, $0.001 par value, and 5,000,000 shares of
preferred stock, $0.001 par value.
COMMON STOCK
As of March 31, 2000 there were 19,025,525 shares of common stock
outstanding and held by 125 stockholders of record, assuming the automatic
conversion of each outstanding share of preferred stock upon the closing of this
offering. After this offering, there will be shares of our common stock
outstanding, shares if the underwriters exercise their over-allotment
option in full.
The holders of our common stock are entitled to one vote for each share held
of record on all matters submitted to a vote of the stockholders, including the
election of directors, and do not have cumulative voting rights. Accordingly,
the holders of a majority of the shares of common stock entitled to vote in any
election of directors can elect all of the directors standing for election, if
they so choose. Subject to preferences that may be applicable to any then
outstanding preferred stock, holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the board of directors out
of funds legally available therefor. See "Dividend Policy." Upon our
liquidation, dissolution or winding up, the holders of common stock will be
entitled to share ratably in the net assets legally available for distribution
to stockholders after the payment of all of our debts and other liabilities of
our company, subject to the prior rights of any preferred stock then
outstanding. Holders of common stock have no preemptive or conversion rights or
other subscription rights and there are no redemption or sinking funds
provisions applicable to the common stock. All outstanding shares of common
stock are, and the common stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into common stock. See Note 8 of notes to our financial
statements for a description of the currently outstanding preferred stock.
Following the conversion, our certificate of incorporation will be restated to
delete all references to the prior series of preferred stock, and 5,000,000
shares of undesignated preferred stock will be authorized. The board of
directors has the authority, without further action by the stockholders, to
issue from time to time the preferred stock in one or more series and to fix the
number of shares, designations, preferences, powers, and relative,
participating, optional or other special rights and the qualifications or
restrictions thereof. The preferences, powers, rights and restrictions of
different series of preferred stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions, and purchase funds and other matters. The
issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to holders of common stock or affect adversely the
rights
60
<PAGE>
and powers, including voting rights, of the holders of common stock, and may
have the effect of delaying, deferring or preventing a change in control of us.
WARRANTS
As of March 31, 2000, we had two outstanding warrants entitling their
holders to purchase an aggregate of 37,713 shares of Series B preferred stock at
an exercise price of $1.75 per share and one outstanding warrant entitling the
holder to purchase 400,000 shares of Series C preferred stock at $3.58 per
share. The Series B warrants contain provisions which adjust the exercise price
and the aggregate number of shares that may be issued upon the exercise of the
warrant if a stock dividend, stock split, reorganization, reclassification or
consolidation occurs.
REGISTRATION RIGHTS
After this offering, the holders of 16,308,013 shares of common stock issued
upon conversion of the Series A preferred stock, Series B preferred stock and
Series C preferred stock and upon exercise of warrants are entitled to certain
rights with respect to the registration of such shares under the Securities Act.
If we propose to register any of our securities under the Securities Act for our
own account, holders of common stock issuable upon conversion of the Series A,
Series B and Series C preferred stock are entitled to notice of such
registration and are entitled to include their shares in that registration
subject to various conditions. The underwriters of any such offering have the
right to limit the number of shares included in such registration.
In addition, commencing 180 days after the effective date of the
registration statement of which this prospectus is a part, holders of at least
40% of the common stock issuable upon conversion of the Series C preferred stock
may require us to prepare and file a registration statement under the Securities
Act at our expense covering at least 40% of the common stock issuable upon
conversion of the Series C preferred stock, provided that the shares to be
included in such registration have an anticipated aggregate net proceeds to us
of at least $5,000,000. The holders of common stock issued upon conversion of
the Series A preferred stock and Series B preferred stock are entitled to
participate in any such registration. In addition, commencing 180 days after the
effective date of this registration statement of which this prospectus is a
part, holders of at least 30% of the common stock issuable upon conversion of
the Series A and Series B preferred stock may require us to prepare and file a
registration statement, under the Securities Act at our expense covering at
least 30% of the common stock issuable upon conversion of the Series A and
Series B preferred stock, provided that the shares entitled to be included in
such registration have an anticipated aggregated net proceeds to us of at least
$5,000,000. Under these demand registration rights, we are required to use our
reasonable best efforts to cause the shares requested to be included in the
registration statement, subject to customary conditions and limitations. We are
not obligated to effect more than two of these stockholder-initiated
registrations.
Once we become eligible to file a registration statement on Form S-3, the
holders of common stock issuable upon conversion of the Series A, Series B and
Series C preferred stock may require us to register, all or a portion of their
securities on a registration statement on Form S-3 and may participate in a
Form S-3 registration by us, subject to certain conditions and limitations.
Registration rights terminate no later than five years after this offering.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION AND BY-LAWS AND DELAWARE LAW
Our amended and restated certificate of incorporation and by-laws, effective
upon completion of this offering, contain provisions that could discourage,
delay or prevent a tender offer or takeover attempt at a price which many
stockholders may find attractive. The existence of these provisions,
61
<PAGE>
which are intended to enhance the likelihood of continuity and stability in the
composition of, and policies formulated by, our board, could limit the price
that investors might otherwise pay in the future for shares of our common stock.
BLANK CHECK PREFERRED STOCK. As noted above, our board of directors,
without stockholder approval, will have the authority under our amended and
restated certificate of incorporation to issue preferred stock with rights
superior to the rights of the holders of common stock. As a result, preferred
stock could be issued quickly and easily, could impair the rights of holders of
common stock and could be issued with terms calculated to delay or prevent a
change of control or make removal of management more difficult.
CLASSIFIED BOARD OF DIRECTORS. Our amended and restated certificate of
incorporation provides for a board of directors divided into three classes of
directors serving staggered three-year terms. The classification of directors
has the effect of making it more difficult for stockholders to change the
composition of the board of directors in a relatively short period of time. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the board of directors.
STOCKHOLDER ACTION. Our amended and restated certificate of incorporation
provides that stockholders may only act at meetings of stockholders and not by
written consent in lieu of a stockholders' meeting.
STOCKHOLDER MEETINGS. Our amended and restated certificate of incorporation
and by-laws provide that stockholders may not call a special meeting of the
stockholders. Rather, special meetings of stockholders may only be called by the
chief executive officer or secretary only at the request of the chairman of the
board, the chief executive officer or the president of our company or by a
resolution adopted by a majority of our board of directors. Our amended and
restated by-laws also provide that stockholders may only conduct business at
special meetings of stockholders that was specified in the notice of the
meeting. These provisions may discourage another person or entity from making a
tender offer, even if it acquired a majority of our outstanding voting stock,
because the person or entity could only take action at a duly called
stockholders' meeting relating to the business specified in the notice of
meeting and not by written consent.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. Our amended and restated by-laws provide that a stockholder seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide timely notice of this intention in writing. To be timely, a stockholder
must deliver or mail the notice and we must receive the notice at our principal
executive offices not less than 50 days nor more than 75 days prior to the
scheduled date of the annual meeting of stockholders. The amended and restated
by-laws also include a similar requirement for making nominations at special
meetings and specify requirements as to the time, form and content of the
stockholder's notice. These provisions could delay stockholder actions that are
favored by the holders of a majority of our outstanding stock until the next
stockholders' meeting.
SUPER-MAJORITY VOTING. Delaware law generally provides that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation, unless a corporation's
certificate of incorporation requires a greater percentage. We have provisions
in our certificate of incorporation which require a vote of at least 66 2/3% of
the stockholders entitled to vote in the election of directors to amend in any
respect or repeal the anti-takeover provisions of our certificate of
incorporation and a vote of at least 66 2/3% of the voting power of the
stockholders or board of directors to adopt, amend or repeal the by-laws of our
company.
62
<PAGE>
DELAWARE ANTI-TAKEOVER STATUTE. Section 203 of the Delaware corporation law
prohibits persons deemed "interested stockholders" from engaging in a "business
combination" with a Delaware corporation for three years following the date
these persons become interested stockholders. Interested stockholders generally
include:
- persons who are the beneficial owners of 15% or more of our outstanding
voting stock; and
- persons who are our affiliates or associates and who hold 15% or more of
our outstanding voting stock at any time within three years before the
date on which such person's status as an interested stockholder is
determined.
Subject to certain exceptions, a "business combination" includes, among
other things:
- mergers and consolidations;
- the sale, lease, exchange, mortgage, pledge, transfer or other disposition
of assets having an aggregate market value equal to 10% or more of either
the aggregate market value of all assets of the corporation determined on
a consolidated basis or the aggregate market value of all our outstanding
stock;
- transactions that result in our issuance or transfer of any of our stock
to the interested stockholder, except pursuant to certain exercises,
exchanges, conversions, distributions or offers to purchase with respect
to securities outstanding prior to the time that the interested
stockholder became such and that, generally, do not increase the
interested stockholder's proportionate share of any class or series of our
stock;
- any transaction involving us that has the effect of increasing the
proportionate share of our stock of any class or series, or securities
convertible into the stock of any class or series, that is owned directly
or indirectly by the interested stockholder; or
- any receipt by the interested stockholder of the benefit (except
proportionately as a stockholder) of any loans, advances, guarantees,
pledges or other financial benefits which we provided.
Section 203 does not apply to a business combination if:
- before a person becomes an interested stockholder, our board approves the
transaction in which the interested stockholder became an interested
stockholder or approves the business combination;
- upon consummation of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested stockholder
owns at least 85% of our voting stock outstanding at the time the
transaction commences (other than certain excluded shares); or
- following a transaction in which the person became an interested
stockholder, the business combination is approved by our board and
authorized at a regular or special meeting of stockholders (and not by
written consent) by the affirmative vote of the holders of at least
two-thirds of our outstanding voting stock not owned by the interested
stockholder.
These provisions of Delaware law and our amended and restated certificate of
incorporation and bylaws could have the effect of discouraging others from
attempting hostile takeovers and, as a consequence, they may also inhibit
temporary fluctuations in the market price of our common stock that often result
from actual or rumored hostile takeover attempts. Such provisions may also have
the effect of preventing changes in our management. It is possible that these
provisions could make it more difficult to accomplish transactions which
stockholders may otherwise deem to be in their best interests.
63
<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
We have adopted provisions in our amended and restated certificate of
incorporation that limit the liability of our directors for monetary damages for
breach of their fiduciary duty as directors, except for liability that cannot be
eliminated under the Delaware General Corporation Law, or Delaware Law. The
Delaware Law provides that directors of a company will not be personally liable
for monetary damages for breach of their fiduciary duty as directors, except for
liability
- for any breach of their duty of loyalty to us or our stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for unlawful payment of dividend or unlawful stock repurchase or
redemption, as provided Section 174 of the Delaware Law; or
- for any transaction from which the director derived an improper personal
benefit.
Any amendment or repeal of these provisions requires the approval of the
holders of shares representing at least 66 2/3% of our shares entitled to vote
in the election of directors, voting as one class.
Our amended and restated certificate of incorporation and amended and
restated bylaws also provide that we shall indemnify our directors and officers
to the fullest extent permitted by the Delaware Law. We have entered into
separate indemnification agreements with our directors and executive officers
that could require us, among other things, to indemnify them against liabilities
that may arise by reason of their status or service as directors and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified. We believes that the limitation of liability
provision in our amended and restated certificate of incorporation and the
indemnification agreements will facilitate our ability to continue to attract
and retain qualified individuals to serve as directors and officers of our
company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is BankBoston, N.A.
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common stock,
and no predictions can be made regarding the effect, if any, that market sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. As described below, only a limited number of
shares will be available for sale shortly after this offering due to certain
contractual and legal restrictions on resale. Nevertheless, sales of our common
stock in the public market after the restrictions lapse, or the perception that
such sales may occur, could adversely affect the prevailing market price.
SALE OF RESTRICTED SHARES AND LOCK-UP AGREEMENTS
Upon completion of this offering, we will have an aggregate of
outstanding shares of common stock, or shares if the underwriters exercise
the over-allotment option in full. As of March 31, 2000, we had:
- 1,572,568 outstanding restricted shares to employees, consultants and
directors;
- outstanding stock options to employees, consultants and directors for the
purchase of an aggregate of 1,117,100 shares of common stock;
- outstanding warrants to purchase 37,713 shares of Series B preferred stock
which will automatically convert into warrants to purchase an equal number
of shares of common stock upon the completion of this offering; and
- an outstanding a warrant to purchase 400,000 shares of Series C preferred
stock.
The shares of common stock being sold being sold in this offering will
be freely tradable (other than by an "affiliate" of our company as such term is
defined in the Securities Act) without restriction or registration under the
Securities Act. All remaining shares were issued and sold by us in private
transactions and are eligible for public sale if registered under the Securities
Act or sold in accordance with Rule 144 or Rule 701 thereunder.
Our directors, executive officers and certain stockholders, who collectively
hold an aggregate of shares of common stock, have agreed, pursuant to
lock-up agreements, that they will not sell any common stock owned by them
without the prior written consent of the representatives of the underwriters for
a period of 180 days from the date of this prospectus.
Following the expiration of the lockup period, approximately shares of
common stock, including shares issuable upon the exercise of certain options,
will be available for sale in the public market subject to compliance with
Rule 144 or Rule 701, including approximately shares eligible for the sale
under Rule 144(k). See "Underwriting."
RULE 144
In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person deemed to be our affiliate, or a person
holding restricted shares who beneficially owns shares that were not acquired
from us or our affiliate within the previous one year, would be entitled to sell
within any three-month period 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, assuming no exercise of the
underwriters' over-allotment option, or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on which
notice of the sale is filed with the SEC.
65
<PAGE>
Sales under Rule 144 are subject to certain requirements relating to manner
of sale, notice and availability of current public information about us.
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the ninety days preceding a sale, and who has beneficially owned the
shares to be sold for at least two years, is entitled to sell those shares
without regard to the volume, manner-of-sale or other limitations contained in
Rule 144.
RULE 701
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from us by our employees,
directors, officers, consultants or advisers prior to the closing of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the SEC has indicated
that Rule 701 will apply to stock options granted by us before this offering,
along with the shares acquired upon exercise of such options. Securities issued
in reliance on Rule 701 are deemed to be restricted shares and, beginning
90 days after the date of this prospectus (unless subject to the contractual
restrictions described above), may be sold by persons other than affiliates
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with the two-year minimum holding period
requirements.
STOCK OPTIONS
We intend to file registration statements under the Securities Act covering
approximately shares of common stock reserved for issuance under the 1998
Stock Plan, 2000 Stock Plan and 2000 Employee Stock Purchase Plan. This
registration statement is expected to be filed soon after the date of this
prospectus and will automatically become effective upon filing. Accordingly,
shares registered under such registration statement will be available for sale
in the open market, unless such shares are subject to vesting restrictions with
us or the contractual restrictions described above.
REGISTRATION RIGHTS
In addition, after this offering, the holders of preferred shares and
warrants convertible into an aggregate of 16,308,013 shares of common stock will
be entitled to certain rights to cause us to register the sale of such shares
under the Securities Act. Registration of these shares under the Securities Act
would result in these shares, other than shares purchased by our affiliates,
becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of such registration. See "Description of
Capital Stock--Registration Rights."
66
<PAGE>
U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a general discussion of the principal U.S. federal income
and estate tax consequences of the ownership and disposition of our common stock
by a non-U.S. holder. As used in this prospectus, the term "non-U.S. holder" is
a person other than:
- a citizen or individual resident of the U.S. for U.S. federal income tax
purposes;
- a corporation or other entity taxable as a corporation created or
organized in or under the laws of the United States or of any political
subdivision of the U.S.;
- an estate whose income is includible in gross income for U.S. federal
income tax purposes regardless of its source; or
- a trust, in general, if it is subject to the primary supervision of a
court within the U.S. and the control of one or more U.S. persons.
This discussion does not consider:
- U.S. state and local or non-U.S. tax consequences;
- specific facts and circumstances that may be relevant to a particular
non-U.S. holder's tax position, including, if the non-U.S. holder is a
partnership, that the U.S. tax consequences of holding and disposing of
our common stock may be affected by certain determinations made at the
partner level;
- the tax consequences for the shareholders or beneficiaries of a non-U.S.
holder;
- special tax rules that may apply to certain non-U.S. holders, including,
without limitation, banks, insurance companies, dealers in securities and
traders in securities who elect to apply a mark-to-market method of
accounting; or
- special tax rules that may apply to a non-U.S. holder that holds our
common stock as part of a "straddle," "hedge," or "conversion
transaction."
The following is based on provisions of the U.S. Internal Revenue Code of
1986, as amended, applicable Treasury regulations, and administrative and
judicial interpretations, all as of the date of this prospectus, and all of
which may change, retroactively or prospectively. The following summary is for
general information. ACCORDINGLY, EACH NON-U.S. HOLDER SHOULD CONSULT A TAX
ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER
TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF SHARES OF OUR COMMON
STOCK.
DIVIDENDS
In the event that dividends are paid the on shares of common stock,
dividends paid to a non-U.S. holder of common stock generally will be subject to
withholding of U.S. federal income tax at a 30% rate, or such lower rate as may
be provided by an applicable income tax treaty. Non-U.S. holders should consult
their tax advisors regarding their entitlement to benefits under a relevant
income tax treaty.
Dividends that are effectively connected with a non-U.S. holder's conduct of
a trade or business in the U.S. or, if an income tax treaty applies,
attributable to a permanent establishment, or in the case of an individual, a
"fixed base", in the U.S., as provided in that treaty ("U.S. trade or business
income"), are generally subject to U.S. federal income tax on a net income basis
at regular graduated rates, but are not generally subject to the 30% withholding
tax if the non-U.S. holder files the appropriate U.S. Internal Revenue Service
form with the payor. Any U.S. trade or business income received by a non-U.S.
holder that is a corporation may also, under certain circumstances, be subject
to an additional "branch profits tax" at a 30% rate or such lower rate as
specified by an applicable income tax treaty.
67
<PAGE>
Dividends paid prior to January 1, 2001 to an address in a foreign country
are presumed, absent actual knowledge to the contrary, to be paid to a resident
of that country for purposes of the withholding discussed above and for purposes
of determining the applicability of a tax treaty rate. For dividends paid after
December 31, 2000:
- a non-U.S. holder of common stock who claims the benefit of an applicable
income tax treaty rate generally will be required to satisfy applicable
certification and other requirements;
- in the case of common stock held by a foreign partnership, the
certification requirement will generally be applied to the partners of the
partnership and the partnership will be required to provide certain
information, including a U.S. taxpayer identification number; and
- look-through rules will apply for tiered partnerships.
A non-U.S. holder of common stock that is eligible for a reduced rate of
U.S. withholding tax under an income tax treaty may obtain a refund or credit of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
GAIN ON DISPOSITION OF COMMON STOCK
A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of common stock unless:
- the gain is U.S. trade or business income, in which case, the branch
profits tax described above may also apply to a corporate non-U.S. holder;
- the non-U.S. holder is an individual who holds the common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue
Code, is present in the U.S. for more than 182 days in the taxable year of
the disposition and meets certain other requirements;
- the non-U.S. holder is subject to tax pursuant to the provisions of the
U.S. tax law applicable to certain U.S. expatriates; or
- we are or have been a "U.S. real property holding corporation" for federal
income tax purposes at any time during the shorter of the five-year period
ending on the date of disposition or the period that the non-U.S. holder
held our common stock.
Generally, a corporation is a "U.S. real property holding corporation" if
the fair market value of its "U.S. real property interests" equals or exceeds
50% of the sum of the fair market value of its worldwide real property interests
plus its other assets used or held for use in a trade or business. We believe
that we have not been and are not currently, and we do not anticipate our
becoming, a "U.S. real property holding corporation" for U.S. federal income tax
purposes. The tax relating to stock in a "U.S. real property holding
corporation" will not apply to a non-U.S. holder whose holdings, direct and
indirect, at all times during the applicable period, constituted 5% or less of
the common stock, provided that the common stock was regularly traded on an
established securities market.
FEDERAL ESTATE TAX
Common stock owned or treated as owned by an individual who is a non-U.S.
holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes, unless an applicable estate tax or other
treaty provides otherwise and, therefore, may be subject to U.S. federal estate
tax.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Under specified circumstances, U.S. Treasury Regulations require information
reporting and backup withholding at a rate of 31% on certain payments on common
stock. Under currently applicable
68
<PAGE>
law, non-U.S. holders of common stock generally will be exempt from these
information reporting requirements and from backup withholding on dividends paid
prior to January 1, 2001 to an address outside the U.S. For dividends paid after
December 31, 2000, however, a non-U.S. holder of common stock that fails to
certify its non-U.S. holder status in accordance with applicable U.S. Treasury
Regulations may be subject to backup withholding at a rate of 31% on payments of
dividends.
The payment of the proceeds of the disposition of common stock by a holder
to or through the U.S. office of a broker or through a non-U.S. branch of a U.S.
broker generally will be subject to information reporting and backup withholding
at a rate of 31% unless the holder either certifies its status as a non-U.S.
holder under penalties of perjury or otherwise establishes an exemption. The
payment of the proceeds of the disposition by a non-U.S. holder of common stock
to or through a non-U.S. office of a non-U.S. broker will not be subject to
backup withholding or information reporting unless the non-U.S. broker is a
"U.S. related person." In the case of the payment of proceeds from the
disposition of common stock by or through a non-U.S. office of a broker that is
a U.S. person or a "U.S. related person," information reporting, but currently
not backup withholding, on the payment applies unless the broker receives a
statement from the owner, signed under penalty of perjury, certifying its
non-U.S. status or the broker has documentary evidence in its files that the
holder is a non-U.S. holder and the broker has no actual knowledge to the
contrary. For this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income for certain periods is
derived from the conduct of a U.S. trade or business; or
- effective after December 31, 2000, a foreign partnership if, at any time
during its taxable year;
-- at least 50% of the capital or profits interest in the partnership is
owned by U.S. persons; or
-- the partnership is engaged in a U.S. trade or business.
Effective after December 31, 2000, backup withholding may apply to the
payment of disposition proceeds by or through a non-U.S. office of a broker that
is a U.S. person or a "U.S. related person" unless certain certification
requirements are satisfied or an exemption is otherwise established and the
broker has no actual knowledge or reason to know that the holder is a U.S.
person. Non-U.S. holders should consult their own tax advisors regarding the
application of the information reporting and backup withholding rules to them,
including changes to these rules that will become effective after December 31,
2000.
Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder will be refunded, or credited against the holder's U.S. federal
income tax liability, if any, provided that the required information is
furnished to the IRS.
69
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, each
underwriter named below has severally agreed to purchase, and we have agreed to
sell to each underwriter, the number of shares set forth opposite the name of
that underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Salomon Smith Barney Inc....................................
FleetBoston Robertson Stephens Inc..........................
U.S. Bancorp Piper Jaffray Inc..............................
---------
Total.....................................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by counsel and to other conditions. The underwriters
are obligated to purchase all the shares, other than those covered by the
over-allotment option described below, if they purchase any of the shares.
The underwriters, for whom Salomon Smith Barney Inc., FleetBoston Robertson
Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as representatives,
propose to offer some of the shares directly to the public at the public
offering price set forth on the cover page of this prospectus and some of the
shares to dealers at the public offering price less a concession not in excess
of $ per share. The underwriters may allow, and the dealers may reallow, a
concession not in excess of $ per share on sales to other dealers. If all
of the shares are not sold at the initial offering price, the representatives
may change the public offering price and the other selling terms. The
representatives have advised us that the underwriters do not intend to confirm
any sales to any accounts over which they exercise discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares of common
stock at the public offering price less the underwriting discount. The
underwriters may exercise this option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent the
option is exercised, each underwriter must, subject to specified conditions,
purchase a number of additional shares approximately proportionate to that
underwriter's initial purchase commitment.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to of the common shares, or % of our
common stock to be sold in this offering to our directors, officers and
employees, as well as to clients, vendors and individuals associated with us. We
currently expect that an additional shares or % of our common stock
to be sold in this offering will be offered to our existing Series C preferred
stockholders. The number of shares available for sale to the general public will
be reduced to the extent that any reserve shares are purchased. Any reserved
shares not purchased will be offered by the underwriters on the same terms as
the other shares offered by this prospectus. We have agreed to indemnify the
underwriters against some liabilities and expenses, including liabilities under
the Securities Act of 1933, in connection with sales of the directed shares.
We, our officers and directors and holders of substantially all of our
existing outstanding shares have agreed that, for a period of 180 days from the
date of this prospectus, they will not, without the prior written consent of
Salomon Smith Barney Inc., dispose of or hedge any shares of our common stock or
any securities convertible into or exchangeable for common stock. Salomon Smith
Barney Inc. in its sole discretion may release any of the securities subject to
these lock-up agreements at any time without notice.
70
<PAGE>
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our shares was
determined by negotiations among us and the representatives. Among the factors
considered in determining the initial public offering price were our record of
operations, our current financial condition, our future prospects, our markets,
the economic conditions in and future prospects for the industry in which we
compete, our management, and currently prevailing general conditions in the
equity securities markets, including current market valuations of publicly
traded companies considered comparable to us. There can be no assurance,
however, that the prices at which our shares will sell in the public market
after this offering will not be lower than the price at which they are sold by
the underwriters or that an active trading market in our common stock will
develop and continue after this offering.
We have applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "DGEN."
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY DELTAGEN
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids or purchases of common stock
made to prevent or retard a decline in the market price of the common stock
while the offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from an underwriter when Salomon
Smith Barney Inc., in covering syndicate short positions or making stabilizing
purchases, repurchases shares originally sold by that underwriter.
Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
these transactions. These transactions may be effected on the Nasdaq National
Market or in the over-the-counter market, or otherwise and, if commenced, may be
discontinued at any time.
We estimate that the total expenses, excluding underwriting discounts and
commissions, of this offering will be approximately $ .
The representatives or their respective affiliates may, in the future,
perform various investment banking and advisory services for us from time to
time, for which they will receive customary fees. The representatives may, from
time to time, engage in transactions with and perform services for us in the
ordinary course of business.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
71
<PAGE>
LEGAL MATTERS
Various legal matters with respect to the validity of the common stock
offered by this prospectus will be passed upon for us by Pillsbury Madison &
Sutro LLP, San Francisco, California. Selected legal matters relating to our
intellectual property will be passed upon by John E. Burke, our own Vice
President of Intellectual Property. Partners of Pillsbury Madison & Sutro LLP
own an aggregate of 25,000 shares of our common stock. Mr. Burke, our Vice
President of Intellectual Property, owns 150,000 shares of our common stock.
Various legal matters relating to the offering will be passed upon for the
underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for the period
from January 28, 1997 (date of inception) to December 31, 1997 and for the years
ended December 31, 1999, and for the period from January 28, 1997 (date of
inception) to December 31, 1999, included in this prospectus, have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission under the Securities Act with respect to the shares of
common stock offered in this offering. This prospectus, which is a part of the
registration statement, does not contain all of the information set forth in the
registration statement, or the exhibits which are part of the registration
statement, parts of which are omitted as permitted by the rules and regulations
of the Securities and Exchange Commission. For further information about us and
the shares of our common stock to be sold in this offering, please refer to the
registration statement and the exhibits which are part of the registration
statement. Statements contained in this prospectus as to the contents of any
contract or any other document are not necessarily complete. Each statement in
this prospectus regarding the contents of the referenced contract or other
document is qualified in all respects by our reference to the copy filed with
the registration statement.
For further information about us and our common stock, we refer you to our
registration statement and its attached exhibits, copies of which may be
inspected without charge at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center,
Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these
documents by writing to the Securities and Exchange Commission and paying a
duplicating fee. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information about the public reference rooms. The
Commission maintains a World Wide Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy and information statements and
other information with the Commission. Our periodic reports, proxy and
information statements and other information will be available for inspection
and copying at the regional offices, public references facilities and Web site
of the Commission referred to above.
We intend to furnish our stockholders with annual reports containing audited
financial statements and an opinion thereon expressed by independent certified
public accountants. We also intend to furnish other reports as we may determine
or as required by law.
72
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Deficit......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Deltagen, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' deficit and of cash flows present fairly, in all
material respects, the financial position of Deltagen, Inc. (a company in the
development stage) at December 31, 1998 and 1999, and the results of its
operations and its cash flows from January 28, 1997 (date of inception) to
December 31, 1997, the years ended December 31, 1998 and 1999 and for the
cumulative period from January 28, 1997 (date of inception) to December 31,
1999, in conformity with accounting principles generally accepted in the United
States. 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 of these statements in
accordance with auditing standards generally accepted in the United States,
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 6, 2000
F-2
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, DEFICIT
------------------- DECEMBER 31,
1998 1999 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,635 $ 848
Accounts receivable, net.................................. 357 585
Prepaid expenses.......................................... 62 205
------- --------
Total current assets.................................. 9,054 1,638
Property and equipment, net................................. 2,213 4,973
Other assets................................................ 13 163
------- --------
Total assets.......................................... $11,280 $ 6,774
======= ========
LIABILITIES, REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 631 $ 2,976
Accrued liabilities....................................... 95 984
Current portion of capital lease obligations.............. 28 30
Current portion of loans payable.......................... -- 503
Deferred revenue.......................................... 559 946
------- --------
Total current liabilities............................. 1,313 5,439
Capital lease obligations, less current portion........... 65 22
Loans payable, less current portion....................... -- 2,233
------- --------
Total liabilities..................................... 1,378 7,694
------- --------
Commitments (Note 4)
Redeemable convertible preferred stock:
Authorized: 9,621,430 shares
Issued and outstanding: 9,571,430 shares at December 31,
1998 and 1999 and none pro forma
(Liquidation value: $14,500 at December 31, 1998 and
1999)..................................................... 14,447 14,447 $ --
------- -------- --------
Stockholders' deficit:
Common stock, $0.001 par value:
Authorized: 13,250,000 shares
Issued and outstanding: 1,584,860 shares at
December 31, 1998
and 1,810,975 shares at December 31, 1999 and 11,382,405
shares pro forma........................................ 1 2 11
Additional paid-in capital.................................. 74 10,695 25,133
Unearned stock-based compensation........................... (13) (7,610) (7,610)
Deficit accumulated during the development stage............ (4,607) (18,454) (18,454)
------- -------- --------
Total stockholders' deficit........................... (4,545) (15,367) $ (920)
------- -------- ========
Total liabilities, redeemable convertible preferred
stock and stockholders' deficit..................... $11,280 $ 6,774
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE PERIOD
JANUARY 28, FROM JANUARY 28,
1997 (DATE OF YEARS ENDED 1997 (DATE OF
INCEPTION) TO DECEMBER 31, INCEPTION) TO
DECEMBER 31, ------------------- DECEMBER 31,
1997 1998 1999 1999
------------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Contract revenue.............................. $ -- $ 381 $ 1,240 $ 1,621
------- ------- -------- --------
Operating expenses:
Research and development.................... 879 3,360 12,144 16,383
General and administrative.................. 416 638 2,932 3,986
------- ------- -------- --------
Total operating expenses.................. 1,295 3,998 15,076 20,369
------- ------- -------- --------
Loss from operations.......................... (1,295) (3,617) (13,836) (18,748)
Interest income............................... 40 268 251 559
Interest expense.............................. -- (3) (262) (265)
------- ------- -------- --------
Net loss...................................... $(1,255) $(3,352) $(13,847) $(18,454)
======= ======= ======== ========
Net loss per common share, basic and
diluted..................................... $ -- $ (9.13) $ (14.79)
======= ======= ========
Weighted average shares used in computing net
loss per share, basic and diluted........... -- 367 936
======= ======= ========
Pro forma net loss per share basic and diluted
(unaudited)................................. $ (1.32)
========
Weighted average shares used in computing pro
forma net loss per share, basic and diluted
(unaudited)................................. 10,507
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM JANUARY 28, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNEARNED TOTAL
---------------------- PAID-IN STOCK-BASED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT DEFICIT
--------- ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
cash at $0.01 per share in
January 1997 and at $0.05 per
share in May, June and
December 1997................ 1,563,860 $ 1 $ 24 $ -- $ -- $ 25
Unearned stock-based
compensation................. -- -- 40 (40) -- --
Amortization of unearned
stock-based compensation..... -- -- -- 17 -- 17
Net loss....................... -- -- -- -- (1,255) (1,255)
--------- ---------- ------- ------- -------- --------
Balances, December 31, 1997.... 1,563,860 1 64 (23) (1,255) (1,213)
Issuance of common stock for
cash at $0.05 per share in
January 1998................. 21,000 -- 1 -- -- 1
Unearned stock-based
compensation................. -- -- 9 (9) -- --
Amortization of unearned
stock-based compensation..... -- -- -- 19 -- 19
Net loss....................... -- -- -- -- (3,352) (3,352)
--------- ---------- ------- ------- -------- --------
Balances, December 31, 1998.... 1,584,860 1 74 (13) (4,607) (4,545)
Stock option exercise at $0.35
per share.................... 238,407 1 83 -- -- 84
Issuance of warrants........... -- -- 185 -- -- 185
Repurchase of unvested
restricted stock............. (12,292) -- (1) -- -- (1)
Unearned stock-based
compensation................. -- -- 10,354 (10,354) -- --
Amortization of unearned
stock-based compensation..... -- -- -- 2,757 -- 2,757
Net loss....................... -- -- -- -- (13,847) (13,847)
--------- ---------- ------- ------- -------- --------
Balances, December 31, 1999.... 1,810,975 $ 2 $10,695 $(7,610) $(18,454) $(15,367)
========= ========== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE PERIOD
JANUARY 28, FROM JANUARY 28,
1997 (DATE OF YEARS ENDED 1997 (DATE OF
INCEPTION) TO DECEMBER 31, INCEPTION) TO
DECEMBER 31, ------------------- DECEMBER 31,
1997 1998 1999 1999
------------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,255) $(3,352) $(13,847) $(18,454)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 69 224 677 970
Amortization of equipment under capital lease........... -- 12 28 40
Provisions for bad debt................................. -- -- 104 104
Amortization of warrants issued in connection with
loans................................................. -- -- 37 37
Amortization of unearned stock-based compensation
expense............................................... 17 19 2,757 2,793
Changes in operating assets and liabilities:
Accounts receivable................................... -- (357) (332) (689)
Prepaid expenses...................................... (34) (29) (143) (206)
Deposits.............................................. (13) -- (150) (163)
Accounts payable...................................... 153 478 2,345 2,976
Accrued liabilities................................... 39 56 889 984
Deferred revenue...................................... -- 559 387 946
------- ------- -------- --------
Net cash used in operating activities............... (1,024) (2,390) (7,248) (10,662)
------- ------- -------- --------
Cash flows from investing activities:
Acquisition of property and equipment..................... (578) (1,090) (2,318) (3,986)
Leasehold improvements.................................... (415) (341) (1,147) (1,903)
------- ------- -------- --------
Net cash used in investing activities............... (993) (1,431) (3,465) (5,889)
------- ------- -------- --------
Cash flows from financing activities:
Principal payments under capital lease obligations........ -- -- (41) (41)
Repayment of loans payable................................ -- -- (416) (416)
Proceeds from the issuance of debt........................ -- -- 3,300 3,300
Proceeds from the issuance of common stock, net of
issuance costs.......................................... 25 1 -- 26
Proceeds from the issuance of preferred stock, net of
issuance costs.......................................... 2,980 11,467 -- 14,447
Proceeds from the issuance of common stock under stock
option plan, net of issuance costs and stock
repurchased............................................. -- -- 83 83
------- ------- -------- --------
Net cash provided by financing activities........... 3,005 11,468 2,926 17,399
------- ------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 988 7,647 (7,787) 848
Cash and cash equivalents, beginning of period.............. -- 988 8,635 --
------- ------- -------- --------
Cash and cash equivalents, end of period.................... $ 988 $ 8,635 $ 848 $ 848
======= ======= ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest.................. $ -- $ (3) $ (225) $ (228)
Supplemental disclosure of non-cash investing and financing
activities:
Additions to property and equipment acquired under capital
lease obligations....................................... $ -- $ 93 $ -- $ 93
Unearned stock-based compensation......................... $ 40 $ 9 $ 10,354 $ 10,403
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS OF THE COMPANY
Deltagen, Inc., (the "Company") was incorporated in Delaware on January 28,
1997. The Company's primary business is the determination of the therapeutic
potential of genes by using mammalian genetics to discover the IN VIVO function
of genes and the development and marketing of a database containing these
findings. Deltagen identifies novel gene targets through the use of advanced
bioinformatics. Genetically altered mice are then produced to exclude the
targeted gene and proprietary analysis is performed to determine the potential
function of the excluded gene.
Through December 31, 1999, the Company has been primarily engaged in
developing its initial product technology, recruiting personnel, and raising
capital. The Company has entered into research agreements with United States
based pharmaceutical companies. In the course of its development activities, the
Company has sustained substantial losses and expects such losses to continue
through at least 2003. The Company plans to fund its operations with proceeds
from the sale of capital stock and from debt financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED PRO FORMA INFORMATION
If the Company's initial public offering as described in Note 13 is
consummated, all of the redeemable convertible preferred stock outstanding will
automatically be converted into common stock. The pro forma redeemable
convertible preferred stock and stockholders' deficit at December 31, 1999 has
been adjusted for the assumed conversion of redeemable convertible preferred
stock based on the shares of redeemable convertible preferred stock outstanding
at December 31, 1999.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Investments with an original maturity of 90 days or less as of the date of
purchase are considered cash equivalents.
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
Cash and cash equivalents are invested in deposits with three financial
institutions. The Company has not experienced any losses on its deposits of cash
and cash equivalents. Management regularly reviews these financial institutions
for credit worthiness and, accordingly, minimal credit risk exists.
The Company's receivables relate to contracts, and there is no collateral
required for these receivables. In 1999, three customers individually accounted
for 64%, 20% and 14% of the Company's total revenue. At December 31, 1999, three
customers individually accounted for 57%, 36% and 7% of the net accounts
receivable balance.
F-7
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities approximate fair value due to their relatively short
maturities. Based upon borrowing rates currently available to the Company for
leases with similar terms, the carrying value of capital lease obligations
approximate fair value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation is computed using the straight-line method over
the estimated useful life of the asset; seven years for laboratory equipment,
three years for computer equipment and six years for furniture and fixtures.
Leasehold improvements are amortized over the lesser of their estimated useful
lives or the term of the lease. Maintenance and repairs are charged to
operations as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets under Statement of Financial
Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", which requires
the Company to review for impairment of long-lived assets, whenever events or
changes in circumstances indicate that the carrying amount of an asset might not
be recoverable. When such an event occurs, the Company estimates the future cash
flows expected to result from the use of the asset and its eventual disposition.
If the undiscounted expected future cash flows is less than the carrying amount
of the asset, an impairment loss is recognized. To date, no impairment loss has
been recognized.
INCOME TAXES
The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts expected
to be realized.
REVENUE RECOGNITION
For most contracts revenue is recognized using the contract method of
accounting. The contracts specify milestones to be met and the payments
associated with meeting each milestone. Revenue is recognized on completion of
each milestone.
Where the contract does not specify milestones and payment is upon
completion of the contract, revenue is recognized based on
percentage-of-completion method of accounting.
The portion of payments received in advance of the completion of milestones
is reflected in deferred revenue. Where revenues are recognized on a percentage
of completion basis, but based on the terms of the contract the receivable
cannot yet be billed, these amounts are shown as unbilled receivables.
F-8
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT EXPENDITURES
Research and development costs, including development costs of the Company's
database product which do not meet the capitalization criteria of Statement of
Financial Accounting Standards No. 86 ("SFAS No. 86"), "Accounting for the Cost
of Computer Software to be Sold, Leased or Otherwise Marketed," are charged to
operations as incurred.
CERTAIN RISKS AND UNCERTAINTIES
The Company's services are concentrated in highly competitive markets which
are characterized by rapid technological advances, frequent changes in customer
requirements and evolving regulatory requirements and industry standards. Any
failure by the Company to anticipate or to respond adequately to technological
developments in its industry, changes in customer requirements or changes in
regulatory requirements or industry standards, or any significant delays in the
development or introduction of services, could have a material adverse effect on
the Company's business and operating results.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25 ("APB
No. 25"), "Accounting for Stock issued to Employees" and Financial Accounting
Standards Board Interpretation No. 28 ("FIN No. 28"), "Accounting for Stock
Appreciation Rights and Other Variable Stock Option or Award Plans" and complies
with the disclosure provisions of Statements of Financial Accounting Standards
No. 123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation".
Under APB No. 25, compensation expense is based on the difference, if any,
on the date of the grant, between the fair value of the Company's stock and the
exercise price. SFAS No. 123 defines a "fair value" based method of accounting
for an employee stock option or similar equity investment. The pro forma
disclosures of the difference between compensation expense included in net loss
and the related cost measured by the fair value method are presented in Note 9.
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and Emerging Issues Task Force
Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services."
RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue Recognition in
Financial Statements," which provides guidance on the recognition, presentation,
and disclosure of revenue in financial statements filed with the SEC. SAB
No. 101 outlines the basic criteria that must be met to recognize revenue and
provides guidance for disclosures related to revenue recognition policies. The
Company does not believe that SAB No. 101 will have any significant impact on
its financial position or results of operations.
F-9
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS No. 133 requires that all derivatives be recognized at fair
value in the statement of financial position, and that the corresponding gains
or losses be reported either in the statement of operations or as a component of
comprehensive income, depending on the type of relationship that exists. SFAS
No. 133 will be effective for fiscal years beginning after June 15, 2000. The
Company does not believe that the implementation of SFAS No. 133 will have any
significant impact on its financial position or results of operations.
NET LOSS PER SHARE
Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded from the diluted earnings per
share calculations as they have an antidilutive effect due to the Company's net
losses.
The computation of pro forma net loss per share includes shares issuable
upon the conversion of outstanding shares of convertible preferred stock (using
the as-if converted method) from the original date of issuance.
A reconciliation of shares used in the calculations is as follows (in
thousands except per share data):
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 28,
1997 (DATE OF YEARS ENDED
INCEPTION) TO DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------- -------- --------
<S> <C> <C> <C>
Basic and diluted:
Net loss.................................................. $(1,255) $(3,352) $(13,847)
======= ======= ========
Weighted-average shares of common stock outstanding....... 1,323 1,584 1,615
Less: Weighted-average shares subject to repurchase....... (1,323) (1,217) (679)
------- ------- --------
Weighted-average shares used in basic and diluted net loss
per share............................................... -- 367 936
======= ======= ========
Pro forma basic and diluted:
Net loss.................................................. $(13,847)
========
Weighted-average shares used in basic and diluted net loss
per
share..................................................... 936
Adjustment to reflect weighted-average effect of assumed
conversion of preferred stock (unaudited)................. 9,571
--------
Weighted-average shares used in pro forma basic and diluted
net loss per share (unaudited)............................ 10,507
========
</TABLE>
F-10
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 28,
1997 (DATE OF YEARS ENDED
INCEPTION) TO DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------- -------- --------
<S> <C> <C> <C>
Weighted average effect of common stock equivalents:
Unvested common stock subject to repurchase............... 1,323 1,217 679
Options outstanding....................................... -- 140 1,054
Shares resulting from the conversion of the:
Series A convertible preferred stock...................... 2,312 3,000 3,000
Series B convertible preferred stock...................... -- 3,489 6,571
Warrants to purchase convertible stock.................... -- -- 33
----- ----- ------
Total common stock equivalents excluded from the computation
of earnings per share as their effect was antidilutive.... 3,635 7,846 11,337
===== ===== ======
</TABLE>
3. BALANCE SHEET COMPONENTS
Accounts receivable consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Trade and other receivables................................. $ 57 $689
Unbilled receivables........................................ 300 --
---- ----
357 689
Less: Allowance for doubtful accounts....................... -- (104)
---- ----
$357 $585
==== ====
</TABLE>
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Laboratory equipment....................................... $1,491 $ 3,459
Computer and related equipment............................. 212 457
Furniture and fixtures..................................... 50 155
Leasehold improvements..................................... 756 1,903
------ -------
2,509 5,974
Less: Accumulated depreciation and amortization............ (296) (1,001)
------ -------
$2,213 $ 4,973
====== =======
</TABLE>
F-11
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. BALANCE SHEET COMPONENTS (CONTINUED)
Depreciation and amortization expense was $69,000, $236,000 and $705,000 for
the period ended December 31, 1997 and for the years ended December 31, 1998 and
1999, respectively, and was $1.0 million for the period from January 28, 1997
(date of inception) to December 31, 1999.
Property and equipment includes $93,000 of computer and related equipment
under capital lease at December 31, 1998 and 1999. Accumulated depreciation of
assets under capital lease totaled $12,000 and $40,000 at December 31, 1998 and
1999.
Accrued liabilities consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Accrued liabilities......................................... $46 $862
Accrued payroll/vacation.................................... 49 122
--- ----
$95 $984
=== ====
</TABLE>
4. COMMITMENTS
OPERATING LEASES
The Company leases its facilities in San Carlos, California under an
operating lease which expires in February 2004, with an option to extend the
lease for five additional years. Under the terms of the lease, the Company is
responsible for maintenance costs, taxes and insurance.
The Company leases its facilities in Menlo Park, California under an
operating lease which expires in July 2004, with an option to extend the lease
for five additional years. Under the term of the lease, the Company is
responsible for 53% of the operating expenses, tax expenses, tenants share of
common area and tenants share of utilities. In conjunction with the lease
agreement, a standby letter of credit of $150,000 was issued in November 1999
with a financial institution, in favor of the landlord, as collateral for the
fulfillment of the contract obligations. The letter of credit is secured by a
cash deposit of the same amount and is automatically renewed on an annual basis,
unless notice of cancellation is provided by 30 days in advance.
Rent expense for the period ended December 31, 1997, and for the years ended
December 31, 1998 and 1999 was $130,000, $162,000 and $496,000, respectively.
Rent expense was $788,000 for the cumulative period from January 28, 1997 (date
of inception) to December 31, 1999.
Future minimum lease payments as at December 31, 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $ 865
2001........................................................ 889
2002........................................................ 913
2003........................................................ 938
2004........................................................ 455
------
Total....................................................... $4,060
======
</TABLE>
F-12
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. RESEARCH AND DEVELOPMENT COLLABORATIONS AND LICENSE AGREEMENTS
The Company has entered into several research and development
collaborations.
In July 1998, the Company entered into a research contract with Merck &
Co., Inc. to provide Knockout Mice Projects for a value of $850,000. A second
contract was entered in December 1999 to provide additional Knockout Mice
Projects for an estimated value of $1,000,000. Each project is divided into
milestones and payments are made based on achievement of these. Revenues
recognized relating to the first contract were $68,000 and $179,000 in 1998 and
1999, respectively. No revenues have been recognized relating to the second
contract.
In October 1998, the Company entered into a research contract with Roche
Bioscience, a division of Syntex (USA) Inc., to provide Knockout Mice Projects.
The contract has an estimated value of $650,000. Payments to the Company will be
based on the achievement of specific milestones. The revenues recognized
relating to this contract were $105,000 and $249,000 in 1998 and 1999,
respectively.
In December 1998, the Company entered into a research contract with
Pfizer Inc., to provide Knockout Mice Projects. The total estimated value of the
contract is $970,000. The payments are based on the completion of each
milestone. The revenues recognized relating to this contract were $790,000 in
1999.
The Company entered into a research contract with Tularik Inc. in February
1998, to perform phenotypic analysis on sets of knockout mice and to deliver to
Tularik breeding pairs of mice. The total contract has an estimated value of
$500,000, based upon the payment terms detailed in the contract. The Company may
derive additional revenues from royalties paid by Tularik on a semi-annual
basis. Royalties are equal to 1% of the net sales of royalty bearing products
until the tenth anniversary of the first commercial sale of the royalty bearing
product, on a country-by-country basis. Additional royalty payments, based on a
predetermined amount, will be made by Tularik, upon initiation of a major phase
of additional studies based on Deltagen delivered projects. No royalties have
been recognized or received as at December 31, 1999. The revenues relating to
this contract amount to $208,000 and $22,000 in 1998 and 1999, respectively.
In December 1999, the Company entered into a research contract with
Schering-Plough Research Institute to provide Knockout Mice Projects. The
estimated value of the contract is $1,000,000. Payments are based upon
completion of each milestone. No revenues relating to this contract were
recognized in 1999.
6. CAPITAL LEASE OBLIGATIONS
In June 1998, the Company entered into a three year capital lease agreement
for $93,000, bearing interest at 10.58% per year. The leased equipment includes
various items of computer hardware. Upon termination of the lease agreement, the
Company is required to purchase the equipment for a purchase price of $1.
F-13
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL LEASE OBLIGATIONS (CONTINUED)
As at December 31, 1999, future minimum lease payments under the
non-cancelable capital lease are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $ 35
2001........................................................ 23
----
Total minimum lease payments................................ 58
Less: Amount representing interest.......................... (6)
----
Present value of future minimum lease payments.............. 52
Less: Current portion....................................... (30)
----
Total capital lease obligations, net of current portion..... $ 22
====
</TABLE>
7. LOANS PAYABLE
In December 1998, the Company entered into a loan agreement with a financial
institution to obtain one or more loans totaling up to $1,800,000. A
corresponding amount of machinery, equipment and other property is pledged as
collateral for each loan.
In January 1999 and April 1999, the Company incurred loans of $872,000 and
$928,000, respectively, for a total financing of $1,800,000. These loans bear
respective interest rates of 10.87% and 11.11% and are required to be repaid in
48 monthly installments, beginning in January 1999 and April 1999, respectively.
In accordance with this loan agreement, the financial institution is
entitled to receive a warrant to purchase shares of the Company's Series B
preferred stock at a price of $1.75 per share. The number of shares eligible for
purchase is equal to the greater of 10,000 or the number obtained by multiplying
the amount borrowed by the Company by 2% and then dividing the total by $1.75.
Consequently, the Company issued a warrant to purchase 20,571 Series B preferred
shares at a price of $1.75. The warrant term is seven years and ends in January
2006. The value of the warrant was calculated using the Black-Scholes pricing
model and has been charged to additional paid-in capital and will be amortized
to interest expense over the life of the loan. The assumptions used in the
Black-Scholes model are as follows: dividend yield of 0%, term of 7 years,
expected volatility of 75% and risk free interest rate of 4.96%.
As of December 31, 1999, the Company has recorded a loan discount related to
these warrants of $99,000, of which $21,000 has been amortized to interest
expenses for the year then ended.
In March 1999, the Company entered into a loan agreement with a financial
institution to obtain up to six loans totaling up to $1,500,000. A corresponding
amount of machinery, equipment and other property is pledged as collateral for
each loan.
In June 1999 and October 1999, the Company incurred loans of $919,000 and
$581,000, respectively, obtaining a total financing of $1,500,000. These loans
bear respective interest rates of 11.25% and 11.89% and are required to be
repaid in 48 monthly installments, beginning in July 1999 and November 1999,
respectively.
F-14
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. LOANS PAYABLE (CONTINUED)
In conjunction with this loan agreement, the Company issued in March 1999 a
warrant to purchase 17,142 shares of Series B preferred stock at a price of
$1.75 per share. According to the contract, the number of shares has been
calculated by dividing $1,500,000 by the initial exercise price of $1.75
multiplied by 2%. The warrant has a seven year term and ends in March 2006. The
value of the warrant was calculated using the Black-Scholes pricing model and
has been charged to additional paid-in capital and will be amortized to interest
expense over the life of the loan. The assumptions used in the Black-Scholes
model are as follows: dividend yield of 0%, term of 7 years, volatility of 75%
and risk free interest rate of 5.23%.
As of December 31, 1999, the Company has recorded a loan discount related to
these warrants of $86,000, of which $16,000 has been amortized to interest
expense during the period.
The related loans payable balances as at December 31, 1999 are broken down
as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1999
-------------
<S> <C>
Notes payable in monthly installments at interest rates
ranging from 10.87% to 11.89% maturing from January to
October 2003.............................................. $2,884
Less: Current portion....................................... 503
Less: Discount due to warrants.............................. 148
------
$2,233
======
</TABLE>
Maturities of long-term debt were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $ 503
2001........................................................ 825
2002........................................................ 1,000
2003........................................................ 556
------
$2,884
======
</TABLE>
F-15
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE CONVERTIBLE COMMON STOCK
Under the Company's Certificate of Incorporation, as amended, the Company is
authorized to issue 9,621,430 shares of preferred stock, of which 3,000,000 and
6,621,430 have been designated as Series A preferred stock and Series B
preferred stock, respectively.
Convertible preferred stock as at December 31, 1998 and 1999 consists of the
following (in thousands):
<TABLE>
<CAPTION>
SHARES PROCEEDS
------------------------ LIQUIDATION NET OF
SERIES AUTHORIZED OUTSTANDING AMOUNT ISSUANCE COSTS
- ------ ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
A.............................. 3,000 3,000 $ 3,000 $ 2,980
B.............................. 6,621 6,571 11,500 11,467
----- ----- ------- -------
9,621 9,571 $14,500 $14,447
===== ===== ======= =======
</TABLE>
The holders of convertible preferred stock have the rights and preferences
as follows:
REDEMPTION
The holders of Series A preferred stock and Series B preferred stock are
entitled on or at any time after December 31, 2001 with the approval of 66 2/3%
of the Series A and Series B preferred stock holders to require the Company to
redeem all or a portion of their shares in 12 quarterly installments by paying
in cash a sum equal to the original purchase price per share plus all accrued
but unpaid dividends. On the last day of the calendar quarter during which a
request for redemption is received, the Company shall redeem 8.33% of the shares
of Series A and Series B preferred stock requested by such holders to be
redeemed (the "Designated Shares") and shall redeem an equal number of such
Designated Shares on the last day of the subsequent eleven calendar quarters.
DIVIDENDS
The holders of shares of Series A and Series B preferred stock are entitled
to receive dividends at the rate of $0.08 and $0.14 per share per year,
respectively. In the event dividends are paid on any share of common stock, an
additional dividend must be paid with respect to all outstanding shares of
preferred stock in an amount equal per share (on an as-if-converted basis) to
the amount paid or set aside for each share of common stock whenever funds are
legally available. Such dividends are payable when, as and if declared by the
board of directors. No dividends accrue unless declared by the board of
directors. As of December 31, 1999, no dividends had been declared.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the Company,
the holders of shares of Series A and Series B preferred stock are entitled to
receive, prior and in preference to any distribution of any of the assets of the
Company to the holders of common stock, an amount per share equal to $1.00 and
$1.75 for each outstanding share of Series A and Series B preferred stock,
respectively, (as adjusted for any stock dividends, combinations or splits) plus
any declared but unpaid dividends on such shares. In the event that upon
liquidation or dissolution, the assets and funds of the Company are insufficient
to permit the payment to preferred stockholders of the full preferential
F-16
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE CONVERTIBLE COMMON STOCK (CONTINUED)
amounts, then the entire assets and funds of the Company legally available for
distribution are to be distributed ratably among the holders of the shares of
preferred stock in proportion to the full preferential amount each is otherwise
entitled to receive.
After the distributions described above have been paid in full, the
remaining assets of the Company available for distribution must be distributed
to the holders of shares of Series A and Series B preferred stock and common
stock pro rata based on the number of shares of common stock issuable upon
conversion of Series A and Series B preferred stock.
CONVERSION
Each share of preferred stock, at the option of the holder, is convertible
into a number of fully paid shares of common stock as determined by dividing the
respective preferred stock issue price by the conversion price in effect at the
time. The initial conversion price of shares of Series A and Series B preferred
stock is $1.00 and $1.75, respectively, and is subject to adjustment in
accordance with antidilution provisions contained in the Company's Certificate
of Incorporation, as amended. Conversion is automatic immediately upon the
closing of a firm commitment underwritten public offering in which the public
offering price equals or exceeds $3.00 per share (adjusted to reflect subsequent
stock dividends, stock splits or recapitalization) and the aggregate proceeds
raised equal or exceed $12,000,000.
VOTING RIGHTS
The holder of each share of preferred stock is entitled to one vote for each
share of common stock into which shares of Series A and Series B preferred stock
could be converted.
9. STOCKHOLDERS' DEFICIT
COMMON STOCK
At December 31, 1999, the Company has reserved sufficient shares of common
stock for issuance upon conversion of preferred stock. Common stockholders are
entitled to dividends as and when declared by the board of directors subject to
the prior rights of the preferred stockholders. The holder of each share of
common stock is entitled to one vote.
Common stock held by certain employees and non-employees is subject to stock
purchase agreements whereby the Company has the option to repurchase unvested
shares upon termination of employment at the initial issuance price. The
Company's right to repurchase these shares generally lapses at the rate of 25%
per year from the date of the agreement. At December 31, 1997, 1998 and 1999,
1,564,000, 849,000 and 634,000 of common stock remain subject to the Company's
right of repurchase, respectively. Thereafter, the Company has the right of
first refusal, should any stockholder decide to sell shares.
1998 STOCK INCENTIVE PLAN
In April 1998, the Company adopted the 1998 Stock Incentive Plan (the
"Plan"). The Plan provides for the granting of stock options and restricted
shares to employees and consultants of the
F-17
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' DEFICIT (CONTINUED)
Company. Options granted under the Plan may be either incentive stock options or
nonqualified stock options. Incentive stock options ("ISO") may be granted only
to Company employees (including officers and directors who are also employees).
Nonqualified stock options ("NSO") may be granted to Company employees and
consultants. The Company has reserved 2,156,780 shares of common stock for
issuance under the Plan.
Options under the Plan may be granted for periods of up to ten years and at
prices no less than 85% of the estimated fair value of the shares on the date of
grant as determined by the board of directors, provided, however, that (i) the
exercise price of an ISO and NSO may not be less than 100% and 85% of the
estimated fair value of the shares on the date of grant, respectively, and
(ii) the exercise price of an ISO and NSO granted to a 10% shareholder may not
be less than 110% of the estimated fair value of the shares on the date of
grant, respectively. To date, options granted generally vest over four years.
Activity under the Plan is as follows (in thousands except per share
amount):
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
OPTIONS ----------------------------------------
AVAILABLE NUMBER OF AGGREGATE WEIGHTED AVERAGE
FOR GRANT OPTIONS PRICE EXERCISE PRICE
--------- --------- --------- ----------------
<S> <C> <C> <C> <C>
Options reserved at the plan inception........... 177 -- $ -- $ --
Additional shares reserved....................... 1,180 -- -- --
Options granted.................................. (705) 705 247 0.35
------ ----- ---- -----
Balances, December 31, 1998...................... 652 705 247 0.35
Additional shares reserved....................... 800 -- -- --
Options granted.................................. (1,194) 1,194 418 0.35
Options exercised................................ -- (238) (84) 0.35
Option cancelled................................. 98 (98) (34) 0.35
------ ----- ---- -----
Balances, December 31, 1999...................... 356 1,563 $547 $0.35
====== ===== ==== =====
</TABLE>
In 1998, there was a grant of 10,000 options to a scientific advisor at an
exercise price of $0.35. All these options were still outstanding at
December 31, 1999. Compensation expense for this grant was $1,000 and $22,000,
for 1998 and 1999 respectively. The options vest over four years.
RESTRICTED STOCK GRANTS
The Company granted restricted shares to certain employees. The value of
these grants has been determined based on the fair value at the grant date for
awards consistent with SFAS No. 123, and is included in the pro-forma
stock-based compensation.
In 1997 and 1998, restricted shares were granted to consultants and
scientific advisors. All of these shares were still outstanding as at
December 31, 1999. Compensation expense for these grants was $6,000, $8,000 and
$84,000, respectively for the period ended December 31, 1997 and the years ended
December 31, 1998 and 1999. The Company's right to repurchase these shares
generally lapses at the rate of 25% per year from the date of the agreement.
F-18
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' DEFICIT (CONTINUED)
PRO FORMA STOCK-BASED COMPENSATION
The Company has adopted the disclosure-only provisions of SFAS No. 123. Had
compensation cost been determined based on the fair value at the grant date for
the awards consistent with the provisions of SFAS No. 123, the Company's net
loss would have been as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 28,
1997 (DATE OF YEARS ENDED
INCEPTION) TO DECEMBER 31,
DECEMBER 31, -------------------
1997 1998 1999
------------- -------- --------
<S> <C> <C> <C>
Net loss as reported.......................... $(1,255) $(3,352) $(13,847)
Pro forma..................................... $(1,266) $(3,426) $(14,548)
Basic and diluted net loss per common share:
As reported................................... $ -- $ (9.13) $ (14.79)
Pro forma..................................... $ -- $ (9.34) $ (15.54)
</TABLE>
Such pro forma disclosures may not be representative of future compensation
cost because options vest over several years and additional grants are made each
year. The fair value of each option grant is estimated on the date of grant
using the minimum value method with the following assumptions for grants. No
assumptions are given for 1997 since the Plan was not adopted until 1998.
<TABLE>
<CAPTION>
1998 1999
-------- --------
<S> <C> <C>
Risk-free interest rate.................................... 4.94% 5.88%
Expected life.............................................. 5 years 5 years
Expected dividends......................................... -- --
</TABLE>
The expected life is based on assumption that stock options on average are
exercised one year after they are fully vested. The risk free interest rate was
calculated in accordance with the grant date and the life term of the options.
MINIMUM VALUE OF OPTION
Based on the above assumptions, the weighted average minimum values per
share of options granted under the Plan were $0.08 and $8.98 for the years ended
December 31, 1998 and December 31, 1999, respectively.
The weighted average minimum values per share of restricted shares granted
were $0.03 for the year ended December 31, 1997 and $0.35 for the year ended
December 31, 1998. (None were granted in 1999.)
F-19
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. STOCKHOLDERS' DEFICIT (CONTINUED)
The options outstanding and exercisable by exercise price as at
December 31, 1999 are as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY EXERCISABLE
- ------------------------------------------------------------------------- ------------------------------
WEIGHTED AVERAGE
REMAINING
EXERCISE NUMBER CONTRACTUAL LIFE WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
PRICE OUTSTANDING (IN YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$0.35 1,563 9.4 $0.35 216 $0.35
</TABLE>
At December 31, 1998, 705,000 options were outstanding at an average
exercise price of $0.35 all of which were exercisable but none of which were
vested at that date.
DEFERRED STOCK COMPENSATION
During 1997, 1998 and 1999, the Company issued stock options and restricted
shares to certain employees with exercise prices below the deemed fair value of
the Company's common stock at the date of grant. In accordance with the
requirements of APB No. 25, the Company has recorded unearned stock compensation
for the difference between the exercise price of the stock options and the
deemed fair value of the Company's common stock at the date of grant. This
unearned stock compensation is amortized to expense over the period during which
the options subject to repurchase vest, generally four years, using the method
set out in example 2 of FASB Interpretation No. 28 ("FIN 28"). Under the FIN 28
method, each vested tranche of options is accounted for as a separate option
grant awarded for past services. Accordingly, the compensation expense is
recognized over the period during which the services have been provided. The
Company has recorded unearned stock compensation for options granted to
employees of $26,000, $2,000 and $10,178,000 as of December 31, 1997, 1998 and
1999; of which $11,000, $10,000 and $2,651,000 have been amortized to expenses
during 1997, 1998 and 1999.
10. EMPLOYEE BENEFIT PLAN
In 1999, the Company established a 401(k) Plan (the "Plan") to provide tax
deferred salary deductions for all eligible employees. Participants may make
voluntary contributions to the Plan of up to 20% of their compensation, limited
by certain Internal Revenue Service restrictions. The Company's matching
contribution is discretionary as determined by the board of directors. The
Company has not contributed to the plan since its inception.
11. RELATED PARTIES
In connection with the research and development contract with Tularik,
described in Note 5, Tularik purchased 428,572 shares of Series B preferred
stock at a price of $1.75 per share, in February 1998. There were no outstanding
receivables relating to this agreement as at December 31, 1998 and 1999.
Deferred revenues of $19,000 have been recognized as of December 31, 1999.
F-20
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES
The components of the net deferred tax assets as of December 31, 1998 and
1999 are (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................ $ 1,319 $ 6,386
Research and experimental credits....................... 277 1,022
Cumulative temporary differences........................ 16 1,189
Depreciation and amortization........................... 153 --
------- -------
1,765 8,597
------- -------
Deferred tax liabilities:
Depreciation and amortization........................... -- 219
------- -------
Net deferred tax assets................................. 1,765 8,378
Valuation allowance..................................... (1,765) (8,378)
------- -------
$ -- $ --
======= =======
</TABLE>
The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
At December 31, 1999, the Company had federal and state operating loss
carryforwards of approximately $16,035,000 and $16,013,000, respectively, and
federal and state tax credits of approximately $539,000 and $694,000,
respectively. These carryforwards will expire between 2005-2019, if not
utilized.
The U.S. Federal income tax rules may restrict the utilization of the
operating loss and tax credit carryforwards in the case of an "ownership change"
of a corporation.
13. SUBSEQUENT EVENTS
ISSUANCE OF REDEEMABLE CONVERTIBLE SERIES C PREFERRED STOCK
On January 21, 2000, the Company issued 6,298,870 shares of redeemable
convertible Series C preferred stock for $3.58 per share for total cash proceeds
of $22,550,000. The holders of Series C preferred stock are entitled to receive
dividends of $0.29 per share per annum when and if declared by the board of
directors and $3.58 per share upon liquidation. Each share of Series C preferred
stock converts automatically into one share of common stock upon the closing of
a firm commitment underwritten public offering. As a result of this issuance a
beneficial conversion feature charge will be included in the results of
operations for the three months ended March 31, 2000.
In conjunction with the issuance of the Series C preferred stock financing,
an option to purchase an aggregate of up to 15% of the shares to be sold in the
event of an initial public offering, at the offering price to the public, was
granted to investors of which two Deltagen directors are the general partners.
F-21
<PAGE>
DELTAGEN, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
13. SUBSEQUENT EVENTS (CONTINUED)
As a result of the issuance of the Series C preferred stock the Articles of
Incorporation were amended to increase the total number of authorized shares to
41,621,430, allocated as follows: common stock--25,000,000, Series A preferred
stock--3,000,000, Series B preferred stock--6,621,430 and Series C preferred
stock--7,000,000.
REGISTRATION
In March 2000, the Company's board of directors authorized management to
file a registration statement with the Securities and Exchange Commission to
permit the Company to sell its common stock to the public. Upon completion of
the Company's initial public offering, all of the outstanding preferred stock
will be converted into shares of common stock.
CONSULTING AND RESEARCH COLLABORATION CONTRACT
On March 15, 2000, the company negotiated the basic terms of a three year
consulting and research collaboration agreement with Institute Genetique
Biologie Moleculaire et Cellulaire (IGBMC). Deltagen determines which projects
are to be conducted by IGBMC in the area of functional genomics and particularly
knockout animals and disruption technologies. The costs and expenses related to
the projects will be shared by Deltagen and IGBMC. In conjunction with this
agreement, a three year warrant to purchase 400,000 shares of Series C preferred
stock of Deltagen at a price of $3.58 per share will be granted to IGBMC. The
warrant will vest in its entirety on the four month anniversary of the
commencement date of the agreement. The Chief Executive Officer of IGBMC is the
father of one of the members of Deltagen's board of directors.
PROMISSORY NOTES TO OFFICERS
In March 2000, stock options to purchase an aggregate of 450,000 shares at
an exercise price of $1.79 per share were granted under the 1998 Stock Incentive
Plan to two officers of the Company. All of these options were exercised in
March 2000 for cash in the amount of the par value of the shares of $500 and in
exchange for two four-year promissory notes totalling $805,000.
These notes bear interest at 6.8% and the shares acquired serve as
collateral for the payment of the notes.
F-22
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
DELTAGEN, INC.
COMMON STOCK
[DELTAGEN LOGO]
---------
PROSPECTUS
, 2000
---------
SALOMON SMITH BARNEY
ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
- --------------------------------------------------
- --------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses expected to be incurred
by the registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 26,400
National Association of Securities Dealers, Inc. filing
fee....................................................... 10,500
NASDAQ listing fee.......................................... 90,000
Blue Sky fees and expenses.................................. *
Accounting fees and expenses................................ 300,000
Legal fees and expenses..................................... 500,000
Printing and engraving expenses............................. *
Registrar and Transfer Agent's fees......................... *
Miscellaneous fees and expenses............................. *
----------
Total................................................... $ *
==========
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity 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 a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit 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 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 Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper. The registrant's Restated Certificate of
II-1
<PAGE>
Incorporation and the registrant's bylaws each provide for indemnification of
the registrant's directors, officers, employees and other agents to the extent
and under the circumstances permitted by the Delaware General Corporation Law.
The registrant has also entered into agreements with its directors and officers
that will require the registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors or officers to the fullest extent not prohibited by law.
The underwriting agreement provides for indemnification by the underwriters
of the registrant, its directors and officers, and by the registrant of the
underwriters, for certain liabilities, including liabilities arising under the
Securities Act of 1933, as amended (the "Act"), and affords certain rights of
contribution with respect thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth in chronological order below is information regarding the number
of shares of common and preferred stock issued, as well as the number of options
and warrants granted, by the registrant since January 1, 1997. Further included
is the consideration, if any, received by the registrant for such shares,
options and warrants, and information relating to the section of the Act, or
rule of the SEC, under which exemption from registration was claimed. All awards
of options did not involve any sale under the Act and none of these securities
were registered under the Act.
(a) On various dates between January 1997 and March 2000, the registrant
issued 1,883,157 shares of its common stock to 100 employees and directors
directly and pursuant to the exercise of options granted under its 1998 Stock
Incentive Plan. The exercise prices per share ranged from $0.01 to $1.79, for an
aggregate consideration of $1,473,215. The registrant relied on the exemption
provided by Rule 701 under the Act.
(b) In January 1997, the registrant issued 1,333,360 shares of its common
stock to two accredited investors. The price per share was $0.01, for an
aggregate consideration of $13,333. The registrant relied on the exemption
provided by Section 4(2) of the Act.
(c) In February and May 1997, the registrant issued 3,000,000 shares of
series A preferred stock to one accredited investor. The price per share was
$1.00, for an aggregate consideration of $3,000,000. The registrant relied on
the exemption provided by Rule 506 under Regulation D and Section 4(2) of the
Act.
(d) In February and July 1998, the registrant issued an aggregate of
6,571,430 shares of series B preferred stock to a total of seven accredited
investors. The price per share was $1.75, for an aggregate consideration of
$11,500,000. The registrant relied on the exemption provided by Rule 506 under
Regulation D and Section 4(2) of the Act.
(e) In December 1998 and March 1999, the registrant issued two warrants to
purchase an aggregate of 37,713 series B preferred shares at a price of $1.75
per share. The registrant relied on the exemption provided by Rule 506 under
Regulation D and Section 4(2) of the Act.
(f) In January 2000, the registrant issued 6,298,870 shares of series C
preferred stock to a total of 30 accredited investors. The price per share was
$3.58, for an aggregate consideration of $22,549,955. The registrant relied on
the exemption provided by Rule 506 under Regulation D and Section 4(2) of the
Act.
(g) In March 2000, in connection with a consulting arrangement, the
registrant issued a three-year warrant to purchase 400,000 shares of series C
preferred stock at a price of $3.58 per share. The registrant relied on the
exemptions provided by Regulation S and Section 4(2) of the Act.
The recipients of the above-described securities represented their intention
to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were
II-2
<PAGE>
affixed to the stock certificates and warrants issued in such transactions. All
recipients had adequate access, through employment or other relationships, to
information about the registrant.
No underwriters were engaged in connection with the foregoing sales of
securities. All of the foregoing securities are deemed restricted securities for
purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
*1.1 Form of Underwriting Agreement
3(i).1 Amended Restated Certificate of Incorporation in effect upon
the date of this filing
3(i).2 Form of Restated Certificate of Incorporation to be
effective upon the consummation of this offering
3(ii).1 Bylaws of the Registrant in effect upon the date of this
filing
3(ii).2 Bylaws of the Registrant effective upon the consummation of
this offering
*4.1 Specimen Common Stock Certificate
4.2 Investors' Rights Agreement dated May 27, 1999
4.3 Investors' Rights Agreement dated January 21, 2000
*5.1 Opinion of Pillsbury Madison & Sutro LLP
10.1.1 1998 Stock Incentive Plan
10.1.2 Form of Option Agreement under 1998 Stock Incentive Plan
10.2.1 2000 Stock Incentive Plan
10.2.2 Form of Incentive Option Agreement under 2000 Stock
Incentive Plan
10.2.3 Form of Nonstatutory Stock Option Agreement under 2000 Stock
Incentive Plan
10.3 2000 Employee Stock Purchase Plan
+10.4 Agreement with University of Edinburgh
10.5.1 Lease Agreement for 1031 Bing Street, San Carlos, California
10.5.2 Addendum to Lease Agreement
10.5.3 First Amendment to Lease Agreement
10.6 Lease Agreement for 1003 Hamilton Avenue, Menlo Park,
California
10.7 Form of Indemnification Agreement
10.8 Agreement with William Matthews, Ph.D.
10.9 Agreement with Mark W. Moore, Ph.D.
10.10 Agreement with Augustine G. Yee, Esq.
10.11 Agreement with Terry Coley, Ph.D.
10.12 Series B Preferred Stock Warrant issued to Silicon Valley
Bank
10.13 Series B Preferred Stock Warrant issued to LMSI
10.14 Agreement with IGBMC
10.15 Promissory Note between Deltagen and William Matthews, Ph.D.
10.16 Promissory Note between Deltagen and Mark W. Moore, Ph.D.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<C> <S>
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
*23.2 Consent of Pillsbury Madison & Sutro LLP (included in its
opinion filed as Exhibit 5.1 to this Registration Statement)
24.1 Power of Attorney (see page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential treatment has been requested with respect to portions of these
agreements.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) It will provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
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 Menlo Park, State of
California, on the 12th day of April, 2000.
<TABLE>
<S> <C> <C>
DELTAGEN, INC.
By /s/ WILLIAM MATTHEWS, PH. D.
----------------------------------------
William Matthews, Ph. D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William Matthews, Ph.D. and Augustine G. Yee,
Esq., and each of them, his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments,
including post-effective amendments, to this Registration Statement, and any
registration statement relating to the offering covered by this Registration
Statement and filed pursuant to Rule 462(b) under the Securities Act of 1933,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ WILLIAM MATTHEWS, PH.D. President and Chief Executive
------------------------------------------- Officer (Principal Executive April 12, 2000
William Matthews, Ph.D. Officer) and Director
/s/ BRIAN E. CROWLEY Director of Finance (Principal
------------------------------------------- Financial and Accounting April 12, 2000
Brian E. Crowley Officer)
/s/ VICENTE ANIDO, JR., PH.D.
------------------------------------------- Director April 9, 2000
Vicente Anido, Jr., Ph.D.
/s/ PHILIPPE CHAMBON, M.D., PH.D.
------------------------------------------- Director April 12, 2000
Philippe Chambon, M.D., Ph.D.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <C> <S>
/s/ THOMAS A. PENN
------------------------------------------- Director April 12, 2000
Thomas A. Penn
/s/ F. NOEL PERRY
------------------------------------------- Director April 7, 2000
F. Noel Perry
/s/ NICHOLAS J. SIMON
------------------------------------------- Director April 12, 2000
Nicholas J. Simon
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<C> <S>
*1.1 Form of Underwriting Agreement
3(i).1 Amended Restated Certificate of Incorporation in effect upon
the date of this filing
3(i).2 Form of Restated Certificate of Incorporation to be
effective upon the consummation of this offering
3(ii).1 Bylaws of the Registrant in effect upon the date of this
filing
3(ii).2 Bylaws of the Registrant effective upon the consummation of
this offering
*4.1 Specimen Common Stock Certificate
4.2 Investors' Rights Agreement dated May 27, 1999
4.3 Investors' Rights Agreement dated January 21, 2000
*5.1 Opinion of Pillsbury Madison & Sutro LLP
10.1.1 1998 Stock Incentive Plan
10.1.2 Form of Option Agreement under 1998 Stock Incentive Plan
10.2.1 2000 Stock Incentive Plan
10.2.2 Form of Incentive Option Agreement under 2000 Stock
Incentive Plan
10.2.3 Form of Nonstatutory Stock Option Agreement under 2000 Stock
Incentive Plan
10.3 2000 Employee Stock Purchase Plan
+10.4 Agreement with University of Edinburgh
10.5.1 Lease Agreement for 1031 Bing Street, San Carlos, California
10.5.2 Addendum to Lease Agreement
10.5.3 First Amendment to Lease Agreement
10.6 Lease Agreement for 1003 Hamilton Avenue, Menlo Park,
California
10.7 Form of Indemnification Agreement
10.8 Agreement with William Matthews, Ph.D.
10.9 Agreement with Mark W. Moore, Ph.D.
10.10 Agreement with Augustine G. Yee, Esq.
10.11 Agreement with Terry Coley, Ph.D.
10.12 Series B Preferred Stock Warrant issued to Silicon Valley
Bank
10.13 Series B Preferred Stock Warrant issued to LMSI
10.14 Agreement with IGBMC
10.15 Promissory Note between Deltagen and William Matthews, Ph.D.
10.16 Promissory Note between Deltagen and Mark W. Moore, Ph.D.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
*23.2 Consent of Pillsbury Madison & Sutro LLP (included in its
opinion filed as Exhibit 5.1 to this Registration Statement)
24.1 Power of Attorney (see page II-5)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
+ Confidential treatment has been requested with respect to portions of these
agreements.
<PAGE>
EXHIBIT 3(i).1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
DELTAGEN, INC.
Deltagen, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
FIRST: The name of this corporation is Deltagen, Inc.
SECOND: The date of filing of its original Certificate of Incorporation
with the Secretary of State of Delaware was January 30, 1997.
THIRD: The Certificate of Incorporation of said corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is Deltagen, Inc.
ARTICLE II
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. CLASSES OF STOCK. The total number of shares of all classes of
capital stock which this corporation shall have authority to issue is Forty-One
Million Six Hundred Twenty-One Thousand Four Hundred Thirty (41,621,430) of
which Twenty-Five Million (25,000,000) shares, par value of One Tenth of One
Cent ($.001) per share, shall be Common Stock (the "Common Stock") and Sixteen
Million Six Hundred Twenty-One Thousand Four Hundred Thirty (16,621,430) shares,
par value of One Tenth of One Cent ($.001) per share, shall be Preferred Stock
(the "Preferred Stock").
The Preferred Stock shall be divided into series. The first series
shall be designated the "Series A Preferred Stock" which series shall consist of
3,000,000 shares. The second series
- 1 -
<PAGE>
shall be designated the "Series B Preferred Stock" which series shall consist of
6,621,430 shares. The third series shall be designated the "Series C Preferred
Stock" which series shall consist of 7,000,000 shares. Subject to compliance
with the terms of Section 7 of Division B below, the Board of Directors may
increase or decrease the number of shares in each series subsequent to the issue
of shares in such series but not below the number of shares of such series then
outstanding.
B. RIGHTS PREFERENCES AND RESTRICTIONS OF SERIES A PREFERRED
STOCK, SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK. The Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall
have the voting power, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
thereof, as follows:
1. DIVIDEND PROVISIONS.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, shares of
Common Stock of this corporation) on the Common Stock of this corporation, at
the rate of $.08 per share of Series A Preferred Stock per annum whenever funds
are legally available therefor, payable when, as and if declared by the Board of
Directors. The holders of shares of Series B Preferred Stock shall be entitled
to receive dividends, out of any assets legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, shares of Common Stock of
this corporation) on the Common Stock of this corporation, at the rate of $.14
per share of Series B Preferred Stock per annum whenever funds are legally
available therefor, payable when, as and if declared by the Board of Directors.
The holders of shares of Series C Preferred Stock shall be entitled to receive
dividends, out of any assets legally available therefor, prior and in preference
to any declaration or payment of any dividend (payable other than in Common
Stock or other securities and rights convertible into or entitling the holder
thereof to receive, directly or indirectly, shares of Common Stock of this
corporation) on the Common Stock of this corporation, at the rate of $.29 per
share of Series C Preferred Stock per annum whenever funds are legally available
therefor, payable when, as and if declared by the Board of Directors. Such
dividends shall be cumulative. Dividends, if declared, must be declared and paid
with respect to all series of Preferred Stock contemporaneously, and if less
than full dividends are declared, the same percentage of the dividend rate will
be payable to each series of Preferred Stock.
(b) After payment of such dividends, any additional dividends or
distributions shall be distributed among all holders of Common Stock and all
holders of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock in proportion to the number of shares of Common Stock which
would be held by each such holder if all shares of Series A Preferred Stock,
Series B and Series C Preferred Stock were converted to Common Stock at the then
effective conversion rate.
- 2 -
<PAGE>
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of
this corporation, either voluntary or involuntary, the holders of Series C
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Series A
Preferred Stock, Series B Preferred Stock and Common Stock, by reason of their
ownership thereof, an aggregate amount equal to $3.58 for each outstanding share
of Series C Preferred Stock (the "Original Series C Issue Price") plus all
accrued but unpaid dividends thereon (the "Series C Preferential Amount"), to be
distributed to the holders of Series C Preferred Stock pro rata based upon the
number of shares of Series C Preferred Stock held by each. If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series C Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of this corporation legally available for distribution
shall be distributed ratably among the holders of the Series C Preferred Stock
in proportion to the product of the liquidation preference of each such share
and the number of such shares owned by each such holder.
(b) After the distribution described in section (a) above has been
paid, the holders of Series A Preferred Stock and Series B Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets of this corporation to the holders of Common Stock by reason of their
ownership thereof, an amount per share equal to (i) $1.00 for each outstanding
share of Series A Preferred Stock (the "Original Series A Issue Price") plus an
amount equal to all declared but unpaid dividends on each such share and (ii)
$1.75 for each outstanding share of Series B Preferred Stock (the "Original
Series B Issue Price"), plus an amount equal to all declared but unpaid
dividends on each such share. If upon the occurrence of such event, the assets
and funds thus distributed among the holders of the Series A Preferred Stock and
Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock and Series
B Preferred Stock in proportion to the product of the liquidation preference of
each such share and the number of such shares owned by each such holder.
(c) After the distribution described in sections (a) and (b) above
has been paid, the remaining assets of this corporation available for
distribution to stockholders shall be distributed among the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common
Stock pro rata based on the number of shares of Common Stock held by each
(assuming conversion of all such Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock).
- 3 -
<PAGE>
3. REDEMPTION. The holders of the Preferred Stock shall have the
right to redemption of such stock as set forth in this Section 3.
(a) REDEMPTION REQUEST.
(i) On or at any time after December 31, 2004, and upon the
receipt by this corporation from the holders of (i) at least a majority of the
Series C Preferred Stock, voting together as a separate class, of their written
request for redemption hereunder of all or a portion of their shares, or (ii) at
least 66-2/3% of the Series A Preferred Stock and Series B Preferred Stock,
voting together as a separate class, of their written request for redemption
hereunder of all or a portion of their shares, this corporation shall, to the
extent that it may lawfully do so, redeem the shares of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock requested by such
holders to be redeemed (the "Designated Shares"), as further provided in this
Section 3, by paying in cash therefor a sum equal to, in the case of the Series
A Preferred Stock, the Original Series A Issue Price, plus all accrued but
unpaid dividends thereon (the "Series A Redemption Price"), in the case of the
Series B Preferred Stock, the Original Series B Issue Price, plus all accrued
but unpaid dividends thereon (the "Series B Redemption Price") and, in the case
of the Series C Preferred Stock, an amount equal to the greater of (x) the
Original Series C Issue Price plus all accrued but unpaid dividends thereon and
(y) the fair market value of the Series C Preferred Stock, as determined in good
faith by the Board of Directors and a majority of the Preferred Stock (the
greater of such amounts herein referred to as the "Series C Redemption Price").
Upon the receipt of such redemption request, this corporation shall redeem 8.33%
of the Designated Shares of each such series of Preferred Stock on the last day
of the calendar quarter during which the request for redemption is received and
shall redeem an equal number of such Designated Shares on the last day of the
subsequent eleven calendar quarters. The redemption rights of the Series C
Preferred Stock set forth in this Section 3 shall be prior and in preference to
the redemption rights of the Series A Preferred Stock and the Series B Preferred
Stock.
(ii) The Series A Redemption Price, Series B Redemption Price and
Series C Redemption Price are sometimes collectively referred to as the
Redemption Price.
(b) PROCEDURES.
(i) In the event of any redemption of only a part of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, this
corporation shall effect such redemption pro rata according to the number of
Designated Shares held by each holder thereof. In the event of any redemption of
all or part of a then outstanding series of Preferred Stock, any holder thereof
may avoid all or part of such redemption by converting into Common Stock,
pursuant to Section 4 below, up to that number of shares of such holder's Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, scheduled to be redeemed in such redemption. Such holder may
condition such conversion on deposit by this corporation of the Redemption Price
for the shares to be redeemed pursuant to subsection 3(b)(iv) below.
- 4 -
<PAGE>
(ii) At least 15 but no more than 30 days prior to the date fixed
for any redemption of a series of Preferred Stock (the "Redemption Date"),
written notice shall be mailed, first class postage prepaid, to each holder of
record (at the close of business on the business day next preceding the day on
which notice is given) of such series of Preferred Stock to be redeemed, at the
address last shown on the records of this corporation for such holder or given
by the holder to this corporation for the purpose of notice, notifying such
holder of the redemption to be effected, specifying the number of Designated
Shares to be redeemed from such holder (the "Redemption Shares"), the Redemption
Date, the Redemption Price for such series, the place at which payment may be
obtained and the date on which such holder's conversion rights as to such shares
terminate and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, the certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
subsection 3(b)(iii), on or after the Redemption Date, each holder of Redemption
Shares shall surrender to this corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(iii) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all dividends on the
Redemption Shares shall cease to accrue, all rights of the holders of such
shares (except the right to receive the Redemption Price without interest upon
surrender of their certificate or certificates) shall cease with respect to such
shares, and such shares shall not thereafter be transferred on the books of this
corporation or be deemed to be outstanding for any purpose whatsoever. If the
funds of this corporation legally available for redemption of shares of
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of Redemption Shares to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares in accordance with the provisions of subsection 3(b)(i) hereof. The
Redemption Shares not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. At any time thereafter when additional
funds of this corporation are legally available for the redemption of shares of
Preferred Stock, such funds will immediately be used to redeem the balance of
the Redemption Shares which this corporation has become obligated to redeem on
any Redemption Date but which it has not redeemed.
(iv) Three days prior to the Redemption Date, this corporation
shall deposit the Redemption Price of all Redemption Shares designated for
redemption in the Redemption Notice, and not yet redeemed or converted, with a
bank or trust company having aggregate capital and surplus in excess of
$50,000,000 as a trust fund for the benefit of the respective holders of the
shares designated for redemption and not yet redeemed. Simultaneously, this
corporation shall deposit irrevocable instruction and authority to such bank or
trust company to publish the notice of redemption thereof (or to complete such
publication if theretofore commenced) and to pay, on and after the date fixed
for redemption or prior thereto, the Redemption Price of such series of
Preferred Stock to the holders thereof upon surrender of their certificates. Any
monies deposited by this corporation pursuant to this subsection 3(b)(iv) for
the redemption of shares which are thereafter converted into shares of Common
Stock pursuant
- 5 -
<PAGE>
to Section 4 hereof no later than the close of business on the Redemption Date
shall be returned to this corporation forthwith upon such conversion. The
balance of any monies deposited by this corporation pursuant to this subsection
3(b)(iv) remaining unclaimed at the expiration of two years following the
Redemption Date shall thereafter be returned to this corporation, provided that
the shareholder to which such money would be payable hereunder shall be
entitled, upon proof of its ownership of such series of Preferred Stock and
payment of any bond requested by this corporation, to receive such monies but
without interest from the Redemption Date.
4. CONVERSION. The holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT; AUTOMATIC CONVERSION.
(i) Subject to subsection (c), each share of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share, at the office of this
corporation or any transfer agent for the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, into such number
of fully paid and nonassessable shares of Common Stock as is determined
by dividing the Original Series A Issue Price, the Original Series B
Issue Price or the Original Series C Issue Price, as applicable, by the
Conversion Price applicable to such shares in effect on the date the
certificate for such share is surrendered for conversion. The initial
Conversion Price per share for shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall be the
Original Series A Issue Price, the Original Series B Issue Price or the
Original Series C Issue Price, respectively; provided, however, that
the Conversion Price for shares of each such series of Preferred Stock
shall be subject to adjustment as set forth in subsection 4(c) below.
(ii) Each share of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the
time in effect for such series immediately upon the consummation of
this corporation's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement on Form
S-1 under the Securities Act of 1933, as amended, which results in
aggregate gross proceeds to this corporation of at least $25,000,000,
the public offering price of which was not less than $12.53 per share
(as adjusted to reflect subsequent stock dividends, stock splits,
combinations or recapitalization).
(b) MECHANICS OF CONVERSION. Before any holder of shares of a
series of Preferred Stock shall be entitled to convert the same into shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of this corporation or of any transfer
agent for such series of Preferred Stock, and shall give written notice by mail,
postage prepaid, to this corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock are to be issued.
This corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of such series of Preferred Stock, or to the
- 6 -
<PAGE>
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of such series of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering such series of Preferred
Stock for conversion, be conditioned upon the closing with the underwriter(s) of
the sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock issuable upon such conversion of shares of
such series of Preferred Stock shall not be deemed to have converted such shares
of such series of Preferred Stock until immediately prior to the closing of such
sale of securities.
(c) CONVERSION PRICE ADJUSTMENTS OF SERIES A PREFERRED STOCK,
SERIES B PREFERRED STOCK AND SERIES C PREFERRED STOCK. The Conversion Price of
the Series A Preferred Stock, the Series B Preferred Stock and the Series C
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) (A) If this corporation shall issue after a Purchase
Date (as defined below) any Additional Stock (as defined below) without
consideration or for a consideration per share less than the then
applicable Conversion Price for the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, as the case may be, in
effect on the date of and immediately prior to the issuance of such
Additional Stock, the Conversion Price for each such series of
Preferred Stock in effect immediately prior to each such issuance
shall, after the date of issuance, be adjusted to a price equal to the
quotient obtained by dividing the total of such Additional Stock
(except as otherwise provided in this clause (i)) computed under clause
(x) below by the total computed under clause (y) below as follows:
(x) an amount equal to the sum of
(1) the aggregate consideration received for the
shares of such series of Preferred Stock sold pursuant to the agreement
(or addendum thereto) under which shares of such series of Preferred
Stock were initially sold (the respective "Stock Purchase Agreement");
plus
(2) the aggregate consideration, if any,
received by this corporation for all Additional Stock issued since the
date upon which any shares of such series of Preferred Stock were
initially issued (in each case, a "Purchase Date");
(y) an amount equal to the sum of
(1) the aggregate consideration received for the
shares of such series of Preferred Stock sold pursuant to the Stock
Purchase Agreement divided
- 7 -
<PAGE>
by the Conversion Price for such shares in effect at the respective
Purchase Date (or such higher or lower Conversion Price for such series
as results from the application of subsections 4(c)(iii) and (iv) and
assuming that this Amended and Restated Certificate of Incorporation
was in effect as of the applicable Purchase Date); plus
(2) the number of shares of Additional Stock
issued since a Purchase Date (increased or decreased to the extent that
the number of such shares of Additional Stock shall have been increased
or decreased as the result of the application of subsections 4(c)(iii)
and (iv)).
(B) No adjustment of the Conversion Price for such series
of Preferred Stock shall be made in an amount less than one cent per
share, provided that any such adjustment which is not required to be
made by reason of this sentence shall be carried forward and shall be
either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment
being carried forward, or shall be made on the three-year anniversary
of the date of the event giving rise to such adjustment being carried
forward. Except to the limited extent provided for in subsections
(E)(3) and (E)(4), no adjustment of such Conversion Price for such
series of Preferred Stock pursuant to this subsection 4(c)(i) shall
have the effect of increasing the Conversion Price for such series of
Preferred Stock above the Conversion Price for that series in effect
immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid
therefor before deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by this corporation for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors, and a majority of
the Preferred Stock voting together, irrespective of any accounting
treatment.
(E) In the case of the issuance (whether before, on or
after a Purchase Date) of options to purchase or rights to subscribe
for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities (which are
not excluded from the definition of Additional Stock), and the
following provisions shall apply for all purposes of this subsection
4(c)(i) and subsection 4(c)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of
any conditions to exercisability, including without limitation the
passage of time, but without taking
- 8 -
<PAGE>
into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for
a consideration equal to the consideration (determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)), if any, received by
this corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights (without
taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming
the satisfaction of any conditions to exercisability, including without
limitation the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or
exchangeable securities or upon the exercise of options to purchase or
rights to subscribe for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration,
if any, received by this corporation for any such securities and
related options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by this corporation (without
taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subsections 4(c)(i)(C) and
(c)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or any increase or decrease in the
consideration payable to this corporation upon exercise of such options
or rights or upon conversion of or in exchange for such convertible or
exchangeable securities, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion
Price of such series of Preferred Stock to the extent in any way
affected by or computed based upon such options, rights or securities,
shall be recomputed to reflect such change, but no further adjustment
shall be made for the actual issuance of Common Stock or any payment of
such consideration upon the exercise of any such options or rights or
the conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of such series of
Preferred Stock to the extent in any way affected by or computed based
upon such options, rights or securities or options or rights related to
such securities, shall be recomputed to reflect the issuance of only
the number of shares of Common Stock (and convertible or exchangeable
securities that remain in effect) actually issued upon the exercise of
such options or rights upon the conversion or exchange of such
securities or upon the exercise
- 9 -
<PAGE>
of the options or rights related to such securities; provided, however,
that this section shall not have any effect on any conversion of Series
A Preferred Stock or Series B Preferred Stock prior to such expiration
or termination.
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection
4(c)(i)(E)) by this corporation after a Purchase Date, other than
(A) Common Stock issued pursuant to a transaction
described in subsection 4(c)(iii) hereof,
(B) up to 2,756,780 shares of Common Stock (net of
repurchased shares and lapsed options), issued or issuable to
employees, directors, consultants or advisors directly or pursuant to a
stock option plan or a restricted stock purchase plan approved by the
directors of this corporation, or
(C) Common Stock issued upon conversion of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
(iii) In the event this corporation should at any time or
from time to time after a Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as "Common
Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable
upon conversion or exercise thereof), then as of such record date (or
the date of such dividend distribution split or subdivision if no
record date is fixed), the Conversion Price of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of each such series shall be
increased in proportion to such increase of outstanding shares
determined in accordance with subsection 4(c)(i)(E).
(iv) If the number of shares of Common Stock outstanding
at any time after a Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of
such combination, the Conversion Price for the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of each such series shall be
decreased in proportion to such decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or
- 10 -
<PAGE>
other persons, assets (excluding cash dividends) or options or rights not
referred to in subsection 4(c)(iii), then, in each such case for the purpose of
this subsection 4(d), the holders of Series A Preferred Stock, the holders of
Series B Preferred Stock and the holders of the Series C Preferred Stock shall
be entitled to a proportionate share of any such distribution as though they
were the holders of the number of shares of Common Stock of this corporation
into which their shares of such series of Preferred Stock are convertible as of
the record date fixed for the determination of the holders of Common Stock of
this corporation entitled to receive such distribution.
(e) RECAPITALIZATION. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 5), provision shall be made so that the holders of
Series A Preferred Stock, the holders of Series B Preferred Stock and holders of
Series C Preferred Stock shall thereafter be entitled to receive upon conversion
of their Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock as the case may be, the number of shares of stock or other
securities or property of this corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series A Preferred Stock, the holders of Series B Preferred Stock
and holders of Series C Preferred Stock after the recapitalization to the end
that the provisions of this Section 4 (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion of
each such series of Preferred Stock) shall be applicable after that event as
nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. This corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by this
corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred Stock, the holders of the Series B Preferred
Stock and the holders of Series C Preferred Stock against impairment.
(g) FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon conversion
of any share or shares of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon such conversion shall be
aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance
of a fraction of a share of Common Stock, the corporation shall, in
lieu of issuing any fractional share, pay the holder otherwise entitled
to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the
Board of Directors).
- 11 -
<PAGE>
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock pursuant to this
Section 4, this corporation, at its expense, shall promptly compute
such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A Preferred Stock, Series
B Preferred Stock or Series C Preferred Stock, as the case may be, a
certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is
based. This corporation shall, upon the written request at any time of
any holder of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price for such series of Preferred
Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would
be received upon the conversion of a share of such series of Preferred
Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by this
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, each holder
of Series B Preferred Stock and each holder of Series C Preferred Stock, at
least 20 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, in addition to such other remedies as shall be
available to the holder of such series of Preferred Stock, this corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
(j) NOTICES. Any notice required by the provisions of this Section
4 to be given to the holders of shares of any series of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
- 12 -
<PAGE>
5. MERGER CONSOLIDATION.
(a) A consolidation, merger or other reorganization of this
corporation with or into another corporation or other entity or person in which
this corporation shall not be the continuing or surviving entity of such merger,
consolidation or reorganization, or the sale of all or substantially all of this
corporation's properties and assets to any other person, or any transaction or
series of related transactions by this corporation in which an excess of 50% of
this corporation's voting power is transferred shall be deemed to be a
liquidation for all purposes of Section 2 hereof, unless this corporation's
stockholders of record immediately prior to such merger, consolidation,
reorganization, sale or transaction are holders of more than 50% of the voting
equity securities of the surviving corporation.
(b) Any securities to be delivered to the holders of Preferred
Stock and Common Stock pursuant to subsection 5(a) above shall be valued as
follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or
through the NASDAQ National Market, the value shall be deemed to be the
average of the closing prices of the securities on such exchange or
system over the 30-day period ending three days prior to the closing;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale
prices (as applicable) over the 30-day period ending three days prior
to the closing; and
(C) If there is no active public market, the
value shall be the fair market value thereof, as mutually determined in
good faith by the Board of Directors of this corporation and the
holders of a majority of the then outstanding shares of Preferred
Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other
than restrictions arising solely be virtue of a stockholder's status as
an affiliate or former affiliate) shall be to make an appropriate
discount from the market value determined as above in (i)(A), (B) or
(C) to reflect the approximate fair market value thereof, as mutually
determined by the Board of Directors of this corporation and the
holders of a majority of the then outstanding shares of Preferred
Stock.
(c) In the event the requirements of subsections 5(a) and 5(b) are
not complied with, this corporation shall forthwith either:
(i) cause such closing to be postponed until such time as
the requirements of this Section 5 have been complied with, or
- 13 -
<PAGE>
(ii) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall
revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to
in subsection 5(d) hereof.
(d) This corporation shall give each holder of record of Preferred
Stock written notice of such impending transaction not later than 20 days prior
to the stockholders' meeting called to approve such transaction, or 20 days
prior to the closing of such transaction, whichever is earlier, and shall also
notify such holders in writing of the final approval of such transaction. The
first of such notices shall describe the material terms and conditions of the
impending transaction and the provisions of this Section 5, and this corporation
shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place earlier than 20 days after this
corporation has given the first notice provided for herein or earlier than ten
days after this corporation has given notice of any material changes provided
for herein; provided, however, that such periods may be shortened upon the
written consent of the holders of a majority of the shares of the Preferred
Stock then outstanding.
(e) The provisions of this Section 5 are in addition to the
protective provisions of Section 7 hereof.
6. VOTING RIGHTS.
(a) The holder of each share of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall have the right to one vote
for each share of Common Stock into which such Preferred Stock could then be
converted. In all cases any fractional share, determined on an aggregate
as-converted basis, shall be rounded to the nearest whole share (with one-half
being rounded upward). With respect to such vote, such holder shall have full
voting rights and powers equal to the voting rights and powers of the holders of
Common Stock, and shall be entitled, notwithstanding any provision hereof, to
notice of any stockholders' meeting in accordance with the bylaws of this
corporation, and shall be entitled to vote, together with holders of Common
Stock, with respect to any question upon which holders of Common Stock have the
right to vote.
(b) The number of directors of the Company shall be seven, one of
whom shall be the Chief Executive Officer. The holders of Series A Preferred
Stock, voting as a separate class, shall be entitled to elect one director of
this corporation, the holders of Series B Preferred Stock, voting as a separate
class, shall be entitled to elect two directors of this corporation, the holders
of Series C Preferred Stock, voting as a separate class, shall be entitled to
elect two directors of this corporation, and the holders of the Preferred Stock
and the Common Stock, voting as a separate class, shall be entitled to elect one
director of this corporation.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of director occurring among the directors elected by the holders of a
class or series of stock pursuant to this Section 6(b), the remaining directors
so elected by that class or series may by affirmative vote of a majority thereof
(or the remaining director so elected if there be but one, or if there are no
such directors remaining, by the affirmative vote of the holders of a majority
of the shares of that class or series), elect a successor or successors to hold
office for the unexpired
- 14 -
<PAGE>
term of the director or directors whose place or places shall be vacant. Any
director who shall have been elected by the holders of a class or series of
stock or by any directors so elected as provided in the immediately preceding
sentence hereof may be removed during the aforesaid term of office, either with
or without cause, by and only by, the affirmative vote of the holders of the
shares of such class or series of stock entitled to elect such director or
directors, given either at a special meeting of such stockholders duly called
for such purpose or pursuant to written consent of stockholders, and any vacancy
thereby created may be filled by the holders of that class or series of stock
represented at the meeting or pursuant to written consent of such holders. Any
amendment to this Section 6(b) shall require the affirmative vote of the holders
of the shares of at least a majority of each class or series of stock entitled
to elect directors hereunder.
7. PROTECTIVE PROVISIONS.
(a) So long as shares of Preferred Stock are outstanding, this
corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least 66 2/3 % of the then
outstanding shares of Preferred Stock (voting together as a single class, and
not as separate series, in accordance with Section 6):
(i) sell, convey, lease or otherwise dispose of or
encumber all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of this corporation is disposed of;
(ii) alter or change the rights, preferences or privileges
of the shares of the Preferred Stock so as to affect adversely the shares; or
(iii) increase or decrease (other than by redemption or
conversion) the authorized number of shares of Preferred Stock; or
(iv) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security (i) having a preference over, or being on a
parity with, the Preferred Stock with respect to voting, dividends or upon
liquidation, or (ii) having rights equal or superior to any of the rights of the
Preferred Stock under this Section 7;
(v) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to (i) the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for this corporation
or any subsidiary of it pursuant to agreements under which this corporation has
the option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment or service or (ii) the
redemption of any share or shares of Preferred Stock in accordance with Section
3;
(vi) declare or pay any dividends on this corporation's
capital stock; or
(vii) change this corporation's authorized number of
directors as set forth in Section 6(b) hereof.
- 15 -
<PAGE>
(b) So long as shares of Series C Preferred Stock are outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least 66 2/3 % of the
then outstanding shares of Series C Preferred Stock (voting together as a single
series):
(i) sell, convey, lease or otherwise dispose of or
encumber all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of this corporation is disposed of;
(ii) alter or change the rights, preferences or privileges
of the shares of the Series C Preferred Stock so as to affect adversely the
shares; or
(iii) increase or decrease (other than by redemption or
conversion) the authorized number of shares of Series C Preferred Stock; or
(iv) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security (i) having a preference over, or being on a
parity with, the Series C Preferred Stock with respect to voting, dividends or
upon liquidation, or (ii) having rights equal or superior to any of the rights
of the Series C Preferred Stock under this Section 7;
(v) redeem, purchase or otherwise acquire (or pay into or
set aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided, however, that this restriction shall not apply
to (i) the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for this corporation
or any subsidiary of it pursuant to agreements under which this corporation has
the option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment or service or (ii) the
redemption of any share or shares of Series A Preferred Stock or Series B
Preferred Stock in accordance with Section 3;
(vi) declare or pay any dividends on this corporation's
capital stock;
(vii) change this corporation's authorized number of
directors as set forth in Section 6(b) hereof;
(viii) incur debt in excess of $2,500,000;
(ix) grant an exclusive license to any of the
corporation's technology (other than in the ordinary course of business; or
(x) amend or waive any provisions in this Certificate of
Incorporation or the Bylaws of the corporation which affect adversely the Series
C Preferred Stock.
8. STATUS OF CONVERTED STOCK. In the event any shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
redeemed or converted pursuant to Section 3 or Section 4 hereof, the shares so
redeemed or converted shall be canceled and shall not be issuable by this
corporation, and the Amended and Restated Certificate of Incorporation
- 16 -
<PAGE>
of this corporation shall be appropriately amended to effect the corresponding
reduction in this corporation's authorized capital stock.
C. COMMON STOCK.
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK. All
preferences, voting powers, relative, participating optional or other special
rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those that may be
fixed with respect to any shares of Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or this
Restated Certificate, each holder of Common Stock shall have one vote in respect
of each share of stock held by him of record on the books of this corporation
for the election of directors and on all matters submitted to a vote of
stockholders of this corporation.
3. DIVIDENDS. Subject to the preferential rights of the Preferred
Stock set forth in Section B(1) of this Article IV, 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 this corporation which are by law available
therefor, dividends payable either in cash, in property or in shares of capital
stock.
4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of this corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of the Preferred Stock, holders of Common Stock shall be
entitled to participate in any distribution of the assets of this corporation in
accordance with Section B(2) of this Article IV.
5. MERGER, CONSOLIDATION. In the event of a reorganization,
merger, consolidation or sale of this corporation, after distribution in full of
the preferential amounts, if any, to be distributed to the holders of shares of
Preferred Stock pursuant to Section B(5) of this Article IV of Division B
hereof, the holders of Common Stock shall be entitled to participate in any
distribution of the remaining stock or other securities or property to be issued
to this corporation or its stockholders in accordance with such Section 5.
ARTICLE V
This corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:
A. The Board of Directors of this corporation is expressly
authorized to adopt, amend or repeal the bylaws of this corporation; provided,
however, that the bylaws may only be amended in accordance with the provisions
thereof.
- 17 -
<PAGE>
B. Elections of directors need not be by written ballot unless
the bylaws of this corporation shall so provide.
C. The books of this corporation may be kept at such place within
or without the State of Delaware as the bylaws of this corporation may provide
or as may be designated from time to time by the Board of Directors of this
corporation.
ARTICLE VII
To the fullest extent permitted by Delaware General Corporation Law as
it now exists or as it may hereafter be amended, a director of this corporation
shall not be personally liable to this corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to this
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is hereafter amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then, after
approval by the stockholders of this Article, the liability of a director of
this corporation shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporation Law as so amended.
Any amendment, repeal or modification of the foregoing provisions of
this Article VII, or the adoption of any provision in an amended or restated
Certificate of Incorporation inconsistent with this Article VII, by the
stockholders of this corporation shall not apply to or adversely affect any
right or protection of a director of this corporation existing at the time of
such amendment, repeal, modification or adoption.
ARTICLE VIII
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) such
agents of this corporation (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders and others.
Any amendment, repeal or modification of any of the foregoing
provisions of this Article VIII shall not adversely affect any right or
protection of a director, officer, agent or other person existing at the time
of, or increase the liability of any director of this corporation with respect
to any acts or omissions of such director, officer or agent occurring prior to
such amendment, repeal or modification.
ARTICLE IX
Except as provided in Section 7 of Article IV hereof, this corporation
reserves the right to amend or repeal any provision contained in this Restated
Certificate of Incorporation, in the
- 18 -
<PAGE>
manner now or hereafter prescribed by statute, and all rights conferred upon a
stockholder herein are granted subject to this reservation.
FOURTH: This Amended and Restated Certificate was duly adopted by the
Board of Directors of this corporation.
FIFTH: This Amended and Restated Certificate was duly adopted by
written consent of the stockholders in accordance with sections 228, 245 and 242
of the General Corporation Law of the State of Delaware and written notice of
such action has been given as provided in section 228.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
- 19 -
<PAGE>
IN WITNESS WHEREOF, said Deltagen, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by its Secretary, Augustine
G. Yee, this ____ day of January, 2000.
Deltagen, Inc.
By /s/ Augustine G. Yee
---------------------------------
Augustine G. Yee
Secretary
- 20 -
<PAGE>
EXHIBIT 3(i).2
RESTATED
CERTIFICATE OF INCORPORATION
OF
DELTAGEN, INC.
Deltagen, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
FIRST. The name of the corporation is Deltagen, Inc..
SECOND. The date of filing of the corporation's original Certificate
of Incorporation with the Secretary of State of Delaware was January 30, 1997.
THIRD. The Certificate of Incorporation of the corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of the corporation is Deltagen, Inc.
ARTICLE II
The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
(A) CLASSES OF STOCK. The total number of shares of all classes of
capital stock which the corporation shall have authority to issue is eighty
million (80,000,000), of which seventy-five million (75,000,000) shares of the
par value of one tenth of one cent ($.001) each shall be Common Stock (the
"Common Stock") and five million (5,000,000)
-1-
<PAGE>
shares of the par value of one tenth of one cent ($.001) each shall be Preferred
Stock (the "Preferred Stock"). The number of authorized shares of Common Stock
or Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the then outstanding shares of Common Stock, without a vote of the
holders of the Preferred Stock, or of any series thereof, unless a vote of any
such Preferred Stock holders is required pursuant to the provisions established
by the Board of Directors of this corporation (the "Board of Directors") in the
resolution or resolutions providing for the issue of such Preferred Stock, and
if such holders of such Preferred Stock are so entitled to vote thereon, then,
except as may otherwise be set forth in this Restated Certificate of
Incorporation, the only stockholder approval required shall be the affirmative
vote of a majority of the combined voting power of the Common Stock and the
Preferred Stock so entitled to vote.
(B) PREFERRED STOCK. The Preferred Stock may be issued from time
to time in one or more series. The Board of Directors is expressly authorized to
provide for the issue, in one or more series, of all or any of the remaining
shares of Preferred Stock and, in the resolution or resolutions providing for
such issue, to establish for each such series the number of its shares, the
voting powers, full or limited, of the shares of such series, or that such
shares shall have no voting powers, and the designations, preferences and
relative, participating, optional or other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof. The Board
of Directors is also expressly authorized (unless forbidden in the resolution or
resolutions providing for such issue) to increase or decrease (but not below the
number of shares of the series then outstanding) the number of shares of any
series subsequent to the issuance of shares of that series. In case the number
of shares of any such series shall be so decreased, the shares constituting such
decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
(C) COMMON STOCK.
1. RELATIVE RIGHTS OF PREFERRED STOCK AND COMMON STOCK. All
preferences, voting powers, relative, participating, optional or other special
rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those that may be
fixed with respect to any shares of the Preferred Stock.
2. VOTING RIGHTS. Except as otherwise required by law or this
Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of stock held by such holder of record on the
books of the corporation for the election of directors and on all matters
submitted to a vote of stockholders of the corporation.
3. DIVIDENDS. Subject to the preferential rights 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 therefor, dividends payable either in cash, in
property or in shares of capital stock.
-2-
<PAGE>
4. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of the Preferred Stock, holders of Common Stock shall be
entitled, unless otherwise provided by law or this Restated Certificate of
Incorporation, to receive all of the remaining assets of the corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware:
(A) AMENDMENT TO CHARTER. Notwithstanding any other provision of
this Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66K%) of the voting power of all of the
then outstanding shares of the stock of the corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend in any respect or repeal this Article VI and Articles VII
and VIII below.
(B) AMENDMENT OF BYLAWS. The Board of Directors of the corporation
is expressly authorized to adopt, amend or repeal the Bylaws of the corporation,
provided, however, that any adoption, amendment or repeal of Bylaws of the
corporation by the Board of Directors shall require the approval of at least
sixty-six and two-thirds percent (66K%) of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any resolution providing for adoption, amendment or
repeal is presented to the Board of Directors). The stockholders shall also have
power to adopt, amend or repeal Bylaws of the corporation, provided, however,
that in addition to any vote of the holders of any class or series of stock of
the corporation required by law or by this Restated Certificate of Incorporation
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66K%) of the voting power of all of the then outstanding shares of the stock of
the corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for such adoption, amendment or
repeal by the stockholders of any provisions of the Bylaws of the corporation.
(C) WRITTEN BALLOT NOT REQUIRED. Elections of directors need not
be by written ballot unless the Bylaws of the corporation shall so provide.
(D) CLASSIFIED BOARD. The Board of Directors shall be divided into
three classes, designated Class I, Class II and Class III, as nearly equal in
number as possible, and the term of office of directors of one class shall
expire at each annual meeting of
-3-
<PAGE>
stockholders, and in all cases as to each director until his or her successor
shall be elected and shall qualify or until his or her earlier resignation,
removal from office, death or incapacity. Additional directorships resulting
from an increase in number of directors shall be apportioned among the classes
as equally as possible. At each annual meeting of stockholders the number of
directors equal to the number of directors of the class whose term expires at
the time of such meeting (or, if less, the number of directors properly
nominated and qualified for election) shall be elected to hold office until the
third succeeding annual meeting of stockholders after their election.
(E) NO ACTION BY WRITTEN CONSENT. No action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied. Special meetings of
the stockholders of the corporation may be called only by the Chairman of the
Board or the Chief Executive Officer of the corporation or by a resolution
adopted by the affirmative vote of a majority of the Board of Directors.
(F) CORPORATE RECORDS. The books of the corporation may be kept at
such place within or without the State of Delaware as the Bylaws of the
corporation may provide or as may be designated from time to time by the Board
of Directors of the corporation.
ARTICLE VII
(A) NO PERSONAL LIABILITY. A director of the corporation shall not
be personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit.
(B) INDEMNIFICATION. Each person who is or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment),
-4-
<PAGE>
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in the second paragraph hereof, the corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the corporation any expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this section or otherwise. The
corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
If a claim under the first paragraph of this section is not paid in
full by the corporation within thirty (30) days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any
-5-
<PAGE>
statute, provision of the Restated Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
(C) The corporation may 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
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
(D) Any repeal or modification of the foregoing provisions of this
Article VII shall not adversely affect any right or protection of any director,
officer, employee or agent of the corporation existing at the time of such
repeal or modification.
ARTICLE VIII
The corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon a stockholder herein are
granted subject to this reservation.
FOURTH. This Restated Certificate of Incorporation was duly adopted by
the Board of Directors of the corporation.
FIFTH. This Restated Certificate of Incorporation was duly adopted by
the stockholders in accordance with sections 242 and 245 of the General
Corporation Law of the State of Delaware. Written consent of the stockholders
has been given with respect to this Restated Certificate of Incorporation in
accordance with section 228 of the General Corporation Law of the State of
Delaware, and written notice has been given as provided in section 228.
IN WITNESS WHEREOF, said Deltagen, Inc. has caused this Certificate to
be signed by its President, William Matthews attested to by its Secretary,
Augustine G. Yee, this ___ day of __________, 2000.
By
-----------------------------
William Matthews
President
Attest:
- ----------------------------
Augustine G. Yee
Secretary
-6-
<PAGE>
EXHIBIT 3(ii).1
Draft of 3/31/2000
AMENDED AND RESTATED
BYLAWS
OF
DELTAGEN, INC.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1: Offices......................................................1
1.1 Principal Office.............................................1
1.2 Additional Offices...........................................1
ARTICLE 2: Meeting of Stockholders......................................1
2.1 Place of Meeting.............................................1
2.2 Annual Meeting...............................................1
2.3 Special Meetings.............................................2
2.4 Notice of Meetings...........................................3
2.5 Business Matter of a Special Meeting.........................3
2.6 List of Stockholders.........................................3
2.7 Organization and Conduct of Business.........................3
2.8 Quorum and Adjournments......................................3
2.9 Voting Rights................................................4
2.10 Majority Vote................................................4
2.11 Record Date for Stockholder Notice and Voting................4
2.12 Proxies......................................................4
2.13 Inspectors of Election.......................................4
2.14 Action Without a Meeting.....................................5
ARTICLE 3: Directors....................................................5
3.1 Number, Election, Tenure and Qualifications..................5
3.2 Vacancies....................................................6
3.3 Resignation and Removal......................................6
3.4 Powers.......................................................6
3.5 Chairman of the Board........................................7
3.6 Place of Meetings............................................7
3.7 Annual Meetings..............................................7
3.8 Regular Meetings.............................................7
3.9 Special Meetings.............................................7
3.10 Quorum, Action at Meeting, Adjournments......................7
3.11 Action Without Meeting.......................................7
3.12 Telephone Meetings...........................................8
3.13 Committees...................................................8
3.14 Fees and Compensation of Directors...........................8
3.15 Rights of Inspection.........................................8
ARTICLE 4: Officers.....................................................9
4.1 Officers Designated..........................................9
4.2 Election.....................................................9
4.3 Tenure.......................................................9
4.4 Compensation.................................................9
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
4.5 The Chief Executive Officer..................................9
4.6 The President................................................9
4.7 The Vice President..........................................10
4.8 The Secretary...............................................10
4.9 The Assistant Secretary.....................................10
4.10 The Chief Financial Officer.................................10
4.11 Bond........................................................11
4.12 Delegation of Authority.....................................11
ARTICLE 5: Notices.....................................................11
5.1 Delivery....................................................11
5.2 Waiver of Notice............................................11
ARTICLE 6: Indemnification.............................................12
6.1 Actions Other Than By or in the Right of the Corporation....12
6.2 Actions By or in the Right of the Corporation...............12
6.3 Success on the Merits.......................................12
6.4 Specific Authorization......................................13
6.5 Advance Payment.............................................13
6.6 Non-Exclusivity.............................................13
6.7 Insurance...................................................13
6.8 Severability................................................13
6.9 Intent of Article...........................................13
ARTICLE 7: Capital Stock...............................................14
7.1 Certificates for Shares.....................................14
7.2 Signatures on Certificates..................................14
7.3 Transfer of Stock...........................................14
7.4 Registered Stockholders.....................................14
7.5 Lost, Stolen or Destroyed Certificates......................15
ARTICLE 8: Certain Transactions........................................15
8.1 Transactions with Interested Parties........................15
8.2 Quorum......................................................15
ARTICLE 9: General Provisions..........................................16
9.1 Dividends...................................................16
9.2 Dividend Reserve............................................16
9.3 Checks......................................................16
9.4 Corporate Seal..............................................16
9.5 Fiscal Year.................................................16
9.6 Execution of Corporate Contracts and Instruments............16
9.7 Representation of Shares of Other Corporations..............16
ARTICLE 10: Amendments..................................................17
</TABLE>
-ii-
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
DELTAGEN, INC.
(A DELAWARE CORPORATION)
ARTICLE 1
OFFICES
1.1 PRINCIPAL OFFICE. The registered office of the corporation
shall be 1209 Orange Street, Wilmington, Delaware, and the name of the
registered agent in charge thereof is The Corporation Trust Company.
1.2 ADDITIONAL OFFICES. The corporation may also have offices at
such other places, either within or without the State of Delaware, as the Board
of Directors (the "Board") may from time to time designate or the business of
the corporation may require.
ARTICLE 2
MEETING OF STOCKHOLDERS
2.1 PLACE OF MEETING. Meetings of stockholders may be held at such
place, either within or without of the State of Delaware, as may be designated
by or in the manner provided in these Bylaws, or, if not so designated, at the
registered office of the corporation or the principal executive offices of the
corporation.
2.2 ANNUAL MEETING. Annual meetings of stockholders shall be held
each year at such date and time as shall be designated from time to time by the
Board and stated in the notice of the meeting. At such annual meeting, the
stockholders shall elect by a plurality vote the number of directors equal to
the number of directors of the class whose term expires at such meetings (or, if
fewer, the number of directors properly nominated and qualified for election) to
hold office until the third succeeding annual meeting of stockholders after
their election. The stockholders shall also transact such other business as may
properly be brought before the meetings.
To be properly brought before the annual meeting, business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors or the Chief Executive Officer, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or the Chief Executive Officer, or (c) otherwise properly
brought before the meeting by a stockholder of record. In addition to any other
-1-
<PAGE>
applicable requirements, for business to be properly brought before the annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered personally or deposited in the United States mail, or
delivered to a common carrier for transmission to the recipient or actually
transmitted by the person giving the notice by electronic means to the recipient
or sent by other means of written communication, postage or delivery charges
prepaid in all such cases, and received at the principal executive offices of
the corporation, addressed to the attention of the Secretary of the corporation,
not less than fifty (50) days nor more than seventy-five (75) days prior to the
scheduled date of the meeting (regardless of any postponements, deferrals or
adjournments of that meeting to a later date); PROVIDED, HOWEVER, that in the
event that less than sixty-five (65) days' notice or prior public disclosure of
the date of the scheduled meeting is given or made to stockholders, notice by
the stockholder to be timely must be so received not later than the earlier of
(a) the close of business on the 15th day following the day on which such notice
of the date of the scheduled annual meeting was mailed or such public disclosure
was made, whichever first occurs, and (b) two days prior to the date of the
scheduled meeting. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class, series and number of shares of the corporation that are owned
beneficially by the stockholder, and (iv) any material interest of the
stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section; provided, however, that nothing in this
Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
The Chairman of the Board of the corporation (or such other person
presiding at the meeting in accordance with these Bylaws) shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
2.3 SPECIAL MEETINGS. Special meetings of the stockholders may be
called for any purpose or purposes, unless otherwise prescribed by statute or by
the Restated Certificate of Incorporation, by the Chief Executive Officer or
Secretary only at the request of the Chairman of the Board of Directors, the
Chief Executive Officer or President of the corporation or by a resolution duly
adopted by the affirmative vote of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
2.4 NOTICE OF MEETINGS. Written notice of stockholders' meetings,
stating the place, date and time of the meeting and, in the case of a special
meeting, the purpose or purposes for which such special meeting is called, shall
be given to each stockholder entitled to vote at such meeting not less than ten
(10) nor more than sixty (60) days prior to the meeting.
-2-
<PAGE>
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date and time of the adjourned meeting shall be given in conformity herewith. At
any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
2.5 BUSINESS MATTER OF A SPECIAL MEETING. Business transacted at
any special meeting of stockholders shall be limited to the purposes stated in
the notice, except to the extent such notice is waived or is not required.
2.6 LIST OF STOCKHOLDERS. The officer in charge of the stock
ledger of the corporation or the transfer agent shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting arranged in alphabetical order, and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, at a place
within the city where the meeting is to be held, which place, if other than the
place of the meeting, shall be specified in the notice of the meeting. The list
shall also be produced and kept at the place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present in person
thereat.
2.7 ORGANIZATION AND CONDUCT OF BUSINESS. The Chairman of the
Board or, in his or her absence, the Chief Executive Officer or President of the
corporation or, in their absence, such person as the Board may have designated
or, in the absence of such a person, such person as may be chosen by the holders
of a majority of the shares entitled to vote who are present, in person or by
proxy, shall call to order any meeting of the stockholders and act as Chairman
of the meeting. In the absence of the Secretary of the corporation, the
Secretary of the meeting shall be such person as the Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seems to him or her in order.
2.8 QUORUM AND ADJOURNMENTS. Except where otherwise provided by
law or the Restated Certificate of Incorporation or these Bylaws, the holders of
a majority of the stock issued and outstanding and entitled to vote, present in
person or represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person
-3-
<PAGE>
or represented by proxy shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented.
2.9 VOTING RIGHTS. Unless otherwise provided in the Restated
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder.
2.10 MAJORITY VOTE. When a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the Restated Certificate of Incorporation or of these Bylaws, a
different vote is required in which case such express provision shall govern and
control the decision of such question.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE AND VOTING. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any dividend or other distribution, or entitled
to exercise any right in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten (10)
days before the date of any such meeting nor more than sixty (60) days before
any other action. If the Board does not so fix a record date, 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 business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
2.12 PROXIES. Every person entitled to vote for directors or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the corporation. 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 attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of three years from the date of the proxy, unless
otherwise provided in the proxy.
2.13 INSPECTORS OF ELECTION. The corporation shall, in advance of
any meeting of stockholders, appoint one or more inspectors of election to act
at the meeting and make a written report thereof. The corporation may designate
one or more persons to act as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or
-4-
<PAGE>
her duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability.
2.14 ACTION WITHOUT A MEETING. No action required or permitted to
be taken at any annual or special meeting of the stockholders of the corporation
may be taken without a meeting and the power of the stockholders to consent in
writing, without a meeting, to the taking of any action is specifically denied.
ARTICLE 3
DIRECTORS
3.1 NUMBER, ELECTION, TENURE AND QUALIFICATIONS. The Board of
Directors of the corporation shall consist of not less than five (5) members nor
more than nine (9) members and shall be divided into three classes, designated
as Class I, Class II and Class III, as nearly equal in number as possible. The
initial Board of Directors shall consist of seven (7) members, with Class I
consisting of two (2) directors, Class II consisting of two (2) directors and
Class III consisting of three (3) directors, and the exact number of members of
any future Board of Directors, and the exact number of directors in each Class,
shall be determined from time to time by resolution of the Board of Directors.
Notwithstanding the foregoing, additional directorships resulting from an
increase in the number of directors shall be apportioned among the classes as
equally as possible.
The directors shall be elected at the annual meeting or at any special
meeting of the stockholders, except as otherwise provided in this Section, and
each director elected shall hold office until such director's successor is
elected and qualified, unless sooner displaced.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors. Nominations of persons
for election to the Board of Directors at the annual meeting, by or at the
direction of the Board of Directors, may be made by any nominating committee or
person appointed by the Board of Directors; nominations may also be made by any
stockholder of record of the corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section. Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation. To be timely, a stockholder's notice shall be
delivered personally or deposited in the United States mail, or delivered to a
common carrier for transmission to the recipient or actually transmitted by the
person giving the notice by electronic means to the recipient or sent by other
means of written communication, postage or delivery charges prepaid in all such
cases, and received at the principal executive offices of the corporation
addressed to the attention of the Secretary of the corporation not less than one
hundred twenty (120) days prior to the scheduled date of the meeting (regardless
of any postponements, deferrals or adjournments of that meeting to a later
date); provided, however, that, in the case of an annual meeting and in the
event that less than one hundred (100) days' notice or prior public disclosure
of the date of the scheduled meeting is given or made to stockholders, notice by
the stockholder to be timely must be so received not later than the close of
business on the 7th day following the day on which such notice of the
-5-
<PAGE>
date of the scheduled meeting was mailed or such public disclosure was made,
whichever first occurs. Such stockholder's notice to the Secretary shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class, series and number of shares of capital stock of the
corporation that are owned beneficially by the person, (iv) a statement as to
the person's citizenship, and (v) any other information relating to the person
that is required to be disclosed in solicitations for proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice, (i) the name and record address of the
stockholder and (ii) the class, series and number of shares of capital stock of
the corporation that are owned beneficially by the stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as director of the corporation. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth herein.
In connection with any annual meeting, the Chairman of the Board of
Directors (or such other person presiding at such meeting in accordance with
these Bylaws) shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
Directors shall serve as provided in the Restated Certificate of
Incorporation of the corporation. Directors need not be stockholders.
3.2 VACANCIES. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election at which the term of the class to which they have been
elected expires and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law or these bylaws, may exercise the powers of the full board until
the vacancy is filled.
3.3 RESIGNATION AND REMOVAL. Any director may resign at any time
upon written notice to the corporation at its principal place of business or to
the Chief Executive Officer or the Secretary. Such resignation shall be
effective upon receipt of such notice unless the notice specifies such
resignation to be effective at some other time or upon the happening of some
other event. Any director or the entire Board of Directors may be removed, but
only for cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, unless otherwise specified by law or the Restated
Certificate of Incorporation.
3.4 POWERS. The business of the corporation shall be managed by or
under the direction of the Board which may exercise all such powers of the
corporation and do all such
-6-
<PAGE>
lawful acts and things which are not by statute or by the Restated Certificate
of Incorporation or by these Bylaws directed or required to be exercised or done
by the stockholders.
3.5 CHAIRMAN OF THE BOARD. If the Board of Directors appoints a
Chairman of the Board, such Chairman shall, when present, preside at all
meetings of the stockholders and the Board. The Chairman shall perform such
duties and possess such powers as are customarily vested in the office of the
Chairman of the Board or as may be vested in the Chairman by the Board of
Directors.
3.6 PLACE OF MEETINGS. The Board may hold meetings, both regular
and special, either within or without the State of Delaware.
3.7 ANNUAL MEETINGS. The annual meetings of the Board shall be
held immediately following the annual meeting of stockholders, and no notice of
such meeting shall be necessary to the Board, provided a quorum shall be
present. The annual meetings shall be for the purposes of organization, and an
election of officers and the transaction of other business.
3.8 REGULAR MEETINGS. Regular meetings of the Board may be held
without notice at such time and place as may be determined from time to time by
the Board; provided that any director who is absent when such a determination is
made shall be given prompt notice of such determination.
3.9 SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman of the Board, the Chief Executive Officer, the President, the
Secretary, or on the written request of two or more directors, or by one
director in the event that there is only one director in office. Four hours'
notice to each director, either personally or by telegram, cable, telecopy,
commercial delivery service, telex or similar means sent to such director's
business or home address, or two days' notice by written notice deposited in the
mail or delivered by a nationally recognized courier service, shall be given to
each director by the secretary or by the officer or one of the directors calling
the meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
3.10 QUORUM, ACTION AT MEETING, ADJOURNMENTS. At all meetings of
the Board, a majority of directors then in office, but in no event less than one
third (1/3) of the entire Board, 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, except as may be
otherwise specifically provided by law or by the Restated Certificate of
Incorporation. For purposes of this section, the term "entire Board" shall mean
the number of directors last fixed by the stockholders or directors, as the case
may be, in accordance with law and these Bylaws; provided, however, that if less
than all the number so fixed of directors were elected, the "entire Board" shall
mean the greatest number of directors so elected to hold office at any one time
pursuant to such authorization. If a quorum shall not be present at any meeting
of the Board, a majority of the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
3.11 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Restated Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting
-7-
<PAGE>
of the Board or of any committee thereof may be taken without a meeting, if all
members of the Board 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 or committee.
3.12 TELEPHONE MEETINGS. Unless otherwise restricted by the
Restated Certificate of Incorporation or these Bylaws, any member of the Board
or any committee thereof may participate in a meeting of the Board or of any
committee, as the case may be, 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.
3.13 COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
board 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. Any such committee, to the extent provided in the resolution of the
Board, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to amending
the Restated Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation; and, unless the
resolution designating such committee or the Restated Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board. Each committee shall keep
regular minutes of its meetings and make such reports to the Board as the Board
may request. Except as the Board may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the conduct of
its business by the Board.
3.14 FEES AND COMPENSATION OF DIRECTORS. Unless otherwise
restricted by the Restated Certificate of Incorporation or these Bylaws, the
Board shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board and may be paid a fixed sum for attendance at each meeting of the
Board or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.15 RIGHTS OF INSPECTION. 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.
-8-
<PAGE>
ARTICLE 4
OFFICERS
4.1 OFFICERS DESIGNATED. The officers of the corporation shall be
chosen by the Board of Directors and shall be a Chief Executive Officer, a
President, a Secretary and a Chief Financial Officer. The Board may also choose
a Chief Operating Officer, one or more Vice Presidents, and one or more
assistant Secretaries. Any number of offices may be held by the same person,
unless the Restated Certificate of Incorporation or these Bylaws otherwise
provide.
4.2 ELECTION. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a Chief Executive Officer, a
President, a Secretary and a Chief Financial Officer. Other officers may be
appointed by the Board of Directors at such meeting, at any other meeting, or by
written consent or may be appointed by the Chief Executive Officer pursuant to a
delegation of authority from the Board of Directors.
4.3 TENURE. The officers of the corporation shall hold office
until their successors are chosen and qualify, unless a different term is
specified in the vote choosing or appointing such officer, or until such
officer's earlier death, resignation or removal. Any officer elected or
appointed by the Board of Directors or by the Chief Executive Officer may be
removed with or without cause at any time by the affirmative vote of a majority
of the Board of Directors or a committee duly authorized to do so, except that
any officer appointed by the Chief Executive Officer may also be removed at any
time by the Chief Executive Officer. Any vacancy occurring in any office of the
corporation may be filled by the Board of Directors, at its discretion. Any
officer may resign by delivering such officer's written resignation to the
corporation at its principal place of business or to the Chief Executive Officer
or the Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
4.4 COMPENSATION. The salaries of all officers of the corporation
shall be fixed from time to time by the Board and no officer shall be prevented
from receiving a salary because he is also a director of the corporation.
4.5 THE CHIEF EXECUTIVE OFFICER. Subject to such supervisory
powers, if any, as may be given by the Board to the Chairman of the Board, the
Chief Executive Officer shall preside at all meetings of the stockholders and in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board are
carried into effect. He or she shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board to some other officer or agent of the corporation.
4.6 THE PRESIDENT. The President shall, in the event there be no
Chief Executive Officer or in the absence of the Chief Executive Officer or in
the event of his or her disability
-9-
<PAGE>
or refusal to act, perform the duties of the Chief Executive Officer, and when
so acting, shall have the powers of and subject to all the restrictions upon the
Chief Executive Officer. The President shall perform such other duties and have
such other powers as may from time to time be prescribed for them by the Board,
the Chairman of the Board, the Chief Executive Officer or these Bylaws.
4.7 THE VICE PRESIDENT. The Vice President (or in the event there
be more than one, the Vice Presidents in the order designated by the directors,
or in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his or her disability or refusal
to act, perform the duties of the President, and when so acting, shall have the
powers of and subject to all the restrictions upon the President. The Vice
President(s) shall perform such other duties and have such other powers as may
from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these Bylaws.
4.8 THE SECRETARY. The Secretary shall attend all meetings of the
Board and the stockholders and record all votes and the proceedings of the
meetings in a book to be kept for that purpose and shall perform like duties for
the standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board,
and shall perform such other duties as may from time to time be prescribed by
the Board, the Chairman of the Board or the Chief Executive Officer, under whose
supervision he or she shall act. The Secretary shall have custody of the seal of
the corporation, and the Secretary, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it, and, when so
affixed, the seal may be attested by his or her signature or by the signature of
such Assistant Secretary. The Board may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing thereof
by his or her signature. The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board, 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 issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
4.9 THE ASSISTANT SECRETARY. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order designated by the Board
(or in the absence of any designation, in the order of their election) shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
4.10 THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
have the custody of the Corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board. The Chief Financial Officer shall disburse the funds of the
corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board, at
its regular meetings, or when
-10-
<PAGE>
the Board so requires, an account of all his or her transactions as Chief
Financial Officer and of the financial condition of the corporation.
4.11 BOND. If required by the Board of Directors, any officer shall
give the corporation a bond in such sum and with such surety or sureties and
upon such terms and conditions as shall be satisfactory to the Board of
Directors, including without limitation a bond for the faithful performance of
the duties of such officer's office and for the restoration to the corporation
of all books, papers, vouchers, money and other property of whatever kind in
such officer's possession or under such officer's control and belonging to the
corporation.
4.12 DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
ARTICLE 5
NOTICES
5.1 DELIVERY. Whenever, under the provisions of law, or of the
Restated Certificate of Incorporation or these Bylaws, written notice is
required to be given to any director or stockholder, such notice may be given by
mail, addressed to such director or stockholder, at such person's address as it
appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail or delivered to a nationally recognized
courier service. Unless written notice by mail is required by law, written
notice may also be given by telegram, cable, telecopy, commercial delivery
services, telex or similar means, addressed to such director or stockholder at
such person's address as it appears on the records of the corporation, in which
case such notice shall be deemed to be given when delivered into the control of
the persons charged with effecting such transmission, the transmission charge to
be paid by the corporation or the person sending such notice and not by the
addressee. Oral notice or other in-hand delivery, in person or by telephone,
shall be deemed given at the time it is actually given.
5.2 WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of law or of the Restated Certificate of Incorporation or
of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. In addition to the foregoing, notice of a meeting
need not be given to any director who signs a waiver of notice or a consent to
holding the meeting or an approval of the minutes thereof, whether before or
after the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such director. All such waivers,
consents and approvals executed under this Section 5.2 shall be filed with the
corporate records or made a part of the minutes of the meeting.
-11-
<PAGE>
ARTICLE 6
INDEMNIFICATION
6.1 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceedings, had no reasonable cause to believe such person's 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 such person 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 such
person's conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation
shall indemnify any person 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
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and 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 for negligence or misconduct in the performance of such person's duty to
the corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the State
of Delaware or such other court shall deem proper.
6.3 SUCCESS ON THE MERITS. To the extent that any person described
in Sections 6.1 or 6.2 of this Article 6 has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
-12-
<PAGE>
6.4 SPECIFIC AUTHORIZATION. Any indemnification under Sections 6.1
or 6.2 of this Article 6 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
6.5 ADVANCE PAYMENT. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the manner provided for in Section 6.4 of this Article 6
upon receipt of an undertaking by or on behalf of any person described in said
Section to repay such amount unless it shall ultimately be determined that such
person is entitled to indemnification by the corporation as authorized in this
Article 6.
6.6 NON-EXCLUSIVITY. The indemnification provided by this Article
6 shall not be deemed exclusive of any other rights to which those indemnified
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be director,
officer, employee or agent of the corporation and shall inure to the benefit of
the heirs, executors and administrators of such a person.
6.7 INSURANCE. The Board of Directors may authorize, by a vote of
the majority of the full board, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability under the provisions of
this Article 6.
6.8 SEVERABILITY. If any word, clause or provision of this Article
6 or any award made hereunder shall for any reason be determined to be invalid,
the provisions hereof shall not otherwise be affected thereby but shall remain
in full force and effect.
6.9 INTENT OF ARTICLE. The intent of this Article 6 is to provide
for indemnification to the fullest extent permitted by Section 145 of the
General Corporation Law of the State of Delaware. To the extent that such
Section or any successor Section may be amended or supplemented from time to
time, this Article 6 shall be amended automatically and construed so as to
permit indemnification to the fullest extent from time to time permitted by law.
-13-
<PAGE>
ARTICLE 7
CAPITAL STOCK
7.1 CERTIFICATES FOR SHARES. The shares of the corporation shall
be represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and by the Chief
Financial Officer, the Secretary or an Assistant Secretary of the corporation.
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 shall have 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 such person were such officer,
transfer agent or registrar at the date of issue. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid shares, the total amount of the
consideration to be paid therefor, and the amount paid thereon shall be
specified.
Within a reasonable time after the issuance or transfer of
uncertificated stock, the corporation shall send to the registered owner thereof
a written notice containing the information required by the General Corporation
Law of the State of Delaware or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of each
class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
7.2 SIGNATURES ON CERTIFICATES. Any or all of the signatures on a
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
shall have 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 were such officer, transfer agent or registrar at the date of issue.
7.3 TRANSFER OF STOCK. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate of 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 certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated share, such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
7.4 REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a percent 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 any other person, whether or not
it
-14-
<PAGE>
shall have express or other notice thereof, except as otherwise provided by the
laws of Delaware.
7.5 LOST, STOLEN OR DESTROYED CERTIFICATES. The Board may direct
that a new certificate or certificates be issued to replace any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing the issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of the lost, stolen or destroyed certificate or certificates, or his or
her legal representative, to advertise the same in such manner as it shall
require, and/or to give the corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE 8
CERTAIN TRANSACTIONS
8.1 TRANSACTIONS WITH INTERESTED PARTIES. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the board or committee thereof which
authorizes the contract or transaction or solely because the vote or votes of
such director or officer are counted for such purpose, if:
(a) the material facts as to such person's relationship
or interest and as to the contract or transaction are disclosed or are
known to the Board of Directors or the committee, and the board or
committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(b) the material facts as to such person's relationship
or interest and as to the contract or transaction are disclosed or are
known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or
(c) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified, by
the Board of Directors, a committee thereof, or the stockholders.
8.2 QUORUM. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
-15-
<PAGE>
ARTICLE 9
GENERAL PROVISIONS
9.1 DIVIDENDS. Dividends upon the capital stock of the
corporation, subject to any restrictions contained in the General Corporation
Law of the State of Delaware or the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of the capital
stock, subject to the provisions of the Restated Certificate of Incorporation.
9.2 DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
9.3 CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board may from time to time designate.
9.4 CORPORATE SEAL. The Board of Directors may, by resolution,
adopt a corporate seal. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the word "Delaware." The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or otherwise reproduced. The seal may be altered from time to time by the Board
of Directors.
9.5 FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
9.6 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. The Board,
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 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.
9.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The Chief
Executive Officer, the President or any Vice President or the Secretary or any
Assistant Secretary of this corporation is authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all shares
of any corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation any and all shares held by this corporation in any other corporation
or corporations
-16-
<PAGE>
may be exercised either by such officers in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officers.
ARTICLE 10
AMENDMENTS
The Board of Directors is expressly empowered to adopt, amend or repeal
these Bylaws, provided, however, that any adoption, amendment or repeal of these
Bylaws by the Board of Directors shall require the approval of at least
sixty-six and two-thirds percent (66-2/3%) of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any resolution providing for adoption, amendment or
repeal is presented to the board). The stockholders shall also have power to
adopt, amend or repeal these Bylaws, provided, however, that in addition to any
vote of the holders of any class or series of stock of this corporation required
by law or by the Restated Certificate of Incorporation of this corporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding shares of the stock
of the corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required for such adoption,
amendment or repeal by the stockholders of any provisions of these Bylaws.
-17-
<PAGE>
EXHIBIT 3(ii).2
Bylaws adopted as of January 20, 1997
BYLAWS
OF
DELTAGEN, INC.
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. All meetings of the stockholders
shall be held at such place within or without the State of Delaware as may be
fixed from time to time by the Board of Directors or the chief executive
officer, or if not so designated, at the registered office of the corporation.
Section 2. ANNUAL MEETING. Annual meetings of stockholders
shall be held on the second Tuesday in April in each year if not a legal
holiday, and if a legal holiday, then on the next secular day following, at
10:00 A.M., or at such other date and time as shall be designated from time to
time by the Board of Directors or the chief executive officer, at which meeting
the stockholders shall elect by a plurality vote a Board of Directors and shall
transact such other business as may properly be brought before the meeting. If
no annual meeting is held in accordance with the foregoing provisions, the Board
of Directors shall cause the meeting to be held as soon thereafter as
convenient, which meeting shall be designated a special meeting in lieu of
annual meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the
stockholders, for any purpose or purposes, may, unless otherwise prescribed by
statute or by the certificate of incorporation, be called by the Board of
Directors or the chief executive officer and shall be called by the chief
executive officer or secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of stockholders owning ten
percent of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting shall be limited to
matters relating to the purpose or purposes stated in the notice of meeting.
Section 4. NOTICE OF MEETINGS. Except as otherwise provided by
law, written notice of each meeting of stockholders, annual or special, stating
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, shall be given not
1
<PAGE>
less than ten nor more than sixty days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 5. VOTING LIST. The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city or
town where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. 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, the certificate of incorporation or these bylaws.
Section 7. ADJOURNMENTS. Any meeting of stockholders may be
adjourned from time to time to any other time and to any other place at which a
meeting of stockholders may be held under these bylaws, which time and place
shall be announced at the meeting, by a majority of the stockholders present in
person or represented by proxy at the meeting and entitled to vote, though less
than a quorum, or, if no stockholder is present or represented by proxy, by any
officer entitled to preside at or to act as secretary of such meeting, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the original meeting. If the adjournment is for more than thirty 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 8. ACTION AT MEETINGS. When a quorum is present at any
meeting, the vote of the holders of a majority of the stock present in person or
represented by proxy and entitled to vote on the question shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of law, the certificate of incorporation or these bylaws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
2
<PAGE>
Section 9. VOTING AND PROXIES. Unless otherwise provided in
the certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each stockholder entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 10. ACTION WITHOUT MEETING. Any action required to be
taken at any annual or special meeting of stockholders, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
Section 1. NUMBER, ELECTION, TENURE AND QUALIFICATION. The
number of directors which shall constitute the whole board shall be determined
from time to time by resolution of the Board of Directors or by the stockholders
at the annual meeting or at any special meeting of stockholders. The directors
shall be elected at the annual meeting or at any special meeting of the
stockholders, except as provided in Section 3 of this Article, and each director
elected shall hold office until his successor is elected and qualified, unless
sooner displaced. Directors need not be stockholders.
Section 2. ENLARGEMENT. The number of the Board of Directors
may be increased at any time by vote of a majority of the directors then in
office.
Section 3. VACANCIES. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director, and the directors so chosen shall hold
office until the next annual election and until their successors are duly
elected and shall qualify, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute. In the event of a vacancy in the Board of Directors, the remaining
directors, except as otherwise provided by law or these bylaws, may
3
<PAGE>
exercise the powers of the full board until the vacancy is filled.
Section 4. RESIGNATION AND REMOVAL. Any director may resign at
any time upon written notice to the corporation at its principal place of
business or to the chief executive officer or the secretary. Such resignation
shall be effective upon receipt unless it is specified to be effective at some
other time or upon the happening of some other event. Any director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors, unless
otherwise specified by law or the certificate of incorporation.
Section 5. GENERAL POWERS. The business and affairs of the
corporation shall be managed by its Board of Directors, which may exercise all
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these bylaws directed or
required to be exercised or done by the stockholders.
Section 6. CHAIRMAN OF THE BOARD. If the Board of Directors
appoints a chairman of the board, he shall, when present, preside at all
meetings of the stockholders and the Board of Directors. He shall perform such
duties and possess such powers as are customarily vested in the office of the
chairman of the board or as may be vested in him by the Board of Directors.
Section 7. PLACE OF MEETINGS. The Board of Directors may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 8. 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; provided that any director who is
absent when such a determination is made shall be given prompt notice of such
determination. A regular meeting of the Board of Directors may be held without
notice immediately after and at the same place as the annual meeting of
stockholders.
Section 9. SPECIAL MEETINGS. Special meetings of the board may
be called by the chief executive officer, secretary, or on the written request
of two or more directors, or by one director in the event that there is only one
director in office. Two days notice to each director, either personally or by
telegram, cable, telecopy, commercial delivery service, telex or similar means
sent to his business or home address, or three days notice by written notice
deposited in the mail, shall be given to each director by the secretary or by
the officer or one of the directors calling the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.
4
<PAGE>
Section 10. QUORUM, ACTION AT MEETING, ADJOURNMENTS. At all
meetings of the board, a majority of directors then in office, but in no event
less than one third of the entire board, 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 law or by the
certificate of incorporation. For purposes of this section, the term "entire
board" shall mean the number of directors last fixed by the stockholders or
directors, as the case may be, in accordance with law and these bylaws;
provided, however, that if less than all the number so fixed of directors were
elected, the "entire board" shall mean the greatest number of directors so
elected to hold office at any one time pursuant to such authorization. If a
quorum shall not be present at any meeting of the Board of Directors, a majority
of the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
Section 11. ACTION BY CONSENT. 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 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 or committee.
Section 12. TELEPHONIC MEETINGS. Unless otherwise restricted
by the certificate of incorporation or these bylaws, members of the Board of
Directors or of any committee thereof may participate in a meeting of the Board
of Directors or of any committee, as the case may be, 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 13. COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board 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. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
5
<PAGE>
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution designating such committee
or the certificate of incorporation expressly so provide, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and make
such reports to the Board of Directors as the Board of Directors may request.
Except as the Board of Directors may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these bylaws for the conduct of
its business by the Board of Directors.
Section 14. COMPENSATION. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall have
the authority to fix from time to time the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and the performance of their responsibilities as
directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors and/or a stated salary as director. No such payment shall
preclude any director from serving the corporation or its parent or subsidiary
corporations in any other capacity and receiving compensation therefor. The
Board of Directors may also allow compensation for members of special or
standing committees for service on such committees.
ARTICLE III
OFFICERS
Section 1. ENUMERATION. The officers of the corporation shall
be chosen by the Board of Directors and shall be a president, a secretary and a
treasurer and such other officers with such titles, terms of office and duties
as the Board of Directors may from time to time determine, including a chairman
of the board, one or more vice-presidents, and one or more assistant secretaries
and assistant treasurers. If authorized by resolution of the Board of Directors,
the chief executive officer may be empowered to appoint from time to time
assistant secretaries and assistant treasurers. Any number of offices may be
held by the same person, unless the certificate of incorporation or these bylaws
otherwise provide.
Section 2. ELECTION. The Board of Directors at its first
meeting after each annual meeting of stockholders shall choose a president, a
secretary and a treasurer. Other officers may be appointed by the Board of
Directors at such meeting, at
6
<PAGE>
any other meeting, or by written consent.
Section 3. TENURE. The officers of the corporation shall hold
office until their successors are chosen and qualified, unless a different term
is specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal. Any officer elected or appointed by the Board of
Directors or by the chief executive officer may be removed at any time by the
affirmative vote of a majority of the Board of Directors or a committee duly
authorized to do so, except that any officer appointed by the chief executive
officer may also be removed at any time by the chief executive officer. Any
vacancy occurring in any office of the corporation may be filled by the Board of
Directors, at its discretion. Any officer may resign by delivering his written
resignation to the corporation at its principal place of business or to the
chief executive officer or the secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
Section 4. PRESIDENT. The president shall be the chief
operating officer of the corporation. He shall also be the chief executive
officer unless the Board of Directors otherwise provides. The president shall,
unless the Board of Directors provides otherwise in a specific instance or
generally, preside at all meetings of the stockholders and the Board of
Directors, have general and active management of the business of the corporation
and see that all orders and resolutions of the Board of Directors are carried
into effect. The president shall execute bonds, mortgages, and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 5. VICE-PRESIDENTS. In the absence of the president or
in the event of his inability or refusal to act, the vice-president, or if there
be more than one vice-president, the vice-presidents in the order designated by
the Board of Directors or the chief executive officer (or in the absence of any
designation, then in the order determined by their tenure in office) shall
perform 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 perform such other duties and have such other powers as
the Board of Directors or the chief executive officer may from time to time
prescribe.
Section 6. SECRETARY. The secretary shall have such powers and
perform such duties as are incident to the office of secretary. He shall
maintain a stock ledger and prepare lists of stockholders and their addresses as
required and shall be the custodian of corporate records. The secretary shall
attend all meetings of the Board of Directors and all meetings of the
7
<PAGE>
stockholders and record all the proceedings of the meetings of the corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. He shall give, or
cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as may
be from time to time prescribed by the Board of Directors or chief executive
officer, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 7. ASSISTANT SECRETARIES. The assistant secretary, or
if there be more than one, the assistant secretaries in the order determined by
the Board of Directors, the chief executive officer or the secretary (or if
there be no such determination, then in the order determined by their tenure in
office), shall, in the absence of the secretary or in the event of his inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the Board of
Directors, the chief executive officer or the secretary may from time to time
prescribe. In the absence of the secretary or any assistant secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary or acting secretary to keep a record of the meeting.
Section 8. TREASURER. The treasurer shall perform such duties
and shall have such powers as may be assigned to him by the Board of Directors
or the chief executive officer. In addition, the treasurer shall perform such
duties and have such powers as are incident to the office of treasurer. The
treasurer shall have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the chief executive officer and the
Board of Directors, when the chief executive officer or Board of Directors so
requires, an account of all his transactions as treasurer and of the financial
condition of the corporation.
Section 9. ASSISTANT TREASURERS. The assistant treasurer, or
if there shall be more than one, the assistant treasurers in the order
determined by the Board of Directors, the chief executive officer or the
treasurer (or if there be no such determination, then in the order determined by
their tenure
8
<PAGE>
in office), shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of
the treasurer and shall perform such other duties and have such other powers
as the Board of Directors, the chief executive officer or the treasurer may
from time to time prescribe.
Section 10. BOND. If required by the Board of Directors, any
officer shall give the corporation a bond in such sum and with such surety or
sureties and upon such terms and conditions as shall be satisfactory to the
Board of Directors, including without limitation a bond for the faithful
performance of the duties of his office and for the restoration to the
corporation of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control and belonging to the corporation.
ARTICLE IV
NOTICES
Section 1. DELIVERY. Whenever, under the provisions of law, or
of the certificate of incorporation or these bylaws, written notice is required
to be given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram, cable, telecopy, commercial delivery service,
telex or similar means, addressed to such director or stockholder at his address
as it appears on the records of the corporation, in which case such notice shall
be deemed to be given when delivered into the control of the persons charged
with effecting such transmission, the transmission charge to be paid by the
corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
Section 2. WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of law or of the certificate of incorporation
or of these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
9
<PAGE>
ARTICLE V
INDEMNIFICATION
Section 1. ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceedings, 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.
Section 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person 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 a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit 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 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 for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the State
of Delaware or such other court
10
<PAGE>
shall deem proper.
Section 3. SUCCESS ON THE MERITS. To the extent that any
person described in Section 1 or 2 of this Article V has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
said Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. SPECIFIC AUTHORIZATION. Any indemnification under
Section 1 or 2 of this Article V (unless ordered by a court) shall be made by
the corporation only as authorized in the specific case upon a determination
that indemnification of any person described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections. Such determination shall be made (1) by the Board of Directors by
a majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders of the
corporation.
Section 5. ADVANCE PAYMENT. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the manner provided for in Section 4 of
this Article V upon receipt of an undertaking by or on behalf of any person
described in said Section to repay such amount unless it shall ultimately be
determined that he is entitled to indemnification by the corporation as
authorized in this Article V.
Section 6. NON-EXCLUSIVITY. The indemnification provided by
this Article V shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be director, officer, employee or
agent of the corporation and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 7. INSURANCE. The Board of Directors may authorize, by
a vote of the majority of the full board, the corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the
11
<PAGE>
power to indemnify him against such liability under the provisions of this
Article V.
Section 8. SEVERABILITY. If any word, clause or provision of
this Article V or any award made hereunder shall for any reason be determined to
be invalid, the provisions hereof shall not otherwise be affected thereby but
shall remain in full force and effect.
Section 9. INTENT OF ARTICLE. The intent of this Article V is
to provide for indemnification to the fullest extent permitted by section 145 of
the General Corporation Law of Delaware. To the extent that such Section or any
successor section may be amended or supplemented from time to time, this Article
V shall be amended automatically and construed so as to permit indemnification
to the fullest extent from time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. CERTIFICATES OF STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the chairman or vice-chairman of the Board of Directors,
or the president or a vice-president and the treasurer or an assistant
treasurer, or the secretary or an assistant secretary of the corporation,
certifying the number of shares owned by him in the corporation. 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 shall have 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 were such officer, transfer agent or
registrar at the date of issue. Certificates may be issued for partly paid
shares and in such case upon the face or back of the certificates issued to
represent any such partly paid shares, the total amount of the consideration to
be paid therefor, and the amount paid thereon shall be specified.
Section 2. LOST CERTIFICATES. The Board of Directors may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to give reasonable evidence of such loss, theft or destruction,
to advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with
12
<PAGE>
respect to the certificate alleged to have been lost, stolen or destroyed or
the issuance of such new certificate.
Section 3. 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,
assignment or authority to transfer, and proper evidence of compliance with
other conditions to rightful transfer, it shall be the duty of the corporation
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 4. RECORD DATE. 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 to express consent to corporate
action in writing without a meeting, 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 sixty days nor less then
ten days before the date of such meeting, nor more than sixty days prior to any
other action to which such record date relates. 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. If no record date
is fixed, 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 before the day on which notice is given, or, if notice is waived, at the
close of business on the day before the day on which the meeting is held. The
record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors is necessary, shall be the day on which the first written consent
is expressed. 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 to such purpose.
Section 5. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a 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 any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
13
<PAGE>
ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. TRANSACTIONS WITH INTERESTED PARTIES. No contract
or transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the board or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(a) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the board or committee in good
faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders.
Section 2. QUORUM. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
corporation, if any, may be declared by the Board of Directors at any regular or
special meeting or by written consent, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the provisions
of the certificate of incorporation.
Section 2. RESERVES. The directors may set apart out
14
<PAGE>
of any funds of the corporation available for dividends a reserve or reserves
for any proper purpose and may abolish any such reserve.
Section 3. CHECKS. All checks or demands for money and notes
of the corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the Board of Directors.
Section 5. SEAL. The Board of Directors may, by resolution,
adopt a corporate seal. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the word "Delaware." The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or otherwise reproduced. The seal may be altered from time to time by the Board
of Directors.
ARTICLE IX
AMENDMENTS
These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors provided,
however, that in the case of a regular or special meeting of stockholders,
notice of such alteration, amendment, repeal or adoption of new bylaws be
contained in the notice of such meeting.
15
<PAGE>
CERTIFICATE OF SECRETARY
I hereby certify:
1. That I am the duly elected and acting Secretary of Deltagen, Inc.,
a Delaware corporation; and
2. That the foregoing bylaws, comprising 15 pages, constitute the
bylaws of such corporation as duly adopted by directors of the corporation at a
duly held meeting of the Board of Directors on January 30, 1997, and which
became effective on that date.
IN WITNESS WHEREOF, I have hereunder subscribed my name this 30th day
of January, 1997.
/s/ Mark W. Moore
---------------------------
Mark W. Moore
Secretary
16
<PAGE>
EXHIBIT 4.2
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (the "Agreement") is made as of the
27th day of May, 1999 by and between DELTAGEN, INC., a Delaware corporation (the
"Company"), and the investors listed on Schedule A attached hereto, each of
which is herein referred to as an "Investor" and Silicon Valley Bank (the
"Bank").
THE PARTIES HEREBY AGREE that, effective upon the signature on behalf
of the Company, (i) the holders of at least a majority of its Series A Preferred
Stock, (ii) the holders of at least a majority of its Series B Preferred Stock
as follows and (iii) the holders of at least 66-23/% of the Series A Preferred
Stock and Series B Preferred Stock, voting together:
A. Section 8 of that certain Series A Preferred Stock Purchase
Agreement dated as of February 4, 1997 between the Company and the holders of
its Series A Preferred Stock, as amended, shall be deleted in its entirety.
B. Section 7 and Section 8 of that certain Series B Preferred
Stock Purchase Agreement dated as of February 18, 1998 between the Company and
the holders of its Series B Preferred Stock, as amended, shall be deleted in
their entirety.
C. The Bank shall be added as a party hereto for purposes of
Section 1 only, effective upon the issuance by the Company to the Bank of a
warrant to purchase shares of Series B Preferred Stock.
D. The registration rights, information rights and rights of
first offer of the holders of Series A Preferred Stock and Series B Preferred
Stock (hereinafter, the Series A Preferred Stock and Series B Preferred Stock
may be referred to, collectively, as the "Preferred Stock") shall hereafter be
as set forth herein:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock and the
Series B Preferred Stock and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such preferred stock or Common Stock,
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his registration rights under this Section 1 are not
assigned;
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are exercisable or convertible into,
Registrable Securities;
<PAGE>
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof;
(e) The term "Form S-3" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC in lieu of Form S-3 which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of (i)
January 31, 2000 or (ii) one hundred eighty (180) days after the effective date
of the first registration statement for a public offering of securities of the
Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Holders of at least thirty percent (30%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act covering the registration of at least thirty percent (30%) of the
Registrable Securities then outstanding, with anticipated aggregate proceeds to
the Company, net of underwriting discounts and commission, of at least
$5,000,000), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), file as soon as practicable, and in any
event within sixty (60) days of the receipt of such request, a registration
statement under the Securities Act covering all Registrable Securities which the
Holders request to be registered within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) The Company is obligated to effect only two such registrations
pursuant to this Section 1.2 and other similar provisions granting demand
registration rights.
- 2 -
<PAGE>
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2 a
certificate signed by the President of the Company stating that, in the good
faith judgment of the Board of Directors, by a vote of at least 2/3 of its
members, of the Company it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than sixty (60)
days after receipt of the request of the Initiating Holders; provided, however,
that the Company may not utilize this right more than once in any twelve (12)
month period.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Securities Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the
Securities Act all of the Registrable Securities that each such Holder has
requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 1
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect
to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or Blue Sky laws of
such jurisdictions as shall be reasonably requested by the Holders; provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing
- 3 -
<PAGE>
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 1, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 1, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange on which similar securities issued by
the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to Registrable Securities that the selling Holders shall furnish to the
Company such information regarding themselves, the Registrable Securities held
by them, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holders' Registrable Securities.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business or prospects of
the Company that was unknown to the Holders at the time of their request, then
the Holders shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 1.2.
- 4 -
<PAGE>
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders) but in no event shall (a) the amount
of securities of the selling Holders included in the offering be reduced below
thirty percent (30%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities in which case the selling stockholders may be excluded if the
underwriters make the determination described above and no other stockholder's
securities are included or (b) notwithstanding (a) above, any shares being sold
by a stockholder exercising a demand registration right similar to that granted
in Section 1.2 be excluded from such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder that is a
Holder of Registrable Securities and that is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder," and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount of Registrable Securities
owned by all entities and individuals included in such "selling stockholder," as
defined in this sentence.
1.9 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors and legal counsel of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state securities law,
insofar as
- 5 -
<PAGE>
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively, a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law; and the Company will reimburse, as
incurred, each such Holder, officer, director, legal counsel, underwriter or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 1.10(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder, officer, director, underwriter or controlling
person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement, any of such Holder's
directors or officers and any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any of the foregoing persons may become subject, under the Securities Act,
the Exchange Act or other federal or state securities law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse, as incurred, any
legal or other expenses reasonably incurred by the Company or any person
intended to be indemnified pursuant to this subsection 1.10(b) in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.10(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 1.10(b)
exceed the proceeds (net of underwriting discounts and commissions) from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
- 6 -
<PAGE>
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after ninety (90) days after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
- 7 -
<PAGE>
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144 (at any time after
ninety (90) days after the effective date of the first registration statement
filed by the Company), the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 1.12: (i) if
Form S-3 is not available for such offering by the Holders; (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,500,000; (iii) if the
Company shall furnish to the Holders a certificate signed by the President or
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company it would be seriously detrimental to
the Company and its stockholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 Registration Statement for a period of not more than
sixty (60) days after receipt of the request of the Holder or Holders under this
Section 1.12; provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period; or (iv) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall
- 8 -
<PAGE>
be borne by the Company. Registrations effected pursuant to this Section 1.12
shall not be counted as demands for registration effected pursuant to Section
1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related obligations) by (a) a Holder to a transferee or
assignee of an amount of such securities representing not less than ten percent
(10%) of the aggregate number of shares of Common Stock then outstanding
(including for purposes of such calculation the shares of Common Stock then
issuable upon conversion of all then outstanding Preferred Stock) or (b) any
Investor who transfers all of its shares purchased hereunder; provided, in each
case, (i) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (ii) such transferee or assignee agrees in writing to assume the
obligations of such Holder under and be bound by and subject to the terms and
conditions of Sections 1 and 3 of this Agreement; and (iii) such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 or Section 1.3
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not in any manner reduce the amount of
the Registrable Securities of the Holders which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the earlier of either of the dates set forth in
subsection 1.2(a) or within one hundred twenty (120) days of the effective date
of any registration effected pursuant to Section 1.2 or Section 1.3.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees, and any
future holder of such Investor's shares of Preferred Stock (or the Common Stock
issued upon conversion thereof) shall agree, that it shall not, to the extent
requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, sell or otherwise transfer or dispose (other than to
donees who agree to be similarly bound) of any Common Stock issued upon
conversion of such Investor's Preferred Stock during a reasonable and customary
period of time, as agreed to by the Company and the underwriters, not to exceed
one hundred eighty (180) days, following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however,
that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers shares (or securities) to be
sold on its behalf to the public in an underwritten offering; and
- 9 -
<PAGE>
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Common Stock issued upon
conversion of the Preferred Stock of such Investor (or assignee of such
Investor), and the shares or securities of every other person subject to the
foregoing restriction, until the end of such reasonable and customary period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.16 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 1
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of at least 66-2/3% of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities at the time outstanding (including securities into which
such Registrable Securities are convertible), each future holder of all such
Registrable Securities, and the Company.
1.17 TERMINATION OF REGISTRATION RIGHTS. The Company's obligations
pursuant to this Section 1 shall terminate with respect to each Holder severally
upon the earlier of (a) five (5) years from the date of consummation of the
Company's sale of its common stock in a bona fide, firm commitment underwriting
pursuant to a registration statement on Form S-1 under the Securities Act, with
a public offering price per share of at least $3.00 and aggregate gross offering
proceeds to the Company of at least $12,000,000, or (b) after the closing of the
first registered public offering of Common Stock of the Company, at such time as
such Holder is able to sell all of such Holder's Registrable Securities under
Rule 144 within a single three (3) month period.
2. COVENANTS.
2.1 DELIVERY OF FINANCIAL STATEMENTS.
(a) The Company shall deliver to the Investors and each
assignee of each Investor who acquires (i) all of such Investor's shares of
Preferred Stock or (ii) an aggregate amount of Common Stock and Preferred Stock
which together represent at least ten percent (10%) of the aggregate amount of
Common Stock then outstanding and the Common Stock issuable upon conversion of
the then outstanding Preferred Stock:
(i) as soon as practicable, but in any event within ninety
(90) days after the end of each fiscal year of the Company, a statement
of operations for such fiscal year, a balance sheet of the Company as
of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and
audited and certified by independent public accountants of nationally
recognized standing selected by the Company;
- 10 -
<PAGE>
(ii) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three quarters
of the fiscal year, the Company's unaudited statement of operations,
statement of cash flows and balance sheet for and as of the end of such
quarter;
(iii) within sixty (60) days prior to the close of each fiscal
year, a comprehensive operating budget for the next fiscal year
forecasting the Company's revenues, expenses and cash position,
prepared on a monthly basis, including balance sheets and statements of
cash flows for such months and, as soon as prepared, any other budgets
or revised budgets prepared by the Company;
(iii) with respect to the financial statements called for in
subsection (ii) of this Section 2.1(a), an instrument executed by the
Treasurer, Chief Financial Officer, Chief Executive Officer or the
President of the Company and certifying that such financials were
prepared in accordance with internally consistent accounting methods
consistently applied with prior practice for earlier periods and fairly
present the financial condition of the Company and its results of
operations for the period specified, subject to year-end audit
adjustment.
(b) The Company shall deliver to each Major Investor (as defined
herein):
(i) within thirty (30) days of the end of each month, an
unaudited statement of operations, statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail; such
monthly statements shall also contain the foregoing information on a
year-to-date basis and shall also compare actual performance to budget;
(ii) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as
the Investor or any such assignee of the Investor may from time to time
request;
provided, however, that the Company shall not be obligated under this Section
2.1 to provide information which it deems in good faith to be a trade secret,
confidential or of a nature providing a competitive advantage.
(c) The term "Major Investor" means a person or entity which, together
with its affiliates holds at least 100,000 shares (subject to appropriate
adjustments for stock splits, stock dividends, combinations and other
recapitalizations) of the Company's Preferred Stock.
2.2 INSPECTION. The Company shall permit each Major Investor, at such
Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret, confidential or of a nature
providing a competitive advantage.
2.3 TERMINATION OF COVENANTS. The covenants set forth in Sections 2.1
and 2.2 shall terminate and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the
Securities Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of
- 11 -
<PAGE>
section 13(a) or 15(d) of the Exchange Act, whichever event shall first occur;
provided that the Company shall furnish to each Major Investor copies of its
reports on Forms 10-K and 10-Q within ten (10) days after filing with the SEC.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 2.4, the Company hereby grants to the Investors a right of first
offer with respect to future sales by the Company of its Shares (as hereinafter
defined). Each Investor shall be entitled to apportion the right of first offer
hereby granted it among itself and its partners and affiliates (including, in
the case of a venture capital fund, partners and funds affiliated with such
fund) in such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for, any class of its capital stock ("Shares"),
the Company shall first make an offering of such Shares to the Investors in
accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice") to
the Investors stating (i) its bona fide intention to offer or issue such Shares,
(ii) the number of such Shares to be offered, and (iii) the price and other
terms, if any, upon which it proposes to offer such Shares.
(b) Within twenty (20) calendar days after receipt of the Notice, each
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Preferred Stock then held, by such Investor
bears to the total number of shares of outstanding Common Stock and Common Stock
issuable upon conversion of the Preferred Stock then outstanding. Each Investor,
together with any holders of Preferred Stock with equivalent rights of first
offer (individually, an "Offeree," and, collectively, the "Offerees"), shall
have a right of over-allotment such that if any Offeree fails to exercise its
right of first offer to purchase its pro rata share of Shares, the other
Offerees may purchase the non-exercising Offeree's portion on the same pro-rata
basis described in the previous sentence.
(c) If all such Shares referred to in the Notice are not elected to be
obtained as provided in subsection 2.4(b) hereof, the Company may, during the
sixty (60) day period following the expiration of the periods provided in
subsection 2.4(b) hereof, offer the remaining unsubscribed Shares to any person
or persons at a price not less than that, and upon terms no more favorable to
the offeree than those, specified in the Notice. If the Company does not enter
into an agreement for the sale of the Shares within such period, or if such
agreement is not consummated within sixty (60) days of the execution thereof,
the right provided hereunder shall be deemed to be revived and such Shares shall
not be offered unless first reoffered to each Investor in accordance herewith.
(d) The right of first offer granted in this Section 2.4 shall not be
applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, directors, consultants or advisors of the Company (for
the primary purpose of soliciting or retaining their services) pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
approved by the Company's Board of Directors, (ii) to the issuance of securities
of the Company in connection with the acquisition by the Company of the stock or
assets of a corporation, partnership or other entity, (iii) to the issuance and
sale of the Company's securities to a corporation, partnership, educational
institution or other entity in connection with an equipment lease, research and
development partnership, licensing, or other collaborative
- 12 -
<PAGE>
arrangement or similar transaction between the Company and such institution or
entity, which issuance and sale is approved by the Company's Board of Directors,
or (iv) to or after consummation of a bona fide, firmly underwritten public
offering of shares of the Company's Common Stock registered under the Securities
Act pursuant to a registration statement on Form S-1 which results in aggregate
gross proceeds to the Company of at least $12,000,000.
2.5 KEY-MAN INSURANCE. The Company will use its reasonable commercial
efforts to maintain term life insurance from financially sound and reputable
insurers on each of the lives of William Matthews and Mark W. Moore in the
amounts of $1,000,000 and $1,000,000, respectively, except as otherwise decided
in accordance with policies adopted by the Company's Board of Directors. Such
policies shall name the Company as loss payee and shall not be cancelable by the
Company without prior approval of the Board of Directors.
2.6 COMMON STOCK VESTING. All shares of the Company's Common Stock and
all options exercisable for shares of the Company's Common Stock (collectively,
for purposes of this paragraph only, the "Stock") issued or granted,
respectively, after the date of the Closing to employees, directors, consultants
and other service providers of the Company (each referred to herein as a
"Service Provider") shall be subject to a corresponding right of repurchase in
favor of the Company (in the case of any outstanding Common Stock) or shall be
cancelable by the Company (in the case of any outstanding options for Common
Stock), respectively (for purposes of this paragraph only, either such right
shall hereinafter be referred to as the "Company Right"). Unless otherwise
approved by the Board of Directors, the Company Right on all such Stock will
lapse according to the following vesting schedule: twenty-five percent (25%) of
the Stock shall vest, and the Company Right shall lapse accordingly with respect
thereto, upon the Service Provider's completion of one (1) year of continuous
service to the Company from the date of first issuance or grant of the Stock and
the remaining seventy-five percent (75%) of the Stock shall thereafter vest, and
the Company Right shall lapse accordingly with respect thereto, in successive
equal daily installments upon the Service Provider's completion of each of the
next thirty-six (36) months of service to the Company. With respect to any
repurchases of outstanding Common Stock by the Company in accordance with the
foregoing provisions, the Company shall repurchase such Common Stock at cost.
2.7 VOTING ON CORPORATE TRANSACTIONS.
(a) In the event that a Corporate Transaction (as defined below) is
approved by the Company's Board of Directors and the requisite majority of the
holders of the Company's Preferred Stock entitled to approve such Corporate
Transaction pursuant to Section 7 of Part B of Article IV of the Restated
Certificate, then each Investor hereby agrees to (i) vote all voting securities
beneficially owned by such Investor and/or any affiliated entity of such
Investor, either at a meeting of stockholders or pursuant to an action by
written consent of the stockholders, in favor of such Corporate Transaction and
(ii) if such Corporate Transaction is intended by the parties to be accounted
for as a "pooling of interests," to take all actions reasonably deemed necessary
by the Company's Board of Directors to preserve pooling of interest accounting
treatment for such Corporate Transaction. For purposes of this Section 2.7, a
Corporate Transaction shall mean the sale of all or substantially all of the
assets of the Company, or a merger, other combination or acquisition of the
Company by or with another entity in any transaction or series of related
transaction in which more than 50% of the voting power of the Company is
transferred. The Investors and their respective affiliated entities, as holders
of shares of voting securities, shall be present, in person or by proxy, at all
meetings of stockholders of the Company so that all shares of voting securities
beneficially owned by such Investors and/or its affiliated entities may be
counted for the purposes of determining the
- 13 -
<PAGE>
presence of a quorum at such meetings. Neither an Investor nor any of its
affiliated entities shall deposit any voting securities beneficially owned by
such holders in a voting trust or subject any such securities to any arrangement
or agreement with respect to the voting of such securities.
(b) The voting obligations of the Investors pursuant to Section 2.7(a)
above shall terminate upon the consummation of the Company's sale of its Common
Stock pursuant to a registration statement on Form S-1 or Form SB-2 under the
Securities Act.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California (irrespective of its choice of law
principles).
3.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified (or upon
the date of attempted delivery where delivery is refused) or, if sent by
telecopier, telex, telegram, or other facsimile means, upon receipt of
appropriate confirmation of receipt, or five (5) days after deposit with the
United States Postal Service, registered or certified mail, or one (1) day after
deposit with next day air courier, with postage and fees prepaid and addressed
to the party entitled to such notice at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties to this Agreement.
3.6 AMENDMENTS AND WAIVERS. Except as set forth in Section 1.16 hereof,
any term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the holders of at least 66-2/3% of the Series A Preferred Stock and the
Series B Preferred Stock. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company.
3.7 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
- 14 -
<PAGE>
3.8 AGGREGATION OF STOCK. All Registrable Securities or shares of the
Company's Preferred stock held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DELTAGEN, INC.
By /s/ William B. Matthews
----------------------------------
William B. Matthews
President and Chief Executive
Officer
Address: 1031 Bing Street
San Carlos, CA 94070
- 15 -
<PAGE>
COUNTERPART SIGNATURE PAGE
INVESTORS' RIGHTS AGREEMENT
DELTAGEN, INC.
STIPA INVESTMENTS, L.P.
By Baccharis Capital, Inc.
Its General Partner
By /s/ F. Noel Perry
---------------------------------------
F. Noel Perry
General Partner
Address: 2420 Sand Hill Road, Suite 100
Menlo Park, CA 94025
TULARIK INC.
By /s/ William Rieflin
---------------------------------------
William Rieflin
Vice President
Address: Two Corporate Drive
South San Francisco,
CA 94080
- 16 -
<PAGE>
COUNTERPART SIGNATURE PAGE
INVESTORS' RIGHTS AGREEMENT
DELTAGEN, INC.
DLJ CAPITAL CORP.
By /s/ Philippe O. Chambon
-------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
DLJ ESC II, L.P.
By: DLJ LBO Plans Management Corporation,
Its Manager
By /s/ Philippe O. Chambon
-------------------------------
Philippe O. Chambon
Attorney In Fact
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
SPROUT CAPITAL VIII, L.P.
By DLJ Capital Corp., Its
Managing General Partner
By /s/ Philippe O. Chambon
-------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
- 17 -
<PAGE>
COUNTERPART SIGNATURE PAGE
INVESTORS' RIGHTS AGREEMENT
DELTAGEN, INC.
SPROUT VENTURE CAPITAL, L.P.
By DLJ Capital Corp.,
Its General Partner
By /s/ Philippe O. Chambon
-------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
THE SPROUT CEO FUND, L.P.
By DLJ Capital Corp.
Its General Partner
By /s/ Philippe O. Chambon
-------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
- 18 -
<PAGE>
COUNTERPART SIGNATURE PAGE
INVESTORS' RIGHTS AGREEMENT
DELTAGEN, INC.
SILICON VALLEY BANK
By
--------------------------------
Name:
--------------------
Title:
-------------------
- 19 -
<PAGE>
SCHEDULE A
STIPA INVESTMENTS, L.P.
TULARIK INC.
DLJ CAPITAL CORP.
DLJ ESC II, L.P.
SPROUT CAPITAL VIII, L.P.
SPROUT VENTURE CAPITAL, L.P.
THE SPROUT CEO FUND, L.P.
- 20 -
<PAGE>
AMENDMENT TO
INVESTORS' RIGHTS AGREEMENT
AND
WAIVER OF RIGHTS OF FIRST OFFER
Deltagen, Inc., a Delaware corporation (the "Company"), and, as applicable,
each of the undersigned holders of the Company's Series A Preferred Stock and
Series B Preferred Stock hereby agree as follows:
1. The Company and the holders of its Series A Preferred Stock
and Series B Preferred Stock hereby waive observance of the right
of first offer, the right of notice granted and the limitations
on the grant of subsequent registration rights, as the case may
be, set forth in Sections 1.14 and 2.4 of the Investors' Rights
Agreement, dated as of May 27, 1999 (the "Agreement"), with
respect to the offering by the Company and issuance at the
Closing of up to 7,000,000 shares of Series C Preferred Stock at
a price per share of $3.58 and the registration rights granted in
connection therewith.
2. Section 1.18 shall be added to the Agreement, and shall read
in full as set forth below:
Each Holder acknowledges that the rights granted pursuant to this
Section 1 are subject to the limitations set forth in the
Investors' Rights Agreement (the "Series C Rights Agreement"),
dated as of January 21, 2000, by and among the Company and the
holders of the Company's Series C Preferred Stock ("Series C
Holder"). In the event that a Holder exercises its rights
pursuant to Sections 1.2, 1.3 or 1.12 hereof, the Company shall
promptly notify each Series C Holder, and the relative rights and
obligations of the Holders hereunder and the Series C Holders in
connection with the registration shall be determined in
accordance Sections 1.2, 1.3 and 1.12 of the Series C Rights
Agreement.
3. Except as specifically provided herein, the Agreement, as
originally executed by the parties thereto, shall remain in full
force and effect.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in
one or more counterparts as of January 18, 2000.
COMPANY:
DELTAGEN, INC.
By /s/ William Matthews
------------------------------------------
William Matthews
President and Chief Executive Officer
-2-
<PAGE>
DELTAGEN, INC.
AMENDMENT AND WAIVER
COUNTERPART SIGNATURE PAGE
STIPA INVESTMENTS, L.P.
By: Baccharis Capital, Inc.
Its: General Partner
By: /s/ F. Noel Perry
----------------------------------
F. Noel Perry
General Partner
Address: 2420 Sand Hill Road
Suite 100
Menlo Park, CA 94025
-3-
<PAGE>
DELTAGEN, INC.
AMENDMENT AND WAIVER
COUNTERPART SIGNATURE PAGE
DLJ CAPITAL CORP.
By: /s/ Philippe O. Chambon
------------------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
DLJ ESC II, L.P.
By: DLJ LBO Plans Management
Corporation, Its Manager
By: /s/ Philippe O. Chambon
------------------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
SPROUT CAPITAL VIII, L.P.
By: DLJ Capital Corp., Its
Managing Corporation
By: /s/ Philippe O. Chambon
------------------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
-4-
<PAGE>
DELTAGEN, INC.
AMENDMENT AND WAIVER
COUNTERPART SIGNATURE PAGE
SPROUT VENTURE CAPITAL, L.P.
By: DLJ Capital Corp., Its General Partner
By: /s/ Philippe O. Chambon
------------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corp., Its
Managing Partner
By: /s/ Philippe O. Chambon
------------------------------------
Philippe O. Chambon
Vice President
Address: 3000 Sand Hill Road
Building 3, Suite 170
Menlo Park, CA 94025
Attn: Mr. Philippe O. Chambon
-5-
<PAGE>
EXHIBIT 4.3
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (the "Agreement") is made as of the
21st day of January, 2000 by and between DELTAGEN, INC., a Delaware corporation
(the "Company"), and the investors listed on Schedule A attached hereto.
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS.
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The terms "register," "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series C Preferred Stock and (ii) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Series C Preferred Stock or Common Stock, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his
registration rights under this Section 1 are not assigned;
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are exercisable or
convertible into, Registrable Securities;
(d) The term "Series C Holders" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof;
(e) The term "Form S-3" means such form under the Securities Act
as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the SEC in lieu of Form S-3 which permits inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the earlier of
(i) January 21, 2002 or (ii) one hundred eighty (180) days after the effective
date of the first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Series C Holders of at least forty percent (40%) of the Registrable
Securities then outstanding that the Company file a registration statement under
the Securities Act covering the registration of at least forty percent
<PAGE>
(40%) of the Registrable Securities then outstanding, with anticipated aggregate
proceeds to the Company, net of underwriting discounts and commission, of at
least $5,000,000), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Series C Holders and to all
holders ("Prior Holders") of securities registrable pursuant to that certain
Investors' Rights Agreement, dated as of May 27, 1999, between and among the
Company and certain stockholders set forth therein, as amended (the "Prior
Rights Agreement") and shall, subject to the limitations of subsection 1.2(b),
file as soon as practicable, and in any event within sixty (60) days of the
receipt of such request, a registration statement under the Securities Act
covering all Registrable Securities which the Series C Holders and the Prior
Holders request to be registered within twenty (20) days of the mailing of such
notice by the Company in accordance with Section 3.5.
(b) If the Series C Holders initiating the registration request
hereunder ("Initiating Series C Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 1.2
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). In such event, the right of any Series C Holder or Prior
Holder to include his Registrable Securities in such registration shall be
conditioned upon such holder's participation in such underwriting and the
inclusion of such holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Series C
Holders and such holder) to the extent provided herein. All Series C Holders and
Prior Holders proposing to distribute their securities through such underwriting
shall (together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Series C Holders. Notwithstanding any other provision of this Section 1.2, if
the underwriter advises the Initiating Series C Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Series C Holders shall so advise all Series C
Holders and all Prior Holders of registrable securities which would otherwise be
underwritten pursuant hereto or pursuant to the Prior Investors' Rights
Agreement, and the number of shares of registrable securities that may be
included in the underwriting shall be allocated among all Series C Holders and
all Prior Holders hereof, including the Initiating Series C Holders, in
proportion (as nearly as practicable) to the amount of registrable securities of
the Company owned by each Series C Holder and Prior Holder; provided, however,
that the number of shares of registrable securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) The Company is obligated to effect only two such registrations
pursuant to this Section 1.2 and other similar provisions granting demand
registration rights (excluding registrations pursuant to Section 1.12 hereof).
(d) Notwithstanding the foregoing, if the Company shall furnish to
Series C Holders requesting a registration statement pursuant to this Section
1.2 a certificate signed by the President of the Company stating that, in the
good faith judgment of the Board of Directors, by a vote of at least 2/3 of its
members, of the Company it would be seriously detrimental to the Company and its
stockholders for such registration statement to be filed and it is therefore
essential to defer the filing of such registration statement, the Company shall
have the right to defer such filing for a period of not more than sixty (60)
days after receipt of the request of the
2
<PAGE>
Initiating Series C Holders; provided, however, that the Company may not utilize
this right more than once in any twelve (12) month period.
1.3 COMPANY REGISTRATION. If (but without any obligation to do so)
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Series C Holders) any of
its stock or other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Company stock
plan, or a registration on any form which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Series C Holder and each Prior Holder written notice of
such registration. Upon the written request of each Series C Holder and Prior
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Securities Act all of the
registrable securities that each such Series C Holder or Prior Holder has
requested to be registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Series
C Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to one hundred twenty (120)
days.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Series C Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Series C
Holders; provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Series C
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
3
<PAGE>
(f) Notify each Series C Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Series C Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Series C Holders
requesting registration of Registrable Securities and (ii) a letter dated such
date, from the independent certified public accountants of the Company, in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Series C Holders requesting registration of
Registrable Securities.
(h) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to Registrable Securities that the selling Series C Holders shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them, and the intended method of disposition of such
securities as shall be required to effect the registration of such Series C
Holders' Registrable Securities.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Series C
Holders and one counsel for the Prior Holders shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Series C
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Series C Holders shall bear such expenses), unless the
Series C Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the
4
<PAGE>
Series C Holders have learned of a material adverse change in the condition,
business or prospects of the Company that was unknown to the Series C Holders at
the time of their request, then the Series C Holders shall not be required to
pay any of such expenses and shall retain their rights pursuant to Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Series C Holder (which right may be assigned as
provided in Section 1.13), including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees relating or
apportionable thereto and the fees and disbursements of one counsel for the
selling Series C Holders and one counsel for the selling Prior Holders selected
by them, but excluding underwriting discounts and commissions relating to
Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 1.3 to include any of the Series C Holders'
or Prior Holders' securities in such underwriting unless they accept the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the opinion of
the underwriters, jeopardize the success of the offering by the Company. If the
total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters reasonably believe
compatible with the success of the offering, then the Company shall be required
to include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering (the securities so included to be apportioned pro rata
among the selling stockholders according to the total amount of securities
entitled to be included therein owned by each selling stockholder or in such
other proportions as shall mutually be agreed to by such selling stockholders)
but in no event shall (a) the amount of securities of the selling Series C
Holders and Prior Holders included in the offering be reduced below thirty
percent (30%) of the total amount of securities included in such offering,
unless such offering is the initial public offering of the Company's securities
in which case the selling stockholders may be excluded if the underwriters make
the determination described above and no other stockholder's securities are
included or (b) notwithstanding (a) above, any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 1.2 be excluded from such offering. For purposes of the preceding
parenthetical concerning apportionment, for any selling stockholder that is a
Series C Holder of Registrable Securities and that is a partnership or
corporation, the partners, retired partners and stockholders of such Holder, or
the estates and family members of any such partners and retired partners and any
trusts for the benefit of any of the foregoing persons shall be deemed to be a
single "selling stockholder," and any pro rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of Registrable
Securities owned by all entities and individuals included in such "selling
stockholder," as defined in this sentence.
1.9 DELAY OF REGISTRATION. No Series C Holder shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any
5
<PAGE>
controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.10 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers, directors and legal counsel of each
Holder, any underwriter (as defined in the Securities Act) for such Series C
Holder and each person, if any, who controls such Series C Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state securities law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively, a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law; and the
Company will reimburse, as incurred, each such Holder, officer, director, legal
counsel, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Series C Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter,
any other Series C Holder selling securities in such registration statement, any
of such Holder's directors or officers and any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act or other federal or state securities law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Series C Holder
expressly for use in connection with such registration; and each such Series C
Holder will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company or any person intended to be indemnified pursuant to
this subsection 1.10(b) in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in
6
<PAGE>
this subsection 1.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this subsection
1.10(b) exceed the proceeds (net of underwriting discounts and commissions) from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Series C Holders under this
Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
7
<PAGE>
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Series C Holders the benefits of Rule 144 and any other
rule or regulation of the SEC that may at any time permit a Series C Holder to
sell securities of the Company to the public without registration or pursuant to
a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all times after ninety (90) days after
the effective date of the first registration statement filed by the Company for
the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under section 12 of the Exchange Act, as is necessary to enable the
Series C Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of the
fiscal year in which the first registration statement filed by the Company for
the offering of its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(d) furnish to any Holder, so long as the Series C Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested in
availing any Series C Holder of any rule or regulation of the SEC which permits
the selling of any such securities without registration or pursuant to such
form.
1.12 FORM S-3 REGISTRATION. In case the Company shall receive from
any Series C Holder a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Series C
Holder, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Series C Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Series C Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Series C Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance pursuant to this Section
1.12: (i) if Form S-3 is not available for such offering by the Series C
Holders; (ii) if the Series C Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and
8
<PAGE>
such other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,500,000; (iii) if the
Company shall furnish to the Series C Holders a certificate signed by the
President or Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 Registration Statement for a period of not more
than sixty (60) days after receipt of the request of the Series C Holders under
this Section 1.12; provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; or (iv) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Series C Holders. All expenses incurred in connection
with a registration requested pursuant to Section 1.12, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling Series
C Holders and counsel for the Company, shall be borne by the Company.
Registrations effected pursuant to this Section 1.12 shall not be counted as
demands for registration effected pursuant to Section 1.2.
1.13 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by (a) a Series C Holder to a
transferee or assignee of an amount of such securities representing not less
than ten percent (10%) of the aggregate number of shares of Common Stock then
outstanding (including for purposes of such calculation the shares of Common
Stock then issuable upon conversion of all then outstanding Preferred Stock) or
(b) any Investor who transfers all of its shares purchased hereunder; provided,
in each case, (i) the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights are
being assigned; (ii) such transferee or assignee agrees in writing to assume the
obligations of such Series C Holder under and be bound by and subject to the
terms and conditions of Sections 1 and 3 of this Agreement; and (iii) such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all assignees and transferees who would
not qualify individually for assignment of registration rights shall have a
single attorney-in-fact for the purpose of exercising any rights, receiving
notices or taking any action under this Section 1.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of the Series C Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or
9
<PAGE>
prospective holder of any securities of the Company which would allow such
holder or prospective holder (a) to include such securities in any registration
filed under Section 1.2 or Section 1.3 hereof, unless under the terms of such
agreement, such holder or prospective holder may include such securities in any
such registration only to the extent that the inclusion of his securities will
not in any manner reduce the amount of the Registrable Securities of the Series
C Holders which is included or (b) to make a demand registration which could
result in such registration statement being declared effective prior to the
earlier of either of the dates set forth in subsection 1.2(a) or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2 or Section 1.3.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees, and
any future holder of such Investor's shares of Preferred Stock (or the Common
Stock issued upon conversion thereof) shall agree, that it shall not, to the
extent requested by the Company and an underwriter of Common Stock (or other
securities) of the Company, sell or otherwise transfer or dispose (other than to
donees who agree to be similarly bound) of any Common Stock issued upon
conversion of such Investor's Preferred Stock during a reasonable and customary
period of time, as agreed to by the Company and the underwriters, not to exceed
one hundred eighty (180) days, following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however,
that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers shares (or securities) to be
sold on its behalf to the public in an underwritten offering; and
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Common Stock issued upon
conversion of the Preferred Stock of such Investor (or assignee of such
Investor), and the shares or securities of every other person subject to the
foregoing restriction, until the end of such reasonable and customary period.
Notwithstanding the foregoing, the obligations described in this
Section 1.15 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.
1.16 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least 66-2/3% of the Registrable Securities then outstanding; provided,
however, that any such amendment or waiver that adversely affect the rights
granted to the Prior Rights Holders hereunder shall also require the written
consent of Prior Rights Holders holding at least 66-2/3% of the securities
subject to the Prior Rights Agreement that are then outstanding. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities at the time outstanding (including
securities into which such
10
<PAGE>
Registrable Securities are convertible), each future holder of all such
Registrable Securities, and the Company.
1.17 TERMINATION OF REGISTRATION RIGHTS. The Company's obligations
pursuant to this Section 1 shall terminate with respect to each Series C Holder
severally upon the earlier of (a) five (5) years from the date of consummation
of the Initial Public Offering or (b) after the closing of the Initial Public
Offering, at such time as such Series C Holder is able to sell all of such
Holder's Registrable Securities under Rule 144 within a single three (3) month
period.
2. COVENANTS.
2.1 DELIVERY OF FINANCIAL STATEMENTS.
(a) The Company shall deliver to the Investors and each
assignee of each Investor who acquires (i) all of such Investor's shares of
Preferred Stock or (ii) an aggregate amount of Common Stock and Preferred Stock
which together represent at least ten percent (10%) of the aggregate amount of
Common Stock then outstanding and the Common Stock issuable upon conversion of
the then outstanding Preferred Stock:
(i) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, a
statement of operations for such fiscal year, a balance sheet of the
Company as of the end of such year, and a statement of cash flows for
such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles
("GAAP"), and audited and certified by "Big Five" independent public
accountants mutually agreed to by the Company and the holders of Series
C Preferred Stock;
(ii) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three quarters
of the fiscal year, the Company's unaudited statement of operations,
statement of cash flows and balance sheet for and as of the end of such
quarter;
(iii) within sixty (60) days prior to the close of each
fiscal year, an updated five year strategic plan and a comprehensive
operating budget for the next fiscal year forecasting the Company's
revenues, expenses and cash position, prepared on a monthly basis,
including balance sheets and statements of cash flows for such months
and, as soon as prepared, any other budgets or revised budgets prepared
by the Company;
(iii) with respect to the financial statements called for
in subsection (ii) of this Section 2.1(a), an instrument executed by
the Treasurer, Chief Financial Officer, Chief Executive Officer or the
President of the Company and certifying that such financials were
prepared in accordance with internally consistent accounting methods
consistently applied with prior practice for earlier periods and fairly
present the financial condition of the Company and its results of
operations for the period specified, subject to year-end audit
adjustment.
11
<PAGE>
(b) The Company shall deliver to each Major Investor (as defined
herein):
(i) within thirty (30) days of the end of each month, an
unaudited statement of operations, statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail; such
monthly statements shall also contain the foregoing information on a
year-to-date basis and shall also compare actual performance to budget;
(ii) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as
the Investor or any such assignee of the Investor may from time to time
request;
provided, however, that the Company shall not be obligated under this Section
2.1 to provide information which it deems in good faith to be a trade secret,
confidential or of a nature providing a competitive advantage.
(c) The term "Major Investor" means a person or entity which,
together with its affiliates holds at least 100,000 shares (subject to
appropriate adjustments for stock splits, stock dividends, combinations and
other recapitalizations) of the Company's Preferred Stock.
2.2 INSPECTION. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret, confidential or of a nature
providing a competitive advantage.
2.3 TERMINATION OF COVENANTS. The covenants set forth in Sections
2.1 and 2.2 shall terminate and be of no further force or effect when the sale
of securities pursuant to a registration statement filed by the Company under
the Securities Act in connection with the firm commitment underwritten offering
of its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of section 13(a) or 15(d)
of the Exchange Act, whichever event shall first occur; provided that the
Company shall furnish to each Major Investor copies of its reports on Forms 10-K
and 10-Q within ten (10) days after filing with the SEC.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.4, the Company hereby grants to the Investors a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). Each Investor shall be entitled to apportion the right
of first offer hereby granted it (including without limitation the right to
purchase shares in an initial public offering, as referenced in Section 2.4(d))
to partners and affiliates (including, in the case of a venture capital fund,
partners and funds affiliated with such fund) in such proportions as it deems
appropriate.
12
<PAGE>
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for, any class of its capital stock ("Shares"),
the Company shall first make an offering of such Shares to the Investors in
accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Investors stating (i) its bona fide intention to offer or
issue such Shares, (ii) the number of such Shares to be offered, and (iii) the
price and other terms, if any, upon which it proposes to offer such Shares.
(b) Within twenty (20) calendar days after receipt of the Notice,
each Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that (i) 0.75 times the number of shares of Common Stock issued and
held, or issuable upon conversion of the Preferred Stock then held, by such
Investor bears to (ii) the total number of shares of outstanding Common Stock
and Common Stock issuable upon conversion of the Preferred Stock then
outstanding. Each Investor, together with any holders of Preferred Stock with
equivalent rights of first offer (individually, an "Offeree," and, collectively,
the "Offerees"), shall have a right of over-allotment such that if any Offeree
fails to exercise its right of first offer to purchase its pro rata share of
Shares, the other Offerees may purchase the non-exercising Offeree's portion on
the same pro-rata basis described in the previous sentence.
(c) If all such Shares referred to in the Notice are not elected
to be obtained as provided in subsection 2.4(b) hereof, the Company may, during
the sixty (60) day period following the expiration of the periods provided in
subsection 2.4(b) hereof, offer the remaining unsubscribed Shares to any person
or persons at a price not less than that, and upon terms no more favorable to
the offeree than those, specified in the Notice. If the Company does not enter
into an agreement for the sale of the Shares within such period, or if such
agreement is not consummated within sixty (60) days of the execution thereof,
the right provided hereunder shall be deemed to be revived and such Shares shall
not be offered unless first reoffered to each Investor in accordance herewith.
(d) The right of first offer granted in this Section 2.4 shall not
be applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees, directors, consultants or advisors of the Company (for
the primary purpose of soliciting or retaining their services) pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement
approved by the Company's Board of Directors, (ii) to the issuance of securities
of the Company in connection with the acquisition by the Company of the stock or
assets of a corporation, partnership or other entity, (iii) to the issuance and
sale of the Company's securities to a corporation, partnership, educational
institution or other entity in connection with an equipment lease, research and
development partnership, licensing, or other collaborative arrangement or
similar transaction between the Company and such institution or entity, which
issuance and sale is approved by the Company's Board of Directors, or (iv) to or
after consummation of a bona fide, firmly underwritten initial public offering
of shares of the Company's Common Stock registered under the Securities Act
pursuant to a registration statement on Form S-1 (an "Initial Public Offering").
Notwithstanding subsection (iv) of the immediately preceding sentence, the
Investors shall have the right, but not the obligation, to purchase in the
Initial Public Offering, at the offering price to public, an aggregate of up to
15%
13
<PAGE>
of the shares to be sold in such offering (assuming for such purposes no
exercise of the underwriters' over-allotment option, if any) with a right of
over-allotment for any shares not subscribed for by any Investor.
2.5 KEY-MAN INSURANCE. The Company will use its reasonable
commercial efforts to maintain term life insurance from financially sound and
reputable insurers on the life of William Matthews, the Chief Executive Officer,
in the amount of $2,000,000, except as otherwise decided in accordance with
policies adopted by the Company's Board of Directors. Such policies shall name
the Company as loss payee and shall not be cancelable by the Company without
prior approval of the Board of Directors.
2.6 COMMON STOCK VESTING. All shares of the Company's Common Stock
and all options exercisable for shares of the Company's Common Stock
(collectively, for purposes of this paragraph only, the "Stock") issued or
granted, respectively, after the date of the Closing to employees, directors,
consultants and other service providers of the Company (each referred to herein
as a "Service Provider") shall be subject to a corresponding right of repurchase
in favor of the Company (in the case of any outstanding Common Stock) or shall
be cancelable by the Company (in the case of any outstanding options for Common
Stock), respectively (for purposes of this paragraph only, either such right
shall hereinafter be referred to as the "Company Right"). Unless otherwise
approved by the Board of Directors, the Company Right on all such Stock will
lapse according to the following vesting schedule: twenty-five percent (25%) of
the Stock shall vest, and the Company Right shall lapse accordingly with respect
thereto, upon the Service Provider's completion of one (1) year of continuous
service to the Company from the date of first issuance or grant of the Stock and
the remaining seventy-five percent (75%) of the Stock shall thereafter vest, and
the Company Right shall lapse accordingly with respect thereto, in successive
equal daily installments upon the Service Provider's completion of each of the
next thirty-six (36) months of service to the Company. With respect to any
repurchases of outstanding Common Stock by the Company in accordance with the
foregoing provisions, the Company shall repurchase such Common Stock at cost.
2.7 VOTING ON CORPORATE TRANSACTIONS.
(a) In the event that a Corporate Transaction (as defined below)
is approved by the Company's Board of Directors and the requisite majority of
the holders of the Company's Preferred Stock entitled to approve such Corporate
Transaction pursuant to Section 7 of Part B of Article IV of the Restated
Certificate, then each Investor hereby agrees to (i) vote all voting securities
beneficially owned by such Investor and/or any affiliated entity of such
Investor, either at a meeting of stockholders or pursuant to an action by
written consent of the stockholders, in favor of such Corporate Transaction and
(ii) if such Corporate Transaction is intended by the parties to be accounted
for as a "pooling of interests," to take all actions reasonably deemed necessary
by the Company's Board of Directors to preserve pooling of interest accounting
treatment for such Corporate Transaction. For purposes of this Section 2.7, a
Corporate Transaction shall mean the sale of all or substantially all of the
assets of the Company, or a merger, other combination or acquisition of the
Company by or with another entity in any transaction or series of related
transaction in which more than 50% of the voting power of the Company is
transferred. The Investors and their respective affiliated entities, as holders
of shares of voting securities, shall be present, in person or by proxy, at all
meetings of stockholders
14
<PAGE>
of the Company so that all shares of voting securities beneficially owned by
such Investors and/or its affiliated entities may be counted for the purposes of
determining the presence of a quorum at such meetings. Neither an Investor nor
any of its affiliated entities shall deposit any voting securities beneficially
owned by such holders in a voting trust or subject any such securities to any
arrangement or agreement with respect to the voting of such securities.
(b) The voting obligations of the Investors pursuant to Section
2.7(a) above shall terminate upon the consummation of an Initial Public
Offering.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California (irrespective of its choice
of law principles).
3.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified (or upon
the date of attempted delivery where delivery is refused) or, if sent by
telecopier, telex, telegram, or other facsimile means, upon receipt of
appropriate confirmation of receipt, or five (5) days after deposit with the
United States Postal Service, registered or certified mail, or one (1) day after
deposit with next day air courier, with postage and fees prepaid and addressed
to the party entitled to such notice at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties to this Agreement.
3.6 AMENDMENTS AND WAIVERS. Except as set forth in Section 1.16
hereof, any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively), only with the written consent of the
Company and the holders of at least 66-2/3% of the Series C Preferred Stock. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company.
3.7 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and
15
<PAGE>
the balance of this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
3.8 AGGREGATION OF STOCK. All Registrable Securities or shares of
the Company's Preferred stock held or acquired by affiliated entities or persons
shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DELTAGEN, INC.
By /s/ William Matthews
---------------------------------------
William Matthews
President and Chief Executive Officer
Address: 1003 Hamilton Avenue
Menlo Park, CA 94025
[CONFORMED SIGNATURES OF SERIES C PURCHASERS OMITTED FROM FILING]
16
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------------- ------------------------ ----------------------
INVESTORS NUMBER OF SHARES PURCHASE PRICE
- ------------------------------------------- ------------------------ ----------------------
<S> <C> <C>
Boston Millennia Partners II Limited 2,131,524 $7,630,855.92
Partnership
Boston Millennia Partners II-A Limited 78,225 280,045.50
Partnership
Boston Millennia Associates II 24,887 89,095.46
Partnership
- ------------------------------------------- ------------------------ ----------------------
Sprout Capital VIII, L.P. 1,183,297 4,236,203.26
- ------------------------------------------- ------------------------ ----------------------
Stipa Investments, L.P. 837,988 2,999,997.04
- ------------------------------------------- ------------------------ ----------------------
Lombard Odier & Cie 837,988 2,999,997.04
- ------------------------------------------- ------------------------ ----------------------
Crossroads Cornerstone Direct/ 698,324 2,499,999.92
Co-Investment Fund V, L.P.
- ------------------------------------------- ------------------------ ----------------------
DLJ ESC II, L.P. 118,400 423,872.00
- ------------------------------------------- ------------------------ ----------------------
Sprout Venture Capital, L.P. 70,998 254,172.84
- ------------------------------------------- ------------------------ ----------------------
DLJ Capital Corp. 18,575 66,498.50
- ------------------------------------------- ------------------------ ----------------------
Sprout CEO Fund LP 5,378 19,253.24
- ------------------------------------------- ------------------------ ----------------------
Karl D. Handelsman 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
George S. Taylor 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
Bradford W. Baer 6,983 24,999.14
- ------------------------------------------- ------------------------ ----------------------
Beveren Company 6,983 24,999.14
- ------------------------------------------- ------------------------ ----------------------
Nicholas J. Simon III 27,932 99,996.56
- ------------------------------------------- ------------------------ ----------------------
Paul Coghlan 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
Bradford S. Goodwin and Cathy W. Goodwin, 27,932 99,996.56
as Trustees of the Goodwin Family Trust
- ------------------------------------------- ------------------------ ----------------------
</TABLE>
A-1
<PAGE>
<TABLE>
- ------------------------------------------- ------------------------ ----------------------
<S> <C> <C>
Rod A. Fisher 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
Norman F. Sokoloff, M.D., Trustee of the 19,553 69,999.74
Camelot Medical Group, Inc. PSP FBO
Norman F. Sokoloff, M.D.
- ------------------------------------------- ------------------------ ----------------------
Norman F. Sokoloff, M.D., 8,379 29,996.82
Trustee U/D/T dated
February 4, 1992 of the Sokoloff Family
Trust
- ------------------------------------------- ------------------------ ----------------------
Stephen R. Bochner, M.D. 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
Security Trust Company, 13,966 49,998.28
Custodian FBO Frank
Ruderman IRA
- ------------------------------------------- ------------------------ ----------------------
Greg B. Scott and Sarah 27,932 99,996.56
E. Scott, as Joint Tenants
- ------------------------------------------- ------------------------ ----------------------
James R. Margolis/Janet M. Margolis, 13,966 49,998.28
Joint Tenants in the Entirety
- ------------------------------------------- ------------------------ ----------------------
Pacific Rim Capital, LLC 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
Howard Palefsky 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
The Edmon Russell Jennings, Jr. Living 13,966 49,998.28
Trust, Dated May 12, 1995
- ------------------------------------------- ------------------------ ----------------------
Allan W. May 13,966 49,998.28
Trustee Allan W. May
Revocable Trust Dated May 14, 1991
- ------------------------------------------- ------------------------ ----------------------
Nicolas Reifart 13,966 49,998.28
- ------------------------------------------- ------------------------ ----------------------
TOTAL 6,298,870 $22,549,954.60
- ------------------------------------------- ------------------------ ----------------------
</TABLE>
A-2
<PAGE>
EXHIBIT 10.1.1
DELTAGEN, INC.
AMENDED AND RESTATED
1998 STOCK INCENTIVE PLAN
(AS ADOPTED AND EFFECTIVE APRIL 30, 1998)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) "Award". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) "Board of Directors" . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(c) "Change in Control". . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(d) "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(e) "Committee". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(f) "Common-Law Employee". . . . . . . . . . . . . . . . . . . . . . . . . . 1
(g) "Company". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(h) "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(i) "Exchange Act" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(j) "Exercise Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(k) "Fair Market Value". . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(l) "Incentive Stock Option" or "ISO". . . . . . . . . . . . . . . . . . . . 3
(m) "Nonstatutory Option" or "NSO" . . . . . . . . . . . . . . . . . . . . . 3
(n) "Offeree". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(o) "Option" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(p) "Optionee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(q) "Outside Director" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(r) "Participant". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(s) "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(t) "Purchase Price" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(u) "Restricted Share" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(v) "Service". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(w) "Share". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(x) "Stock". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(y) "Stock Award Agreement". . . . . . . . . . . . . . . . . . . . . . . . . 4
(z) "Stock Option Agreement" . . . . . . . . . . . . . . . . . . . . . . . . 4
(aa) "Stock Purchase Agreement". . . . . . . . . . . . . . . . . . . . . . . 4
(ab) "Subsidiary". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(ac) "Total and Permanent Disability". . . . . . . . . . . . . . . . . . . . 4
(ad) "W-2 Payroll" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. ADMINISTRATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Committee Membership.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Committee Procedures.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Committee Responsibilities.. . . . . . . . . . . . . . . . . . . . . . . 5
(d) Committee Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(e) Financial Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) General Rule.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
-i-
<PAGE>
(b) Ten-Percent Shareholders.. . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Attribution Rules. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Outstanding Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 5. STOCK SUBJECT TO PLAN. . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Basic Limitation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Additional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES. . . . . . . . . . . . . . . . 7
(a) Stock Purchase Agreement.. . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Duration of Offers.. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Purchase Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Payment for Shares.. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(i) Surrender of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 8
(ii) Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . . 8
(iii) Cashless Exercise . . . . . . . . . . . . . . . . . . . . . . . . 9
(iv) Other Forms of Payment . . . . . . . . . . . . . . . . . . . . . . 9
(e) Exercise of Awards on Termination of Service . . . . . . . . . . . . . . 9
SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED
SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Form and Amount of Award . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Exercisability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Effect of Change in Control. . . . . . . . . . . . . . . . . . . . . . . 9
(d) Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 8. TERMS AND CONDITIONS OF OPTIONS. . . . . . . . . . . . . . . . . . . . 10
(a) Stock Option Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Number of Shares.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Exercise Price.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Exercisability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(e) Effect of Change in Control. . . . . . . . . . . . . . . . . . . . . . . 11
(f) Term.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(g) Exercise of Options on Termination of Service. . . . . . . . . . . . . . 11
(h) Payment of Option Shares . . . . . . . . . . . . . . . . . . . . . . . . 11
(i) Surrender of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 11
(ii) Promissory Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 12
(iii) Cashless Exercise. . . . . . . . . . . . . . . . . . . . . . . . . 12
(iv) Other Forms of Payment . . . . . . . . . . . . . . . . . . . . . . 12
(i) No Rights as a Shareholder . . . . . . . . . . . . . . . . . . . . . . . 12
(j) Modification, Extension and Assumption of Options. . . . . . . . . . . . 12
SECTION 9. ADJUSTMENT OF SHARES.. . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Reorganizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Reservation of Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 13
-ii-
<PAGE>
SECTION 10. WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Share Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Cashless Exercise/Pledge . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Other Forms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS. . . . . . . . . . . . . . . . . . . 14
(a) General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 12. LEGAL REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 13. NO EMPLOYMENT RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 14. DURATION AND AMENDMENTS.. . . . . . . . . . . . . . . . . . . . . . . 15
(a) Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Right to Amend or Terminate the Plan.. . . . . . . . . . . . . . . . . . 15
(c) Effect of Amendment or Termination.. . . . . . . . . . . . . . . . . . . 16
SECTION 15. EXECUTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
FEDERAL TAX INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Initial Grant of Options . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Nonqualified Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . 1
Incentive Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Alternative Minimum Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
-iii-
<PAGE>
DELTAGEN, INC.
AMENDED AND RESTATED
1998 STOCK INCENTIVE PLAN
(AS ADOPTED AND EFFECTIVE APRIL 30, 1998)
SECTION 1. PURPOSE.
The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success
of the Company, or to increase such interest, to encourage such selected
persons to remain in the employ of the Company and to attract new employees
with outstanding qualifications. The Plan seeks to achieve this purpose by
providing for Awards in the form of Restricted Shares and Options (which may
constitute Incentive Stock Options or Nonstatutory Stock Options) as well as
the direct award or sale of Shares of the Company's Common Stock. The Plan
was adopted by the Board on April 30, 1998.
SECTION 2. DEFINITIONS.
(a) "AWARD" shall mean any award of an Option, Restricted Share or
other right under the Plan.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(c) "CHANGE IN CONTROL" shall be defined by the Committee and provided
for in the Stock Purchase Agreements, Stock Option Agreements and Stock Award
Agreements. The term "Change in Control" shall not include a transaction the
sole purpose of which is to change the state of the Company's incorporation.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean a committee of the Board of Directors which
is authorized to administer the Plan under Section 3.
(f) "COMMON-LAW EMPLOYEE" means an individual paid from W-2 Payroll of
the Company or a Subsidiary. If, during any period, the Company (or
Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not paid such individual in a manner which
results in the issuance of a Form W-2 and withheld taxes with respect to him
or her, then that individual shall not be an eligible
-1-
<PAGE>
Employee for that period, even if any person, court of law or government
agency determines, retroactively, that that individual is or was a Common-Law
Employee during all or any portion of that period.
(g) "COMPANY" shall mean DELTAGEN, INC., a Delaware corporation.
(h) "EMPLOYEE" shall mean (i) any individual who is a Common-Law
Employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, including (without limitation) an Outside Director, or an
affiliate of a member of the Board of Directors,(iii) a member of the board
of directors of a Subsidiary, or (iv) an independent contractor who performs
services for the Company or a Subsidiary. Service as a member of the Board
of Directors, a member of the board of directors of a Subsidiary or an
independent contractor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a).
(i) "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as
amended.
(j) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(k) "FAIR MARKET VALUE" means the market price of Shares, determined by
the Committee as follows:
(i) If the Shares were traded over-the-counter on the date in question
but were not traded on the Nasdaq Stock Market or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the mean
between the last reported representative bid and asked prices quoted for
such date by the principal automated inter-dealer quotation system on which
the Shares are quoted or, if the Shares are not quoted on any such system,
by the "Pink Sheets" published by the National Quotation Bureau, Inc.;
(ii) If the Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq Stock Market or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the
last-transaction price quoted for such date by the Nasdaq Stock Market or
the Nasdaq National Market;
-2-
<PAGE>
(iii) If the Shares were traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and
(iv) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.
In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.
(l) "INCENTIVE STOCK OPTION" or "ISO" shall mean an employee incentive
stock option described in Code section 422(b).
(m) "NONSTATUTORY OPTION" or "NSO" shall mean an employee stock option
that is not an ISO.
(n) "OFFEREE" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan (other than upon exercise
of an Option).
(o) "OPTION" shall mean an Incentive Stock Option or Nonstatutory
Option granted under the Plan and entitling the holder to purchase Shares.
(p) "OPTIONEE" shall mean an individual or estate who holds an Option.
(q) "OUTSIDE DIRECTOR" shall mean a member of the Board who is not a
Common-Law Employee of the Company or a Subsidiary.
(r) "PARTICIPANT" shall means an individual or estate who holds an
Award.
(s) "PLAN" shall mean this DELTAGEN, INC., 1998 Stock Incentive Plan.
(t) "PURCHASE PRICE" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(u) "RESTRICTED SHARE" shall mean a Share sold or granted to an
eligible Employee which is nontransferable and subject to substantial risk of
forfeiture until restrictions lapse.
-3-
<PAGE>
(v) "SERVICE" shall mean service as an Employee.
(w) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(x) "STOCK" shall mean the common stock of the Company.
(y) "STOCK AWARD AGREEMENT" shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Share.
(z) "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
(aa) "STOCK PURCHASE AGREEMENT" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such
Shares.
(bb) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
(cc) "TOTAL AND PERMANENT DISABILITY" means that the Optionee is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment.
(dd) "W-2 PAYROLL" means whatever mechanism or procedure that the
Company or a Subsidiary utilizes to pay any individual which results in the
issuance of Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a
consultant. Whether a mechanism or procedure qualifies as a "W-2 Payroll"
shall be determined in the absolute discretion of the Company (or Subsidiary,
as applicable), and the Company or Subsidiary determination shall be
conclusive and binding on all persons.
-4-
<PAGE>
SECTION 3. ADMINISTRATION.
(a) COMMITTEE MEMBERSHIP. The Plan shall be administered by the
Committee appointed by the Board of Directors. In the event the Company's
Shares become publicly traded, the Committee shall be comprised solely of two
or more Outside Directors (although Committee functions may be delegated to
officers to the extent the awards relate to persons who are not subject to
the reporting requirements of Section 16 of the Exchange Act). If no
Committee has been appointed, the entire Board shall constitute the Committee.
(b) COMMITTEE PROCEDURES. The Board of Directors shall designate one
of the members of the Committee as chairperson. The Committee may hold
meetings at such times and places as it shall determine. The acts of a
majority of the Committee members present at meetings at which a quorum
exists, or acts reduced to or approved in writing by all Committee members,
shall be valid acts of the Committee.
(c) COMMITTEE RESPONSIBILITIES. The Committee has and may exercise
such power and authority as may be necessary or appropriate for the Committee
to carry out its functions as described in the Plan. The Committee has
authority in its discretion to determine eligible Employees to whom, and the
time or times at which, Awards may be granted and the number of Shares
subject to each Award. Subject to the express provisions of the respective
Award agreements (which need not be identical) and to make all other
determinations necessary or advisable for Plan administration. The Committee
has authority to prescribe, amend, and rescind rules and regulations relating
to the Plan. All interpretations, determinations, and actions by the
Committee will be final, conclusive, and binding upon all persons.
(d) COMMITTEE LIABILITY. No member of the Board or the Committee will
be liable for any action or determination made in good faith by the Committee
with respect to the Plan or any Award made under the Plan.
(e) FINANCIAL REPORTS. To the extent required by applicable law, and
not less often than annually, the Company shall furnish to Offerees,
Optionees and Shareholders who have received Stock under the Plan its
financial statements including a balance sheet regarding the Company's
financial condition and results of operations, unless such Offerees,
Optionees or Shareholders have duties with the Company that assure them
-5-
<PAGE>
access to equivalent information. Such financial statements need not be
audited.
SECTION 4. ELIGIBILITY.
(a) GENERAL RULE. Only Employees, as defined in Section 2(h), shall be
eligible for designation as Participants by the Committee. In addition, only
individuals who are employed as Common-Law Employees by the Company or a
Subsidiary shall be eligible for the grant of ISOs.
(b) TEN-PERCENT SHAREHOLDERS. An Employee who owns more than ten
percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company or any of its Subsidiaries shall not be
eligible for designation as an Offeree or Optionee unless (i) the Exercise
Price for an ISO (and a NSO to the extent required by applicable law) is at
least one hundred ten percent (110%) of the Fair Market Value of a Share on
the date of grant, (ii) the Purchase Price of Shares is at least one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, and
(iii) in the case of an ISO, such ISO by its terms is not exercisable after
the expiration of five years from the date of grant.
(c) ATTRIBUTION RULES. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock
owned, directly or indirectly, by or for his brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall not be counted.
(d) OUTSTANDING STOCK. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding Stock" shall not include shares
authorized for issuance under outstanding Options held by the Employee or by
any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) BASIC LIMITATION. Shares offered under the Plan shall be
authorized but unissued Shares. Subject to Sections 5(b) and 9 of the Plan,
the aggregate number of Shares which may be issued or transferred pursuant to
an Award under the Plan shall not exceed Three Million Seven Hundred
Fifty-Six Thousand Seven Hundred
-6-
<PAGE>
Eighty Shares (3,756,780) In any event, (i) the number of Shares which are
subject to Awards or other rights outstanding at any time under the Plan
shall not exceed the number of Shares which then remain available for
issuance under the Plan; and (ii) the number of Shares which are subject to
Awards or other rights outstanding at any time under the Plan or otherwise
shall not exceed the limitation imposed by Section 260.140.45 of the Code of
Regulations of the California Commissioner of Corporations. The Company,
during the term of the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.
(b) ADDITIONAL SHARES. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the Shares
allocable to the unexercised portion of such Option or other right shall again
be available for the purposes of the Plan. If a Restricted Share is forfeited
before any dividends have been paid with respect to such Restricted Share, then
such Restricted Share shall again become available for award under the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) STOCK PURCHASE AGREEMENT. Each award or sale of Shares under the Plan
(other than upon exercise of an Option) shall be evidenced by a Stock Purchase
Agreement between the Offeree and the Company. Such award or sale shall be
subject to all applicable terms and conditions of the Plan and may be subject to
any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
-7-
<PAGE>
(b) DURATION OF OFFERS. Any right to acquire Shares under the Plan (other
than an Option) shall automatically expire if not exercised by the Offeree
within 30 days after the grant of such right was communicated to the Offeree by
the Committee.
(c) PURCHASE PRICE. The Purchase Price of Shares to be offered under the
Plan shall not be less than eighty-five percent (85%) of the Fair Market Value
of a Share on the date of grant (100% for 10% shareholders), except as otherwise
provided in Section 4(b). Subject to the preceding sentence, the Purchase Price
shall be determined by the Committee in its sole discretion. The Purchase Price
shall be payable in a form described in Subsection (d) below.
(d) PAYMENT FOR SHARES. The entire Purchase Price of Shares issued under
the Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided below. Notwithstanding
any other provision of the Plan, Shares may, in the discretion of the Committee,
be awarded under the Plan in consideration of Services rendered to the Company
or a Subsidiary prior to the Award. Permissible forms of payment, in addition
to cash, are:
(i) SURRENDER OF STOCK. To the extent that a Purchase Option
Agreement so provides, payment may be made all or in part with Shares which
have already been owned by the Offeree or the Offeree's representative for
any time period specified by the Committee and which are surrendered to the
Company in good form for transfer. Such Shares shall be valued at their
Fair Market Value on the date when the new Shares are purchased under the
Plan.
(ii) PROMISSORY NOTES. To the extent that a Stock Purchase Agreement
so provides, payment may be made all or in part with a full recourse
promissory note executed by the Offeree. The interest rate and other terms
and conditions of such note shall be determined by the Committee. The
Committee may require that the Offeree pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Shares be released to the
Offeree until such note is paid in full.
(iii) CASHLESS EXERCISE. To the extent that a Stock Purchase
Agreement so provides and a public market for the Shares exists, payment
may be made all or in part by delivery (on a form prescribed by the
Committee) of an irrevocable direction to a securities broker to sell
-8-
<PAGE>
Shares and to deliver all or part of the sale proceeds to the Company in
payment of the aggregate Exercise Price.
(iv) OTHER FORMS OF PAYMENT. To the extent provided in the Stock
Purchase Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules, including payment
for past services.
(e) EXERCISE OF AWARDS ON TERMINATION OF SERVICE. Each Stock Award
Agreement shall set forth the extent to which the recipient shall have the right
to exercise the Award following termination of the recipient's Service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all the Awards issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment.
SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES.
(a) FORM AND AMOUNT OF AWARD. Each Stock Award Agreement shall specify
the number of Shares that are subject to the Award. Restricted Shares may be
awarded in combination with NSOs and such an Award may provide that the
Restricted Shares will be forfeited in the event that the related NSOs are
exercised.
(b) EXERCISABILITY. Each Stock Award Agreement shall specify the
conditions upon which Restricted Shares shall become vested, in full or in
installments. To the extent required by applicable law, a Stock Award shall
become exercisable no less rapidly than the rate of 20% per year for each of the
first five years from the date of grant. Subject to the preceding sentence, the
exercisability of any Stock Award shall be determined by the Committee in its
sole discretion.
(c) EFFECT OF CHANGE IN CONTROL. The Committee may determine at the time
of making an Award or thereafter, that such Award shall become fully vested in
the event that a Change in Control occurs with respect to the Company.
(d) VOTING RIGHTS. Holders of Restricted Shares awarded under the Plan
shall have the same voting, dividend and other rights a the Company's other
stockholders. A Stock Award Agreement, however, may require that the holders
invested any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same
-9-
<PAGE>
conditions and restrictions as the Award with respect to which the dividends
were paid. Such additional Restricted Shares shall not reduce the number of
Shares available under Section 5.
SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(b). To the extent required by applicable law
and except as otherwise provided in Section 4(b), the Exercise Price of a
Nonstatutory Option shall not be less than eighty-five percent (85%) of the Fair
Market Value of a Share on the date of grant. Subject to the preceding two
sentences, the Exercise Price under any Option shall be determined by the
Committee in its sole discretion. The Exercise Price shall be payable in a form
described in Subsection (h) below.
(d) EXERCISABILITY. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of 20% per year for each of the first five years from the
date of grant. Subject to the preceding sentence, the exercisability of any
Option shall be determined by the Committee in its sole discretion.
(e) EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the time
of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Shares subject to such Option in the event that a Change
in Control
-10-
<PAGE>
occurs with respect to the Company.
(f) TERM. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten years from the date of grant (or five (5)
years for ten percent (10%) shareholders as provided in Section 4(b)). Subject
to the preceding sentence, the Committee at its sole discretion shall determine
when an Option is to expire.
(g) EXERCISE OF OPTIONS ON TERMINATION OF SERVICE. Each Option shall
set forth the extent to which the Optionee shall have the right to exercise
the Option following termination of the Optionee's Service with the Company
and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment. Notwithstanding the foregoing, to the extent
required by applicable law, each Option shall provide that the Optionee shall
have the right to exercise the vested portion of any Option held at
termination for at least 30 days following termination of Service with the
Company for any reason, and that the Optionee shall have the right to
exercise the Option for at least six months if the Optionee's Service
terminates due to death or Disability.
(h) PAYMENT OF OPTION SHARES. The entire Exercise Price of Shares issued
under the Plan shall be payable in lawful money of the United States of America
at the time when such Shares are purchased, except as provided below:
(i) SURRENDER OF STOCK. To the extent that a Stock Option
Agreement so provides, payment may be made all or in part with Shares
which have already been owned by the Optionee or the Optionee's
representative for any time period specified by the Committee and
which are surrendered to the Company in good form for transfer. Such
Shares shall be valued at their Fair Market Value on the date when the
new Shares are purchased under the Plan.
(ii) PROMISSORY NOTES. To the extent that a Stock Option
Agreement or Stock Purchase Agreement so provides, payment may be made
all or in part with a full recourse promissory note executed by the
Optionee or Offeree. The interest rate and other terms and conditions
of such note shall be determined by the Committee. The Committee may
require that the Optionee or Offeree pledge his or her Shares to the
-11-
<PAGE>
Company for the purpose of securing the payment of such note. In no
event shall the stock certificate(s) representing such Shares be
released to the Optionee or Offeree until such note is paid in full.
(iii)CASHLESS EXERCISE. To the extent that a Stock Option
Agreement so provides and a public market for the Shares exists,
payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker
to sell Shares and to deliver all or part of the sale proceeds to the
Company in payment of the aggregate Exercise Price.
(iv) OTHER FORMS OF PAYMENT. To the extent provided in the
Stock Option Agreement, payment may be made in any other form that is
consistent with applicable laws, regulations and rules.
(i) NO RIGHTS AS A SHAREHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by an Option until the date of the issuance of a stock certificate for
such Shares.
(j) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of Shares and at the same or a different Exercise
Price or for other consideration.
SECTION 9. ADJUSTMENT OF SHARES.
(a) GENERAL. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock into a lesser
number of Shares, a recapitalization, a reclassification or a similar
occurrence, the Committee shall make appropriate adjustments in one or more of
(i) the number of Shares available for future Awards under Section 5, (ii) the
number of Shares covered by each outstanding Option or Purchase Agreement or
(iii) the Exercise Price or Purchase Price under each outstanding Option or
Stock Purchase Agreement.
-12-
<PAGE>
(b) REORGANIZATIONS. In the event that the Company is a party to a merger
or reorganization, outstanding Options shall be subject to the agreement of
merger or reorganization.
(c) RESERVATION OF RIGHTS. Except as provided in this Section 9, an
Optionee or an Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number, Exercise
Price or Purchase Agreement of Shares subject to an Option or Stock Purchase
Agreement. The grant of an Award pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
SECTION 10. WITHHOLDING TAXES.
(a) GENERAL. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Committee for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
(b) SHARE WITHHOLDING. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Shares that otherwise would be issued
to him or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash. Any payment of taxes
by assigning Shares to the Company may be subject to restrictions, including any
restrictions required by rules of any federal or state regulatory body or other
authority.
(c) CASHLESS EXERCISE/PLEDGE. The Committee may provide that if Company
Shares are publicly traded at the time of exercise, arrangements may be made to
meet the Optionee's withholding obligation by cashless exercise or pledge.
-13-
<PAGE>
(d) OTHER FORMS OF PAYMENT. The Committee may permit such other means of
tax withholding as it deems appropriate.
SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS.
(a) GENERAL. An Award granted under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs may
not be transferable. Also notwithstanding the foregoing, while the Shares are
subject to California Corporations Code Section 25102(o), Offerees and Optionees
may not transfer their rights hereunder except by will, beneficiary designation
or the laws of descent and distribution, and (ii) any rights of repurchase in
favor of the Company shall take into account the provisions of Department of
Corporations Regulation Section 260.140.41 or 260.140.42, as applicable.
(b) TRUSTS. Neither this Section 11 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved by the Committee in writing. A transfer or assignment of Restricted
Shares from such trustee to any other person than such Participant shall be
permitted only to the extent approved in advance by the Committee in writing,
and Restricted Shares held by such trustee shall be subject to all the
conditions and restrictions set forth in the Plan and in the applicable Stock
Award Agreement, as if such trustee were a party to such Agreement.
SECTION 12. LEGAL REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations, and the regulations of any stock exchange on which the Company's
securities may then be listed.
SECTION 13. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted
-14-
<PAGE>
under the Plan, shall be construed to give any person any right to become, to
be treated as, or to remain an Employee. The Company and its Subsidiaries
reserve the right to terminate any person's Service at any time and for any
reason.
SECTION 14. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any grants already made shall be null and void, and no additional
grants shall be made after such date. The Plan shall terminate automatically
ten (10) years after its adoption by the Board of Directors and may be
terminated on any earlier date pursuant to Subsection (b) below.
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any right or Option granted before amendment of the Plan shall not be materially
altered, or impaired adversely, by such amendment, except with consent of the
person to whom the right or Option was granted. An amendment of the Plan shall
be subject to the approval of the Company's shareholders only to the extent
required by applicable laws, regulations or rules including the rules of any
applicable exchange.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or sold
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Shares previously issued or any Option
previously granted under the Plan.
SECTION 15. EXECUTION.
To record the adoption of the Plan by the Company effective as of April
30, 1998 and its amendment as of July 17, 1998, September 16, 1999, December
16, 1999, January 21, 2000 and April 5, 2000, the Board of Directors
has caused its authorized officer to execute the same this 11th day of April,
2000.
DELTAGEN, INC.
By /s/ William Matthews, Ph.D.
----------------------------
William Matthews, Ph.D.
President and Chief
Executive Officer
15
<PAGE>
EXHIBIT 10.1.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.
DELTAGEN, INC.
1998 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
DELTAGEN, INC., a Delaware corporation (the "Company"), hereby
grants an Option to purchase shares of its common stock ("Shares") to the
Optionee named below. The terms and conditions of the Option are set forth
in this cover sheet, in the attachment and in the Company's 1998 Stock
Incentive Plan (the "Plan").
Date of Grant: _______________
Name of Optionee: ____________________________________________________________
Optionee's Social Security Number:____________________________________________
Number of Shares Covered by Option: _________________________________________
Exercise Price per Share: ___________________________________________________
[must be at least 100% fair market value on Date of Grant]
Vesting Start Date: _________________________________________________________
__ Check here if Optionee is a 10% owner (so that exercise price must be
110% of fair market value and term will not exceed 5 years).
BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED IN THE ATTACHED AGREEMENT AND IN THE PLAN, A COPY OF WHICH IS
ALSO ATTACHED.
Optionee: ____________________________________________________________________
(Signature)
Company: _____________________________________________________________________
(Signature)
Title: _______________________________________________________________________
<PAGE>
DELTAGEN, INC.
1998 STOCK INCENTIVE PLAN
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE This Option is intended to be an incentive stock
STOCK OPTION option under section 422 of the Internal Revenue
Code and will be interpreted accordingly.
VESTING Your Option vests monthly over a four-year
period beginning on the Vesting Start Date as
shown on the cover sheet. Accordingly, this
Option vests at a rate of 2.083333% of the
Shares covered by the Option per month from the
Vesting Start Date. The number of Shares which
vest under this Option at the Exercise Price
shall be equal to the product of the number of
full months of your continuous employment with
the Company ("Service") (including any approved
leaves of absence) from the Vesting Start Date
times the number of Shares covered by this
Option times .02083333. Notwithstanding the
above, no Shares will vest until you have
performed twelve months of Service from the
Vesting Start Date. The resulting number of
Shares will be rounded to the nearest whole
number. No additional Shares will vest after
your Service has terminated for any reason.
You should note that you may exercise the Option
prior to vesting. In that case, the Company has a
right to repurchase the unvested shares at the
original exercise price if you terminate employment
before vesting in all shares you purchased. Also,
if you exercise before vesting, you should consider
making an 83(b) election. Please see the attached
Tax Summary. THE 83(b) ELECTION MUST BE FILED
WITHIN 30 DAYS OF THE DATE YOU EXERCISE.
TERM Your Option will expire in any event at the close
of business at Company headquarters on the day
before the tenth anniversary (fifth anniversary for
a 10% owner) of the Date of Grant, as shown on the
cover sheet. (It will expire earlier if your
Service terminates, as described below.)
REGULAR TERMINATION If your Service terminates for any reason except
death or Disability, your Option will expire at
the close of business at Company headquarters on
the 30th day after your termination date. During
that 30-day period, you may exercise that
portion of your Option that was vested on your
termination date.
<PAGE>
DEATH If you die while in Service with the Company, your
Option will expire at the close of business at
Company headquarters on the date six months after
the date of death. During that six-month period,
your estate or heirs may exercise that portion of
your Option that was vested on the date of death.
DISABILITY If your Service terminates because of your
Disability, your Option will expire at the close
of business at Company headquarters on the date
six months after your termination date.
(However, if your Disability is not expected to
result in death or to last for a continuous
period of at least 12 months, your Option will
be eligible for ISO tax treatment only if it is
exercised within three months following the
termination of your Service.) During that
six-month period, you may exercise that portion
of your Option that was vested on the date of
your Disability.
"Disability" means that you are unable to engage in
any substantial gainful activity by reason of any
medically determinable physical or mental
impairment.
LEAVES OF ABSENCE For purposes of this Option, your Service does
not terminate when you go on a BONA FIDE leave
of absence that was approved by the Company in
writing, if the terms of the leave provide for
continued service crediting, or when continued
service crediting is required by applicable law.
However, your Service will be treated as
terminating 90 days after you went on leave,
unless your right to return to active work is
guaranteed by law or by a contract. Your
Service terminates in any event when the
approved leave ends unless you immediately
return to active work. The Company determines
which leaves count for this purpose, and when
your Service terminates for all purposes under
the Plan. The Company also determines the
extent to which you may exercise the vested
portion of your Option during a leave of absence.
NOTICE OF EXERCISE When you wish to exercise this Option, you must
execute the Notice of Exercise/Common Stock
Purchase Agreement (and, if exercise is prior to
vesting, you must also execute Exhibits C and
D). If you exercise by means of a promissory
note (as permitted by the Option Agreement), you
must execute Exhibits A and B also. Your
exercise will be effective when it is received
by the Company. If someone else wants to
exercise this Option after your death, that
person must prove to the Company's satisfaction
that he or she is entitled to do so.
<PAGE>
FORM OF PAYMENT When you submit the Notice of Exercise
and Common Stock Purchase Agreement, you must
include payment of the Exercise Price for the
Shares you are purchasing. Payment may be made in
one (or a combination) of the following forms:
- Your personal check, a cashier's check or
a money order.
- Shares which you have owned for six months
and which are surrendered to the Company.
The value of the Shares, determined as of
the effective date of the Option exercise,
will be applied to the Exercise Price.
- To the extent that a public market for the
Shares exists as determined by the
Company, by delivery (on a form prescribed
by the Committee) of an irrevocable
direction to a securities broker to sell
Shares and to deliver all or part of the
sale proceeds to the Company in payment of
the aggregate Exercise Price.
- A personal check, cashier's check, or
money order for the par value of the
Shares purchased and a full-recourse
promissory note for the balance.
- Any other form of legal consideration
approved by the Committee.
WITHHOLDING You will not be allowed to exercise this Option
TAXES unless you make acceptable arrangements to pay
any withholding or other taxes that may be due
as a result of the Option exercise or the sale of
Shares acquired upon exercise of this Option.
RESTRICTIONS ON EXERCISE By signing this Agreement, you agree not to
AND RESALE exercise this Option or sell any Shares
acquired upon exercise of this Option at
a time when applicable laws, regulations or
Company or underwriter trading policies prohibit
exercise or sale. In particular, the Company
shall have the right to designate one or more
periods of time, each of which shall not exceed
180 days in length, during which this Option
shall not be exercisable if the Company
determines (in its sole discretion) that such
limitation on exercise could in any way
facilitate a lessening of any restriction on
transfer pursuant to the Securities Act or any
state securities laws with respect to any
issuance of securities by the Company,
facilitate the registration or qualification of
any securities by the Company under the
Securities Act or any state securities laws, or
facilitate the perfection of any exemption from
the registration or qualification requirements
of the Securities Act or any applicable state
securities laws for the issuance or transfer of
any securities.
<PAGE>
Such limitation on exercise shall not alter the
vesting schedule set forth in this Agreement
other than to limit the periods during which
this Option shall be exercisable.
If the sale of Shares under the Plan is not
registered under the Securities Act of 1933, as
amended (the "Securities Act"), but an exemption is
available which requires an investment or other
representation, you shall represent and agree at
the time of exercise that the Shares being acquired
upon exercise of this Option are being acquired for
investment, and not with a view to the sale or
distribution thereof, and shall make such other
representations as are deemed necessary or
appropriate by the Company and its counsel.
THE COMPANY'S RIGHT OF In the event that you propose to sell, pledge or
FIRST REFUSAL otherwise transfer to a third party any Shares
acquired under this Agreement, or any interest in
such Shares, the Company shall have the "Right
of First Refusal" with respect to all (and not
less than all) of such Shares. If you desire to
transfer Shares acquired under this Agreement,
you must give a written "Transfer Notice" to the
Company describing fully the proposed transfer,
including the number of Shares proposed to be
transferred, the proposed transfer price and the
name and address of the proposed transferee. The
Transfer Notice shall be signed both by you and
by the proposed transferee and must constitute a
binding commitment of both parties to the
transfer of the Shares.
The Company and its assignees shall have the right
to purchase all, and not less than all, of the
Shares on the terms described in the Transfer
Notice (subject, however, to any change in such
terms permitted in the next paragraph) by delivery
of a Notice of Exercise of the Right of First
Refusal within 30 days after the date when the
Transfer Notice was received by the Company. The
Company's rights under this Subsection shall be
freely assignable, in whole or in part.
If the Company fails to exercise its Right of First
Refusal within 30 days after the date when it
received the Transfer Notice, you may, not later
than six months following receipt of the Transfer
Notice by the Company, conclude a transfer of the
Shares subject to the Transfer Notice on the terms
and conditions described in the Transfer Notice.
Any proposed transfer on terms and conditions
different from those described in the Transfer
Notice, as well as any subsequent proposed transfer
by you, shall again be subject to the Right of
First Refusal and shall require compliance with the
procedure described in the paragraph above. If the
Company exercises its Right of First Refusal, you
and the
<PAGE>
Company (or its assignees) shall consummate
the sale of the Shares on the terms set forth in
the Transfer Notice.
The Company's Right of First Refusal shall inure to
the benefit of its successors and assigns and shall
be binding upon any transferee of the Shares.
TRANSFER OF OPTION Prior to your death, only you may exercise this
Option. You cannot transfer or assign this
Option. For instance, you may not sell this
Option or use it as security for a loan. If you
attempt to do any of these things, this Option
will immediately become invalid. You may,
however, dispose of this Option in your will.
Regardless of any marital property settlement
agreement, the Company is not obligated to honor a
Notice of Exercise from your spouse or former
spouse, nor is the Company obligated to recognize
such individual's interest in your Option in any
other way.
RETENTION RIGHTS This Agreement does not give you the right to
be retained by the Company in any capacity. The
Company reserves the right to terminate your
Service at any time and for any reason.
SHAREHOLDER RIGHTS Neither you, nor your estate or heirs, have
any rights as a shareholder of the Company until a
certificate for the Shares acquired upon exercise
of this Option has been issued. No adjustments are
made for dividends or other rights if the
applicable record date occurs before your stock
certificate is issued, except as described in the
Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or
a similar change in the Company's Stock, the number
of Shares covered by this Option and the Exercise
Price per share may be adjusted pursuant to the
Plan. Your Option shall be subject to the terms of
the agreement of merger, liquidation or
reorganization in the event the Company is subject
to such corporate activity.
LEGENDS All certificates representing the Shares issued
upon exercise of this Option shall, where
applicable, have endorsed thereon the following
legends:
"THESE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE. THEY MAY NOT BE SOLD,
OFFERED FOR
<PAGE>
SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT AND QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS OR AN
OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
THIS CERTIFICATE AND THE SHARES
REPRESENTED HEREBY MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN
ANY MANNER DISPOSED OF EXCEPT IN
CONFORMITY WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE CORPORATION AND THE
REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES).
SUCH AGREEMENT GRANTS CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL TO THE
CORPORATION (OR ITS ASSIGNEES) UPON THE
SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR
OTHER DISPOSITION OF THE CORPORATION'S
SHARES. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED WITHOUT CHARGE UPON WRITTEN
REQUEST TO THE SECRETARY OF THE
CORPORATION."
APPLICABLE LAW This Agreement will be interpreted and enforced
under the laws of the State of California (without
regard to their choice of law provisions).
THE PLAN AND OTHER The text of the Plan is incorporated in this
AGREEMENTS Agreement by reference. Certain capitalized terms
used in this Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire
understanding between you and the Company regarding
this Option. Any prior agreements, commitments or
negotiations concerning this Option are superseded.
By signing the cover sheet of this Agreement, you agree to all of the terms
and conditions described above and in the Plan. You also acknowledge that
you have read Section 11, "Purchaser's Investment Representation," in
Notice of Exercise and Common Stock
<PAGE>
Purchase Agreement, and that you can, and hereby do, make the same
representations with respect to the grant of this Option.
<PAGE>
EXHIBIT 10.2.1
DELTAGEN, INC.
2000 STOCK INCENTIVE PLAN
(Adopted by the Board on April 9, 2000)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. ESTABLISHMENT AND PURPOSE ..........................................1
SECTION 2. DEFINITIONS.........................................................1
(a) "Affiliate"..............................................................1
(b) "Award"..................................................................1
(c) "Board of Directors".....................................................1
(d) "Change in Control"......................................................1
(e) "Code"...................................................................2
(f) "Committee"..............................................................2
(g) "Company"................................................................2
(h) "Consultant".............................................................2
(i) "Employee"...............................................................2
(j) "Exchange Act"...........................................................2
(k) "Exercise Price".........................................................3
(l) "Fair Market Value"......................................................3
(m) "ISO"....................................................................3
(n) "Nonstatutory Option" or "NSO"...........................................3
(o) "Offeree" ...............................................................3
(p) "Option" ................................................................3
(q) "Optionee"...............................................................3
(r) "Outside Director".......................................................3
(s) "Parent".................................................................4
(t) "Participant"............................................................4
(u) "Plan"...................................................................4
(v) "Purchase Price".........................................................4
(w) "Restricted Share".......................................................4
(x) "Restricted Share Agreement".............................................4
(y) "SAR"....................................................................4
(z) "SAR Agreement"..........................................................4
(aa) "Service"...............................................................4
(bb) "Share".................................................................4
(cc) "Stock".................................................................4
(dd) "Stock Option Agreement"................................................5
(ee) "Stock Purchase Agreement"..............................................5
(ff) "Stock Unit"............................................................5
(gg) "Stock Unit Agreement"..................................................5
(hh) "Subsidiary"............................................................5
(ii) "Total and Permanent Disability"........................................5
SECTION 3. ADMINISTRATION .....................................................5
(a) Committee Procedures ....................................................5
(b) Committee Responsibilities ..............................................6
</TABLE>
- i -
<PAGE>
<TABLE>
<S> <C>
SECTION 4. ELIGIBILITY.........................................................7
(a) General Rule ............................................................7
(b) Outside Directors .......................................................7
(c) Limitation On Grants ....................................................8
(d) Ten-Percent Stockholders ................................................8
(e) Attribution Rules........................................................8
(f) Outstanding Stock........................................................8
SECTION 5. STOCK SUBJECT TO PLAN ..............................................8
(a) Basic Limitation ........................................................8
(b) Annual Increase in Shares ...............................................8
(c) Additional Shares .......................................................9
(d) Dividend Equivalents ....................................................9
SECTION 6. RESTRICTED SHARES ..................................................9
(a) Restricted Stock Agreement...............................................9
(b) Payment for Awards.......................................................9
(c) Vesting ................................................................10
(d) Voting and Dividend Rights .............................................10
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES......................10
(a) Duration of Offers and Nontransferability of Rights ....................10
(b) Purchase Price .........................................................10
(c) Withholding Taxes ......................................................10
(d) Restrictions on Transfer of Shares .....................................11
SECTION 8. TERMS AND CONDITIONS OF OPTIONS ...................................11
(a) Stock Option Agreement .................................................11
(b) Number of Shares........................................................11
(c) Exercise Price..........................................................11
(d) Withholding Taxes ......................................................11
(e) Exercisability and Term ................................................12
(f) Nontransferability .....................................................12
(g) Exercise of Options Upon Termination of Service ........................12
(h) Effect of Change in Control ............................................12
(i) Leaves of Absence ......................................................13
(j) No Rights as a Stockholder..............................................13
(k) Modification, Extension and Renewal of Options .........................13
(l) Restrictions on Transfer of Shares .....................................13
(m) Buyout Provisions ......................................................13
SECTION 9. PAYMENT FOR SHARES ................................................13
(a) General Rule ...........................................................13
(b) Surrender of Stock .....................................................14
(c) Services Rendered ......................................................14
(d) Cashless Exercise ......................................................14
(e) Exercise/Pledge ........................................................14
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C>
(f) Promissory Note ........................................................14
(g) Other Forms of Payment .................................................14
SECTION 10. STOCK APPRECIATION RIGHTS ........................................15
(a) SAR Agreement ..........................................................15
(b) Number of Shares .......................................................15
(c) Exercise Price .........................................................15
(d) Exercisability and Term ................................................15
(e) Effect of Change in Control ............................................15
(f) Exercise of SARs .......................................................16
(g) Modification or Assumption of SARs .....................................16
SECTION 11. STOCK UNITS ......................................................16
(a) Stock Unit Agreement ...................................................16
(b) Payment for Awards .....................................................16
(c) Vesting Conditions .....................................................16
(d) Voting and Dividend Rights .............................................17
(e) Form and Time of Settlement of Stock Units .............................17
(f) Death of Recipient .....................................................17
(g) Creditors' Rights ......................................................17
SECTION 12. PROTECTION AGAINST DILUTION ......................................18
(a) Adjustments ............................................................18
(b) Dissolution or Liquidation .............................................18
(c) Reorganizations ........................................................18
SECTION 13. DEFERRAL OF AWARDS ...............................................19
SECTION 14. AWARDS UNDER OTHER PLANS .........................................19
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES .........................20
(a) Effective Date .........................................................20
(b) Elections to Receive NSOs, Restricted Shares or Stock Units ............20
(c) Number and Terms of NSOs, Restricted Shares or Stock Units..............20
SECTION 16. ADJUSTMENT OF SHARES .............................................20
(a) General ................................................................20
(b) Reorganizations ........................................................20
(c) Reservation of Rights ..................................................20
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS ................................21
SECTION 18. WITHHOLDING TAXES ................................................21
(a) General ................................................................21
(b) Share Withholding ......................................................21
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS .................................21
(a) Scope of Limitation ....................................................21
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C>
(b) Basic Rule..............................................................21
(c) Reduction of Payments ..................................................22
(d) Overpayments and Underpayments .........................................22
(e) Related Corporations ...................................................23
SECTION 20. NO EMPLOYMENT RIGHTS .............................................23
SECTION 21. DURATION AND AMENDMENTS...........................................23
(a) Term of the Plan .......................................................23
(b) Right to Amend or Terminate the Plan ...................................23
(c) Effect of Amendment or Termination .....................................23
SECTION 22. EXECUTION.........................................................23
</TABLE>
- iv -
<PAGE>
DELTAGEN, INC.
2000 STOCK INCENTIVE PLAN
(Adopted by the Board on April 9, 2000)
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Board of Directors effective April 9,
2000. The purpose of the Plan is to promote the long-term success of the Company
and the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.
SECTION 2. DEFINITIONS
(a) "AFFILIATE" shall mean any entity other than a Subsidiary, if
the Company and/or one of more Subsidiaries own not less than fifty percent
(50%) of such entity.
(b) "AWARD" shall mean any award of an Option, a SAR, a Restricted
Share or a Stock Unit under the Plan.
(c) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(d) "CHANGE IN CONTROL" shall mean the occurrence of either of the
following events:
(i) A change in the composition of the Board of
Directors, as a result of which fewer than one-half of the incumbent
directors are directors who either:
(A) Had been directors of the Company
twenty-four (24) months prior to such change; or
(B) Were elected, or nominated for election, to
the Board of Directors with the affirmative votes of at least
a majority of the directors who had been directors of the
Company twenty-four (24) months prior to such change and who
were still in office at the time of the election or
nomination; or
(ii) Any "person" (as such term is used in sections 13(d)
and 14(d) of the Exchange Act) who by the acquisition or aggregation of
securities, is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing fifty percent (50%) or more
of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having
- 1 -
<PAGE>
the right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall
be disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. For purposes of this Subsection (ii), the term "person" shall
not include an employee benefit plan maintained by the Company.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "COMMITTEE" shall mean the committee designated by the Board
of Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Options or
other rights granted under the Plan to qualify for exemption under Rule 16b-3
with respect to persons who are subject to Section 16 of the Exchange Act.
(g) "COMPANY" shall mean Deltagen, Inc., a Delaware corporation.
(h) "CONSULTANT" shall mean a consultant or advisor who provides
bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in the second sentence of
Section 4(a) and Section 4(b).
(i) "EMPLOYEE" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary; (ii) a member of the Board of
Directors, including (without limitation) an Outside Director, or an affiliate
of a member the Board of Directors; (iii) a member of the board of directors of
a Subsidiary; or (iv) an independent contractor or advisor who performs services
for the Company or a Subsidiary. Service as a member of the Board of Directors,
a member of the board of directors of a Subsidiary or as an independent
contractor or advisor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a) and Section 4(b).
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(k) "EXERCISE PRICE" shall mean, in the case of an Option, the
amount for which one Common Share may be purchased upon exercise of such Option,
as specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
(l) "FAIR MARKET VALUE" shall mean (i) the closing price of a
Share on the principal exchange which the Shares are trading, on the date on
which the Fair Market Value is determined (if Fair Market Value is determined on
a date which the principal exchange is closed, Fair Market Value shall be
determined on the last immediately preceding trading day), or (ii) if the Shares
are not traded on an exchange but are quoted on the Nasdaq National Market or a
successor quotation system, the closing price on the date on which the Fair
Market Value is determined, or (iii) if the Shares are not traded on an exchange
or quoted on the Nasdaq National
- 2 -
<PAGE>
Market or a successor quotation system, the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(m) "ISO" shall mean an employee incentive stock option described
in Code section 422.
(n) "NONSTATUTORY OPTION" or "NSO" shall mean an employee stock
option that is not an ISO.
(o) "OFFEREE" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan (other than upon exercise of
an Option).
(p) "OPTION" shall mean an ISO or Nonstatutory Option granted
under the Plan and entitling the holder to purchase Shares.
(q) "OPTIONEE" shall mean an individual or estate who holds an
Option or SAR.
(r) "OUTSIDE DIRECTOR" shall mean a member of the Board of
Directors who is not a common-law employee of the Company or of a Subsidiary.
Service as an Outside Director shall be considered employment for all purposes
of the Plan, except as provided in the second sentence of Section 4(a).
(s) "PARENT" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be a parent commencing as
of such date.
(t) "PARTICIPANT" shall mean an individual or estate who holds an
Award.
(u) "PLAN" shall mean this 2000 Stock Incentive Plan of Deltagen,
Inc., as amended from time to time.
(v) "PURCHASE PRICE" shall mean the consideration for which one
Share may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(w) "RESTRICTED SHARE" shall mean a Common Share awarded under the
Plan.
(x) "RESTRICTED SHARE AGREEMENT" shall mean the agreement between
the Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.
(y) "SAR" shall mean a stock appreciation right granted under the
Plan.
(z) "SAR AGREEMENT" shall mean the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her SAR.
- 3 -
<PAGE>
(aa) "SERVICE" shall mean service as an Employee.
(bb) "SHARE" shall mean one share of Stock, as adjusted in
accordance with Section 9 (if applicable).
(cc) "STOCK" shall mean the Common Stock of the Company.
(dd) "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his Option.
(ee) "STOCK PURCHASE AGREEMENT" shall mean the agreement between
the Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(ff) "STOCK UNIT" shall mean a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
(gg) "STOCK UNIT AGREEMENT" shall mean the agreement between the
Company and the recipient of a Stock Unit which contains the terms, conditions
and restrictions pertaining to such Stock Unit.
(hh) "SUBSIDIARY" shall mean any corporation, if the Company
and/or one or more other Subsidiaries own not less than fifty percent (50%) of
the total combined voting power of all classes of outstanding stock of such
corporation. A corporation that attains the status of a Subsidiary on a date
after the adoption of the Plan shall be considered a Subsidiary commencing as of
such date.
(ii) "TOTAL AND PERMANENT DISABILITY" shall mean that the Optionee
is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or which has lasted, or can be expected to last, for a
continuous period of not less than twelve (12) months.
SECTION 3. ADMINISTRATION.
(a) COMMITTEE PROCEDURES. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board of Directors. The Board of
Directors shall designate one of the members of the Committee as chairman. The
Committee may hold meetings at such times and places as it shall determine. The
acts of a majority of the Committee members present at meetings at which a
quorum exists, or acts reduced to or approved in writing by all Committee
members, shall be valid acts of the Committee.
(b) COMMITTEE RESPONSIBILITIES. Subject to the provisions of the
Plan, the Committee shall have full authority and discretion to take the
following actions:
(i) To interpret the Plan and to apply its provisions;
- 4 -
<PAGE>
(ii) To adopt, amend or rescind rules, procedures and
forms relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered
for sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to
each Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award
or sale of Shares, including (without limitation) the Purchase Price,
the vesting of the award (including accelerating the vesting of awards)
and to specify the provisions of the Stock Purchase Agreement relating
to such award or sale;
(viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, the vesting or
duration of the Option (including accelerating the vesting of the
Option), to determine whether such Option is to be classified as an ISO
or as a Nonstatutory Option, and to specify the provisions of the Stock
Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or
Stock Option Agreement, subject to applicable legal restrictions and to
the consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each
Option or other right under the Plan and to determine the sufficiency
of such consideration;
(xi) To determine the disposition of each Option or other
right under the Plan in the event of an Optionee's or Offeree's divorce
or dissolution of marriage;
(xii) To determine whether Options or other rights under
the Plan will be granted in replacement of other grants under an
incentive or other compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Stock Option Agreement or
any Stock Purchase Agreement; and
(xiv) To take any other actions deemed necessary or
advisable for the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its
- 5 -
<PAGE>
authority with regard to the selection for participation of or the granting of
Options or other rights under the Plan to persons subject to Section 16 of the
Exchange Act. All decisions, interpretations and other actions of the Committee
shall be final and binding on all Offerees, all Optionees, and all persons
deriving their rights from an Offeree or Optionee. No member of the Committee
shall be liable for any action that he has taken or has failed to take in good
faith with respect to the Plan, any Option, or any right to acquire Shares under
the Plan.
SECTION 4. ELIGIBILITY
(a) GENERAL RULE. Only Employees shall be eligible for the grant
of Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals
who are employed as common-law employees by the Company, a Parent or a
Subsidiary shall be eligible for the grant of ISOs. In addition, an Employee who
owns more than ten percent (10%) of the total combined voting power of all
classes of outstanding stock of the Company or any of its Parents or
Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(6) of the Code are satisfied.
(b) OUTSIDE DIRECTORS. Any other provision of the Plan
notwithstanding, the participation of Outside Directors in the Plan shall be
subject to the following restrictions:
(i) Outside Directors shall only be eligible for the
grant of Restricted Shares, Stock Units, Nonstatutory Options and SARs.
(ii) Each Outside Director shall automatically be granted
a Nonstatutory Option to purchase twenty thousand (20,000) Shares
(subject to adjustment under Section 16) as a result of their
appointment as an Outside Director on, or after, the effectiveness of
the Company's initial public offering of the Stocks. In addition, upon
the conclusion of each regular annual meeting of the Company's
stockholders occurring after 2000 and following the meeting at which
they were appointed, each Outside Director who will continue serving as
a member of the Board thereafter shall receive a Nonstatutory Option to
purchase five-thousand (5,000) Shares (subject to adjustment under
Section 16).
(iii) The Exercise Price of all Nonstatutory Options
granted to an Outside Director under this Section 4(b) shall be equal
to one hundred percent (100%) of the Fair Market Value of a Share on
the date of grant, payable in one of the forms described in Section
9(a), (b) and (d).
(iv) All Nonstatutory Options granted to an Outside
Director under this Section 4(b) shall terminate on the earliest of (A)
the tenth (10th) anniversary of the date of grant of such Options or
(B) the date twelve (12) months after the termination of such Outside
Director's service for any reason.
(c) LIMITATION ON GRANTS. No Employee shall be granted Options to
purchase more than seven-hundred fifty thousand (750,000) Shares in any fiscal
year of the Company, except that Options granted to a new Employee in the fiscal
year of the Company in which his or her
- 6 -
<PAGE>
service as an Employee first commences shall not pertain to more than one
million five-hundred thousand (1,500,000) Common Shares.
(d) TEN-PERCENT STOCKHOLDERS. An Employee who owns more than ten
percent (10%) of the total combined voting power of all classes of outstanding
stock of the Company or any of its Subsidiaries shall not be eligible for the
grant of an ISO unless such grant satisfies the requirements of Code section
422(c)(6).
(e) ATTRIBUTION RULES. For purposes of Subsection (d) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.
(f) OUTSTANDING STOCK. For purposes of Subsection (d) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) BASIC LIMITATION. Shares offered under the Plan shall be
authorized but unissued Shares or treasury Shares. The maximum aggregate number
of Options, SARs, Stock Units and Restricted Shares awarded under the Plan shall
not exceed four million eight-hundred (4,800,000) Shares, plus the additional
Shares described in Sections (b) and (c), but in no event more than forty
million Shares (40,000,000). The limitation of this Section 5(a) shall be
subject to adjustment pursuant to Section 12.
(b) ANNUAL INCREASE IN SHARES. As of January 1 of each year,
commencing with the year 2001, the aggregate number of Options, SARs, Stock
Units and Restricted Shares that may be awarded under the Plan shall
automatically increase by a number equal to the lesser of (i) four million
(4,000,000) shares, (ii) 5% of the fully diluted outstanding shares of Common
Stock of the Company on such date or (iii) a lesser amount determined by the
Board. The aggregate number of Shares which may be issued under the Plan shall
at all times be subject to adjustment pursuant to Section 16. The number of
Shares which are subject to Options or other rights outstanding at any time
under the Plan shall not exceed the number of Shares which then remain available
for issuance under the Plan. The Company, during the term of the Plan, shall at
all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
(c) ADDITIONAL SHARES. If Restricted Shares or Common Shares
issued upon the exercise of Options are forfeited, then such Shares shall
again become available for Awards under the Plan. If Stock Units, Options or
SARs are forfeited or terminate for any other reason before being exercised,
then the corresponding Common Shares shall again become available for Awards
under the Plan. If Stock Units are settled, then only the number of Common
Shares (if any) actually issued in settlement of such Stock Units shall reduce
the number available under Section 5(a) and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Common Shares (if any) actually
- 7 -
<PAGE>
issued in settlement of such SARs shall reduce the number available in Section
5(a) and the balance shall again become available for Awards under the Plan. The
foregoing notwithstanding, the aggregate number of Common Shares that may be
issued under the Plan upon the exercise of ISOs shall not be increased when
Restricted Shares or other Common Shares are forfeited.
(d) DIVIDEND EQUIVALENTS. Any dividend equivalents paid or
credited under the Plan shall not be applied against the number of Restricted
Shares, Stock Units, Options or SARs available for Awards, whether or not such
dividend equivalents are converted into Stock Units.
SECTION 6. RESTRICTED SHARES
(a) RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares
under the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.
(b) PAYMENT FOR AWARDS. Subject to the following sentence,
Restricted Shares may be sold or awarded under the Plan for such consideration
as the Committee may determine, including (without limitation) cash, cash
equivalents, full-recourse promissory notes, past services and future services.
To the extent that an Award consists of newly issued Restricted Shares, the
Award recipient shall furnish consideration with a value not less than the par
value of such Restricted Shares in the form of cash, cash equivalents, or past
services rendered to the Company (or a Parent or Subsidiary), as the Committee
may determine.
(c) VESTING. Each Award of Restricted Shares may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. The
Committee may include among such conditions the requirement that the performance
of the Company or a business unit of the Company for a specified period of one
or more years equal or exceed a target determined in advance by the Committee.
Such, performance shall be determined by the Company's independent auditors.
Such target shall be based on one or more of the criteria set forth in Appendix
A. The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Restricted Shares which are subject to
performance based vesting conditions exceed one million (1,000,000), subject to
adjustment in accordance with Section 16. A Restricted Stock Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of granting Restricted Shares of thereafter, that all or part of such
Restricted Shares shall become vested in the event that a Change in Control
occurs with respect to the Company.
(d) VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares
awarded under the Plan shall have the same voting, dividend and other rights as
the Company's other stockholders. A Restricted Stock Agreement, however, may
require that the holders of Restricted Shares invest any cash dividends received
in additional Restricted Shares. Such additional Restricted Shares shall be
subject to the same conditions and restrictions as the Award with respect to
which the dividends were paid.
- 8 -
<PAGE>
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) DURATION OF OFFERS AND NONTRANSFERABILITY OF RIGHTS. Any right
to acquire Shares under the Plan (other than an Option) shall automatically
expire if not exercised by the Offeree within thirty (30) days after the grant
of such right was communicated to him by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.
(b) PURCHASE PRICE. The Purchase Price shall be determined by the
Committee at its sole discretion. The Purchase Price shall be payable in one of
the forms described in Sections 9(a), (b) or (c).
(c) WITHHOLDING TAXES. As a condition to the purchase of Shares,
the Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(d) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares awarded or sold
under the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTI0N 8. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The Stock Option Agreement shall specify
whether the Option is an ISO or an NSO. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. Options may
be granted in consideration of a reduction in the Optionee's other compensation.
A Stock Option Agreement may provide that a new Option will be granted
automatically to the Optionee when he or she exercises a prior Option and pays
the Exercise Price in a form described in Section 9.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify
the number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 16. Options granted to an
Optionee in a single fiscal year of the Company shall not cover more than
seven-hundred fifty thousand (750,000) Shares, except that Options granted to a
new Employee in the fiscal year of the Company in which his or her service as an
Employee first commences shall not pertain to more than one million five-hundred
thousand (1,500,000) Common Shares.
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100 percent
(100%) of the Fair Market Value of a Share on the date of grant, except as
otherwise provided in Section 4(d). Subject to the foregoing in this Section
8(c), the Exercise Price under any Option shall be determined by the
- 9 -
<PAGE>
Committee at its sole discretion. The Exercise Price shall be payable in one of
the forms described in Sections 9.
(d) WITHHOLDING TAXES. As a condition to the exercise of an
Option, the Optionee shall make such arrangements as the Committee may require
for the satisfaction of any federal, state or local withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state or local withholding tax obligations that may arise in connection
with the disposition of Shares acquired by exercising an Option.
(e) EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. The Stock Option Agreement shall also specify the term of the
Option; provided that the term of an ISO shall in no event exceed ten (10) years
from the date of grant (five (5) years for Employees described in Section 4(d)).
A Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability, or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. Options may be awarded in combination
with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. Subject to the foregoing in
this Section 8(e), the Committee at its sole discretion shall determine when all
or any installment of an Option is to become exercisable and when an Option is
to expire.
(f) NONTRANSFERABILITY . During an Optionee's lifetime, his
Option(s) shall be exercisable only by him and shall not be transferable. In the
event of an Optionee's death, his Option(s) shall not be transferable other than
by will or by the laws of descent and distribution.
(g) EXERCISE OF OPTIONS UPON TERMINATION OF SERVICE. Each Stock
Option Agreement shall set forth the extent to which the Optionee shall have the
right to exercise the Option following termination of the Optionee's Service
with the Company and its Subsidiaries, and the right to exercise the Option of
any executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.
(h) EFFECT OF CHANGE IN CONTROL. The Committee may determine, at
the time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company, subject to the
following limitations:
(i) In the case of an ISO, the acceleration of
exercisability shall not occur without the Optionee's written consent.
(ii) If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be
treated as a "pooling of interests" for financial reporting purposes,
and if such transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the Company's
- 10 -
<PAGE>
independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would
preclude the use of "pooling of interests" accounting.
(i) LEAVES OF ABSENCE. An Employee's Service shall cease when such
Employee ceases to be actively employed by, or a consultant or adviser to, the
Company (or any subsidiary) as determined in the sole discretion of the Board of
Directors. For purposes of Options, Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued service crediting, or
when continued service crediting is required by applicable law. However, for
purposes of determining whether an Option is entitled to ISO status, an
Employee's Service will be treated as terminating ninety (90) days after such
Employee went on leave, unless such Employee's right to return to active work is
guaranteed by law or by a contract. Service terminates in any event when the
approved leave ends, unless such Employee immediately returns to active work.
The Company determines which leaves count toward Service, and when Service
terminates for all purposes under the Plan.
(j) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 16.
(k) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
options or may accept the cancellation of outstanding options (to the extent not
previously exercised), whether or not granted hereunder, in return for the grant
of new Options for the same or a different number of Shares and at the same or a
different exercise price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair his rights or increase
his obligations under such Option.
(l) RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued upon
exercise of an Option shall be subject to such special forfeiture conditions,
rights of repurchase, rights of first refusal and other transfer restrictions as
the Committee may determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to any general
restrictions that may apply to all holders of Shares.
(m) BUYOUT PROVISIONS. The Committee may at any time (a) offer to
buy out for a payment in cash or cash equivalents an Option previously granted
or (b) authorize an Optionee to elect to cash out an Option previously granted,
in either case at such time and based upon such terms and conditions as the
Committee shall establish.
SECTION 9. PAYMENT FOR SHARES.
(a) GENERAL RULE. The entire Exercise Price of Shares issued under
the Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b)
through (g) below.
- 11 -
<PAGE>
(b) SURRENDER OF STOCK, To the extent that a Stock Option
Agreement so provides, payment may be made all or in part by surrendering, or
attesting to the ownership of, Shares which have already been owned by the
Optionee or his representative for more than twelve (12) months. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan. The Optionee shall not surrender, or attest to the
ownership of, Shares in payment of the Exercise Price if such action would cause
the Company to recognize compensation expense (or additional compensation
expense) with respect to the Option for financial reporting purposes.
(c) SERVICES RENDERED. At the discretion of the Committee, Shares
may be awarded under the Plan in consideration of services rendered to the
Company or a Subsidiary prior to the award. If Shares are awarded without the
payment of a Purchase Price in cash, the Committee shall make a determination
(at the time of the award) of the value of the services rendered by the Offeree
and the sufficiency of the consideration to meet the requirements of Section
6(c).
(d) CASHLESS EXERCISE. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part by delivery (on a form
prescribed by the Committee) of an irrevocable direction to a securities broker
to sell Shares and to deliver all or part of the sale proceeds to the Company in
payment of the aggregate Exercise Price.
(e) EXERCISE/PLEDGE. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part by delivery (on a form
prescribed by the Committee) of an irrevocable direction to a securities broker
or lender to pledge Shares, as security for a loan, and to deliver all or part
of the loan proceeds to the Company in payment of the aggregate Exercise Price.
(f) PROMISSORY NOTE. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part by delivering (on a form
prescribed by the Company) a full-recourse promissory note. However, the par
value of the Common Shares being purchased under the Plan, if newly issued,
shall be paid in cash or cash equivalents.
(g) OTHER FORMS OF PAYMENT. To the extent that a Stock Option
Agreement so provides, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.
SECTION 10. STOCK APPRECIATION RIGHTS.
(a) SAR AGREEMENT. Each grant of a SAR under the Plan shall be
evidenced by a SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.
(b) NUMBER OF SHARES. Each SAR Agreement shall specify the number
of Common Shares to which the SAR pertains and shall provide for the adjustment
of such number in accordance with Section 12. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than seven-hundred fifty
thousand (750,000) Common Shares, except that
- 12 -
<PAGE>
SARs granted to a new Employee in the fiscal year of the Company in which his or
her service as an Employee first commences shall not pertain to more than one
million five-hundred thousand (1,500,000) Common Shares. The limitations set
forth in the preceding sentence shall be subject to adjustment in accordance
with Section 12.
(c) EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. A SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.
(d) EXERCISABILITY AND TERM. Each SAR Agreement shall specify the
date when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. A SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
(e) EFFECT OF CHANGE IN CONTROL. The Committee may determine, at
the time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company, subject to the
following sentence. If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be treated
as a "pooling of interests" for financial reporting purposes, and if such
transaction in fact is so treated, then the acceleration of exercisability
shall not occur to the extent that the Company's independent accountants and
such other party's independent accountants separately determine in good faith
that such acceleration would preclude the use of "pooling of interests"
accounting.
(f) EXERCISE OF SARs. Upon exercise of a SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when a SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
(g) MODIFICATION OR ASSUMPTION OF SARs. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding SARs or may
accept the cancellation of outstanding SARs (whether granted by the Company or
by another issuer) in return for the grant of new SARs for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of a SAR shall, without the consent
of the Optionee, may alter or impair his or her rights or obligations under such
SAR.
- 13 -
<PAGE>
SECTION 11. STOCK UNITS.
(a) STOCK UNIT AGREEMENT. Each grant of Stock Units under the Plan
shall be evidenced by a Stock Unit Agreement between the recipient and the
Company. Such Stock Units shall be subject to all applicable terms of the Plan
and may be subject to any other terms that are not inconsistent with the Plan.
The provisions of the various Stock Unit Agreements entered into under the Plan
need not be identical. Stock Units may be granted in consideration of a
reduction in the recipient's other compensation.
(b) PAYMENT FOR AWARDS. To the extent that an Award is granted in
the form of Stock Units, no cash consideration shall be required of the Award
recipients.
(c) VESTING CONDITIONS. Each Award of Stock Units may or may not
be subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company, except as provided in the next following
sentence. If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of vesting shall not occur to the extent that
the Company's independent accountants and such other party's independent
accountants separately determine in good faith that such acceleration would
preclude the use of "pooling of interests" accounting.
(d) VOTING AND DIVIDEND RIGHTS, The holders of Stock Units shall
have no voting rights. Prior to settlement or forfeiture, any Stock Unit awarded
under the Plan may, at the Committee's discretion, carry with it a right to
dividend equivalents. Such right entitles the holder to be credited with an
amount equal to all cash dividends paid on one Common Share while the Stock Unit
is outstanding. Dividend equivalents may be converted into additional Stock
Units. Settlement of dividend equivalents may be made in the form of cash, in
the form of Common Shares, or in a combination of both. Prior to distribution,
any dividend equivalents which are not paid shall be subject to the same
conditions and restrictions as the Stock Units to which they attach.
(e) FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of
vested Stock Units may be made in the form of (a) cash, (b) Common Shares or (c)
any combination of both, as determined by the Committee. The actual number of
Stock Units eligible for settlement may be larger or smaller than the number
included in the original Award, based on predetermined performance factors.
Methods of converting Stock Units into cash may include (without limitation) a
method based on the average Fair Market Value of Common Shares over a series of
trading days. Vested Stock Units may be settled in a lump sum or in
installments. The distribution may occur or commence when all vesting
conditions applicable to the Stock Units have been satisfied or have lapsed, or
it may be deferred to any later date. The amount of a deferred distribution may
be increased by an interest factor or by dividend equivalents. Until an Award of
Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Section 12.
- 14 -
<PAGE>
(f) DEATH OF RECIPIENT. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
(g) CREDITORS' RIGHTS, A holder of Stock Units shall have no
rights other than those of a general creditor of the Company. Stock Units
represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Stock Unit Agreement.
SECTION 12. PROTECTION AGAINST DILUTION.
(a) ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of:
(i) The number of Options, SARs, Restricted Shares and
Stock Units available for future Awards under Section 5;
(ii) The limitations set forth in Sections 8(b) and 10(b);
(iii) The number of NSOs to be granted to Outside Directors
under Section 4(b);
(iv) The number of Common Shares covered by each
outstanding Option and SAR;
(v) The Exercise Price under each outstanding Option and
SAR; or
(vi) The number of Stock Units included in any prior Award
which has not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
(b) DISSOLUTION OR LIQUIDATION. To the extent not previously
exercised or settled, Options, SARs and Stock Units shall terminate immediately
prior to the dissolution or liquidation of the Company.
- 15 -
<PAGE>
(c) REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for:
(i) The continuation of the outstanding Awards by the
Company, if the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its
parent or subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated
expiration of the outstanding Awards; or
(v) Settlement of the full value of the outstanding
Awards in cash or cash equivalents followed by cancellation of such
Awards.
SECTION 13. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to:
a) Have cash that otherwise would be paid to such Participant as
a result of the exercise of a SAR or the settlement of Stock
Units credited to a deferred compensation account established
for such Participant by the Committee as an entry on the
Company's books;
b) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR
converted into an equal number of Stock Units; or
c) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or
the settlement of Stock Units converted into amounts credited
to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's
books. Such amounts shall be determined by reference to the
Fair Market Value of such Common Shares as of the date when
they otherwise would have been delivered to such Participant.
A deferred compensation account established under this Section 13 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms
- 16 -
<PAGE>
pertaining to such Awards, including (without limitation) the settlement of
deferred of deferred compensation accounts established under this Section 13.
SECTION 14. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Section 5.
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
(a) EFFECTIVE DATE. No provision of this Section 15 shall be
effective unless and until the Board has determined to implement such provision.
(b) ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS.
An Outside Director may elect to receive his or her annual retainer payments
and/or meeting fees from the Company in the form of cash, NSOs, Restricted
Shares or Stock Units, or a combination thereof, as determined by the Board.
Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An
election under this Section 15 shall be filed with the Company on the prescribed
form.
(c) NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS.
The number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
SECTION 16. ADJUSTMENT OF SHARES.
(a) GENERAL. IN THE event of a subdivision of the outstanding
Stock, a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that has a material
effect on the value of Shares, a combination or consolidation of the
outstanding Stock (by reclassification or otherwise) into a lesser number of
Shares, a recapitalization or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of (i) the number of Shares available
for future grants under Section 5, (ii) the number of Shares available for
grants under Section 4(c), (iii) the number of Shares covered by each
outstanding Option, (iv) the Exercise Price under each outstanding Option,
(v) the number of shares covered by each outstanding award or (vi) the
Purchase Price of each outstanding award.
(b) REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement may provide for the
assumption of outstanding Options by the surviving corporation or its parent or
for their continuation by the Company (if the Company is a surviving
corporation); provided, however, that if assumption or continuation of the
outstanding Options is not provided by such agreement then the Committee shall
have the option of offering
- 17 -
<PAGE>
the payment of a cash settlement equal to the difference between the amount to
be paid for one Share under such agreement and the Exercise Price, in all cases
without the Optionees' consent,
(c) RESERVATION OF RIGHTS. Except as provided in this Section 16,
an Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.
SECTION 18. WITHHOLDING TAXES.
(a) GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
(b) SHARE WITHHOLDING The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Common Shares that
otherwise would be issued to him or her or by surrendering all or a portion of
any Common Shares that he or she previously acquired. Such Common Shares shall
be valued at their Fair Market Value on the date when taxes otherwise would be
withheld in cash.
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.
(a) SCOPE OF LIMITATION. This Section 19 shall apply to an Award
unless the Committee, at the time of making an Award under the Plan or at any
time thereafter, specifies in writing that such Award shall not be subject to
this Section 19. If this Section 19 applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan.
(b) BASIC RULE. In the event that the independent auditors most
recently selected by the Board (the "Auditors") determine that any payment or
transfer by the Company under the Plan to
- 18 -
<PAGE>
or for the benefit of a Participant (a "Payment") would be nondeductible by the
Company for federal income tax purposes because of the provisions concerning
"excess parachute payments" in Section 28OG of the Code, then the aggregate
present value of all Payments shall be reduced (but not below zero) to the
Reduced Amount. For purposes of this Section 19, the "Reduced Amount" shall be
the amount, expressed as a present value, which maximizes the aggregate present
value of the Payments without causing any Payment to be nondeductible by the
Company because of Section 280G of the Code.
(c) REDUCTION OF PAYMENTS. If the Auditors determine that any
Payment would be nondeductible by the Company because of Section 280G of the
Code, then the Company shall promptly give the Participant notice to that effect
and a copy of the detailed calculation thereof and of the Reduced Amount, and
the Participant may then elect, in his or her sole discretion, which and how
much of the Payments shall be eliminated or reduced (as long as after such
election the aggregate present value of the Payments equals the Reduced Amount)
and shall advise the Company in writing of his or her election within 10 days of
receipt of notice. If no such election is made by the Participant within such
10-day period, then the Company may elect which and how much of the Payments
shall be eliminated or reduced (as long as after such election the aggregate
present value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Section 19, present
value shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Section 19 shall be binding upon
the Company and the Participant and shall be made within sixty (60) days of the
date when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
(d) OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in
the application of Section 28OG of the Code at the time of an initial
determination by the Auditors hereunder, it is possible that Payments will have
been made by the Company that should not have been made (an "Overpayment") or
that additional Payments that will not have been made by the Company could have
been made (an "Underpayment"), consistent in each case with the calculation of
the Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount subject to taxation under Section 4999 of the Code.
In the event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable federal
rate provided in Section 7872(f)(2) of the Code.
- 19 -
<PAGE>
(e) RELATED CORPORATIONS. For purposes of this Section 19, the
term "Company" shall include affiliated corporations to the extent determined by
the Auditors in accordance with Section 280G(d)(5) of the Code.
SECTION 20. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason, with or
without notice.
SECTION 21. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The amended and restated Plan, as set
forth herein, shall terminate automatically on April 9, 2010 and may be
terminated on any earlier date pursuant to Subsection (b) below.
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors
may amend the Plan at any time and from time to time. Rights and obligations
under any Option granted before amendment of the Plan shall not be materially
impaired by such amendment, except with consent of the person to whom the Option
was granted. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued
or sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 22. EXECUTION.
To record the adoption of the amended and restated Plan by the Board of
Directors effective as of April 9, 2000, the Company has caused its authorized
officer to execute the same.
DELTAGEN, INC.
By /s/ William Matthews, Ph.D.
-------------------------------
President and Chief
Executive Officer
- 20 -
<PAGE>
EXHIBIT 10.2.2
DELTAGEN, INC. 2000 STOCK INCENTIVE PLAN:
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK This Option is intended to be an incentive stock option
OPTION under section 422 of the Internal Revenue Code to the
extent permitted under applicable law.
VESTING Your Option vests over a four-year period as follows: No
part of your Option will vest until you have performed
twelve months of Service from the Vesting Start Date.
Twenty Five percent (25%) of your Option vests when you
complete twelve months of Service from the Vesting Start
Date as shown on the cover sheet; the balance of your
Option will vest with respect to an additional 1/48 of the
Shares subject to the Option for each full month of Service
thereafter (rounded to the nearest whole share). After
your Service has terminated for any reason, vesting of your
Option immediately stops.
TERM Your Option will expire in any event at the close of
business at Deltagen headquarters on the day before the
10th anniversary of the Date of Grant shown on the cover
sheet (fifth anniversary for a 10% owner). It will expire
earlier if your Deltagen service terminates, as described
below.
REGULAR If your service as an employee of Deltagen (or any
TERMINATION subsidiary) terminates for any reason except death or total
and permanent disability, then your option will expire at
the close of business at Deltagen headquarters on the 90th
day after your termination date.
Deltagen determines when your service terminates for this
purpose.
If you die as an employee of Deltagen or one of its
DEATH subsidiaries, then your Option will expire at the close of
business at Deltagen headquarters on the date six months
after the date of death. During that six-month period,
your estate or heirs may exercise your Option.
<PAGE>
DISABILITY If your service as an employee of Deltagen (or any
subsidiary) terminates because of your total and permanent
disability, then your Option will expire at the close of
business at Deltagen headquarters on the date six months
after your termination date.
LEAVES OF For purposes of this Option, your service does not
ABSENCE terminate when you go on a military leave, a sick leave or
another BONA FIDE leave of absence that was approved by
Deltagen in writing. Your service terminates when the
approved leave ends, unless you immediately return to
active work.
Deltagen determines which leaves count for this purpose.
RESTRICTIONS ON Deltagen will not permit you to exercise this option if the
EXERCISE issuance of shares at that time would violate any law.
NOTICE OF When you wish to exercise this option, you must submit the
EXERCISE form provided by Deltagen at the following address:
Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
Attn: Stock Administration
Facsimiles are not acceptable. Your notice must specify
how many shares you wish to purchase and how your shares
should be registered (in your name only or in your and your
spouse's names as community property or as joint tenants
with right of survivorship). The notice will be effective
when it is received by Deltagen.
If someone else wants to exercise this Option after your
death, that person must prove to Deltagen's satisfaction
that he or she is entitled to do so.
-2-
<PAGE>
FORM OF PAYMENT When you submit your notice of exercise, you must include
payment of the option price for the shares you are
purchasing. Payment may be made in one (or a combination
of two or more) of the following forms:
- Your personal check, a cashier's check or a money
order.
- Irrevocable directions to a securities broker approved
by Deltagen to sell your option shares and to deliver
all or a portion of the sale proceeds to Deltagen in
payment of the option price. The directions must be
given by signing the form provided by Deltagen. The
balance of the sale proceeds, if any, will be
delivered to you.
- Certificates for Deltagen stock that you have owned
for at least six months, along with any forms needed
to effect a transfer of the shares to Deltagen. The
value of the shares, determined as of the effective
date of the option exercise, will be applied to the
option price.
WITHHOLDING You will not be allowed to exercise this Option unless you
TAXES make acceptable arrangements to pay any withholding taxes
that may be due as a result of the option exercise.
RESTRICTIONS ON By signing this Agreement, you agree not to sell any option
RESALE shares at a time when applicable laws or Deltagen policies
prohibit a sale. This restriction will apply as long as
you are an employee of Deltagen or a subsidiary.
TRANSFER OF Prior to your death, only you may exercise this Option.
OPTION You cannot transfer or assign this option. For instance,
you may not sell this Option or use it as security for a
loan. If you attempt to do any of these things, this
Option will immediately become invalid. You may, however,
dispose of this Option in your will.
Regardless of any marital property settlement agreement,
Deltagen is not obligated to honor a notice of exercise
from your former spouse, nor is Deltagen obligated to
recognize your former spouse's interest in your Option in
any other way.
RETENTION RIGHTS Your Option or this Agreement do not give you the right to
be retained by Deltagen or its subsidiaries in any
capacity. Deltagen and its subsidiaries reserve the right
to terminate your service at any time, with or without
cause.
-3-
<PAGE>
STOCKHOLDER You, or your estate or heirs, have no rights as a
RIGHTS stockholder of Deltagen until a certificate for your option
shares has been issued. No adjustments are made for
dividends or other rights if the applicable record date
occurs before your stock certificate is issued, except as
described in the Plan.
ADJUSTMENTS In the event of a stock split, stock dividend or a similar
change in Deltagen stock, the number of shares covered by
this Option and the exercise price per share may be
adjusted pursuant to the Plan.
APPLICABLE LAW This Agreement will be interpreted and enforced under the
laws of the State of California.
THE PLAN AND The text of the Deltagen, Inc. 2000 Stock Incentive Plan is
OTHER AGREEMENTS incorporated in this Agreement by reference. This
Agreement and the Plan constitute the entire understanding
between you and Deltagen regarding this Option. Any prior
agreements, commitments or negotiations concerning this
option are superseded.
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL
OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
-4-
<PAGE>
EXHIBIT 10.2.3
DELTAGEN, INC. 2000 STOCK INCENTIVE PLAN:
NONSTATUTORY STOCK OPTION AGREEMENT
NONSTATUTORY This option is not intended to be an incentive stock option
STOCK OPTION under section 422 of the Internal Revenue Code.
VESTING Your Option vests over a four-year period as follows: No
part of your Option will vest until you have performed
twelve months of Service from the Vesting Start Date.
Twenty Five percent (25%) of your Option vests when you
complete twelve months of Service from the Vesting Start
Date as shown on the cover sheet; the balance of your
Option will vest with respect to an additional 1/48 of the
Shares subject to the Option for each full month of Service
thereafter (rounded to the nearest whole share). After
your Service has terminated for any reason, vesting of your
Option immediately stops.
TERM Your Option will expire in any event at the close of
business at Deltagen headquarters on the day before the
10th anniversary of the Date of Grant shown on the cover
sheet (fifth anniversary for a 10% owner). It will expire
earlier if your Deltagen service terminates, as described
below.
REGULAR If your service as an employee, consultant or advisor of
TERMINATION Deltagen (or any subsidiary) terminates for any reason
except death or total and permanent disability, then your
Option will expire at the close of business at Deltagen
headquarters on the 90th day after your termination date.
Deltagen determines when your service terminates for this
purpose.
<PAGE>
DEATH If you die as an employee, consultant or advisor of
Deltagen or one of its subsidiaries, then your Option will
expire at the close of business at Deltagen headquarters on
the date six months after the date of death. During that
six-month period, your estate or heirs may exercise your
option.
DISABILITY If your service as an employee, consultant or advisor of
Deltagen (or any subsidiary) terminates because of your
total and permanent disability, then your Option will
expire at the close of business at Deltagen headquarters on
the date six months after your termination date.
LEAVES OF For purposes of this Option, your service does not
ABSENCE terminate when you go on a military leave, a sick leave or
another BONA FIDE leave of absence that was approved by
Deltagen in writing. Your service terminates when the
approved leave ends, unless you immediately return to
active work.
Deltagen determines which leaves count for this purpose.
RESTRICTIONS ON Deltagen will not permit you to exercise this Option if the
EXERCISE issuance of shares at that time would violate any law.
NOTICE OF When you wish to exercise this Option, you must submit the
EXERCISE form provided by Deltagen at the following address:
Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
Attn: Stock Administration
-2-
<PAGE>
Facsimiles are not acceptable. Your notice must specify
how many shares you wish to purchase and how your shares
should be registered (in your name only or in your and your
spouse's names as community property or as joint tenants
with right of survivorship). The notice will be effective
when it is received by Deltagen.
If someone else wants to exercise this Option after your
death, that person must prove to Deltagen's satisfaction
that he or she is entitled to do so.
FORM OF PAYMENT When you submit your notice of exercise, you must include
payment of the option price for the shares you are
purchasing. Payment may be made in one (or a combination
of two or more) of the following forms:
- Your personal check, a cashier's check or a money
order.
- Irrevocable directions to a securities broker approved
by Deltagen to sell your option shares and to deliver
all or a portion of the sale proceeds to Deltagen in
payment of the option price. The directions must be
given by signing the form provided by Deltagen. The
balance of the sale proceeds, if any, will be
delivered to you.
- Certificates for Deltagen stock that you have owned
for at least six months, along with any forms needed
to effect a transfer of the shares to Deltagen. The
value of the shares, determined as of the effective
date of the option exercise, will be applied to the
option price.
WITHHOLDING You will not be allowed to exercise this Option unless you
TAXES make acceptable arrangements to pay any withholding taxes
that may be due as a result of the option exercise.
RESTRICTIONS ON By signing this Agreement, you agree not to sell any option
RESALE shares at a time when applicable laws or Deltagen policies
prohibit a sale. This restriction will apply as long as
you are an employee of Deltagen or a subsidiary.
-3-
<PAGE>
TRANSFER OF Prior to your death, only you may exercise this Option.
OPTION You cannot transfer or assign this option. For instance,
you may not sell this option or use it as security for a
loan. If you attempt to do any of these things, this
option will immediately become invalid. You may, however,
dispose of this Option in your will.
Regardless of any marital property settlement agreement,
Deltagen is not obligated to honor a notice of exercise
from your former spouse, nor is Deltagen obligated to
recognize your former spouse's interest in your Option in
any other way.
RETENTION RIGHTS Your Option or this Agreement do not give you the right to
be retained by Deltagen or its subsidiaries in any
capacity. Deltagen and its subsidiaries reserve the right
to terminate your service at any time, with or without
cause.
STOCKHOLDER You, or your estate or heirs, have no rights as a
RIGHTS stockholder of Deltagen until a certificate for your option
shares has been issued. No adjustments are made for
dividends or other rights if the applicable record date
occurs before your stock certificate is issued, except as
described in the Plan.
ADJUSTMENTS In the event of a stock split, stock dividend or a similar
change in Deltagen stock, the number of shares covered by
this Option and the exercise price per share may be
adjusted pursuant to the Plan.
APPLICABLE LAW This Agreement will be interpreted and enforced under the
laws of the State of California.
THE PLAN AND The text of the Deltagen, Inc. 2000 Stock Incentive Plan is
OTHER AGREEMENTS incorporated in this Agreement by reference. This
Agreement and the Plan constitute the entire understanding
between you and Deltagen regarding this Option. Any prior
agreements, commitments or negotiations concerning this
option are superseded.
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL
OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
-4-
<PAGE>
EXHIBIT 10.3
DELTAGEN, INC
2000 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board on April 9, 2000)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 Purpose Of The Plan..................................................1
SECTION 2 Definitions..........................................................1
(a) "Accumulation Period"................................................1
(b) "Board"..............................................................1
(c) "Code"...............................................................1
(d) "Committee"..........................................................1
(e) "Company"............................................................1
(f) "Compensation".......................................................1
(g) "Corporate Reorganization"...........................................2
(h) "Eligible Employee"..................................................2
(i) "Exchange Act".......................................................2
(j) "Fair Market Value"..................................................2
(k) "IPO"................................................................2
(l) "Offering Period"....................................................3
(m) "Participant"........................................................3
(n) "Participating Company"..............................................3
(o) "Plan"...............................................................3
(p) "Plan Account".......................................................3
(q) "Purchase Price".....................................................3
(r) "Stock"..............................................................3
(s) "Subsidiary".........................................................3
SECTION 3 Administration Of The Plan...........................................3
(a) Committee Composition................................................3
(b) Committee Responsibilities...........................................4
SECTION 4 Enrollment And Participation.........................................4
(a) Offering Periods.....................................................4
(b) Accumulation Periods.................................................4
(c) Enrollment...........................................................4
(d) Duration of Participation............................................4
(e) Applicable Offering Period...........................................4
SECTION 5 Employee Contributions...............................................5
(a) Frequency of Payroll Deductions......................................5
(b) Amount of Payroll Deductions.........................................5
(c) Changing Withholding Rate............................................5
(d) Discontinuing Payroll Deductions.....................................5
(e) Limit on Number of Elections.........................................6
SECTION 6 Withdrawal From The Plan.............................................6
(a) Withdrawal...........................................................6
(b) Re-enrollment After Withdrawal.......................................6
SECTION 7 Change In Employment Status..........................................6
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
(a) Termination of Employment............................................6
(b) Leave of Absence.....................................................6
(c) Death................................................................6
SECTION 8 Plan Accounts And Purchase Of Shares.................................7
(a) Plan Accounts........................................................7
(b) Purchase Price.......................................................7
(c) Number of Shares Purchased...........................................7
(d) Available Shares Insufficient........................................7
(e) Issuance of Stock....................................................7
(f) Unused Cash Balances.................................................8
(g) Stockholder Approval.................................................8
SECTION 9 Limitations On Stock Ownership.......................................8
(a) Five Percent Limit...................................................8
(b) Dollar Limit.........................................................8
SECTION 10 Rights Not Transferable.............................................9
SECTION 11 No Rights As An Employee............................................9
SECTION 12 No Rights As A Stockholder..........................................9
SECTION 13 Securities Law Requirements.........................................9
SECTION 14 Stock Offered Under The Plan........................................9
(a) Authorized Shares....................................................9
(b) Antidilution Adjustments............................................10
(c) Reorganizations.....................................................10
SECTION 15 Amendment Or Discontinuance........................................10
SECTION 16 Execution..........................................................11
</TABLE>
-ii-
<PAGE>
DELTAGEN, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1 PURPOSE OF THE PLAN.
The Plan was adopted by the Board on April 9, 2000, effective as of
the date of the IPO. The purpose of the Plan is to provide Eligible Employees
with an opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify under
section 423 of the Code.
SECTION 2 DEFINITIONS.
(a) "ACCUMULATION PERIOD" means a six-month period during which
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).
(b) "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of the Board, as described in
Section 3.
(e) "COMPANY" means Deltagen, Inc., a Delaware Corporation.
(f) "COMPENSATION" means (i) the total compensation paid in cash
to a Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or 125 of
the Code. "Compensation" shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee shall determine whether a particular item is included in
Compensation.
(g) "CORPORATE REORGANIZATION" means:
(i) The consummation of a merger or consolidation of the
Company with or into another entity, or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets or the complete liquidation or
dissolution of the Company.
-1-
<PAGE>
(h) "ELIGIBLE EMPLOYEE" means any employee of a Participating
Company whose customary employment is for more than five months per calendar
year and for more than 20 hours per week.
The foregoing notwithstanding, an individual shall not be considered an
Eligible Employee if his or her participation in the Plan is prohibited by the
law of any country which has jurisdiction over him or her or if he or she is
subject to a collective bargaining agreement that does not provide for
participation in the Plan.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(j) "FAIR MARKET VALUE" means the market price of Stock,
determined by the Committee as follows:
(i) If Stock was traded on The Nasdaq National Market on
the date in question, then the Fair Market Value shall be equal to the
last-transaction price quoted for such date by The Nasdaq National
Market;
(ii) If Stock was traded on a stock exchange on the date
in question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite transactions report for such
date; or
(iii) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the WALL STREET JOURNAL or as
reported directly to the Company by Nasdaq or a stock exchange. Such
determination shall be conclusive and binding on all persons.
(k) "IPO" means the initial offering of Stock to the public
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission.
(l) "OFFERING PERIOD" means a 12- or 24-month period with
respect to which the right to purchase Stock may be granted under the Plan,
as determined pursuant to Section 4(a).
(m) "PARTICIPANT" means an Eligible Employee who elects to
participate in the Plan, as provided in Section 4(c).
(n) "PARTICIPATING COMPANY" means (i) the Company and (ii) each
present or future Subsidiary designated by the Committee as a Participating
Company.
(o) "PLAN" means this Deltagen, Inc. 2000 Employee Stock Purchase
Plan, as it may be amended from time to time.
(p) "PLAN ACCOUNT" means the account established for each
Participant pursuant to Section 8(a).
-2-
<PAGE>
(q) "PURCHASE PRICE" means the price at which Participants may
purchase Stock under the Plan, as determined pursuant to Section 8(b).
(r) "STOCK" means the Common Stock of the Company.
(s) "SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
SECTION 3 ADMINISTRATION OF THE PLAN.
(a) COMMITTEE COMPOSITION. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.
(b) COMMITTEE RESPONSIBILITIES. The Committee shall interpret the
Plan and make all other policy decisions relating to the operation of the Plan.
The Committee may adopt such rules, guidelines and forms as it deems appropriate
to implement the Plan. The Committee's determinations under the Plan shall be
final and binding on all persons.
SECTION 4 ENROLLMENT AND PARTICIPATION.
(a) OFFERING PERIODS. While the Plan is in effect, two Offering
Periods shall commence in each calendar year. The Offering Periods shall consist
of the 24-month periods commencing on each January 1 and July 1, except that the
first Offering Period shall consist of a 12-month period commencing on the
date of the IPO and ending on June 30, 2001.
(b) ACCUMULATION PERIODS. While the Plan is in effect, two
Accumulation Periods shall commence in each calendar year. The Accumulation
Periods shall consist of the six month periods commencing on January 1 and July
1, except that the first Accumulation Period shall commence on the date of the
IPO and end on December 31, 2000.
(c) ENROLLMENT. Any individual who, on the day preceding the first
day of an Offering Period, qualifies as an Eligible Employee may elect to become
a Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Company at the prescribed location not later than 15 days prior
to the commencement of such Offering Period.
(d) DURATION OF PARTICIPATION. Once enrolled in the Plan, a
Participant shall continue to participate in the Plan until he or she ceases to
be an Eligible Employee, withdraws from the Plan under Section 5(a) or reaches
the end of the Offering Period in which his or her employee contributions were
discontinued under Section 5(d) or 9(b). A Participant who discontinued employee
contributions under Section 5(d) or 9(b) or withdrew from the Plan under Section
6(a) may again become a Participant, if he or she then is an Eligible Employee,
by following the procedure described in Subsection (c) above. A Participant
whose employee contributions were discontinued automatically under Section 9(b)
shall automatically resume participation at the
-3-
<PAGE>
beginning of the earliest Offering Period ending in the next calendar year, if
he or she then is an Eligible Employee.
(e) APPLICABLE OFFERING PERIOD. For purposes of calculating the
purchase price under Section 8(b), the applicable Offering Period shall be
determined as follows:
(i) Once a Participant is enrolled in the Plan for an
Offering Period, such Offering Period shall continue to apply to him or
her until the earliest of: (A) the end of such Offering Period; (B) the
end of his or her participation under Subsection (d) above; or (C)
re-enrollment in a subsequent Offering Period under Paragraph (ii)
below.
(ii) In the event that the Fair Market Value of Stock on
the last trading day before the commencement of the Offering Period in
which the Participant is enrolled is higher than on the last trading
day before the commencement of any subsequent Offering Period, the
Participant shall automatically be re-enrolled for such subsequent
Offering Period.
(iii) When a Participant reaches the end of an Offering
Period but his or her participation is to continue, then such
Participant shall automatically be re-enrolled for the Offering Period
that commences immediately after the end of the prior Offering Period.
SECTION 5 EMPLOYEE CONTRIBUTIONS.
(a) FREQUENCY OF PAYROLL DEDUCTIONS. A Participant may purchase
shares of Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b) below,
shall occur on each payday during participation in the Plan.
(b) AMOUNT OF PAYROLL DEDUCTIONS. An Eligible Employee shall
designate on the enrollment form the portion of his or her Compensation that he
or she elects to have withheld for the purchase of Stock. Such portion shall be
a whole percentage of the Eligible Employee's Compensation, but not less than
1% nor more than 15%.
(c) CHANGING WITHHOLDING RATE. If a Participant wishes to change
the rate of payroll withholding, he or she may do so by filing a new enrollment
form with the Company at the prescribed location at any time. The new
withholding rate shall be effective as soon as reasonably practicable after such
form has been received by the Company. The new withholding rate shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 15%.
(d) DISCONTINUING PAYROLL DEDUCTIONS. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time. Payroll
withholding shall cease as soon as reasonably practicable after such form has
been received by the Company. In addition, employee contributions may be
discontinued automatically pursuant to Section 9(b). A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding
-4-
<PAGE>
shall resume as soon as reasonably practicable after such form has been received
by the Company.
(e) LIMIT ON NUMBER OF ELECTIONS. No Participant shall make
more than four elections under Subsection (c) or (d) above during any
Calendar Year.
SECTION 6 WITHDRAWAL FROM THE PLAN.
(a) WITHDRAWAL. A Participant may elect to withdraw from the Plan
by filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Accumulation Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.
(b) RE-ENROLLMENT AFTER WITHDRAWAL. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls in
the Plan under Section 4(c). Re-enrollment may be effective only at the
commencement of an Offering Period.
SECTION 7 CHANGE IN EMPLOYMENT STATUS.
(a) TERMINATION OF EMPLOYMENT. Termination of employment as an
Eligible Employee for any reason, including death, shall be treated as an
automatic withdrawal from the Plan under Section 6(a). Notwithstanding the
foregoing in this Section 7, a transfer from one Participating Company to
another shall not be treated as a termination of employment.
(b) LEAVE OF ABSENCE. For purposes of the Plan, employment shall
not be deemed to terminate when the Participant goes on a military leave, a
sick leave or another bona fide leave of absence, if the leave was approved
by the Company in writing. Employment, however, shall be deemed to terminate
90 days after the Participant goes on a leave, unless a contract or statute
guarantees his or her right to return to work. Employment shall be deemed to
terminate in any event when the approved leave ends, unless the Participant
immediately returns to work.
(c) DEATH. In the event of the Participant's death, the amount
credited to his or her Plan Account shall be paid to a beneficiary designated
by him or her for this purpose on the prescribed form or, if none, to the
Participant's estate. Such form shall be valid only if it was filed with the
Company at the prescribed location before the Participant's death.
SECTION 8 PLAN ACCOUNTS AND PURCHASE OF SHARES.
(a) PLAN ACCOUNTS. The Company shall maintain a Plan Account on
its books in the name of each Participant. Whenever an amount is deducted
from the Participant's Compensation under the Plan, such amount shall be
credited to the Participant's Plan Account. Amounts credited to Plan Accounts
shall not be trust funds and may be commingled with the Company's general
assets and applied to general corporate purposes. No interest shall be
credited to Plan Accounts.
(b) PURCHASE PRICE. The Purchase Price for each share of Stock
purchased at the close of an Accumulation Period shall be the lower of:
-5-
<PAGE>
(i) 85% of the Fair Market Value of such share on the
last trading day in such Accumulation Period; or
(ii) 85% of the Fair Market Value of such share on the
last trading day before the commencement of the applicable Offering
Period (as determined under Section 4(e)) or, in the case of the first
Offering Period under the Plan, 85% of the price at which one share of
Stock is offered to the public in the IPO.
(c) NUMBER OF SHARES PURCHASED. As of the last day of each
Accumulation Period, each Participant shall be deemed to have elected to
purchase the number of shares of Stock calculated in accordance with this
Subsection (c), unless the Participant has previously elected to withdraw from
the Plan in accordance with Section 6(a). The amount then in the Participant's
Plan Account shall be divided by the Purchase Price, and the number of shares
that results shall be purchased from the Company with the funds in the
Participant's Plan Account. The foregoing notwithstanding, no Participant shall
purchase more than 1,200 shares of Stock with respect to any Accumulation Period
nor more than the amounts of Stock set forth in Sections 9(b) and 14(a). The
Committee may determine with respect to all Participants that any fractional
share, as calculated under this Subsection (c), shall be (i) rounded down to the
next lower whole share or (ii) credited as a fractional share.
(d) AVAILABLE SHARES INSUFFICIENT. In the event that the aggregate
number of shares that all Participants elect to purchase during an Accumulation
Period exceeds the maximum number of shares remaining available for issuance
under Section 14(a), then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
(e) ISSUANCE OF STOCK. Certificates representing the shares of
Stock purchased by a Participant under the Plan shall be issued to him or her as
soon as reasonably practicable after the close of the applicable Accumulation
Period, except that the Committee may determine that such shares shall be held
for each Participant's benefit by a broker designated by the Committee (unless
the Participant has elected that certificates be issued to him or her). Shares
may be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.
(f) UNUSED CASH BALANCES. An amount remaining in the Participant's
Plan Account that represents the Purchase Price for any fractional share shall
be carried over in the Participant's Plan Account to the next Accumulation
Period. Any amount remaining in the Participant's Plan Account that represents
the Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 9(b) or Section 14(a) shall be refunded to the
Participant in cash, without interest.
(g) STOCKHOLDER APPROVAL. Any other provision of the Plan
notwithstanding, no shares of Stock shall be purchased under the Plan unless and
until the Company's stockholders have approved the adoption of the Plan.
-6-
<PAGE>
SECTION 9 LIMITATIONS ON STOCK OWNERSHIP.
(a) FIVE PERCENT LIMIT. Any other provision of the Plan
notwithstanding, no Participant shall be granted a right to purchase Stock under
the Plan if such Participant, immediately after his or her election to purchase
such Stock, would own stock possessing more than 5% of the total combined voting
power or value of all classes of stock of the Company or any parent or
Subsidiary of the Company. For purposes of this Subsection (a), the following
rules shall apply:
(i) Ownership of stock shall be determined after applying
the attribution rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock
that he or she has a right or option to purchase under this or any
other plan; and
(iii) Each Participant shall be deemed to have the right to
purchase 1,200 shares of Stock under this Plan with respect to each
Accumulation Period.
(b) DOLLAR LIMIT. Any other provision of the Plan notwithstanding,
no Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:
Any other provision of the Plan notwithstanding, no Participant shall
purchase Stock with a Fair Market Value in excess of $25,000 per calendar year
(under this Plan and all other employee stock purchase plans of the Company or
any parent or Subsidiary of the Company).
For purposes of this Subsection (b), the Fair Market Value of Stock
shall be determined in each case as of the beginning of the Offering Period in
which such Stock is purchased. Employee stock purchase plans not described in
section 423 of the Code shall be disregarded. If a Participant is precluded by
this Subsection (b) from purchasing additional Stock under the Plan, then his or
her employee contributions shall automatically be discontinued and shall resume
at the beginning of the earliest Accumulation Period ending in the next calendar
year (if he or she then is an Eligible Employee).
SECTION 10 RIGHTS NOT TRANSFERABLE.
The rights of any Participant under the Plan, or any Participant's
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary designation
or the laws of descent and distribution. If a Participant in any manner attempts
to transfer, assign or otherwise encumber his or her rights or interest under
the Plan, other than by beneficiary designation or the laws of descent and
distribution, then such act shall be treated as an election by the Participant
to withdraw from the Plan under Section 6(a).
SECTION 11 NO RIGHTS AS AN EMPLOYEE
Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating
-7-
<PAGE>
Companies or of the Participant, which rights are hereby expressly reserved by
each, to terminate his or her employment at any time and for any reason, with or
without cause.
SECTION 12 NO RIGHTS AS A STOCKHOLDER.
A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.
SECTION 13 SECURITIES LAW REQUIREMENTS.
Shares of Stock shall not be issued under the Plan unless the issuance
and delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.
SECTION 14 STOCK OFFERED UNDER THE PLAN.
(a) AUTHORIZED SHARES. The maximum aggregate number of shares
of Stock available for purchase under the Plan is one million (1,000,000),
plus an annual increase to be added on the first day of the Company's fiscal
year beginning in 2001 equal to the lesser of (i) 5% of the fully diluted
outstanding shares of Common Stock of the Company on such date or (ii) a
lesser amount determined by the Board. The aggregate number of Shares
available for purchase under the Plan shall at all times be subject to
adjustment pursuant to Section 14.
(b) ANTIDILUTION ADJUSTMENTS. The aggregate number of shares of
Stock offered under the Plan, the 1,200 share limitation described in Section
8(c) and the price of shares that any Participant has elected to purchase shall
be adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.
(c) REORGANIZATIONS. Any other provision of the Plan
notwithstanding, immediately prior to the effective time of a Corporate
Reorganization, the Offering Period then in progress shall terminate and shares
shall be purchased pursuant to Section 8, unless the Plan is assumed by the
surviving corporation or its parent corporation pursuant to the plan of merger
or consolidation. The Plan shall in no event be construed to restrict in any way
the Company's right to undertake a dissolution, liquidation, merger,
consolidation or other reorganization.
SECTION 15 AMENDMENT OR DISCONTINUANCE.
The Board shall have the right to amend, suspend or terminate the Plan
at any time and without notice. Except as provided in Section 14, any increase
in the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a
-8-
<PAGE>
vote of the stockholders of the Company to the extent required by an applicable
law or regulation.
SECTION 16 EXECUTION.
To record the adoption of the Plan by the Board on April 9, 2000, the
Company has caused its authorized officer to execute the same.
Deltagen, Inc.
By: /s/ William Matthews, Ph.D.
---------------------------------------------------
Title: President and Chief Executive Officer
------------------------------------------------
-9-
<PAGE>
EXHIBIT 10.4
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.]
THIS AGREEMENT is effective as of the 23 day of December 1998, by and
between UNIVERSITY OF EDINBURGH operating through its CENTRE FOR GENOME
RESEARCH, of King's Buildings, West Mains Road, Edinburgh EH9 3JQ, United
Kingdom (the "Licensor"), and DELTAGEN, INC., a corporation organized under the
laws of the State of Delaware and having its principal offices at 1031 Bing
Street, San Carlos, California 94070 U.S.A. (the "Licensee").
A. WHEREAS, Licensor owns or has rights in certain technology
regarding vectors and the capturing of genes.
B. WHEREAS, Licensor wishes to grant, and the Licensee wishes to
receive, an *** license under Licensor's rights in such technology to research,
develop and commercialize technology and products.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties agree as follows:
1. DEFINITIONS AND INTERPRETATION.
In this Agreement and in the Recitals, unless the context otherwise
requires, the following words and expressions have the following meanings:
1.1 "Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls or is controlled by or is under
common control with a Party to this Agreement.
1.2 "*** Product" means a ***.
1.3 "*** Product" means any cell line that ***.
1.4 "Centre" means the Centre for Genome Research of the
University of Edinburgh and includes any Person who becomes, in whole or in
part, its successor, substitute or assignee (which includes a Person taking by
way of novation).
1.5 "Confidential Information" means, with respect to a party, all
information of any kind whatsoever (including without limitation, compilations,
data, formulae, models, patent disclosures, procedures, processes, projections,
protocols, results of experimentation and testing, specifications, strategies
and techniques), and all tangible and intangible embodiments thereof of any kind
whatsoever (including without limitation, apparatus, biological or chemical
materials, *** compositions, compounds, documents, drawings, machinery, patent
applications, records, reports), which is owned or controlled by such party, is
disclosed by such party to the other party pursuant to this Agreement, and (if
disclosed in writing or other tangible medium) is marked or identified as
confidential at the time of disclosure to the receiving party or (if otherwise
-1-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
disclosed) is identified as confidential at the time of disclosure to the
receiving party and described as such in writing within thirty (30) days after
such disclosure.
1.6 "Control" means ownership, directly or though one or more
Affiliates, of more than fifty percent (50%) of the shares of stock entitled to
vote for the election of directors, in the case of a corporation, or more than
fifty percent (50%) of the equity interests in the case of any other type of
legal entity, or any other arrangement whereby a party controls or has the right
to control the Board of Directors or equivalent governing body of a corporation
of other entity.
1.7 "*** Product" means any product which is used in the *** and
which contains a product that (x) was directly developed from the practice of
any process or method within the Licensed Technology or (y) incorporates a
composition of matter claimed within the Licensed Technology, and (z) is covered
by one or more Valid Claims.
1.8 "***" means any *** through the practice of a process or
method within the Licensed Technology and which is covered by one or more Valid
Claims.
1.9 "***" means the *** information with respect to a Discovered
Gene.
1.10 "*** Product" means ***.
1.11 "Field" means the use of ***.
1.12 "First Commercial Sale" means with respect to any Product, the
first sale for use or consumption by the general public of such Product.
1.13 "Gene Therapy Product" means any product that (a) is ***.
1.14 ***
1.15 *** means the relative percentage representation of the ***.
1.16 "Information and Know-How" means all information, data and
know-how relating to the Field, owned by or licensed to the Licensor prior to or
during the term of this Agreement, which is not generally known including, but
not limited to, formulae, sequences, procedures, protocols, methods, techniques,
compositions, expertise, practice, experience, skill, technical knowledge and
results of experimentation and testing, which are necessary or useful for
Licensee to perform research, development or commercialization on a Product, or
to make, use, sell, offer for sale, or import a Product, or to practice the
methods and processes or make or use any compositions under the Patents.
1.17 "Inventions" means and includes all patentable and
unpatentable inventions, discoveries, data, information, compositions, methods,
techniques, technology and other results, relating to the Field,
(a) possessed, created, invented, developed or acquired
by the Licensor or jointly by the Licensor and the Licensee prior to
the date of this Agreement; or
-2-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
(b) possessed, created, invented, developed or acquired
by the Licensor (or licensed to the Licensor) or jointly by the
Licensor and the Licensee during the term of this Agreement.
1.18 "Improvement" means any improvement, addition, enhancement,
information, know-how, modification, development, invention, alteration or
technical advance in or relating to any Patent, Invention or Information and
Know-How (whether patentable or not) created, invented, developed or acquired by
the Licensor (or licensed to the Licensor ) or jointly by the Licensor and the
Licensee during the term of this Agreement, in which the Licensor has an
ownership or licensable interest prior to the date of this Agreement or during
the term of this Agreement.
1.19 "Licensed Technology" means Improvements, Inventions,
Information and Know-How and Patents.
1.20 "Net Sales Price" means, with respect to any Product, the
actual net selling price determined from gross invoiced sales of the Products to
customers, less (a) all discounts, credits, allowances, returns and rebates to
and chargebacks from the account of such customers, (b) transportation charges,
freight, packaging costs and insurance costs incurred with respect to such
Product, (c) cash, quantity and trade discounts and other price reductions, (d)
sales, use, value-added and other taxes directly based on sale and/or time of
payment, (e) customs duties, surcharges and other governmental charges incurred
in connection with exportation or importation of such Product, ***.
1.21 *** that (a) is directly developed through the use of the
Licensed Technology and (b) is covered by one or more Valid Claims.
1.22 "Parties" means the Licensor and the Licensee, and "Party"
means either of the Licensor or the Licensee.
1.23 "Patents" means :
(a) (i) Patent number 5,767,336 granted in the
United States of America entitled "Gene Trap Vectors
Comprising a Type II Transmembrane Domain", issued August 4,
1998;
(ii) Patent number 5,789,653 granted in the
United States of America entitled "Secretary Gene Trap",
issued June 16, 1998;
(iii) Patent number 673,650 granted in Australia
entitled "Novel Vectors and Use Thereof for Capturing Target
Genes", issued March 4, 1997;
(iv) ***; and
(v) ***;
(b) all patents that have issued or in the future issue
from such Original Patents and all present and future patents granted
on patent applications filed in any part of the
-3-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
Territory which correspond or relate to any of the Original patents
(including without limitation, utility and design patents, certificates
of invention, invention disclosures and statutory invention
registrations);
(c) all present and future patents or patent applications
which claim any Improvements, Inventions, or Information and Know-How,
filed in any part of the Territory; and
(d) all divisionals, continuations, continuations in
part, supplemental disclosures, renewals, reissues and extensions to
any of the foregoing in subparagraphs (a) through (c) above, together
with any and all patent applications relating to any of them.
1.24 "Product" means collectively, the *** Products, *** Products,
***Products, *** Products, *** Products and *** Products.
1.25 *** means with respect to each Product, the date, *** with
respect to such Product, upon which the Lincensee has ***.
1.26 "Royalty" means the royalty to be paid by the Licensee to the
Licensor pursuant to Section 3.1 below.
1.27 "Royalty Term" means, with respect to each Product in each
country, (a) if the manufacture, use or sale of such Product in such country was
at the time of the First Commercial Sale in such country covered by a Valid
Claim, the term for which such Valid Claim remains in effect and would, if in an
issued patent, be infringed but for the license granted by this Agreement, or
(b) otherwise, *** from the date of the First Commercial Sale of such Product in
such country.
1.28 "Sublicense" means any sublicense to Licensee's rights under
the Licensed Technology granted by the Licensee pursuant to Section 2.1(b).
1.29 "Territory" means the entire world.
1.30 "Therapeutic Protein Product" means a product which (a) ***.
1.31 "Third Party' means any Person other than Licensor, Licensee
and their respective Affiliates.
1.32 "Valid Claim" shall mean either a claim of an issued and
unexpired patent included within the Patents, which has not been held
permanently revoked, unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal, and which has not been admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise.
-4-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
INTERPRETATION
(a) A reference to a "Person" shall mean a natural person or
individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization,
governmental authority, incorporated association, statutory
corporation, the Crown and any other type of entity not specifically
listed herein; words including singular number will include a plural
number and vice versa; words including a gender will include all other
genders;
(b) A reference in this Agreement to statute or a section of a
statute includes all amendments to that statute or section passed in
substitution for the statute or section referred to or incorporating
any of its provisions;
(c) Section headings have been inserted for the purpose of
guidance only, and will not be part of this Agreement;
(d) A reference to a Recital, Article or Section is a
reference to a recital, article or section of this Agreement;
(e) A reference to a Person includes that Person's personal
representatives, successors and permitted assigns;
(f) "Agreement" means this license agreement.
2. GRANT OF LICENSE.
2.1 EXCLUSIVE LICENSE TO LICENSEE
In consideration of the payment of the Royalty set forth in Section 3.1
below, the Licensor hereby grants to the Licensee:
(a) an exclusive license in the Territory under the
Licensed Technology to conduct research on, develop and commercialize
the Licensed Technology, to manufacture, have manufactured, use and
have used, market, sell, have sold, offer for sale, have offered for
sale, import and export and have imported and exported the
compositions, technology or inventions, and to practice (or practise)
the processes or methods that are within or that constitute the
Licensed Technology for use in the Field.
(b) the right to grant Sublicenses (with the right of
such sublicensees to grant further sublicenses) to any of the rights
referred to in paragraph (a) of this Section 2.1 to Affiliates and
Third Parties, PROVIDED THAT, (a) any such Sublicense is on terms not
inconsistent with the Licensor's rights under this Agreement and (b)
Licensee shall be obligated to make the payments required by Section
3.1(b).
-5-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
2.2 NOTIFICATION AND COPIES OF SUBLICENSES.
The Licensee will notify the Licensor of the name and address of each
sublicensee promptly upon the Licensee entering into a Sublicense with such
sublicensee and provide to the Licensor a copy of each such Sublicense within
thirty (30) days of the execution and delivery by Licensee and the relevant
sublicensee of such Sublicense.
2.3 CONTENTS OF SUBLICENSES.
The Licensee will ensure that provisions materially similar to Sections
*** are incorporated in each Sublicense.
2.4 EXPLOITATION OF LICENSE.
The Licensee, at its expense, will use its commercially reasonable
endeavors, subject to the exercise of its commercially reasonable business
judgment, to commercialize and exploit the Original Patents and to
commercialize, exploit and sell Products, or to appoint sublicensees for the
purpose of such commercialization, exploitation and sale. Notwithstanding this
Section 2.4, the Licensor acknowledges that the Licensed Technology, as of the
date of this Agreement, may not be at a stage which is capable of
commercialization or exploitation. The Licensor further acknowledges that it may
be necessary for the Licensee to conduct and engage in extensive research,
development and commercialization efforts in relation to the Licensed Technology
before the Licensee can fulfill its obligations under this Section 2.4, and that
it cannot be determined at this time whether and to what extent the Licensed
Technology can be commercialized or exploited or Products can be commercialized,
exploited and sold.
2.5 AVAILABILITY OF THE LICENSED TECHNOLOGY.
Licensor shall provide Licensee with all information available to
Licensor regarding the Licensed Technology. Licensor shall provide such
technical assistance to Licensee as Licensee reasonably requests regarding the
Licensed Technology.
2.6 *** LICENSES TO LICENSEE.
If during the term of this Agreement:
(a) the Licensor becomes aware that a laboratory, of a
department or unit of the Licensor, other than the Centre (the "Other
Department") ***; or
(b) the Licensor ***,
the Licensor will in each circumstance referred to in subparagraphs (a)
or (b), promptly notify the Licensee of the availability of such
technology, providing a reasonably written detailed description of such
technology, and Licensee shall have ***. Licensor shall provide
Licensee with such information as is reasonably required by Licensee to
evaluate such technology. If the Licensee notifies the Licensor in a
timely manner within the 60-Day Period that the *** and twenty (20)
days of Licensee's notice to Licensor, *** regarding the terms and
conditions of such license agreement in good faith, ***. The
-6-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
Licensee will be under no obligation to accept such offer of a license
or to exercise its right to obtain a license under this Section 2.6. If
Licensee timely provides notice to Licensor within the ***, but elects
not to obtain a license under this Section 2.6, then for a period ***
commencing on the date on which Licensee receives the Licensor's
written notification of disclosure with respect to ***, the Licensor
shall first offer each such license opportunity to Licensee on such
more favorable terms. Licensee shall have sixty (60) days within which
to accept or reject each such offer.
3. ROYALTY.
3.1 ROYALTY.
In consideration of the licenses granted in Article 2, the Licensee
shall pay to the Licensor during the Royalty Term:
(a) subject to the provisions of Article 4, a royalty of:
(i) five percent (5%) *** in the Territory;
(ii) one percent (1%) *** in the Territory;
(iii) one percent (1%) *** in the Territory;
(iv) one percent (1%) *** in the Territory;
(v) *** in the Territory;
(vi) *** in the Territory;
(vii) *** in the Territory; PROVIDED HOWEVER, that
such royalty amount shall ****;
(viii) *** in the Territory;
(ix) ***in the Territory; and
(b) *** under any Sublicense, ***. For the avoidance of
doubt it is agreed that royalties and *** for the purpose of this
Section 3.1(b) ***.
3.2 THIRD PARTY ROYALTIES.
In the event that Licensee, its Affiliates or sublicensee is required
to pay royalties ("Third Party Royalties") to any Third Party in any country in
order to exercise its rights under this Agreement to manufacture, use, sell,
offer for sale, import, commercialize or sublicense any Product or a technology
which embodies, utilizes, incorporates, requires, or is produced, processed or
otherwise manufactured with or infringes a Third Party technology right or an
intellectual property right, *** under this Article 3 with respect to sales of
such Product in such country; PROVIDED HOWEVER, that ***.
-7-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
3.3 COMBINATION PRODUCT.
In the event that one or more Products are sold in combination with one
or more other active or material components (a "Combination Product"), the Net
Sales Price, for purposes of determining Royalties on such Combination Product,
***. In the event that no such separate sales are made by Licensee, its
Affiliates or its sublicensees, the Net Sales Price for royalty determinations
shall be calculated by ***.
3.4 STATEMENTS WITH ROYALTIES.
During the term of this Agreement *** Lincensee shall furnish to
Lincensor a written report showing in reasonably specific detail the items set
forth below. Reports shall be due on the ninetieth (90th) day following the
close of each quarter. Licensee shall keep complete and accurate records in
sufficient detail to properly reflect all gross sales and Net Sales and to
enable the royalties payable hereunder to be determined.
Each such quarterly statement shall contain the following information:
(i) the gross sales of each category of Products
sold by Licensee or its Affiliates during the reporting period
and the calculation of the Net Sales Price of each category of
Products sold by Licensee or its Affiliates from such gross
sales;
(ii) the royalties payable, if any, which shall
have accrued hereunder based upon the Net Sales of each
Product;
(iii) the withholding taxes, if any, required by
law to be deducted in respect of such sales; and
(iv) the royalties payable, if any, which shall
have accrued hereunder based upon the royalties received from
Licensee's sublicensees for such sublicensees' sales of
Products.
3.5 PAYMENT OF ROYALTY.
The Licensee will pay the royalties shown to have accrued by each
royalty report provided for under Section 3.4 on the date such royalty report is
due. Payment of royalties in whole or in part may be made in advance of such due
date.
3.6 CURRENCY AND EXCHANGE RATE.
Each royalty payment provided for under this Agreement shall be paid in
United States dollars. With respect to sales of Products invoiced in United
States dollars, the gross sales, Net Sales, and royalties payable shall be
expressed in United States dollars. With respect to sales of Products invoiced
in a currency other than United States dollars, the gross sales, Net Sales and
royalties payable shall be expressed in the domestic currency of the party
making the sale together with the United States dollar equivalent of the royalty
payable. The United States dollar equivalent shall be calculated using the
average exchange rate (local currency per US$1) published in THE WALL STREET
JOURNAL, Western Edition, under the heading "Currency Trading," on each of the
last business days of each month during the applicable royalty period.
-8-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
3.7 EXCHANGE CONTROL.
If at any time legal restrictions prevent the prompt remittance of part
or all royalties with respect to any country in the Territory where the Product
is sold, Licensee shall have the right, in its sole discretion, to make such
payments by depositing the amount thereof in local currency to Licensor's
account in a bank or other depository institution in such country. If the
royalty rate specified in this Agreement should exceed the permissible rate
established in any country, the royalty rate for sales in such country shall be
adjusted to the highest legally permissible or government-approved rate.
3.8 TAXATION ON ROYALTIES.
(a) All income or withholding taxes levied in accordance
with the tax laws in any country within the Territory on the Royalty
payments to be made by the Licensee under this Agreement ***.
(b) *** the amount of any withholding taxes, value-added
taxes or other taxes, levies or charges with respect to such amounts,
payable by Licensee, its Affiliates or sublicensees, or any taxes
required to be withheld by Licensee, its Affiliates or sublicensees, to
the extent Licensee, its Affiliates or sublicensees pay to the
appropriate governmental authority ***.
(c) The Licensee will furnish the Licensor with tax
receipts or other certificates issued by the competent taxation office
showing the payment (if any) by Licensee of such taxes, levies or other
charges.
3.9 ***.
*** No royalty shall be payable by a sublicensee based upon such
sublicensee's licensing, making, using, offering for sale, importing or sale of
a product or service derived from such sublicensee's use ***.
3.10 AUDITING STATEMENTS.
Any statement provided under Section 3.4 will, if reasonably required
by the Licensor, be certified as correct by the Chief Financial Officer of the
Licensee, or if the Licensee does not have a Chief Financial Officer, by a
Person reasonably approved by the Licensor for this purpose, in each case, to
the actual knowledge of such Officer or Person.
3.11 RECORDS.
The Licensee shall maintain for a period of three (3) years separate
and accurate records and accounts of the manufacture and sale of the Products,
the Net Sales of such Products, and any other information reasonably required by
the Licensor relevant to the products manufactured and sold and the
determination of Net Sales. Such separate and accurate records and accounts
shall be in reasonably sufficient detail.
-9-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
3.12 AUDITING OF RECORDS.
The Licensee will upon reasonable notice and during ordinary business
hours, permit and give all reasonable assistance to an independent certified
public accounting firm of nationally recognized standing, selected by Licensor
and reasonably acceptable to Licensee, at Licensor's cost, to have access on a
confidential basis to all or any of such records required to be maintained by
the Licensee under Section 3.11 as may be reasonably necessary to verify the
accuracy of the royalty reports hereunder for any year not ending more than
twenty-four (24) months prior to the date of such report. The accounting firm
shall disclose to Licensee only whether the reports are correct or not and the
specific details concerning any discrepancies. No other information shall be
shared.
3.13 AUDITING OF SUBLICENSEES' RECORDS.
The Licensee will (to the extent possible), if reasonably requested by
the Licensor, at Licensor's cost, audit such records kept by any sublicensee
pursuant to any Sublicense under this Agreement for the purpose of verifying
Royalty payments made by the Licensee to the Licensor.
3.14 CONFIDENTIAL FINANCIAL INFORMATION.
Licensor shall treat all financial information subject to review under
this Article 3 as confidential, and shall cause its accounting firm to retain
all such financial information in confidence under Article 9 below.
4. ***
*** as set forth below in this Article 4. If during (a) the period
commencing on the *** the aggregate amount of Royalties paid to the Licensor
under this Agreement is less than *** the Licensee shall, within sixty (60) days
of the end of such anniversary period, pay to the Licensor the *** paid in a
year against the royalties payable to the Licensor under Article 3 above and
Licensor shall have the further *** credits which remain unused in any royalty
period to the following year.
5. PATENT APPLICATION.
5.1 PATENT PROSECUTION.
During the term of this Agreement, the Licensor and the Licensee will
reasonably consult and cooperate together on actions to be taken with regard to
filing and the prosecution of patent applications in the Territory with respect
to the Licensed Technology. Licensee shall have the right (but not the
obligation) to control, at its sole cost and discretion, the preparation,
filing, prosecution and maintenance of all patents and patent applications
related to the Licensed Technology in each country within the Territory, unless
the parties otherwise agree. If Licensee elects not to control the preparation,
filing, prosecution or maintenance of a patent or patent application for the
Licensed Technology in any country within the Territory, the Licensor shall then
have the right to do so. Licensee shall give Licensor an opportunity to review
and comment on the text of each patent application subject to this Section 5.1
before filing, and shall supply Licensor with a copy of such patent application
as filed, together with notice of its filing date and
-10-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
serial number.
5.2 PATENTS IN NAME OF LICENSOR.
Unless otherwise agreed in writing between the Parties, or unless
otherwise required by the legislation of a particular country in which a patent
application in respect of any Licensed Technology may be made, all patents
solely developed, created or invented by the Licensor (except for patents on
jointly owned inventions, which will be jointly owned by the parties and
prosecuted in the joint names of the Licensor and Licensee) will be solely owned
by the Licensor and will be prosecuted in the name of the University and the
Parties will make all reasonable efforts to ensure that all documents and things
are executed and done by Parties or their employees, agents or representatives
to secure the grant of such patents in the name of the Licensor.
5.3 DUE DILIGENCE IN PROSECUTING APPLICATIONS.
Each Party will use all reasonable efforts and exercise due diligence
in prosecuting any patent application under Section 5.1 in full accordance with
all the relevant laws and requirements of the country concerned and each will
keep the other informed of all official actions and responses arising out of the
prosecution of such patent application.
5.4 COSTS OF PATENT PROSECUTION.
For so long as the Licensee retains the exclusive license granted under
Section 2.1 during the term of this Agreement, the Licensor will have the right
to seek reimbursement from the Licensee of all reasonable patent application
prosecution expenses it may incur after the date of this Agreement in connection
with the prosecution of any patent application under the Licensed Technology in
the Territory, unless the Licensee notifies the Licensor in writing of
Licensee's intention not to include such patent application to which such
expenditure may relate under the Licensed Technology; ***.
5.5 PARTIES TO ASSIST IN PROSECUTION.
The Licensor and the Licensee each agree to give the other all
assistance (including the execution of all lawful papers and instruments, the
making of all rightful oaths and declarations and the taking of all actions) as
may be reasonably necessary in the preparation, filing, prosecution or
maintenance of all patents, patent applications and filings under this Article
5.
6. REGISTRATION.
During the term of this Agreement, the Licensor, at the request of the
Licensee, shall execute all lawful papers and instruments, make all rightful
oaths and declarations and take all reasonable actions, to enable the Licensee
at its expense, to become duly registered, licensed or otherwise legally
designated in any country in the Territory, as an exclusive licensee under the
Licensed Technology.
-11-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
7. LICENSEE'S ENHANCEMENTS.
7.1 LICENSEE'S ENHANCEMENTS PROPERTY OF LICENSEE.
All inventions, enhancements and improvements to the Original Patents
or the Licensed Technology, originated developed, created, discovered or
invented by the Licensee, and all unpatentable and patentable inventions,
processes, formulae, technical information, compositions, compounds, methods,
expertise, know-how, practice, experience, skill and technical knowledge
relating to the Field which is originated, developed, created, discovered or
invented by the Licensee (collectively, the "Licensee's Technology") shall be
solely owned by the Licensee and all right, title and interest thereto and
therein shall vest in and be the exclusively property of the Licensee.
7.2 NON-EXCLUSIVE LICENSE OF LICENSEE'S TECHNOLOGY TO LICENSOR.
In consideration for the licenses granted by the Licensee to the
Licensor hereunder, during the term of this Agreement, the Licensor shall have
the right to negotiate with the Licensee for a Licensor during the term of this
Agreement a nontransferable, nonassignable, non-sublicensable, nonexclusive
license under the Licensee's Technology for the sole purpose of conducting
non-commercial, internal research in the Field at the Licensor's facilities.
8. STANDARDS OF MANUFACTURE AND LABELING.
8.1 COMPLIANCE WITH STANDARDS.
The Licensee will use all reasonable efforts to manufacture the
Products according to the requirements and specifications of any reasonably
applicable standards set forth by the country and the part of the Territory
where the particular Product is to be sold and the Licensee shall use all
reasonable efforts to not sell any Products that do not meet such specifications
and requirements.
8.2 INDEMNITY.
Except as provided in Section 10.2, the Licensee shall indemnify the
Licensor against all liabilities, damages, costs or expenses, including
reasonable attorneys' fees and costs, in respect of all claims, demands,
actions, proceedings or prosecutions which may be brought, commenced or
prosecuted against the Licensor by a Third Party, relating to or arising out of
the manufacture, sale or commercial utilization of the Products by Licensee, its
Affiliates and its sublicensees.
8.3 INSURANCE.
In the event that insurance is available at commercially reasonable
rates, the Licensee will at all times following the First Commercial Sale of a
Product, maintain and keep current in respect of the Licensee's manufacture and
sale of the Products, product liability insurance obtained from a reasonably
reputable insurer and shall make available to the Licensor such policy for
inspection upon reasonable request by the Licensor.
-12-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
9. SECRECY OBLIGATIONS.
9.1 CONFIDENTIALITY.
Subject to Section 9.2, during the term of this Agreement and for five
(5) years thereafter, each Party undertakes to the other Party to maintain in
confidence and not disclose to any third party all Confidential Information of
the other party and to ensure that its employees, agents, contractors,
subcontractors, solicitors and other advisers keep the Confidential Information
confidential and do not disclose it to any third party.
9.2 EXCEPTIONS.
A Party (the "Recipient") may reveal Confidential Information of the
other Party (the "Provider") which the Recipient establishes:
(a) is required by law to be revealed, provided that the
Recipient immediately notifies the Provider of the requirement and
takes lawful steps to permit the Provider with an opportunity to oppose
or restrict such disclosure to preserve as far as possible the
confidentiality of the Confidential Information;
(b) is in or enters the public domain other than through
a breach of this Agreement; or
(c) is revealed to a sublicensee under a sublicense which
complies in all respects with the provisions of this Agreement
including, without limitation, the provisions of Section 2.3; and
(d) was known to the Recipient before its disclosure by
the provider;
(e) is furnished to the Recipient by a third party
legally entitled to furnish such information and not under an
obligation of confidentiality to the Provider; or
(f) was independently developed by employees or agents of
the Recipient without access to or use of such information disclosed by
the Provider to the Recipient.
9.3 DISCLOSURE OF TERMS AND CONDITIONS OF THIS AGREEMENT.
Except as otherwise provided in Section 9.2 above, Licensor and
Licensee shall not disclose any terms or conditions of this Agreement to any
Third Party without the prior consent of the other party, PROVIDED THAT, either
party may disclose the terms and conditions of this Agreement in connection with
such party's merger, consolidation, change in control, sale of all or
substantially all its assets, an equity investment in such party by a Third
Party or such party's disclosure obligations pursuant to applicable disclosure
laws, rules or regulations. Notwithstanding the foregoing, prior to execution of
this Agreement, Licensor and Licensee shall agree upon the substance of
information that can be used to describe the terms of this transaction, and
Licensor and Licensee may disclose such information, as modified by mutual
agreement from time to time, without the other party's consent.
-13-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
10. REPRESENTATIONS AND WARRANTIES.
10.1 BY EACH PARTY. Each party hereby represents and warrants to the
other party as follows:
(a) Such party is duly organized, validly existing and in
good standing under the laws of the state in which it is organized.
(b) Such party (a) has the power and authority and the
legal right to enter into this Agreement and to perform its obligations
hereunder, and (b) has taken all necessary action on its part to
authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder. This Agreement has been duly
executed and delivered on behalf of such party, and constitutes a
legal, valid, binding obligation, enforceable against such party in
accordance with its terms.
(c) All necessary consents, approvals and authorizations
of all governmental authorities and other Persons required to be
obtained by such party in connection with this Agreement have been
obtained.
(d) The execution and delivery of this Agreement and the
performance of such party's obligations hereunder (a) do not conflict
with or violate any requirement of applicable laws or regulations, and
(b) do not conflict with, or constitute a default under, any
contractual obligation of it.
10.2 BY LICENSOR. The Licensor hereby represents, warrants and
covenants to the Licensee that:
(a) except as may otherwise be expressly notified to the
Licensee in writing, the Licensor has and for the duration of this
Agreement, will continue to have full right and title to the Patents,
the Patent Applications, the Inventions, the Information, the Know-How,
the Improvements and the Licensed Technology, except to the extent
co-owned with Licensee;
(b) the Licensor has the right to grant the license and
sublicense rights under this Agreement to the Licensee and the
Licensee's sublicensees;
(c) the Licensor is entitled to make all patent
applications which it has made, and the Licensor has not made knowing
use of any intellectual property or other rights of any third party in
the making of the patent applications;
(d) all Patent Applications filed by the Licensor at the
date of this Agreement have to the best knowledge of the Licensor been
made in the prescribed form and in the prescribed manner;
(e) the Patents, the Patent Applications, the Inventions,
the Information, the Know-How and the Improvements include or will
include all technology owned by or registered in the name of the
Licensor or to which the Licensor is beneficially entitled on
-14-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
or relating to the Field and possessed, invented, developed or acquired
by or for the Licensor;
(f) all Inventions, Information, Know-How and
Improvements supplied to the Licensee by the Licensor will be to the
best of the knowledge and belief of the Licensor true, accurate,
reliable and up-to-date; and
(g) Licensor (a) is the sole owner or exclusive licensee
of the Licensed Technology, and except as Licensor has expressly
informed Licensee in writing prior to the date of this Agreement, has
not granted to any Third Party any license or other interest in the
Licensed Technology; (b) is not aware of any Third Party patent, patent
application or other intellectual property rights that would be
infringed (i) by practicing any process or method or by making, using
or selling any composition which is claimed or disclosed in the Patents
or which constitutes Information and Know-How, or (ii) by making, using
or selling Products; and (c) is not aware of any infringement or
misappropriation by a Third Party of the Licensed Technology.
10.3 INDEMNITY.
The Licensor will indemnify the Licensee (including its employees,
agents and representatives) throughout the term of this Agreement against legal
liability, and against the costs of any claims or actions arising under this
Agreement to the extent that the liability is directly caused by negligent acts
or by omissions of the Licensor in the carrying out of its obligations under
this Agreement or is caused by a breach of any warranty, representation or
covenant given by the Licensor under this Agreement.
11. FAILURE TO GRANT OR SUBSEQUENT REVOCATION OF TRUST.
11.1 ***
If as a result of the *** the Licensee, its Affiliates or any of the
Licensee's sublicensees in such part of the Territory is significantly adversely
affected with regard to the research, development, commercialization,
manufacture, use, import, offering for sale, sale or profitability of a Product,
*** (i) through an order of a court, other governmental or administrative order
(A) against which no appeal can be taken declaring the relevant patents invalid,
unenforceable or otherwise (as the case may be) or (B) refusing to grant or
recognize the relevant Patent, Patent Application or other intellectual property
right under the Licensed Technology becomes final, (ii) through a law,
regulation or statute or (iii) otherwise; PROVIDED HOWEVER, *** if the Licensee
reasonably demonstrates to the Licensor good and sufficient reason for such
reduction.
11.2 ***
*** the Royalties payable to the Licensor by Licensee under this
Agreement *** and this Agreement shall be deemed automatically amended
accordingly.
-15-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
12. PATENT INFRINGEMENT.
12.1 NOTIFICATION OF INFRINGEMENT.
Each party shall notify the other party of any infringement in the
Territory known to such party of any Patents and shall provide the other party
with the available evidence, if any, of such infringement.
12.2 ENFORCEMENT OF PATENT RIGHTS.
Licensee, at its sole expense, shall have the right to determine the
appropriate course of action to enforce all intellectual property rights within
the Licensed Technology (including without limitation, any Patent, patent right,
trade secret right, or other right) or otherwise abate the infringement thereof,
to take (or refrain from taking) appropriate action to enforce all intellectual
property rights within the Licensed Technology, to control any litigation or
other enforcement action and to enter into, or permit, the settlement of any
such litigation or other enforcement action with respect to the intellectual
property rights within the Licensed Technology, and shall consider, in good
faith, the interests of Licensor in so doing. If Licensee does not, within one
hundred twenty (120) days of receipt of notice from Licensor, abate the
infringement or file suit to enforce the intellectual property rights within the
Licensed Technology against at least one infringing party in the Territory,
Licensor shall have the right to take whatever action it deems appropriate to
enforce such intellectual property rights within the Licensed Technology;
PROVIDED, HOWEVER, that, within thirty (30) days after receipt of notice of
Licensor's intent to file such suit, Licensee shall have the right to jointly
prosecute such suit and to fund up to one-half (1/2) the costs of such suit. The
party controlling any such enforcement action shall not settle the action or
otherwise consent to an adverse judgment in such action that diminishes the
rights or interests of the non-controlling party without the prior written
consent of the other party. All monies recovered upon the final judgment or
settlement of any such suit to enforce the intellectual property rights within
the Licensed Technology shall be shared, after reimbursement of expenses, by
Licensor and Licensee PRO RATA according to the respective percentages of costs
borne by each in such suit. Notwithstanding the foregoing, Licensor and Licensee
shall fully cooperate with each other in the planning and execution of any
action to enforce the intellectual property rights within the Licensed
Technology.
12.3 NOTIFICATION.
In the event either Party asserts a claim or institutes an action as a
result of an actual or apparent infringement of any intellectual property right
within the Licensed Technology, such party will immediately notify the other
party.
12.4 ASSISTANCE.
Either Party (the "Cooperating Party") will if required by a Party
asserting a claim or prosecuting an action pursuant to this Article 12 (the
"Asserting Party"), lend its name and will otherwise do all acts and things the
Asserting Party may reasonably require to assist the Asserting Party in
performing its obligations under this Article 12. Without limiting the preceding
sentence, the Cooperating Party will execute all documents and do all things
reasonably necessary to aid and co-operate in the prosecution of any action
bought by the
-16-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
Asserting Party pursuant to Article 12.
13. TERMINATION.
13.1 EXPIRATION.
Subject to the provisions of Sections 13.2 and 13.3 below, this
Agreement shall expire on the expiration of Licensee's obligation to pay
royalties to the Licensor under Section 3.1 above.
13.2 TERMINATION BY LICENSOR.
The Licensor may at any time terminate this Agreement upon the
happening of any of the following events (other than a "Force Majeure Event"):
(a) if an order is made or a resolution passed for the
winding up or the dissolution without winding up or liquidation of the
Licensee, provided always that default shall not be deemed to have
occurred where the winding up, dissolution or liquidation is for the
purpose of a reorganization, merger, consolidation, reconstruction or
amalgamation and the scheme for such a reorganization, merger,
acquisition, consolidation, reconstruction or amalgamation requires the
surviving entity to assume all of the Licensee's liabilities hereunder;
(b) if default is made by the Licensee in payment of
Royalty, and where such default is not remedied within ninety (90) days
after written notice specifying such default and requiring the Licensee
to remedy the same has been given by the Licensor to the Licensee; or
(c) if material default is made by the Licensee in
performance or observance of any material provision of this Agreement
other than a default referred to in subparagraph (b) above, and where
such default is capable of remedy such default is not remedied within
one hundred and eighty (180) days after written notice specifying such
default and requiring the Licensee to remedy the same has been by the
Licensor to the Licensee.
13.3 TERMINATION BY LICENSEE.
The Licensee may at any time terminate this Agreement:
(a) by notice if material default is made by the Licensor
in the performance or observance of any provision of this Agreement,
and where such default is capable of remedy such default is not is not
remedied within ninety (90) days after written notice specifying such
default and requiring the Licensor to remedy the same has been given by
the Licensor; PROVIDED HOWEVER, that Licensee shall also have the right
to elect not to terminate this Agreement and during the period of such
material default by Licensor under this paragraph (a) ***
(b) in its sole discretion, on a Product-by-Product basis
or otherwise, upon thirty (30) days prior written notice to Licensor.
-17-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
14. EFFECTS OF TERMINATION.
14.1 EFFECTS OF TERMINATION.
Upon terminating of this Agreement for any reason whatsoever:
(a) each Party will return to the other Party all of the
second mentioned Party's Confidential Information in the possession or
under the control, or in the possession or under the control of the
servants or agents of the mentioned Party.
(b) subject to paragraph (c) of this Section 14.1 neither
Party will have any further rights in relation to the other Party's
Confidential Information whether under common or other law, statute or
otherwise and, each Party will, at its own expense, execute and deliver
to the other Party such instruments and take all other action as the
other Party deems reasonably necessary to ensure the termination of any
such rights, and to vest every interest in the Confidential Information
in the Party owning that Confidential Information.
(c) any Sublicense will remain in full force and effect
provided the sublicensee is not in breach of the Sublicense and
performs all reasonable actions required by the Licensor to effect a
novation of the Sublicense to the Licensor;
(d) Sections 3.14, 8.2, 8.3, 10.2, 10.3, 14.1 and
Articles 9, shall survive any termination or expiration of this
Agreement;
(e) Section 3 will continue in force and effect until all
applicable Royalties payable under this Agreement are paid.
14.2 ACCRUED RIGHTS AND OBLIGATIONS.
Upon expiration of this Agreement, Licensee shall have a paid-up, ***
license (with the right to grant sublicenses) under the Licensed Technology to
make, use, sell, offer for sale, import, develop and commercialize Products.
Expiration or termination of this Agreement will not affect any rights or
obligations which may have accrued, to either Party, prior to the date of such
termination.
15. GENERAL.
15.1 WAIVER.
Any waiver or other indulgence by either Party in respect of any
obligation of the other party under this Agreement will operate only if in
writing and will apply only to the specified instance, and will not constitute a
waiver of or an indulgence in respect of any other right or obligation under
this Agreement.
-18-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
15.2 ENTIRE AGREEMENT.
This Agreement constitutes the whole and entire agreement between the
Parties and replaces all previous representations, understandings or
arrangements given or made by the Parties, whether oral or in writing.
15.3 ASSIGNMENT.
Neither Party will assign all or any of its rights under this Agreement
without the prior written consent of the other Party, which consent must not be
unreasonably withheld, except that the Licensee may assign its rights without
consent to any party with which it may merge or consolidate or to which it may
transfer all or substantially all of its assets, provided other such party
agrees in writing to assume all of the Licensee's obligations hereunder.
15.4 APPLICABLE LAW.
This Agreement is governed by and to be construed according to the laws
of the State of New York without regard to the conflicts of laws principles
thereof.
15.5 AMENDMENTS.
This Agreement may not be varied except in writing signed by the
Parties.
15.6 SEVERABILITY.
If any Provision of this Agreement is held by a court to be unlawful,
invalid, unenforceable or in conflict with any rule of law, statute, ordinance
or regulation, the validity and enforceability of the remaining provisions will
not be thereby affected.
15.7 FORCE MAJEURE.
Neither Party shall be held liable or responsible to the other party
nor be deemed to have defaulted under or breached this Agreement for failure or
delay in fulfilling or performing any term of this Agreement to the extent, and
for so long as, such failure or delay is caused by or results from causes beyond
the reasonable control of the affected Party, including but not limited to fire,
floods, embargoes, war, acts of war (whether war be declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other Party.
15.8 NOTICES.
Any consent, notice or report required or permitted to be given or made
under this Agreement by one of the parties hereto to the other party shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery, first class mail (or materially similar mail) or courier),
first class mail or courier, postage prepaid (where applicable), addressed to
such other party at its address indicated below, or to such other address as the
addressee shall have last furnished in writing to the addressor and (except as
otherwise provided in this Agreement) shall be effective upon receipt by the
addressee.
-19-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
If to Licensor: ***
Address: ***
Facsimile: ***
If to Licensee: ***
Address: ***
Facsimile: ***
(a) if given by hand, will be deemed to have been given
on the day it was so delivered;
(b) if given by mail, will be deemed to have been given
seven clear business days after being sent pre-paid mail;
(c) if given by facsimile, will be deemed to have been
given on the day on which the facsimile is sent and the sender's
machine records that the transmission has been received by the
recipient's facsimile machine and, a hard copy of the relevant notice
shall be sent to the recipient by first class pre-paid mail within
twenty-four (24) hours of a successful transmission report by the
sender's facsimile machine.
15.9 FURTHER AGREEMENTS.
Each Party shall execute, acknowledge and deliver such agreements,
deeds and documents and do or cause to be done all such other acts and things as
shall be necessary or appropriate to give effect to this Agreement or to carry
out the purposes and intent of this Agreement.
15.10 CHARGES.
All stamp duties and governmental charges arising out of or incidental
to this Agreement (other than charges with respect to the payment of income
taxes by Licensor) shall be the responsibility of and payable by the Licensee.
-20-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
IN WITNESS WHEREOF the Parties have executed this Agreement on the date
and in the year first above written.
UNIVERSITY OF EDINBURGH
By: /s/ M.D. Cornish
-----------------------------------------------
Name: M.D. Cornish
---------------------------------------------
Title: Deputy Secretary
--------------------------------------------
DELTAGEN, INC.
By: /s/ William Matthews, Ph.D.
-----------------------------------------------
Name: William Matthews
---------------------------------------------
Title: President and Chief Executive
--------------------------------------------
-21-
*** Confidential material redacted and separately filed with the Commission.
<PAGE>
EXHIBIT 10.5.1
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
(Do not use this form for Multi-Tenant Property)
1. Basic Provisions: ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes
only, January 25, 1997, is made by and between Martin P. Hull, Mieke Dankers,
Dennis W. Royer, and Christine J. Royer, tenants in common ("Lessor") and
Deltagen, a Delaware corporation (collectively the "Parties," or individually
a "Party").
1.2 Premises: That certain real property, including all
Improvements therein or to be provided by Lessor under the terms of this
Lease, and commonly known by the street address of 1031 Bing Street, San
Carlos located in the County of San Mateo, State of California, and generally
described as (describe briefly the nature of the property) free-standing
office/warehouse building, including the driveways, walkways, and parking
areas ("Premises"). (See Paragraph 2 for further provisions.)
1.3 Term: 3 years and 0 months ("Original Term") commencing March
1, 1997 ("Commencement Date") and ending February 29, 2000 ("Expiration
Date"). (See Paragraph 3 for further provisions.)
1.4 Early Possession: See paragraph 1.4 of the Addendum below
("Early Possession Date"). (See paragraphs 3.2 and 3.3 for further
provisions.)
1.5 Base Rent: $13,260.00 per month ("Base Rent"), payable on the
1st day of March, 1997. (See Paragraph 4 for further provisions.)
/ / If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted. Paragraph 1.5 is continued on Addendum.
1.6 Base Rent Paid Upon Execution: $13,260.00 as Base Rent for
the period March 1, 1997 through March 31, 1997.
1.7 Security Deposit: $13,260.00 ("Security Deposit"). (See
Paragraph 6 for further provision.)
1.8 Permitted Use: biotechnology, research and development, and
other related legal uses. (See Paragraph 6 for further provisions.)
1.9 Insuring Party: Lessor is the "Insuring Party" unless
otherwise slated herein. (See Paragraph 8 for further provisions.)
1.10 Real Estate Brokers: The following real estate brokers
(collectively, the Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
Cornish & Carey Commercial represents
/X/ Lessor exclusively ("Lessor's Broker"); / / both Lessor and Lessee, and
Dumas & Company represents
/X/ Lessee exclusively ("Lessee's Broker"); / / both Lessee and Lessor.
(See Paragraph 15 for further provisions.)
1.11 Guarantor. The obligations of the Lessee under this Lease are
to be guaranteed by ____________________ ("Guarantor"). (See Paragraph 37
for further provisions.)
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting
of Paragraphs 1, 2 through 53 and Exhibits N/A all of which constitute a part
of this Lease.
-1-
<PAGE>
2. Premises.
2.1 Letting, Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental, is an approximation
which Lessor and Lessee agree is reasonable and the rental based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning, heating
and loading doors, if any, in the Premises, other than those constructed by
Lessee, shall be in good operating condition on the Commencement Date. If a
non-compliance with said warranty exists as of the Commencement Date, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee setting forth with specifically the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee
does not give Lessor written notice of a non-compliance wit this warranty
within thirty (30) days after the Commencement Date, correction of that
non-compliance shall be the obligation of Lessee at Lessee's sole cost and
expense.
2.3 Compliance with Covenants, Restrictions and Building Code,
Lessor warrants to Lessee that the Improvements on the Premises comply with
all applicable covenants or restrictions of record and applicable building
code, regulations and ordinances in affect on the Commencement Date. Said
warranty does not apply to the use to which Lessee will put the Premises or
to any Alterations or Utility Installations (as defined in Paragraph 7.3(a))
made or to be made by Lessee. If the Premises do not comply with said
warranty, Lessor shall, except as otherwise provided in this Lease, promptly
alter receipt of written notice from Lessee setting forth with specifically
the nature and extent of such non-compliance, rectify the same at Lessor's
expense. If Lessee does not give Lessor written notice of a non-compliance
with this warranty within six (6) months following the Commencement Date,
correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that
it has been advised by the Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and
fire sprinkler systems, security, environmental aspects, compliance with
Applicable Law, as defined in Paragraph 6.3) and the present and future
suitability of the Premises for Lessee's intended use.
2.5 Lessee Prior Owner/Occupant. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the
date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original
Term of this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early possession. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Real Property Taxes and Insurance premiums and to maintain the Premises)
shall be in effect during each period. Any such early possession shall not
affect nor advance the Expiration Date of the Original Term.
3.3 Delay in Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, one is specified in Paragraph 1.4, or, if no Early Possession Date is
specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this
-2-
<PAGE>
Lease, or the obligations of Lessee hereunder, or extend the term hereof, but
in such case, Lessee shall not, except as otherwise provided herein, be
obligated to pay rent or perform any other obligation of Lessee under the
terms of this Lease until Lessor delivers possession of the Premises to
Lessee. If possession of the Premises is not delivered to Lessee within
sixty (60) days after the Commencement Date, Lessee may, at its option, by
notice in writing to Lessor within ten (10) days thereafter, cancel this
Lease, in which event the Parties shall be discharged from all obligations
hereunder; provided, however, that if such written notice by Lessee is not
received by Lessor within said ten (10) day period, Lessee's right to cancel
this Lease shall terminate and be of no further force or effect. Except as
may be otherwise provided, and regardless of when the term actually
commences, if possession is not tendered to Lessee when required by this
Lease and Lessee does not terminate this Lease; as aforesaid, the period free
of the obligation to pay Bay Rent, if any, that Lessee would otherwise have
enjoyed shall run from the date of delivery of possession and continue for a
period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts, changes or omissions
of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall cause payment of Base Rent and other
rent or charges, as the same may be adjusted from time to time, to be
received by Lessor in lawful money of the United States, without offset or
deduction, on or before the day on which it is due under the terms of this
Lease. Based Rent and all other rent and charges for any period during the
term hereof which is for less than one (1) full calendar month shall be
prorated based upon the actual number of days of the calendar month involved.
Payment of Base Rent and other charges shall be made to Lessor at its
address stated herein or to such other persons or at such other addresses as
Lessor may from time to time designate in writing to Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee falls to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1). Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys' fees) which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all
or any portion of said Security Deposit, Lessee shall within ten (10) days
after written request therefor deposit moneys with Lessor sufficient to
restore said Security Deposit to the full amount required by this Lease. Any
time the Base Rent increases during the term of this Lease, Lessee shall,
upon written request for Lessor, deposit additional moneys with Lessor
sufficient to maintain the same ratio between the Security Deposit and the
Base Rent as those amounts are specified in the Basic Provisions. Lessor
shall not be required to keep all or any part of the Security Deposit
separate from its general accounts, Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not
used or applied by Lessor. Unless otherwise expressly agreed in writing by
Lessor, no part of the Security Deposit shall be considered to be held in
trust, to bear interest or other increment for its use, or to be prepayment
for any moneys to be paid by Lessee under this Lease.
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the
purposes set forth in Paragraph 1.8, or any other use which is comparable
thereto, and for no other purpose. Lessee shall not use or permit the use of
the Premises in a manner that creates waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to, neighboring premises or
properties. Lessor hereby agrees to not unreasonably withhold or delay its
consents to any written request by Lessee, Lessees assignees or subtenants,
and by prospective assignees and subtenants of the Lessee, its assignees and
subtenants, for a modification of said permitted purpose for which the
premises may be used or occupied, so long as the same will not impair the
structural integrity of the improvements on the Premises, the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises and the Improvements thereon, and is otherwise permissible pursuant
to this Paragraph 8. If Lessor elects to withhold such consent, Lessor shall
within five (5) business days give a written notification of same, which
notice shall include an explanation of Lessor's reasonable objections to the
change in use.
-3-
<PAGE>
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill releases or
affect, either by itself or in combination with other materials expected to
be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment or the Premises, (ii) regulated or
monitored by any governmental authority, or (iii) a basis for liability of
Lessor to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substance shall include, but not be limited
to, hydrocarbons, petroleum, gasoline, crude oil or any products, by-products
or fractions thereof. Lessee shall not engage in any activity in, on or
about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent of
Lessor and compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Law (as defined in Paragraph 6.3). "Reportable Use"
shall mean (i) the installation or use of any above or below ground storage
tank, (iii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filled with, any governmental authority. Reportable Use shall also
include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises
or neighboring properties. Notwithstanding the foregoing, Lessee may,
without Lessor's prior consent, but in compliance with all Applicable Law,
use any ordinary and customary materials reasonably required to be used
Lessee in the normal course of Lessee's business permitted on the Premises,
so long as such use is not a Reportable Use and does not expose the Premises
or neighboring properties to any meaningful risk of contamination or damage
or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to the use or presence
of any Hazardous Substance, activity or storage tank by Lessee upon Lessee's
giving Lessor such additional assurances as Lessor, in its reasonable
discretion, deems necessary to protect itself, the public, the Premises and
the environment against damage, contamination or injury and/or liability
therefrom or therefor, including, but not limited to, the installation (and
removal on or before Lease expiration or earlier termination) of reasonably
necessary protective modifications to the Premises (such as concrete
easements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof. Paragraph 6.2(a) is continued on Addendum or disclosure
to Lessee.
(b) Duty to Inform Lessor. If Lessee knows, or has
reasonable cause to believe, that a Hazardous Substance, or a condition
involving or resulting form same, has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor. Lessee shall
also immediately give Lessor a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action or
proceeding given to, or received from, any governmental authority or private
party, or persons entering or occupying the Premises, concerning the
presence, spill, release, discharge of, or exposure to, any Hazardous
Substance or contamination in, on, or about the Premises, including but not
limited to all such documents as may be involved in any Reportable Uses
Involving the Premises.
(c) Indemnification. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any,
and the Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, costs, claims, liens, expenses, penalties,
permits and attorney's and consultant's fees arising out of or involving any
Hazardous Substance or storage tank brought onto the Premises by or for
Lessee or under Lessee's control. Lessee's obligations under this Paragraph
6 shall include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created or suffered by Lessee,
and the cost of investigation (including consultant's and attorney's fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances or storage
tanks, unless specifically so agreed by Lessor in writing at the time of such
agreement. Paragraph 6.2(d) is set forth in Addendum.
-4-
<PAGE>
6.3 Lessee's Compliance with Law. Lessee shall, within (5) days
after receipt of Lessor's written request, provide Lessor with copies of all
documents and information, including, but not limited to, permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Law specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with any Applicable Law. The first sentence of
paragraph 6 is found in the Addendum.
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as
defined in Paragraph 8.3(a)) shall have the right to enter the Premises and
for verifying compliance by Lessee and this Lease and all Applicable Laws (as
defined in Paragraph 8.3), and to employ experts and/or consultants in
connection therewith and/or consultants in connection therewith and/or to
advise Lessor with respect to Lessee's activities, including but not limited
to the installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance or storage tank on or form the Premises. The costs
and expenses of any such inspections shall be paid by the party requesting
same, unless a Default or Breach of this Lease, violation of Applicable Law,
or a contamination, caused or materially contributed to by Lessee is found to
exist or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent
violation or contamination. In any such case, Lessee shall upon request
reimburse Lessor or Lessor's Lender, as the case may be, for the costs and
expenses of such inspection.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc.), 7.2 (Lessor's obligations to repair), 9 (damage and
destruction), and 14 (condemnation), Lessee shall, at Lessee's sole cost and
expense and at all times, keep the Premises, and every part thereof in good
order, condition and repair, and non-structural (whether or not such portion
of the Premises requiring repairs, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for
such repairs occurs as a result of Lessee's use any prior use, the elements
or the age of such portion of the Premises), including, without limiting the
generality of the foregoing, equipment or facilities serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical,
lighting facilities, boilers, fired or unfired pressure vessels, fire
sprinkler and/or standpipe and hose or other automatic fire extinguishing
system, including fire alarm and/or smoke detection systems and equipment,
fixtures, walls (interior and exterior), ceilings, roofs, floors, windows,
doors, plate glass, skylights. landscaping, signs. Lessee shall not cause
or permit any Hazardous Substance to be spilled or released in, on, under or
about the Premises (including through the plumbing or sanitary sewer system)
and shall promptly, at Lessee's expense, take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered or
required, for the cleanup of any contamination of, and for the maintenance,
security and/or monitoring of the Premises, the elements surrounding same, or
neighboring properties, that was caused or materially contributed to by
Lessee, or pertaining to or involving any Hazardous Substance and/or storage
tank brought onto the Premises by or for Lessee or under its control.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all
-5-
<PAGE>
improvements thereon or a part thereof in good order, condition and state of
repair. If Lessee occupies the Premises for seven (7) years or more, Lessor
may require Lessee to repaint the exterior of the buildings on the Premises
as reasonably required, but not more frequently than any needed repairs.
Notwithstanding the above, Paragraph 7.2 is subject to the terms of Paragraph
50 below of the Addendum.
(b) Lessee, shall, at Lessee's sole cost and expense, procure
and maintain contracts, with copies to Lessor, in customary form and
substances for, and with contractors specializing and experienced in, the
inspection, maintenance and service of the following equipment and
improvements, if any, located on the Premises: (i) heating, air conditioning
and ventilation equipment, (ii) boiler, fired or unfired pressure vessels,
(iii) fire sprinkler and/or standpipe and hose or other automatic fire
extinguishing systems, including fire alarm and/or smoke detection, (iv)
landscaping and irrigation systems, (v) roof covering and drain maintenance
and (vi) asphalt and parking lot maintenance. Paragraph 7.1 is continued on
Addendum.
7.2 Lessor's Obligations. Except for the warranties and
agreements of Lessor contained in Paragraphs 2.2 (relating to condition of
the Premises), 2.3 (relating to compliance with covenants, restrictions and
building code), 9 (relating to destruction of the Premises) and 14 (relating
to condemnation of the Premises). It is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain
the Premises, the improvements located thereon, or the equipment therein, all
of which obligations are intended to be that of the Lessee under Paragraph
7.1 hereof. It is the intention of the Parties that the terms of this Lease
govern the respective obligations of the Parties as to maintenance and repair
of the Premises. Lessee and Lessor expressly waive the benefit of any
statute now or hereafter in effect to the extent it is inconsistent with the
terms of this Leas with respect to, or which affords Lessee the right to make
repairs at the expense of Lessor or to terminate this Lease by reason of any
needed repairs. Notwithstanding the above, Paragraph 7.2 is subject to the
terms of Paragraph 50 below of the Addendum.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility
Installations" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, security, fire
protection systems, communication systems, lighting fixtures, heating,
ventilating, and air conditioning equipment, plumbing, and fencing in, on or
about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the
Premises. The term "Alternations" shall mean any modification of the
improvements on the Premises from that which are provided by Lessor under the
terms of this Lease, other than Utility Installations or Trade Fixtures,
whether by addition or deletion, "Lessee Owned Alternations and/or Utility
Installations" are defined as Alterations and/or Utility Installations made
by lessee that are not yet owned by Lessor as defined in Paragraph 7.4(a).
Lessee shall not make any Alterations or Utility Installations in, on, under
or about the Premises without Lessor's prior written consent. Lessee may,
however, make non-structural Utility Installations to the Interior of the
Premises (excluding the roof), as long as they are not visible from the
outside, do not involve puncturing, relocating or removing the roof or any
existing walls, and the cumulative cost thereof during the term of this Lease
as extended does not exceed $25,000.
(b) Consent. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with proposed detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by
subsequent specific consent, shall be deemed conditioned upon: (i) Lessee's
acquiring all applicable permits required by governmental authorities, (ii)
the furnishing of copies of such permits together with a copy of the plans
and specifications for the Alteration or Utility Installation to Lessor prior
to commencement of the work thereon, and (iii) the compliance by Lessee with
all conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Lessee shall promptly
upon completion thereof furnish Lessor with as-built plans and specifications
therefor. Lessor may (but without obligation to do so) condition its consent
to any requested Alteration or Utility installation that costs $10,000 or
more upon Lessee's providing Lessor with a lien and completion bond in an
amount equal to one and one-
-6-
<PAGE>
half times the estimated cost of such Alteration or Utility Installation
and/or upon Lessee's posting an additional Security Deposit with Lessor under
Paragraph 35 hereof.
(c) Indemnification. Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by
any mechanics' or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of nay work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises.
If Lessor shall require, Lessee shall furnish to Lessor a surely bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorney's fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 Ownership, Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require their
removal or become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee
shall be the property of and owned by Lessee, but considered a part of the
Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee Owned
Alterations and Utility Installations. Unless otherwise instructed per
subparagraph 7.4(b) hereof, all Lessee Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon and be surrendered by Lessee
with the Premises.
(b) Removal. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease,
notwithstanding their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any Lessee
Owned Alterations or Utility Installations made without the required consent
of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the
Premises by the end of the last day of the Lease term or any earlier
termination date, with all of the improvements, parts and surfaces thereof
clean and free of debris and in good operating order, condition and state of
repair, ordinary wear and tear expected. "Ordinary wear and tear" shall not
include any damage or deterioration that would have been prevented by good
maintenance practice or by Lessee performing all of its obligations under
this Lease. Except as otherwise agreed or specified in writing by Lessor, the
Premises, as surrendered, shall include the Utility Installations. The
obligation of Lessee shall include the repair of any damage occasioned by the
installation, maintenance or removal of Lessee's Trade Fixtures, furnishings,
equipment, and Alterations and/or Utility Installations, as well as the
removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or ground water
contaminated by Lessee, all as may then be required by Applicable Law and/or
good service practice. Lessee's Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee subject to its obligations to repair
and restore the Premises per this Lease. Paragraph 7.4 is continued on
Addendum.
8. Insurance; Indemnity.
8.1 Payment for Insurance. Regardless of whether the Lessee is
the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability
insurance carrier by Lessor in excess of $1,000,000 per occurrence. Premiums
for policy periods commencing prior to or extending beyond the Lease term
shall be prorated to correspond t the Lease term. Payment shall be made by
Lessee to Lessor within ten (10) days following receipt of an invoice for any
amount due.
-7-
<PAGE>
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of
Insurance protecting Lessee and Lessor (as an additional insured) against
claims for bodily injury, personal injury and property damage based upon,
involving or arising out of the ownership, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be on
an occurrence basis providing single limit coverage in an amount not less
than $1,000,000 per occurrence with an "Additional Insured-Managers or
Lessors of Premises" Endorsement and contain the "Amendment of the Pollution
Exclusion" for damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease or as an "Insured contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance
required by this Lease or as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory
with any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only.
(b) Carried by Lessor, in the event Lessor is the Insuring
Party, Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above. In addition to, and not in lieu of, the insurance required to
be maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall
obtain and keep in force during the term of this Lease a policy or policies
in the name of Lessor, with loss payable to Lessor and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lender(s)"),
insuring loss or damage to the Premises. The amount of such insurance that
shall be equal to the full replacement cost of the Premises, as the same
shall exist from time to time, or in the amount required by Lenders, but in
no event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost. If Lessor
is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations shall be insured by Lessee under Paragraph 8.4 rather than by
Lessor. If the coverage is available and commercially appropriate, such
policy or policies shall insure against all risks of direct physical loss or
damage (except the perils of flood and/or earthquake unless required by a
Lender), including coverage for any additional costs resulting from debris
removal and reasonable amounts of coverage for the enforcement of any
ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Premises, required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of not less than
the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located. If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss, as defined in Paragraph 9.1(c).
(b) Rental Value. The Insuring Party shall, in addition,
obtain and keep in force during the term of this Lease a policy or policies
in the name of Lessor, with loss payable to Lessor and Lender(s), insuring
the loss of the full rental and other charges payable by Lessee to Lessor
under this Lease or one (1) year (including all real estate taxes, insurance
costs, and any scheduled rental increases). Said insurance shall provide
that in the event the Lease is terminated by reason of an insured loss, the
period of Indemnity for such coverage shall be extended beyond the date of
the completion of repairs or replacement of the Premises, to provide for one
full year's loss of rental revenues from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, property taxes, insurance premium costs
and other expenses, if any, otherwise payable by Lessee, for the next twelve
(12) month period. Lessee shall be liable for any deductible amount in the
event of such loss.
-8-
<PAGE>
(c) Adjacent Premises. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lease shall pay for any increase in
the premiums for the property insurance of such building or buildings if said
increase is caused by Lessor's acts, omissions, use or occupancy of the
Premises.
(d) Tenant's Improvements. If the Lessor is the Insuring
Party, the Lessor shall not be required to insure Lessee Owned Alterations
and Utility Installations unless the item in question has become the property
of Lessor under the terms of this Lease. If Lessee is the Insuring Party,
the policy carried by Lessee under this Paragraph 8.3 shall insure Lessee
Owned Alterations and Utility Installations.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Lessee Owned
Alterations and Utility Installations in, on, or about the Premises similar
in coverage to that carried by the Insuring Party under Paragraph 8.3. Such
insurance shall be full replacement cost coverage with a deductible of not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be
used by Lessee for the replacement of personal property or the restoration of
Lessee Owned Alterations and Utility Installations. Lessee shall be the
Insuring Party with respect to the insurance required by this Paragraph 8.4
and shall provide Lessor with written evidence that such insurance is in
force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or other such rating as may be required by a
Lender having a lien on the Premises, as set forth in the most current issue
of "Best's Insurance Guide." Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in this
Paragraph 8. If Lessee is the Insuring Party, Lessee shall cause to be
delivered to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with the
insureds and loss payable clauses as required by this Lease. No such policy
shall be cancelable or subject to modification except after thirty (30) days
prior written notice to Lessor. Lessee shall at least thirty (30) days prior
to the expiration of such policies, furnish Lessor with evidence of renewals
or "insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. If the Insuring Party shall fall to
procure and maintain the insurance required to be carried by the Insuring
Party under this Paragraph 8, the other Party may, but shall not be required
to, procedure and maintain the same, but at Lessee's expense.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in
contract or in tort) against the other, for loss of or damage to the Waiving
Part's property arising out of or incident to the perils required to be
insured against under Paragraph 8. The effect of such releases and waivers
of the right to recover damages shall not be limited by the amount of
insurance carried or required, or by any deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor's master or ground lessor,
partners and Lenders, from and against any and all claims, loss of rents
and/or damages, costs, liens, judgments, penalties, permits, attorney's and
consultant's fees, expenses and/or liabilities arising out of, involving, or
in dealing with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees, and out of any Default or Breach by
Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding be brought against Lessor
by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory
to Lessor and Lessor shall cooperate with Lessee in such defense,
-9-
<PAGE>
Lessee need not have first paid any such claim in order to be so indemnified.
Paragraph 8. 7 is continued in the Addendum below.
8.8 Exemption of Lessor from Liability. Lessor shall not be
liable for injury or damage to the person or goods, wares, merchandise or
other property of Lessee, Lessee's employees, contractors, invitees,
customers, or any other person in or about the Premises, whether such damage
or injury is caused by or results from fire, steam, electricity, gas, water
or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or form any other cause, whether the said injury or damage
results from conditions arising upon the Premises or upon other portions of
the building of which the Premises are a part, or from other sources or
places, and regardless of whether the cause of such damage or injury or the
means of repairing the same is accessible or not. Lessor shall not be liable
for any damages arising from any act or neglect of any other tenant of
Lessor. Notwithstanding Lessor's negligence or breach of this Lease, Lessor
shall under no circumstances be liable for injury to Lessee's business or for
any loss of income or profit therefrom.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or
destruction to the Improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations, the repair cost of which damage or
destruction be less than 50% of the then Replacement Cost of the Premises
immediately prior to such damage or destruction, excluding from such
calculation the value of the land and Lessee Owned Alterations and Utility
Installations.
(b) "Premises Total Destruction" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or more
of the then Replacement Cost of the Premises immediately prior to such damage
or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to
Improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 83(a), irrespective of any deductible
amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or
rebuild the Improvements owned by Lessor at the time of the occurrence to
their condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence
or discovery of a condition involving the presence of, or a contamination by
a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Partial Damage--Insured Loss. If Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at
Lessor's election, make the repair of any damage or destruction the total
cost to repair of which is $10,000 or less, and, in such event, Lessor shall
make the insurance proceeds available to Lessee on a reasonable basis for
that purpose. Notwithstanding the foregoing, if the required insurance was
not in force or the insurance proceeds are not sufficient to effect such
repair, the Insuring Party shall promptly contribute the shortage to proceeds
(except as to the deductible which is Lessee's responsibility) as and when
required to complete said repairs. In the event, however, the shortage in
proceeds (except s to the deductible which is Lessee's responsibility) as and
when required to complete said repairs. In the event, however, the shortage
in proceeds was due to the fact that, by reason of the unique nature of the
Improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no
-10-
<PAGE>
obligation to pay for the shortage in insurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefor.
If Lessor receives said funds or adequate assurance thereof within said ten
(10) day period, the party responsible for making the repairs shall complete
them as soon as possible and this Lease shall remain in full force and
effect. If Lessor does not receive such funds or assurance within said
period, Lessor may nevertheless elect by written notice to Lessee within ten
(10) days thereafter to make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this
Lease shall remain in full force and effect. If in such case Lessor does not
so elect, then is Lease shall terminate sixty (60) days following the
occurrence of the damage or destruction. Unless otherwise agreed, Lessee
shall in no event have any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises
Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3
rather than Paragraph 9.2, notwithstanding that there may be some insurance
coverage, but the net proceeds of any such insurance shall be made available
for the repairs if made by either Party.
9.3 Partial Damage--Uninsured Loss. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful
act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 13), Lessor may at Lessor's option,
either: (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect,
or (ii) give written notice to Lessee within thirty (30) days after receipt
by Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of
such notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten
(10) days after the receipt of such notice to give written notice to Lessor
of Lessee's commitment to pay for the repair of such damage totally at
Lessee's expense and without reimbursement from Lessor. Lessee shall provide
Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following Lessee's said commitment, in such event this Lease
shall continue in full force and effect, and Lessor shall proceed to make
such repairs as soon as reasonably possible and the required funds are
available. If Lessee does not give such notice and provide the funds or
assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision
hereof, if Premises Total Destruction occurs (including any destruction
required by any authorized public authority), this Lease shall terminate
sixty (60) days following the date of such Premises Total Destruction,
whether or not the damage or destruction is an Insured Loss or was caused by
a negligent or willful act of Lessee. In the event, however, that the damage
or destruction was caused by Lessee, Lessor shall have the right to recover
Lessor's damages from Lessee except as released and waived in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six
(6) months of the term of this Lease there is damage for which the cost to
repair exceeds one (1) month's Base Rent, whether or not an Insured Loss,
Lessor may, at Lessor's option, terminate this Lease effective sixty (60)
days following the date of occurrence of such damage by giving written notice
to Lessee of Lessor's election to do so within thirty (30) days after the
date of occurrence of such damage. Provided, however, if Lessee at that time
has an exercisable option to extend this Lease or to purchase the Premises,
then Lessee may preserve this Lease by, within twenty (20) days following the
occurrence of the damage, or before the expiration of the time provided in
such option for its exercise, whichever of earlier ("Exercise Period"), (i)
exercising such option and (ii) providing Lessor with any shortage in
insurance proceeds (or adequate assurance thereof) to cover any shortage in
insurance proceeds, Lessor shall, at Lessor's expense repair such damage as
soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option and provide such funds or
assurance during said Exercise Period, then Lessor may at Lessor's option
terminate this Lease as of the expiration of said sixty (60) day period
following the occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within ten (10) days after the expiration of the
Exercise Period, notwithstanding any term or provision in the grant of option
to the contrary.
-11-
<PAGE>
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in Paragraph 9.2
(Partial Damage--Insured), whether or not Lessor or Lessee repairs or
restores the Premises, the Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, payable by Lessee hereunder for the
period during which such damage, its repair or the restoration continues (not
to exceed the period for which rental value insurance is required under
Paragraph 8.3(b)), shall be abated in proportion to the degree to which
Lessee's use of the Premises is Impaired. Except for abatement of Base Rent,
Real Property Taxes, insurance premiums, and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in
a substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of such Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) days following the giving of such notice. If Lessee gives such notice
to Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after receipt of such notice, this Lease shall continue, in full force and
effect. "Commence" as used in this Paragraph shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 Hazardous Substance Conditions. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by
Applicable Law and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 13), Lessor may at Lessor's option
either (i) investigate and remediate such Hazardous Substance Condition, if
required, as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) if the estimated
cost to investigate and remediate such condition exceeds twelve (12) times
the then monthly Base Rent or $100,000, whichever is grater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge
of the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of
such notice. In any event Lessor elects to give such notice to Lessor of
Lessee's commitment to pay for the investigation and remediation of such
Hazardous Substance Condition totally at Lessee's expense and without
reimbursement from Lessor except to the extent of an amount equal to twelve
(12) times the then monthly Base Rent or $100,000, whichever is greater,
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such investigation and remediation as soon as
reasonably possible and the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within
the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance
Condition occurs for which Lessee is not legally responsible, there shall be
abatement of Lessee's obligations under this Lease to the same extent as
provided in Paragraph 9.6(a) for a period of not to exceed twelve (12) months.
9.8 Termination-Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by
Lessor under the terms of this Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive the
provisions of any present or future statute to the extent inconsistent
herewith.
-12-
<PAGE>
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessee shall pay the Real Property
Taxes, as defined in Paragraph 10.2, applicable to the Premises during the
term of this Lease. Subject to Paragraph 10.1(b) , all such payments shall
be made at least ten (10) days prior to the delinquency date of the
applicable installment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes to
be paid by Lessee shall cover any period time prior to or after the
expiration or earlier termination of the term hereof, Lessee's share of such
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year this Lease is in effect, and Lessor shall reimburse Lessee
for any overpayment after such proration. If Lessee shall fail to pay any
Real Property Taxes required by this Lease to be paid by Lessee, Lessor shall
have the right to pay the same, and Lessee shall reimburse Lessor therefor
upon demand.
(b) Advance Payment. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the
right, at Lessor's option, to estimate the current Real Property Taxes
applicable to the Premises, and to require such current year's Real Property
Taxes to be paid in advance to Lessor by Lessee, either: (i) in a lump sum
amount equal to the installment due, at least twenty (20) days prior to the
applicable delinquency data, or (ii) monthly in advance with the payment of
the Base Rent. If Lessor elects to require payment monthly in advance, the
monthly payment shall be that equal monthly amount which, over the number of
months remaining before the month in which the applicable tax installment
would become delinquent (and without interest thereon), would provide a fund
large enough to fully discharge before delinquency the estimated installment
of taxes to be paid. When the actual amount of the applicable tax bill is
known, the amount of such equal monthly advance payment shall be adjusted as
required to provide the fund needed to pay the applicable taxes before
delinquency. If the amounts paid to Lessor by Lessee under the provisions of
this Paragraph are insufficient to discharge the obligations of Lessee to pay
such Real Property Taxes as the same becomes due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums as are necessary to pay such
obligations. Al moneys paid to Lessor under this Paragraph may be
intermingled with other moneys of Lessor and shall not bear interest. In the
event of a Breach by Lessee in the performance of the obligations of Lessee
under this Lease, then any balance of funds paid to Lessor under the
provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1(a), at the option of Lessor, be treated as an additional
Security Deposit under Paragraph 5.
10.2 Definition of "Real Property Taxes." As used herein, the term
"Real Property Taxes" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed upon the Premises by
any authority having the direct or indirect power to tax, including any city,
state or federal government, or any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, levied against any
legal or equitable interest of Lessor in the Premises or in the real property
of which the Premises are a part, Lessor's right to rent or other income
therefrom, and/or Lessor's business of leasing the Premises. The term "Real
Property Taxes" shall also include any tax, free, levy, assessment or charge,
or any increase therein, imposed by reason of events occurring, or changes in
applicable law taking effect, during the term of this Lease, including but
not limited to a change in the ownership of the Premises or in the
Improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
10.3 Joint Assessment. If the Premises are not separately
assessed, Lessee's liability shall be an equitable proportion of the Real
Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to
delinquency all taxes assessed against and levied upon Lessee Owned
Alterations, Utility Installations, Trade Fixtures, furnishings, equipment
and all personal property of Lessee contained in the Premises or elsewhere.
When possible, Lessee shall cause its Trade Fixtures, furnishings, equipment
and all other personal property to be assessed and bill separately from the
real property of Lessor. ____
-13-
<PAGE>
any of Lessee's said personal property shall be assessed with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property or, at Lessor's option, as provided in
Paragraph 10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent given under and subject to
the terms of Paragraph 36.
(b)
(c)
(d)
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and injunctive relief.
-14-
<PAGE>
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not: (i) be effective without the express written
assumption by such assignee or subleases of the obligations of Lessee under
this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter
the primary liability of Lessee for the payment of Base Rent and other sums
due Lessor hereunder or for the performance of any other obligations to be
performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval
of an assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent or performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the Default
or Breach by Lessee of any of the terms, covenants or conditions of this
Lease.
(c) The consent of Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable on the Lease or sublease and
without obtaining their consent, and such action shall not relieve such
persons from liability under this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not
limited to the intended use and/or required modification of the Premises,
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be
deemed, for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein to
be observed or performed by Lessee during the term of said assignment or
sublease, other than such obligations as are contrary to or inconsistent with
provisions of an assignment or sublease to which Lessor has specifically
consented in writing.
(g)
(h)
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:
(a)
-15-
<PAGE>
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any other
prior Defaults or Breaches of such sublessor under such sublease.
(c)
(d) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to cure said Default. A "Default" is
defined as a failure by the Lessee to observe, comply with or perform any of
the terms, covenants, conditions or rules applicable to Lessee under this
Lease. A "Breach" defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is
specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, shall entitle Lessor to pursue the
remedies set forth in Paragraphs 3.2 and 13.3:
(a) or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary
payment required to be made by Lessee hereunder, whether to Lessor or to a
third party, as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) days following written notice thereof by or on behalf of
Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable Law
per Paragraph 6.3, (ii) the inspection,
-16-
<PAGE>
maintenance and service contracts required under Paragraph 7.1(b), (iii) the
recission of an unauthorized assignment or subletting per Paragraph 12.1(b),
(iv) a Tenancy Statement per Paragraphs 16 or 27, (v) the subordination or
non-subordination of this Lease per Paragraph 30, (vi) the guaranty of the
performance of Lessee's obligations under this Lease if required under
Paragraphs 1.11 and 37, (vii) the execution of any document requested under
Paragraph 42 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of ten (10) days following
written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under
Paragraph 40 hereof, that are to be observed, complied with or performed by
Lessee, other than those described in subparagraph (a), (b) or (c), above,
where such Default continues for a period of thirty (30) days after written
notice thereof by or on behalf of Lessor to Lessee; provided, however, that
if the nature of Lessee's Default is such that more than thirty (30) days are
reasonably required for its cure, then it shall not be deemed to be a Beach
of this Lease by Lessee if Lessee commence such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The
making by lessee of any general management or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section
101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within sixty (60) days; (iii) the
appointment of a trustee or receiver to take possession of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days;
provided, however, in the event that any portion of this subparagraph (e) is
contrary to any applicable law, such provision shall be of no force or
effect, and not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement
given to Lessor by Lessee or any Guarantor of Lessee's obligations hereunder
was materially false.
(g) If the performance of Lessee's obligations under this
Lease is guaranteed; (i) the death of a guarantor, (ii) the termination of a
guarantor's ability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) a guarantor's becoming insolvent or the
subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurance or security,
which when coupled wit the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check
given to Lessor by Lessee shall not be honored by the bank upon which it is
drawn, Lessor, at its option, may require all future payments to be made
under this Lease by Lessee to be made only by cashier's check. In the event
of a Breach of this Lease by Lessee, as defined in Paragraph 13.1, with or
without further notice or demand, and without limiting Lessor in the exercise
of any right or remedy which Lessor may have by reason of such Breach, Lessor
may:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and he term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee: (i) the worth
at the time of the award of the unpaid rent which had been earned at the time
of award exceeds the amount of such rental loss that the Lessee proves could
have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount
-17-
<PAGE>
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of the leasing
commission paid by Lessor applicable to the unexpired term of this Lease.
The worth at the time of award of the amount referred to in provision (iii)
of the prior sentence shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damaged under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall
have the right to recover in such proceeding the unpaid rent and damages as
are recoverable therein, or Lessor may reserve therein the right to recover
all or any part thereof in a separate suit for such rent and/or damages. If
a notice and grace period required by subparagraphs 13.1(b), (c) or (d) was
not previously given, a notice to pay rent or quit, or to perform or quit, as
the case may be, given to Lessee under any statute authorizing the forfeiture
of leases for unlawful detainer shall also constitute the applicable notice
for grace period purposes required by subparagraphs 13.1(d), (c) or (d). In
such case, the applicable grace period under subparagraphs 13.1(b), (c) or
(d) and under the lawful detainer statute shall run concurrently after the
one such statutory notice, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 195.4) after
Lessee's Breach and abandonment and recover the rent as it becomes due,
provided Lessee has the right to sublet or assign, subject only to reasonable
limitations. See Paragraphs 12 and 36 for the limitations on assignment and
subletting which limitations Lessee and Lessor agree are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under the Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 Inducement Recapture in Event of Breach. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises,
or for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease, all
of which concessions are hereinafter referred to as "Inducement Provisions,"
shall be deemed conditioned upon Lessee's full and faithful performance of
all of the terms, covenants and conditions of this Lease by Lessee, as
defined in Paragraph 13.1, any such inducement Provision shall automatically
be deemed selected from this Lease and of no further force or effect, and any
rent, other charge bonus, inducement or consideration theretofore abated,
given or paid by Lessor under such an inducement Provision shall be
immediately due and payable by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which initiated the operation of this Paragraph shall
not be deemed a waiver by Lessor of the provisions of this Paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust covering the
Premises. Accordingly, if any installment of rent or an other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5)
days after such amount shall be due, then, without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee.
-18-
<PAGE>
Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or
not collected, for three (3) consecutive installments of Base Rents, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable
quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of
this Lease unless Lessor falls within a reasonable time to perform an
obligation required to be performed by Lessor. For purposes of this
Paragraph 13.5, a reasonable time shall in no event be less than thirty (30)
days after receipt by Lessor, and by the holders of any ground lease,
mortgage or deed of trust covering the Premises whose name and address shall
have been furnished to Lessee in writing for such purpose, of written notice
specifying wherein such obligation of Lessor has not been performed;
provided, however, that if the nature of Lessor's obligation is such that
more than thirty (30) days after such notice are reasonably required for its
performance, then Lessor shall not be in breach of this Lease if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken
under the power of eminent domain or sold under the threat of the exercise of
said power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than ten percent
(10%) of the floor area of the Premises, or more than twenty-five percent
(25%) of the land area not occupied by any building, is taken by
condemnation, Lessee may, at Lessee's option, to be exercised in writing
within ten (10) days after Lessor shall have given Lessee written notice of
such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of
the date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in the same proportion as the
rentable floor of the building located on the Premises. No reduction of Base
Rent shall occur if the only portion of the Premises taken is land on which
there is no building. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat
of the exercise of such power shall be the property of Lessor, whether such
award shall be made as compensation for diminution in value of the leasehold
or for the taking of the fee, or as severance damages; provided, however,
that Lessee shall be entitled to any compensation separately awarded to
Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade
Fixtures. In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of its net severance damages
received, over and above the legal and other expenses incurred by Lessor in
the condemnation, Lessor shall to the extent of its net severance damages
received, over and above the legal and other expenses incurred by Lessor in
the condemnation matter, repair any damage to the Promises caused by such
condemnation, except to the extent that Lessee has been reimbursed therefor
by the condemning authority. Lessee shall be responsible for the payment of
any amount in excess of such net severance damages required to complete such
repair.
15. Broker's Fee.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay
to said Brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate written agreement
between Lessor and said Brokers (or in the event there is no separate written
agreement between Lessor and said Brokers, the sum of $______ per agreement)
for brokerage services rendered by said Brokers to Lessor in this transaction.
15.3
-19-
<PAGE>
15.4
15.5 Lessee and Lessor each represent and warrant to the other that
it has had no dealings with any person, firm, broker or finder (other than
the Brokers, if any named in Paragraph 1.10) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Brokers is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party, including any costs, expenses, attorneys'
fees reasonably incurred with respect thereto.
15.6
16. Tenancy Statement.
16.1 Each Party (as "Responding Party") shall within ten (10) days
after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in
form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association,
16.2 If Lessor desires to finance, refinance, or sell the Premises,
any part thereof, or the building of which the Premises are a part, Lessee
and all Guarantors of Lessee's performance hereunder shall deliver to any
potential lender or purchaser designated by Lessor such financial statements
of Lessee and such Guarantors as may be reasonably required by such lender or
purchaser, including but not limited to Lessee's financial statements for the
past three (3) years. All such financial statements shall be received by
Lessor and such lender or purchaser in confidence and shall be used only for
purposes herein set forth. Paragraph 16.2 is continued on Addendum below.
17. Lessor's Liability. The term "Lessor" as used herein shall mean
the owner or owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the Lessee's interest in the prior lease. In
the event of a transfer of Lessor's title or interest in the Premises or in
this Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of
-20-
<PAGE>
12% per annum, but not exceeding the maximum rate allowed by law, in addition
to the late charge provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties
under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under
the terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease
contains all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective.
23. Notices.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The address noted adjacent to a Party's
signature on this Lease shall be that Party's address for delivery or mailing
of notice purposes. Either Party may by written notice to the other specify a
different address for notice purposes, except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address
for the purpose of mailing or delivering notices to Lessee. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours
after delivery of the same to the United States Postal Service or courier.
If any notice is transmitted by facsimile transmission or similar means, the
same shall be deemed served or delivered upon telephone confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Sunday or legal holiday, it
shall be deemed received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof.
Lessor's consent to, or approval of, any act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any
subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. Regardless of Lessor's knowledge of a Default or Breach at the time
of accepting rent, the acceptance of rent by Lessor shall not be a waiver of
any preceding Default or Breach by Lessee of any provision hereof, other than
the failure of Lessee to pay the particular rent so accepted. Any payment
given Lessor by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or conditions
made by Lessee in connection therewith, which such statements and/or
conditions shall be of no force or effect whatsoever unless specifically
agreed to in writing by Lessor at or before the time of deposit of such
payment.
25. Recording. Either Lessor Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
-21-
<PAGE>
26. No Right to Holdover. Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or earlier termination
of this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be
observed or performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon
th3e parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "Security Device"), now
or hereinafter placed by Lessor upon the real property of which the Premises
are a part, to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Lessee agrees that the Lenders holding any such Security Device shall have
no duty, liability or obligation to perform any of the obligations of Lessor
under this Lease, but that in the event of Lessor's default with respect to
any such obligation, Lessee will give any Lender whose name and address have
been furnished Lessee in writing for such purpose notice of Lessor's default
and allow such Lender thirty (30) days following receipt of such notice for
the cure of said default before invoking any remedies Lessee may have by
reason thereof. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall
given written notice thereof to Lessee, this Lease and such Options shall be
deemed prior to such Security Device, notwithstanding the relative dates of
the documentation or recordation thereof.
30.2 Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or
(iii) be bound by prepayment of more than one (1) month's rent.
30.3 Non-Disturbance. With respect to Security Devices entered
into by Lessor after the execution of this Lease, Lessee's subordination of
this Lease shall be subject to receiving assurance (a "non-disturbance
agreement") from the Lender that Lessee's possession and this Lease,
including any options, to extend the term hereof, will not be disturbed so
long as Lessee is not in Breach hereof and attorns to the record owner of the
Premises.
30.4 Self-Execution. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection
with a sale, financing or refinancing of the Premises, Lessee and Lessor
shall execute such further writings as may be reasonably required to
separately document any such subordination or non-subordination, attornment
and/or non-disturbance agreement as is provided for herein.
31. Attorney's Fees. If any Party or Broker brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) or Broker in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorney's fees.
Such fees may be awarded in the same suit or recovered in a separate suit,
whether or not such action or proceeding is pursued to decision or judgment.
The term, "Prevailing Party" shall include, without limitation, a Party or
Broker who substantially obtains or defeats the relief sought, as the case
may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorney's fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorney's fees reasonably incurred. Lessor
shall be entitled to attorney's fees, costs and
-22-
<PAGE>
expenses incurred in the preparation and service of notices of Default and
consultants in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's
agents shall have the right to enter the Premises at any time. In the case
of an emergency, and otherwise at reasonable times for the purpose of showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part, as Lessor may reasonably deem necessary.
Lessor may at any time place on or about the Premises or building any
ordinary "For Sale" signs and Lessor may at any time during the last one
hundred twenty (120) days of the term hereof place on or about the Premises
any ordinary "For Lease" signs. All such activities of Lessor shall be
without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted
either voluntarily or involuntarily, any auction upon the Premises without
first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
34. Signs. Lessee shall not place any sign upon the Premises, except
that Lessee may, with Lessor's prior written consent, install (but not on the
roof) such signs as are reasonably required to advertise Lessee's own
business. The installation of any sign on the Premises by or for Lessee
shall be subject to the provisions of Paragraph 7 (Maintenance, Repairs,
Utility Installations, Trade Fixtures and Alterations). Unless otherwise
expressly agreed herein, Lessor reserves all rights to the use of the roof
and the right to install, and all revenues from the installation of, such
advertising signs on the Premises, including the roof, as do not unreasonably
interfere with the conduct of Lessee's business.
35. Termination; Merger. Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by Lessee,
the mutual termination or cancellation hereof, or a termination hereof by
Lessor for Breach by Lessee, shall automatically terminate any sublease or
lesser estate in the Premises; provided, however, Lessor shall, in the event
of any such surrender, termination or cancellation, have the option to
continue any one or all of any existing subtenancies. Lessor's failure
within ten (10) days following any such event to make a written election to
the contrary by written notice to the holder of any such lesser interest,
shall constitute Lessor's election to have such event constitute the
termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to
an act by or for the other Party, such consent shall not be unreasonably
withheld or delayed. Lessor's actual reasonable costs and expenses
(including but not limited to architects', attorneys', engineers' or other
consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent pertaining to this Lease or the
Premises, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, practice or
storage tank, shall be paid by Lessee to Lessor upon receipt of an invoice
and supporting documentation therefor. Subject to Paragraph 12.2(e)
(applicable to assignment or subletting), Lessor may, as a condition to
considering any such request by Lessee, require that Lessee deposit with
Lessor an amount of money (in addition to the Security Deposit held under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor
will incur in considering and responding to Lessee's request. Except as
otherwise provided, any unused portion of said deposit shall be refunded to
Lessee without interest. Lessor's consent to any act, assignment of this
Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the
time of such consent.
(b) All conditions to Lessor's consent authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
imposition by Lessor at the time of consent
-23-
<PAGE>
of such further or other conditions as are then reasonable with reference to
the particular matter for which consent is being given.
37.
37.1
37.2
38. Quiet Possession. Upon payment by Lessee of the rent for the
Premises and the observance and performance of all of the covenants,
conditions and provisions on Lessee's part to be observed and performed under
this Lease, Lessee shall have quiet possession of the Premises for the entire
term hereof subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Paragraph 39 the word "Option"
has the following meaning: (a) the right to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal to lease the Premises or
the right of first offer to lease the Premises or the right of first refusal
to lease other property of Lessor or the right of first offer to lease other
property of Lessor; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer to
purchase the Premises, or the right to purchase other property of Lessor, or
the right of first refusal to purchase other property of Lessor, or the right
of first offer to purchase other property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph
1.1 hereof, and cannot be voluntarily or involuntarily assigned or exercised
by any person or entity other than said original Lessee while the original
Lessee is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any, herein
granted to lessee are not assignable, either as a part of an assignment of
this Lease or separately or apart therefrom, and no Option may be separated
from this Lease in any manner, by reservation or otherwise. Paragraph 39.2
is continued on the Addendum below.
39.3 Multiple Options. In the event that Lessee has any Multiple
Options to extend or renew this Lease, a later Option cannot be exercised
unless the ______ Options to extend or renew this Lease have been validly
exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i)
during the period commencing with the giving of any notice of Default under
Paragraph 13.1 and continuing until the noticed Default is cured, or (ii)
during the period of time any monetary obligation due Lessor from Lessee is
unpaid (without regard to whether notice thereof is given lessee), or (iii)
during the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of Default under
paragraph 13.1, whether or not the Defaults are cured, during the twelve (12)
month period immediately preceding the exercise of the Option.
-24-
<PAGE>
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability
to exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding
Lessee's due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of thirty (30) days after such obligation
becomes due (without any necessity of Lessor to given notice thereof to
Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of Default
under Paragraph 13.1 during any twelve (12) month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40. Multiple Buildings. If the Premises are part of a group of
buildings controlled by Lessor, Lessee agrees that it will abide by, keep and
observe all reasonable rules and regulations which Lessor may make from time
to time for the management, safety, care, and cleanliness of the grounds, the
parking and unloading of vehicles and the preservation of good order, as well
as for the convenience of other occupants or tenants of such other buildings
and their invitees, and that Lessee will pay its fair share of common
expenses incurred in connection therewith.
41. Security Measures. Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or
other security measures, and that Lessor shall have no obligation whatsoever
to provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessor, its agents and invitees and their property from the acts of
third parties.
42. Reservations. Lessor reserves to itself the right, from time to
time, to grant, without the consent or joinder of Lessee, such easements,
rights and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements,
rights, dedications, maps and restrictions do not unreasonably interfere with
the use of the Premises by Lessee, Lessor agrees to sign any documents
reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise as
to any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum or any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. Authority. If either Party hereto is a corporation, trust, or
general or limited partnership, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly
authorized to execute and deliver this Lease on its behalf. If Lessee is a
corporation, trust or partnership, Lessee shall, within thirty (30) days
after request by Lessor, deliver to Lessor evidence satisfactory to Lessor of
such authority.
45. Conflict. Any conflict between the printed provisions of this
Lease and the typewritten or handwritten provisions shall be controlled by
the typewritten or handwritten provisions.
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This lease may be modified only in writing, signed by
the Parties in Interest at the time of the modification. The parties shall
amend this Lease from time to time to reflect any adjustments that re made to
the Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessor agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing of the property of which
the Premises are a part.
-25-
<PAGE>
48. Multiple Parties. Except as otherwise expressly provided herein,
if more than one person or entity is named herein as either Lessor or Lessee,
the obligations of such Multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES
AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS
LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY
SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates
specified above to their respective signatures.
LESSORS: LESSEE:
DELTAGEN, a Delaware corporation
/s/ Martin P. Hull
- ------------------------------- By: /s/ William D. Matthews
Martin P. Hull ------------------------------
Its: President
/s/ Mieke Dankers ------------------------------
- -------------------------------
Mieke Dankers
/s/ Dennis W. Royer
- -------------------------------
Dennis W. Royer
/s/ Christine J. Royer
- -------------------------------
Christine J. Royer
-26-
<PAGE>
EXHIBIT 10.5.2
ADDENDUM ("ADDENDUM")
TO THAT REAL PROPERTY LEASE
DATED JANUARY 25, 1997,
BY AND BETWEEN MARTIN P. HULL, MIEKE DANKERS,
DENNIS W. ROYER, AND CHRISTINE J. ROYER ("LESSOR")
AND
DELTAGEN, A DELAWARE CORPORATION ("LESSEE")
PARAGRAPH 1.2 CONTINUED:
The Premises are more fully described by way of a legal
description contained in Exhibit A, attached hereto.
PARAGRAPH 1.4 CONTINUED. EARLY POSSESSION.
Upon execution of this Lease, Lessee shall have the right to occupy
the Premises for the purpose of constructing its improvements therein. Lessee
agrees not to interfere with the work of Lessor. In the event Lessee's work
interferes with Lessor's ability to complete its work and to commence
the term of this Lease, then the Lease term shall commence on the date
Lessor would have had the Premises available for occupancy but for the delay
caused by Lessee.
PARAGRAPH 1.5 CONTINUED:
Rent is payable on the first day of each month, commencing on March
1, 1997. However, should Lessor complete those items it has agreed to do
under Paragraph 50 of the Addendum prior to March 1, 1997, then the Lease
Commencement Date shall be the date that Lessor completed its work, and
Lessee shall pay a pro rated Base Rent for the partial month. In the event
Lessor fails to complete its work, under the terms of the Lease, and the work
is completed after March 1, 1997, then the Lease Commencement Date shall
be the latter date and the Base Rent shall be pro rated.
PARAGRAPH 2.2. CONTINUED:
Lessor agrees to transfer to Lessee, as of the Lease Commencement
Date, any warranties Lessor has for work performed by Lessor or its
contractors or agents within the Premises.
PARAGRAPH 6.2(a). CONTINUED:
Lessor acknowledges and consents to Lessee's use of the
"Hazardous Substances" disclosed in Lessee's Application for
Conditional use Permit submitted to and approved by the City of San Carlos.
PARAGRAPH 6.2(d). CONTINUED:
A new Paragraph, 6.2(d) is included in the Lease as follows:
<PAGE>
Lessor shall indemnify, protect, defend and hold Lessee,
its shareholders, officers, directors, employees and agents harmless
from and against any and all losses and/or damages, liabilities,
judgements, costs, claims, liens, expenses, penalties, permits and
attorney's fees and consulting fees arising out of or involving any
Hazardous Substance in or below the Premises which existed prior to the
commencement date of this Lease, or which entered upon or under the
Premises, after the Lease Commencement Date, resulting from the actions of
others than Lessee, its employees, contractors, invitees, agents or others
within the control of Lessee. Lessor's obligations under this Paragraph 6
shall include, but not be limited to the effects of any
contamination or injury to person, property, or the environment created
or suffered by Lessee or others, and the cost of the investigation
(including consultants and attorneys' fees and testing, removal,
remediation, restoration and/or abatement thereof) or any contamination
therein involved, and shall survive the expiration or early termination
of this Lease. No termination, cancellation or release agreement entered
into by Lessee shall release Lessor from its obligations under this Lease
with respect to Hazardous Substances or storage tanks, unless specifically
agreed to by Lessee in writing at the time of such agreement.
Lessee shall notify Lessor in writing immediately upon discovery of
any facts on which Lessee may base a claim for indemnification under this
Paragraph.
PARAGRAPH 6.3 CONTINUED:
Lessee shall, at Lessee's sole cost and expense, fully, diligently,
and in a timely manner, comply with all "Applicable Law" relating to
Lessee's specific occupancy of the Premises. Lessee shall, within five days
after receipt of Lessor's written request, provide Lessor with copies of
all documents and information, including, but not limited to, permits,
registrations, manifests, applications, reports and certificates,
evidencing Lessor's compliance with any Applicable Law, and shall
immediately, upon receipt, notify Lessor, in writing, of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining
to or involving failure by Lessee to comply with any Applicable Law.
"Applicable Law" for purposes of this Agreement, shall mean all federal,
state and local law, ordinances, regulations and permits required.
PARAGRAPH 7.1 CONTINUED:
Notwithstanding anything else contained in the Lease to the
contrary, Landlord shall be responsible for all structural repairs and
Paragraph 7.1 is subject to the terms and conditions contained in Paragraph
50 of the Addendum.
PARAGRAPH 7.4. CONTINUED:
Notwithstanding anything else in the Lease to the contrary,
Lessee's "trade fixtures" will remain the property of Lessee, and Lessee
shall have the right to remove all of its trade fixtures at the termination
of this Lease.
PARAGRAPH 8.7 CONTINUED:
Except for Lessee's negligence and/or breach of express
warranties, Lessor shall indemnify, protect, defend and hold harmless the
Premises, Lessee and its agents, shareholders and lenders from and against
any and all claims, loss of rents and/or damages, costs, liens,
-2-
<PAGE>
judgements, penalties, permits, attorney's and consultant's fees, expenses
and/or liabilities arising out of, involving or in dealing with Lessor's
ownership of the Premises, any act, omission or neglect of Lessor, its
agents, contractors, employees or invitees, and out of any default or breach
by Lessor in the performance in a timely manner of any obligation of Lessor's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessee) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding by brought against Lessee by
reason of any of the foregoing matters, Lessor, upon notice from Lessee,
shall defend the same at Lessor's expense by counsel reasonably satisfactory
to Lessee and Lessee shall cooperate with Lessor in such defense. Lessee need
not have first paid any such claim in order to be so indemnified.
Lessor shall notify Lessor in writing immediately upon discovering
any facts upon which Lessee may base a claim for indemnification
under this Paragraph.
PARAGRAPH 16.2 CONTINUED:
Notwithstanding anything else contained to the contrary in this
Lease, Lessee's obligation to provide financial statements shall be
specifically limited to the prior year's financial statements and its most
current financial statement. Lessee shall not be required to provide this
financial information more than twice during the term of the Lease.
PARAGRAPH 39.2 CONTINUED:
Notwithstanding anything else to the contrary contained herein,
Lessee shall have the right to assign this Lease to any affiliated company or
successor entity, and said affiliated company or successor entity shall have
the right to exercise any options granted under the terms of this Lease.
PARAGRAPH 49.
Lessor estimates that Lessee's expenses, reimbursable to Lessor,
are approximately $2,000.00 per month.
PARAGRAPH 50.
Lessor agrees to pay for, construct, install, repair or perform
the following, prior to the Lease Commencement Date:
a. All general building systems, such as the heating,
ventilating and air conditioning (HVAC),
electrical-systems, plumbing systems, hardware, locking
mechanisms, roll up doors, light bulbs, tubes and ballasts
and the like shall be repaired and in good working order
and capable of functioning in the manner for which they
were intended. Lessor shall not be responsible for
repairing any specialty equipment installed by Lessee.
Lessor, at Lessor's sole cost and expense, shall install a
standard phone line to the building.
-3-
<PAGE>
b. The building shall be repaired and restored in a matter
that will enable it to be free from water intrusion from
leaks in the walls, roof, windows, floors and doors.
Existing water damage shall be repaired and replaced by
the Lessor. Lessee shall have no liability for repair
or replacement of any flooring within the Premises, which
flooring is damaged due to water intrusion into the
Premises, the cause of which was not Lessee's.
c With regard to the presence of Hazardous Substances or the
presence of toxics within the Building, Lessor agrees to:
(1) Remove all existing Hazardous Substances and toxics.
(2) All of the hoods, vents, ducting and piping
associated with the lab areas shall be removed,
with all penetrations properly repaired and patched.
(3) With regard to the "sump room" Lessor shall obtain a
closure report for that room. All equipment, drains,
and the like shall be removed and concrete shall be
poured over the opening in the floor so that the
floor is made level with the adjoining rooms. The
discharge drainage line in this room shall be
pressure tested to ensure that it did not leak.
Lessee shall have the right, at Lessee's cost, to
take core samples of the soil underneath this room
and have those soil samples tested to ensure that no
Hazardous Materials or toxic waste is found therein.
Lessor shall comply with all other requirements of
the County of San Mateo to obtain an appropriate
closure report.
(4) Lessor shall have obtained a final closure report
from the County of San Mateo, for the Premises.
d. Lessor and Lessee agree that Lessee's maintenance
obligations with regard to the HVAC units, shall be
restricted to $4,800.00 per year. The cost of
maintaining or operating the HVAC units over and above
this amount shall be paid for by Lessor.
e. At the rear of the building there is a "chiller". The
chiller, all piping and equipment associated with it,
shall be removed and all holes patched and repaired by
Lessor.
f. Lessor agrees to patch and repair all roof leaks prior to
the Lease Commencement Date, and to guarantee to repair
any roof leaks which manifests themselves during the
first six months of the Lease term.
g. Lessor agrees to employ a structural engineer to review
the structural integrity of the roof system. The engineer
shall specifically investigate the condition of the hangars
used to support the roof framing members, many of which
are corroded and rusted. The integrity of the roof shall
be investigated, and repaired at the cost of Lessor. At
the time of this repair, the foil paper installed in the
ceiling shall be removed. Lessor agrees to install
insulation above the drop ceiling throughout the
-4-
<PAGE>
Premises. Lessee shall have no liability for the repair or
replacement of any portion of the Premises as a result of
condensation damage to the building.
h. The soffit at the front of the building is not secure.
Lessor agrees to, secure the wooden members so that they
may not be removed to allow entry into the Premises.
i. At the back of the building, above the roll up door, is a fan.
Lessor shall remove the fan and patch and repair the hole.
j. Lessor shall repair the exposed electrical wire to the
landscaping timer.
k. The fire sprinkler riser, at the front of the Building, is
set on an angle. Lessee shall have no liability
whatsoever for correcting this deficiency or for any
damage caused by its current condition.
l. Lessor and Lessee acknowledge that the back parking lot
is prone to flooding. Currently, the parking lot is not
in good physical condition, due to recent and past
floods. Lessor agrees to repair this parking lot and
Lessee shall have no liability for its maintenance
throughout the term of this Lease except as to damage
specifically caused by Lessees.
m. At the front left corner of the building, there is a
downspout located near the electrical box for the
adjoining building. Lessee shall have no liability to
Lessor or to any other third parties as a result of this
configuration.
n. All cracks in the cinder block building material for
the exterior of the building, shall be repaired so that
they are water tight.
o. Currently, there is a sink located in one of the
janitor closets which is located next to an electric
water heater. Lessor agrees to relocate the electric water
heater to a safer location.
p. As of the Lease Commencement Date all fire sprinkler lines
and systems shall have been inspected and the five
year test performed. Any fire sprinkler lines which are
not properly supported by brackets, shall be supported in
accordance with applicable building codes.
q. At the front of the building, there is a disconnected
ground wire. This shall be used or removed as necessary by
Lessor.
r. Lessee shall have no liability for the repair of the glue lam
beams in the building throughout the term of the Lease.
s. Notwithstanding anything else contained in this Lease to
the contrary, Lessee shall have no liability to
Lessor for upgrading the building for seismic safety
purposes, unless the seismic upgrade was required as a
result of the specific equipment installed within the
Premises by Lessee.
-5-
<PAGE>
PARAGRAPH 51. OPTION TO RENEW.
Provided Tenant is not in material default under any of the
terms, covenants or condition of this Lease, and subject to the terms and
conditions set forth herein, Tenant is hereby granted the option to extend
this Lease for a period of three years:
(a) Tenant shall notify landlord in writing of Tenant's
exercise of this Option to extend this Lease on or before
November 1, 1999.
(b) The extended term of this Lease shall commence on March 1,
2000 and shall end on February 28, 2003 ("Extended Term").
(c) The monthly Basic Rent during the Extended Term
shall increase, annually, in accordance with the CPI
formula included herein. Nevertheless, the annual minimum
increase in Base Rent will be 2% and the maximum will
be 4%. The CPI formula will be as follows:
Consumer Price Index ("CPI") for all urban Consumers,
subgroup "All Items", San Francisco-Oakland, California
Metropolitan Area (1982-84 = 100) published by the
Bureau of Labor Statistics, U.S. Department of Labor
(the "Index") published nearest the first day of the month
twelve (12) months prior to the beginning date of the
Extended Term (the Beginning Index) and the Index which
is published nearest but prior to the first day of the
first Extended Term, and each and every anniversary
date of the Extended Term (the "Adjustment Index").
The "CPI" adjusted Basic Rent shall be calculated by
multiplying the Basic Rent by a fraction, the numerator
of which is the Adjustment Index and the denominator of
which is the Beginning Index. In no event, however,
shall the "CPI" adjusted Basic Rent decrease below the
Basic Rent of the Lease or any subsequent adjustment
thereof. If the Index is changed so that the Base Year of
the Index differs from that used as of the month
immediately preceding the month in which the term commences
the Index shall be convened in accordance with the
conversion factor published by the United States Department
of Labor, Bureau of Labor Statistics. If the
Index is discontinued or revised during the term, such
other government index or other computation with which it
is replaced shall be used in order to obtain substantially
the same result as would be obtained if the Index had not
been discontinued or revised.
PARAGRAPH 52. OPTION TO PURCHASE.
To and including March 1, 1999, Lessee shall have the option
to purchase all of the Lessor's rights, title and interest in and to the
Premises, on the following terms and conditions ("Option").
a. Lessor hereby grants Lessee the Option to purchase
the Premises as set forth herein. Attached hereto as
Exhibit B is a true and correct copy of a
Preliminary Title Report regarding the Premises issued by
First American Title Company. Lessee has approved title
exceptions ____________ of the Preliminary Title Report
and has rejected title exceptions _________. Lessee
agrees, should it
-6-
<PAGE>
exercise the Option granted herein, to take title subject
to the approved title exceptions. The disapproved title
exceptions shall be eliminated prior to Lessee taking title
to the Property.
b. Lessee may exercise this Option only within the time
period set forth above. This right to purchase the
Premises may be exercised by Lessee, or any subsidiary or
entity controlled by Lessee.
c. If Lessee has not notified Lessor, in writing, of
Lessee's intent to exercise this Option to Purchase, on or
before March 1, 1999, then this Option shall
automatically terminate without any action on the part of
any party.
d. Lessee may exercise this Option, by notifying Lessor
of Lessee's intent, and by depositing a $10,000 check
into Escrow, with the Escrow Holder. The $10,000
shall be the "Initial Deposit" into Escrow, and shall
be applied to the Purchase Price. The Initial Deposit
shall be held in an interest bearing account, for the
benefit of Lessee.
e. The Escrow Holder shall be First American Title Company.
f. Each party to the Escrow shall be pay its normal and customary
fees as is customary in San Mateo County.
g. Lessor shall convey the Premises to Lessee, free of any
liens or encumbrances, except for those approved conditions
of title as set forth in Paragraph 52.A. above, Lessor
shall convey the Premises to Lessee in an "as is" condition.
h. The term of the Escrow shall be for 120 days. During the
120 days, each party shall submit, to the Escrow
Holder, such documents and funds as is necessary to
transfer title to the property to Lessee. Lessee shall
deposit sufficient funds to pay for the Purchase Price and
its share of the Closing Costs. If requested by Lessor,
Lessee shall cooperate with a 1031 Tax Deferred Exchange,
or its equivalent, without increasing the period of the
time of escrow, increasing the liability of any kind to
Lessee, or increasing any cost to Lessee for having
agreed to do so.
i. Lessee shall have the right to purchase the Premises, for
the sum of $1,225,000 ("Purchase Price"). j. Lessor and
Lessee each agree to sign any and all documents, as may be
reasonably required in order to bring to pass the
contemplated sales transaction. Each party agrees to act
in good faith and each party shall have all remedies
available to it, at law or equity, in the event of a
breach of this Agreement.
j. In the event Lessee fails to exercise this Option,
if specifically requested by Lessor, Lessee shall
execute, acknowledge and deliver to Lessor, a quit claim
deed or other reasonable document acknowledging that
this Option has terminated.
-7-
<PAGE>
PARAGRAPH 53.
As additional security, for the payment of rent due under this
Lease, Lessee agrees to tender to Lessor, a standby letter of credit in the
face amount of Seventy Nine Thousand Five Hundred Sixty and No/100
Dollars . The term of this letter of credit shall be for one year. In the
event Lessee defaults in the payment of rent for more than 30 days, then
Lessor shall have the right to receive payment of the delinquent rent
from the letter of credit. The form of the letter of credit shall be
approved by Lessor and Lessee. A letter of credit shall be issued by a bank
reasonably acceptable to Lessor. The rights stated herein are in addition
to, and cumulative, with all of the rights and remedies that Lessor may
have under law or in equity, and/or under the terms of the Lease,
including without limitation the rights and remedies set out in Paragraph 13
of this Lease.
LESSORS: LESSEE:
DELTAGEN,
a Delaware Corporation
/s/ Martin P. Hull By /s/ William Matthews
- ----------------------------------- -----------------------------------
Martin P. Hull Its President
/s/ Mieke Dankers
- -----------------------------------
Mieke Dankers
/s/ Dennis W. Royer
- -----------------------------------
Dennis W. Royer
/s/ Christine J. Royer
- -----------------------------------
Christine J. Royer
-8-
<PAGE>
Exhibit 10.5.3
FIRST AMENDMENT OF LEASE
This First Amendment of Lease ("Amendment") is made and entered into as
of the 1st day of of March, 1999 by and between MARTIN P. HULL, MIEKE DANKERS,
DENNIS W. ROYER and CHRISTINE J. ROYER, tenants in common, each hereinafter
referred to as "Lessor" and DELTAGEN, a Delaware corporation ("Lessee").
RECITALS
A. Lessor and Lessee entered into a lease dated January 25, 1997
("Lease"), for the lease of the building at 1031 Bing Street, San Carlos, San
Mateo County, California ("Premises").
B. Lessor and Lessee now desire to amend the terms of the Lease to
provide for an extension of the Lease Term.
NOW, THEREFORE, in cosideration of the foregoing, and other good and
valuable consideration, the receipt of which is hereby acknowledged, Lessor and
Lessee agree as follows:
1. Unless otherwise expressly provided herein, all terms which are
given a special definition by the Lease, that are used herein, are intended to
be used with the definition given to them in the Lease. The provisions of the
Lease shall remain in full force and effect except as specifically amended
hereby: In the event of any inconsistency between the Lease and this Amendment,
the terms of this Amendment shall prevail.
2. Paragraph 1.3 is amended to extend the Lease Expiration Date by four
(4) years to the date of February 29, 2004.
3. Paragraph 1.5 is amended to provide for the payment of the following
sums of Base Rent:
Commencing on March 1, 1999, and continuing through the month of
February, 2004, the monthly Base Rent shall be $13,260.00.
4. Paragraph 7.4 is amended as follows: Notwithstanding anything else
contained in the Lease to the contrary, Lessee Owned Alterations and Utility
Installations may be retained and removed from the Premises by the Lessee, at
the termination of the Lease term. Any items not removed shall become the
property of Lessor. Upon surrender of the Premises, at the Lease termination,
Lessee shall not be responsible for removal of approved Lessee Owned Alterations
or Utility Installations, nor the restoration of the Premises to its original
condition, prior to the commencement of the Lease. Nevertheless, any damage
caused by the removal of Lessee's property from the Premises shall be repaired
by Lessee. Upon surrender of the Premises, the Premises shall be clean and free
of debris and in good operating order, condition and state of repair, ordinary
wear and tear excepted.
5. Paragraph 50(d) is replaced as follows: "Lessor and Lessee agree
that Lessor shall have no obligation to maintain HVAC units, except for the HVAC
units which were installed in the premises by January 25, 1997. However, with
respect to those units, Lessee shall bear the first $4,800 of maintenance or
repair cost each year."
6. Paragraph 51 of the Lease is deleted in its entirety.
7. Paragraph 52 of the Lease is deleted in its entirety.
8. Paragraph 53 of the Lease is deleted in its entirety.
9. Lessor agrees to pay for any and all brokerage services or fees
incurred by Lessor to obtain this Lease extension, if any, and in the event
Lessee exercises the option set forth below, for the Lease extension
resulting from the exercise of the option. Lessee shall not be obligted to
pay Lessor's real
<PAGE>
estate brokerage fees. Lessor and Lessee each agree to indemnify, defend and
hold the other party harmless from and against any and all liability, damages
and costs (including attorneys' fees) incurred by the other as a result of a
claim made by the other party's real estate broker.
10. Provided Lessee is not in material default under any of the
terms, covenants or conditions of this Lease, and subject to the terms and
conditions set forth herein, Lessee is herby granted the option to extend this
Lease for a period of five (5) years:
a. Lessee shall notify Lessor in writing of Lessee's exercise of
the option on or before December 1, 2003.
b. The extended term of this Lease shall commence on March 1,
2004 and shall end on February 28, 2009 ("First Extended
Term").
c. The monthly Base rent shall continue to be the monthly sum of
$13,260.00 throughout the First Extended term.
11. Except as herein modified and amended, the Lease shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have signed this First Amendment of
Lease, which, for reference purposes, shall be deemed to have been dated as of
March 1, 1999.
Lessor: Lessee:
/s/ Martin P. Hull DELTAGEN, a Delaware corporation
- ------------------------------------
Martin P. Hull
/s/ Mieke Dankers By: /s/ William Matthews
- ------------------------------------ --------------------------------
Mieke Dankers Its Chief Executive Officer
/s/ Dennis W. Royers
- -----------------------------------
Dennis W. Royers
/s/ Christine J. Royers
- -----------------------------------
Christine J. Royers
<PAGE>
LEASE AGREEMENT
(NNN R&D)
BASIC LEASE INFORMATION
LEASE DATE: April 9, 1999
LANDLORD: Willow Park Holding Company II
a Delaware limited liability company
LANDLORD'S ADDRESS: c/o Legacy Partners Commercial, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404-1167
TENANT: Deltagen, Inc.
a Delaware corporation
TENANT'S ADDRESS: 1003 Hamilton Court
Menlo Park, California 94025
PREMISES: Approximately 28,938 rentable square feet as
shown on EXHIBIT A
PREMISES ADDRESS: 1003 Hamilton Court
Menlo Park, California 94025
BUILDING E: Approximately 54,586 rentable square feet
LOT (BUILDING'S TAX PARCEL): APN 055-440-050
WILLOW PARK: Approximately 984,954 rentable square feet
PHASE VIII OF THE PARK: Approximately 54,586 rentable square feet
TERM: July 15, 1999 ("Commencement Date"), through
July 14, 2004 ("Expiration Date")
BASE RENT (PARA 3): Fifty Seven Thousand Eight Hundred Seventy-Six
and 00/100 Dollars ($57,876.00) per month
ADJUSTMENTS TO BASE RENT: July 15, 2000 $59,902.00
July 15, 2001 $61,927.00
July 15, 2002 $63,953.00
July 15, 2003 $65,979.00
LETTER OF CREDIT (PARA 4): Three Hundred Thousand and 00/100 Dollars
($300,000.00)
*TENANT'S SHARE OF OPERATING EXPENSES (PARA 6.1): 53.01% of the Phase
*TENANT'S SHARE OF TAX EXPENSES (PARA 6.2): 53.01% of the Building
*TENANT'S SHARE OF COMMON AREA UTILITY COSTS (PARA 7): 53.01% of the Phase
*TENANT'S SHARE OF UTILITY EXPENSES (PARA 7): 53.01% of the Phase
*The amount of Tenant's Share of the expenses as referenced above shall be
subject to modification as set forth in this Lease.
PERMITTED USES (PARA 9): Office, research and development for gene data
technology, but only to the extent permitted
by the City of Menlo Park and all agencies and
governmental authorities having jurisdiction
thereof.
UNRESERVED
PARKING SPACES: One hundred fourteen (114) non-exclusive and
non-designated spaces
BROKER (PARA 38): Willis & Associates/Equis of California for
Tenant BT Commercial/Legacy Partners
Commercial, Inc. for Landlord
EXHIBITS: EXHIBIT A - PREMISES, BUILDING, LOT AND/OR PARK
EXHIBIT B - INTENTIONALLY OMITTED
EXHIBIT C - RULES AND REGULATIONS
EXHIBIT D - COVENANTS, CONDITIONS AND
RESTRICTIONS
EXHIBIT E - HAZARDOUS MATERIALS DISCLOSURE
CERTIFICATE-EXAMPLE
EXHIBIT F - CHANGE OF COMMENCEMENT DATE - EXAMPLE
EXHIBIT G - TENANT'S INITIAL HAZARDOUS
MATERIALS DISCLOSURE CERTIFICATE
EXHIBIT H - SIGN CRITERIA (INTENTIONALLY
OMITTED)
EXHIBIT I - TENANT'S TRADE FIXTURES
ADDENDA: ADDENDUM 1: OPTION TO EXTEND
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1. Premises..............................................................3
2. Adjustment of Commencement Date; Condition of the Premises............3
3. Rent..................................................................4
4. Collateral for Performance of Lease Obligations.......................4
5. Tenant Improvements...................................................6
6. Additional Rent.......................................................6
7. Utilities............................................................10
8. Late Charges.........................................................11
9. Use of Premises......................................................11
10. Alterations and Additions; and Surrender of Premises.................13
11. Repairs and Maintenance..............................................14
12. Insurance............................................................15
13. Waiver of Subrogation................................................12
14. Limitation of Liability and Indemnity................................12
15. Assignment and Subleasing............................................13
16. Ad Valorem Taxes.....................................................14
17. Subordination........................................................14
18. Right of Entry.......................................................15
19. Estoppel Certificate.................................................15
20. Tenant's Default.....................................................15
21. Remedies for Tenant's Default........................................16
22. Holding Over.........................................................17
23. Landlord's Default...................................................17
24. Parking..............................................................17
25. Sale of Premises.....................................................18
26. Waiver...............................................................18
27. Casualty Damage......................................................18
28. Condemnation.........................................................19
29. Environmental Matters/Hazardous Materials............................19
30. Financial Statements.................................................21
31. General Provisions...................................................21
32. Signs................................................................23
33. Mortgagee Protection.................................................23
34. Quitclaim............................................................23
35. Modifications for Lender.............................................23
36. Warranties of Tenant.................................................23
37. Compliance with Americans with Disabilities Act......................24
38. Brokerage Commission.................................................24
39. Quiet Enjoyment......................................................24
40. Landlord's Ability to Perform Tenant's Unperformed Obligations.......25
</TABLE>
2
<PAGE>
LEASE AGREEMENT
Date: This Lease is made and entered into as of the Lease Date
set forth on Page 1. The Basic Lease Information set forth
on Page 1 and this Lease are and shall be construed as a
single instrument.
1. PREMISES
Landlord hereby leases the Premises to Tenant upon the terms and
conditions contained herein. Landlord hereby grants to Tenant a license for
the right to use, on a non-exclusive basis, parking areas and ancillary
facilities located within the Common Areas of the Park, subject to the terms
of this Lease. Landlord and Tenant hereby agree that for purposes of this
Lease, as of the Lease Date, the rentable square footage area of the
Premises, the Building, the Lot and the Park shall be deemed to be the number
of rentable square feet as set forth in the Basic Lease Information on Page
1. Tenant hereby acknowledges that the rentable square footage of the
Premises may include a proportionate share of certain areas used in common by
all occupants of the Building and/or the Park (for example an electrical room
or telephone room). Tenant further agrees that the number of rentable square
feet of the Building, the Lot and the Park may subsequently change after the
Lease Date commensurate with any modifications to any of the foregoing by
Landlord, and Tenant's Share shall accordingly change.
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES
2.1 If Landlord cannot deliver possession of the Premises on
the Commencement Date, Landlord shall not be subject to any liability nor
shall the validity of the Lease be affected; provided, the Lease Term and the
obligation to pay Rent shall commence on the date possession is tendered and
the Expiration Date shall be extended commensurately. In the event the
commencement date and/or the expiration date of this Lease is other than the
Commencement Date and/or Expiration Date specified in the Basic Lease
Information, as the case may be, Landlord and Tenant shall execute a written
amendment to this Lease, substantially in the form of Exhibit F hereto,
wherein the parties shall specify the actual commencement date, expiration
date and the date on which Tenant is to commence paying Rent. The word "Term"
whenever used herein refers to the initial term of this Lease and any
extension thereof. By taking possession of the Premises, Tenant shall be
deemed to have accepted the Premises in good condition and state of repair.
Landlord shall repair, at its sole cost and expense, after receipt of
Tenant's written notice thereof, which notice must be delivered to Landlord
within the first ninety (90) days of the term of this Lease, any (i) latent
defects in the Premises, and (ii) any mechanical and electrical systems
serving the Premises which are not in good working order to the extent Tenant
has not caused such systems to not be in good working order. Prior to Lease
execution, Tenant shall conduct an inspection of the premises and provide
Landlord a copy of such inspection with a list of items Landlord shall
repair. Upon Lease execution Landlord shall commence to complete all repairs
as diligently as possible. If Tenant fails to timely deliver to Landlord any
such written notice of the aforementioned defects or deficiencies within said
90-day period, Landlord shall have no obligation to perform any such work
thereafter, except as specifically provided in this Lease. Tenant hereby
acknowledges and agrees that neither Landlord nor Landlord's agents or
representatives has made any representations or warranties as
-3-
<PAGE>
to the suitability, safety or fitness of the Premises for the conduct of
Tenant's business, Tenant's intended use of the Premises or for any other
purpose.
2.2 In the event Landlord permits Tenant to occupy the
Premises prior to the Commencement Date, such occupancy shall be at Tenant's
sole risk and subject to all the provisions of this Lease, including, but not
limited to, the requirement to pay Rent and the Security Deposit, and to
obtain the insurance required pursuant to this Lease and to deliver insurance
certificates as required herein. In addition to the foregoing, Landlord shall
have the right to impose such additional conditions on Tenant's early entry
as Landlord shall deem appropriate. If, at any time, Tenant is in default of
any term, condition or provision of this Lease, any such waiver by Landlord
of Tenant's requirement to pay rental payments shall be null and void and
Tenant shall immediately pay to Landlord all rental payments so waived by
Landlord.
3. RENT
On the date that Tenant executes this Lease, Tenant shall deliver to
Landlord the original executed Lease, the Base Rent (which shall be applied
against the Rent payable for the first month Tenant is required to pay Base
Rent), the Security Deposit, and all insurance certificates evidencing the
insurance required to be obtained by Tenant under Section 12 of this Lease.
Tenant agrees to pay Landlord, without prior notice or demand, or abatement,
offset, deduction or claim, the Base Rent specified in the Basic Lease
Information, payable in advance at Landlord's address specified in the Basic
Lease Information on the Commencement Date and thereafter on the first (1st)
day of each month throughout the balance of the Term of the Lease. In
addition to the Base Rent set forth in the Basic Lease Information, Tenant
shall pay Landlord in advance on the Commencement Date and thereafter on the
first (lst) day of each month throughout the balance of the Term of this
Lease, as Additional Rent, Tenant's Share of Operating Expenses, Tax
Expenses, Common Area Utility Costs, and Utility Expenses. Tenant shall also
pay to Landlord as Additional Rent hereunder, immediately on Landlord's
demand therefor, any and all costs and expenses incurred by Landlord to
enforce the provisions of this Lease, including, but not limited to, costs
associated with the delivery of notices, delivery and recordation of
notice(s) of default, attorneys' fees, expert fees, court costs and filing
fees (collectively, the "Enforcement Expenses"). The term "Rent" whenever
used herein refers to the aggregate of all these amounts. If Landlord permits
Tenant to occupy the Premises without requiring Tenant to pay rental payments
for a period of time, the waiver of the requirement to pay rental payments
shall only apply to waiver of the Base Rent and Tenant shall otherwise
perform all other obligations of Tenant required hereunder. The Rent for any
fractional part of a calendar month at the commencement or termination of the
Lease term shall be a prorated amount of the Rent for a full calendar month
based upon a thirty (30) day month. The prorated Rent shall be paid on the
Commencement Date and the first day of the calendar month in which the date
of termination occurs, as the case may be.
4. COLLATERAL FOR PERFORMANCE OF LEASE OBLIGATIONS
Simultaneously with Tenant's delivery to Landlord of this Lease and the
first month's Base Rent in accordance with the provisions of Section 3 above,
Tenant shall deliver to Landlord, as collateral for the full and faithful
performance by Tenant of all of its obligations
-4-
<PAGE>
under this Lease and for all losses and damages Landlord may suffer as a
result of any default by Tenant under this Lease, an irrevocable and
unconditional negotiable letter of credit, in the form and containing the
terms required herein, payable in the City of Foster City, California running
in favor of Landlord issued by a solvent bank under the supervision of the
Superintendent of Banks of the State of California, or a National Banking
Association, in the amount of Three Hundred Thousand Dollars ($300,000.00)
(the "Letter of Credit"). The Letter of Credit shall be (a) at sight and
irrevocable, (b) maintained in effect, whether through replacement, renewal
or extension, for the entire Lease Term (the "Letter of Credit Expiration
Date") and Tenant shall deliver a new Letter of Credit or certificate of
renewal or extension to Landlord at least thirty (30) days prior to the
expiration of the Letter of Credit, without any action whatsoever on the part
of Landlord, (c) subject to the Uniform Customs and Practices for Documentary
Credits (1993-Rev) International Chamber of Commerce Publication #500, (d)
acceptable to Landlord in its sole discretion, and (e) fully assignable by
Landlord and permit partial draws. The Letter of Credit shall be in the
amount of Three Hundred Thousand Dollars ($300,000.00) ("Original L.C.
Amount) through the period of October 31, 2001. So long as Tenant is not
then, or has not been in default of any provision of the Lease, then the
Letter of Credit amount shall be reduced to One Hundred Thousand Dollars
($100,000.00) ("Reduced L.C. Amount") effective as of November 1, 2001,
subject to the replacement renewal or extension provisions herein. In
addition to the foregoing, the form and terms of the Letter of Credit (and
the bank issuing the same) shall be acceptable to Landlord, in Landlord's
sole discretion, and shall provide, among other things, in effect that: (1)
Landlord, or its then managing agent, shall have the right to draw down an
amount up, to the face amount of the Letter of Credit upon the presentation
to the issuing bank of Landlord's (or Landlord's then managing agent's)
statement that such amount is due to Landlord under the terms and conditions
of this Lease, it being understood that if Landlord or its managing agent be
a corporation, partnership or other entity, then such statement shall be
signed by an officer (if a corporation), a general partner (if a
partnership), or any authorized party (if another entity); (2) the Letter of
Credit will be honored by the issuing bank without inquiry as to the accuracy
thereof and regardless of whether the Tenant disputes the content of such
statement; and (3) in the event of a transfer of Landlord's interest in the
Building, Landlord shall transfer the Letter of Credit, in whole or in part
(or cause a substitute letter of credit to be delivered, as applicable), to
the transferee and thereupon the Landlord shall, without any further
agreement between the parties, be released by Tenant from all liability
therefor, and it is agreed that the provisions hereof shall apply to every
transfer or assignment of the whole or any portion of said Letter of Credit
to a new Landlord. If, as a result of any such application of all or any part
of the Letter of Credit, the amount of the Letter of Credit shall be less
than the Original L.C. Amount or the Reduced L.C. Amount, as the case may be,
Tenant shall within five (5) days thereafter provide Landlord with additional
letter(s) of credit in an amount equal to the deficiency (or a replacement
letter of credit in the total amount of the Original L.C. Amount or the
Reduced L.C. Amount, as the case may be, and each such additional (or
replacement) letter of credit shall comply with all of the provisions of this
Section 4, and if Tenant fails to do so, the same shall constitute an
incurable default by Tenant. Tenant further covenants and warrants that it
will neither assign nor encumber the Letter of Credit or any part thereof and
that neither Landlord nor its successors or assigns will be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
Without limiting the generality of the foregoing, if the Letter of Credit
expires earlier than the Letter of Credit Expiration Date, Landlord will
accept a renewal thereof or substitute letter of credit (such renewal or
substitute
-5-
<PAGE>
letter of credit to be in effect not later than thirty (30) days prior to the
expiration thereof), which shall be irrevocable and automatically renewable
as above provided through the Letter of Credit Expiration Date upon the same
terms as the expiring letter of credit or such other terms as may be
acceptable to Landlord in its sole discretion. However, if the Letter of
Credit is not timely renewed or a substitute letter of credit is not timely
received, or if Tenant fails to maintain the Letter of Credit in the amount
and terms set forth in this Section 4, Landlord shall have the right to
present such Letter of Credit to the bank in accordance with the terms of
this Section 4, and the entire sum evidenced thereby shall be paid to and
held by Landlord as collateral for performance of all of Tenant's obligations
under this Lease and for all losses and damages Landlord may suffer as a
result of any default by Tenant under this Lease. If there shall occur a
default under this Lease as set forth in Section 20 of this Lease, Landlord
may, but without obligation to do so, draw upon the Letter of Credit, in part
or in whole, to cure any default of Tenant and/or to compensate Landlord for
any and all damages of any kind or nature sustained or which may be sustained
by Landlord resulting from Tenant's default. Tenant agrees not to interfere
in any way with payment to Landlord of the proceeds of the Letter of Credit,
either prior to or following a "draw" by Landlord of any portion of the
Letter of Credit, regardless of whether any dispute exists between Tenant and
Landlord as to Landlord's right to draw from the Letter of Credit. No
condition or term of this Lease shall be deemed to render the Letter of
Credit conditional to justify the issuer of the Letter of Credit in failing
to honor a drawing upon such Letter of Credit in a timely manner. Landlord
and Tenant acknowledge and agree that in no event or circumstance shall the
Letter of Credit or any renewal thereof or substitute therefor be (i) deemed
to be or treated as a "security deposit" within the meaning of California
Civil Code Section 1950.7, (ii) subject to the terms of such Section 1950.7,
or (iii) intended to serve as a "security deposit" within the meaning of such
Section 1950.7. The parties hereto (x) recite that the Letter of Credit is
not intended to serve as a security deposit and such Section 1950.7 and any
and all other laws, rules and regulations applicable to security deposits in
the commercial context ("Security Deposit Laws") shall have no applicability
or relevancy to the Letter of Credit and (y) waive any and all rights, duties
and obligations either party may now or, in the future, will have relating to
or arising from the Security Deposit Laws.
5. TENANT IMPROVEMENTS
Tenant hereby accepts the Premises as suitable for Tenant's intended
use and as being in good operating order, condition and repair, "AS IS"
subject to the provisions in Section 2.1. Tenant acknowledges and agrees that
neither Landlord nor any of Landlord's agents, representatives or employees
has made any representations as to the suitability, fitness or condition of
the Premises for the conduct of Tenant's business or for any other purpose,
including without limitation, any storage incidental thereto. Tenant further
acknowledges and agrees that neither Landlord nor any of Landlord's agents,
representatives or employees has agreed to perform or undertake (i) any
alterations to the Premises, or (ii) construct any improvements in or to the
Premises (collectively, "Tenant Improvements"). Any exception to the
foregoing provisions must be made by express written agreement by both
parties.
6. ADDITIONAL RENT
It is intended by Landlord and Tenant that this Lease be a "triple
net lease." The costs and expenses described in this Section 6 and all other
sums, charges, costs and expenses
-6-
<PAGE>
specified in this Lease other than Base Rent are to be paid by Tenant to
Landlord as additional rent (collectively, "Additional Rent").
6.1 OPERATING EXPENSES: In addition to the Base Rent set forth
in Section 3, Tenant shall pay Tenant's Share, which is specified in the
Basic Lease Information, of all Operating Expenses as Additional Rent. The
term "Operating Expenses" as used herein shall mean the total amounts paid or
payable by Landlord in connection with the ownership, maintenance, repair and
operation of the Premises, the Building and the Lot, and where applicable, of
the Park referred to in the Basic Lease Information. The amount of Tenant's
Share of Operating Expenses shall be reviewed from time to time by Landlord
and shall be subject to modification by Landlord if there is a change in the
rentable square footage of the Premises, the Building and/or the Park. These
Operating Expenses may include, but are not limited to:
6.1.1 Landlord's cost of repairs to, and maintenance of, the
roof, the roof membrane and the exterior walls of the Building;
6.1.2 Landlord's cost of maintaining the outside paved area,
landscaping and other common areas for the Park. The term "Common Areas"
shall mean all areas and facilities within the Park exclusive of the Premises
and the other portions of the Park leasable exclusively to other tenants. The
Common Areas include, but are not limited to, interior lobbies, mezzanines,
parking areas, access and perimeter roads, sidewalks, rail spurs, landscaped
areas and similar areas and facilities;
6.1.3 Landlord's annual cost of insurance insuring against fire
and extended coverage (including, if Landlord elects, "all risk" or "special
purpose" coverage) and all other insurance, including, but not limited to,
earthquake, flood and/or surface water endorsements for the Building, the Lot
and the Park (including the Common Areas), rental value insurance against
loss of Rent in an amount equal to the amount of Rent for a period of at
least six (6) months commencing on the date of loss, and subject to the
provisions of Section 27 below, any deductible;
6.1.4 Landlord's cost of: (i) modifications and/or new
improvements to the Building, the Common Areas and/or the Park occasioned by
any rules, laws or regulations effective subsequent to the date on which the
Building was originally constructed provided, if there are modifications
necessitated by such rules, laws or regulations and required to be made to
the structural portions of the Premises required to be maintained by Landlord
pursuant to Section 11.3 below, then the cost of such modifications shall be
amortized over a reasonable period which shall not be less than the lesser of
fifteen (15) years or the reasonably estimated useful life of such
modification and Tenant shall pay the monthly amortized portion of such costs
as part of the operating expenses; (ii) reasonably necessary replacement
improvements to the Building, the Common Areas and the Park after the Lease
Date; and (iii) new improvements to the Building, the Common Areas and/or the
Park that reduce operating costs or improve life/safety conditions, all as
reasonably determined by Landlord, in its sole discretion;
6.1.5 If Landlord elects to so procure, Landlord's cost of
preventative maintenance, and repair contracts including, but not limited to,
contracts for elevator systems and
-7-
<PAGE>
heating, ventilation and air conditioning systems, lifts for disabled
persons, and trash or refuse collection;
6.1.6 Landlord's cost of security and fire protection services
for the Building and/or the Park, as the case may be, if in Landlord's sole
discretion such services are provided;
6.1.7 Landlord's cost of supplies, equipment, rental equipment
and other similar items used in the operation and/or maintenance of the Park;
6.1.8 Landlord's cost for the repairs and maintenance items set
forth in Section 11.2 below;
6.1.9 Landlord's cost for the management and administration of
the Premises, the Building and/or Park or any part thereof, including,
without limitation, a property management fee, accounting, auditing, billing,
postage, salaries and benefits for clerical and supervisory employees,
whether located on the Park or off-site, payroll taxes and legal and
accounting costs and all fees, licenses and permits related to the ownership,
operation and management of the Park. Such costs, excluding the cost of
on-site management office expenses and employees, shall not exceed 3% of
Rent; and
6.1.10 Notwithstanding the forgoing, Tenant shall be responsible
for the cost of replacement of capital expenditures described in this
subparagraph 6.1 only on a pro rata basis corresponding to the useful life of
the capital expenditure, based on typical commercial real estate practices,
that will be exhausted during the remainder of the term.
6.2 TAX EXPENSES. In addition to the Base Rent set forth in
Section 3, Tenant shall pay its share, which is specified in the Basic Lease
Information, of all real property taxes applicable to the land and
improvements included within the Lot on which the Premises are situated and
one hundred percent (100%) of all personal property taxes now or hereafter
assessed or levied against the Premises or Tenant's personal property. The
amount of Tenant's Share of Tax Expenses shall be reviewed from time to time
by Landlord and shall be subject to modification by Landlord if there is a
change in the rentable square footage of the Premises, the Building and/or
the Park. Tenant shall also pay one hundred percent (100%) of any increase in
real property taxes attributable, in Landlord's sole discretion, to any and
all alterations or other improvements of any kind, which are above standard
improvements customarily installed for similar buildings located within the
Building or the Park (as applicable), whatsoever placed in, on or about the
Premises for the benefit of, at the request of, or by Tenant. The term "Tax
Expenses" shall mean and include, without limitation, any form of tax and
assessment (general, special, supplemental, ordinary or extraordinary),
commercial rental tax, payments under any improvement bond or bonds, license
fees, license tax, business license fee, rental tax, transaction tax, levy,
or penalty imposed by authority having the direct or indirect power of tax
(including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement district thereof) as
against any legal or equitable interest of Landlord in the Premises, the
Building, the Lot or the Park, as against Landlord's right to rent, or as
against Landlord's business of leasing the Premises or the occupancy of
Tenant or any other tax, fee, or excise, however described, including, but
not limited to, any value added tax, or any tax imposed in substitution
(partially or totally) of any tax previously included within the definition
of real
-8-
<PAGE>
property taxes, or any additional tax the nature of which was previously
included within the definition of real property taxes. The term "Tax
Expenses" shall not include any franchise, estate, inheritance, net income,
or excess profits tax imposed upon Landlord.
6.3 PAYMENT OF EXPENSES. Landlord shall estimate Tenant's
Share of the Operating Expenses and Tax Expenses for the calendar year in
which the Lease commences. Commencing on the Commencement Date, one-twelfth
(1/12th) of this estimated amount shall be paid by Tenant to Landlord, as
Additional Rent, and thereafter on the first (1st) day of each month
throughout the remaining months of such calendar year. Thereafter, Landlord
may estimate such expenses as of the beginning of each calendar year during
the Term of this Lease and Tenant shall pay one-twelfth (1/12th) of such
estimated amount as Additional Rent hereunder on the first (1st) day of each
month during such calendar year and for each ensuing calendar year throughout
the Term of this Lease. Tenant's obligation to pay Tenant's Share of
Operating Expenses and Tax Expenses shall survive the expiration or earlier
termination of this Lease.
6.4 ANNUAL RECONCILIATION. By June 30th of each calendar year,
or as soon thereafter as reasonably possible, Landlord shall endeavor to
furnish Tenant with an accounting of actual Operating Expenses and Tax
Expenses. Within thirty (30) days of Landlord's delivery of such accounting,
Tenant shall pay to Landlord the amount of any underpayment. Notwithstanding
the foregoing, failure by Landlord to give such accounting by such date shall
not constitute a waiver by Landlord of its right to collect any of Tenant's
underpayment at any time. Landlord shall credit the amount of any overpayment
by Tenant toward the next estimated monthly installment(s) falling due, or
where the Term of the Lease has expired, refund the amount of overpayment to
Tenant. If the Term of the Lease expires prior to the annual reconciliation
of expenses Landlord shall have the right to reasonably estimate Tenant's
Share of such expenses, and if Landlord determines that an underpayment is
due, Tenant hereby agrees that Landlord shall be entitled to deduct such
underpayment from Tenant's Security Deposit. If Landlord reasonably
determines that an overpayment has been made by Tenant, Landlord shall refund
said overpayment to Tenant as soon as practicable thereafter. Notwithstanding
the foregoing, failure of Landlord to accurately estimate Tenant's Share of
such expenses or to otherwise perform such reconciliation of expenses,
including without limitation, Landlord's failure to deduct any portion of any
underpayment from Tenant's Security Deposit, shall not constitute a waiver of
Landlord's right to collect any of Tenant's underpayment at any time during
the Term of the Lease or at any time after the expiration or earlier
termination of this Lease.
6.5 AUDIT. After delivery to Landlord of at least thirty (30)
days prior written notice, Tenant, at its sole cost and expense through any
accountant designated by it, shall have the right to examine and/or audit the
books and records evidencing such costs and expenses for the previous one (1)
calendar year, during Landlord's reasonable business hours but not more
frequently than once during any calendar year. Any such accounting firm
designated by Tenant may not be compensated on a contingency fee basis. The
results of any such audit (and any negotiations between the parties related
thereto) shall be maintained strictly confidential by Tenant and its
accounting firm and shall not be disclosed, published or otherwise
disseminated to any other party other than to Landlord and its authorized
agents. Landlord and Tenant shall use their best efforts to cooperate in such
negotiations and to promptly resolve any discrepancies between Landlord and
Tenant in the accounting of such costs and expenses.
-9-
<PAGE>
7. UTILITIES
Utility Expenses, Common Area Utility Costs and all other sums or
charges set forth in this Section 7 are considered part of Additional Rent.
In addition to the Base Rent set forth in Section 3 hereof, Tenant shall pay
the cost of all water, sewer use, sewer discharge fees and sewer connection
fees, gas, heat, electricity, refuse pickup, janitorial service, telephone
and other utilities billed or metered separately to the Premises and/or
Tenant. Tenant shall also pay Tenant's Share of any assessments or charges
for utility or similar purposes included within any tax bill for the Lot on
which the Premises are situated, including, without limitation, entitlement
fees, allocation unit fees, and/or any similar fees or charges, and any
penalties related thereto. For any such utility fees or use charges that are
not billed or metered separately to Tenant, including without limitation,
water and refuse pick up charges, Tenant shall pay to Landlord, as Additional
Rent, without prior notice or demand, on the Commencement Date and thereafter
on the first (1st) day of each month throughout the balance of the Term of
this Lease the amount which is attributable to Tenant's use of the utilities
or similar services, as reasonably estimated and determined by Landlord based
upon factors such as size of the Premises and intensity of use of such
utilities by Tenant such that Tenant shall pay the portion of such charges
reasonably consistent with Tenant's use of such utilities and similar
services ("Utility Expenses"). If Tenant disputes any such estimate or
determination, then Tenant shall either pay the estimated amount or cause the
Premises to be separately metered at Tenant's sole expense. In addition,
Tenant shall pay to Landlord Tenant's Share of any Common Area utility costs,
fees, charges or expenses ("Common Area Utility Costs"). Tenant shall pay to
Landlord one-twelfth (1/12th) of the estimated amount of Tenant's Share of
the Common Area Utility Costs on the Commencement Date and thereafter on the
first (1st) day of each month throughout the balance of the Term of this
Lease and any reconciliation thereof shall be substantially in the same
manner as specified in Section 6.4 above. The amount of Tenant's Share of
Common Area Utility Costs shall be reviewed from time to time by Landlord and
shall be subject to modification by Landlord if there is a change in the
rentable square footage of the Premises, the Building and/or the Park. Tenant
acknowledges that the Premises may become subject to the rationing of utility
services or restrictions on utility use as required by a public utility
company, governmental agency or other similar entity having jurisdiction
thereof. Notwithstanding any such rationing or restrictions on use of any
such utility services, Tenant acknowledges and agrees that its tenancy and
occupancy hereunder shall be subject to such rationing restrictions as may be
imposed upon Landlord, Tenant, the Premises, the Building or the Park, and
Tenant shall in no event be excused or relieved from any covenant or
obligation to be kept or performed by Tenant by reason of any such rationing
or restrictions. Tenant further agrees to timely and faithfully pay, prior to
delinquency, any amount, tax, charge, surcharge, assessment or imposition
levied, assessed or imposed upon the Premises, or Tenant's use and occupancy
thereof. Notwithstanding anything to the contrary contained herein, if
permitted by applicable Laws, Landlord shall have the right at any time and
from time to time during the Term of this Lease to either contract for
service from a different company or companies (each such company shall be
referred to herein as an "Alternate Service Provider") other than the company
or companies presently providing electricity service for the Building or the
Park (the "Electric Service Provider") or continue to contract for service
from the Electric Service Provider, at Landlord's sole discretion. Tenant
hereby agrees to cooperate with Landlord, the Electric Service Provider, and
any Alternate Service Provider at all times and, as reasonably necessary,
shall allow Landlord, the Electric Service Provider and any
-10-
<PAGE>
Alternate Service Provider reasonable access to the Building's electric
lines, feeders, risers, wiring, and any other machinery within the Premises.
8. LATE CHARGES
Any and all sums or charges set forth in this Section 8 are
considered part of Additional Rent. Tenant acknowledges that late payment
(the fifth day of each month or any time thereafter) by Tenant to Landlord of
Base Rent, Tenant's Share of Operating Expenses, Tax Expenses, Common Area
Utility Costs, and Utility Expenses or other sums due hereunder, will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
such costs being extremely difficult and impracticable to fix. Such costs
include, without limitation, processing and accounting charges, and late
charges that may be imposed on Landlord by the terms of any note secured by
any encumbrance against the Premises, and late charges and penalties due to
the late payment of real property taxes on the Premises. Therefore, if any
installment of Rent or any other sum due from Tenant is not received by
Landlord when due (not including the first occurrence that such payment is
not received by Landlord when due, in such case no late charge shall be
incurred), Tenant shall promptly pay to Landlord all of the following, as
applicable: (a) an additional sum equal to ten percent (10%) of such
delinquent amount plus interest on such delinquent amount at the rate equal
to the prime rate plus three percent (3%) for the time period such payments
are delinquent as a late charge for every month or portion thereof that such
sums remain unpaid, (b) the amount of seventy-five dollars ($75) for each
three-day notice prepared for, or served on, Tenant, (c) the amount of fifty
dollars ($50) relating to checks for which there are not sufficient funds. If
Tenant delivers to Landlord a check for which there are not sufficient funds,
Landlord may, at its sole option, require Tenant to replace such check with a
cashier's check for the amount of such check and all other charges payable
hereunder. The parties agree that this late charge and the other charges
referenced above represent a fair and reasonable estimate of the costs that
Landlord will incur by reason of late payment by Tenant. Acceptance of any
late charge or other charges shall not constitute a waiver by Landlord of
Tenant's default with respect to the delinquent amount, nor prevent Landlord
from exercising any of the other rights and remedies available to Landlord
for any other breach of Tenant under this Lease. If a late charge or other
charge becomes payable for any three (3) installments of Rent within any
twelve (12) month period, then Landlord, at Landlord's sole option, can
either require the Rent be paid quarterly in advance, or be paid monthly in
advance by cashier's check or by electronic funds transfer.
9. USE OF PREMISES
9.1 COMPLIANCE WITH LAWS, RECORDED MATTERS, AND RULES AND
REGULATIONS. The Premises are to be used solely for the purposes and uses
specified in the Basic Lease Information and for no other uses or purposes
without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed so long as the proposed use (i) does not
involve the use of Hazardous Materials other than as expressly permitted
under the provisions of Section 29 below, (ii) does not require any
additional parking in excess of the parking spaces already licensed to Tenant
pursuant to the provisions of Section 24 of this Lease, and (iii) is
compatible and consistent with the other uses then being made in the Park and
in other similar types of buildings in the vicinity of the Park, as
reasonably determined by Landlord. The use of the Premises by Tenant and its
employees, representatives, agents, invitees, licensees, subtenants,
-11-
<PAGE>
customers or contractors (collectively, "Tenant's Representatives") shall be
subject to, and at all times in compliance with, (a) any and all applicable
laws, ordinances, statutes, orders and regulations as same exist from time to
time (collectively, the "Laws"), (b) any and all documents, matters or
instruments, including without limitation, any declarations of covenants,
conditions and restrictions, and any supplements thereto, each of which has
been or hereafter is recorded in any official or public records wit respect
to the Premises, the Building, the Lot and/or the Park, or any portion
thereof (collectively, the "Recorded Matters"), and (c) any and all rules and
regulations set forth in Exhibit C, attached to and made a part of this
Lease, and any other reasonable rules and regulations promulgated by Landlord
now or hereafter enacted relating to parking and the operation of the
Premises, the Building and the Park (collectively, the "Rules and
Regulations"). Tenant agrees to, and does hereby, assume full and complete
responsibility to ensure that the Premises are adequate to fully meet the
needs and requirements of Tenant's intended operations of its business within
the Premises, and Tenant's use of the Premises and that same are in
compliance with all applicable Laws throughout the Term of this Lease.
Additionally, Tenant shall be solely responsible for the payment of all
costs, fees and expenses associated with any modifications, improvements or
alterations to the Premises, Building, the Common Areas and/or the Park
occasioned by the enactment of, or changes to, any Laws arising from Tenant's
particular use of the Premises or alterations, improvements or additions made
to the Premises regardless of when such Laws became effective.
9.2 PROHIBITION ON USE. Tenant shall not use the Premises or
permit anything to be done in or about the Premises nor keep or bring
anything therein which will in any way conflict with any of the requirements
of the Board of Fire Underwriters or similar body now or hereafter
constituted or in any way increase the existing rate of or affect any policy
of fire or other insurance upon the Building or any of its contents, or cause
a cancellation of any insurance policy. No auctions may be held or otherwise
conducted in, on or about the Premises, the Building, the Lot or the Park
without Landlord's written consent thereto, which consent may be given or
withheld in Landlord's sole discretion. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct
or interfere with the rights of Landlord, other tenants or occupants of the
Building, other buildings in the Park, or other persons or businesses in the
area, or injure or annoy other tenants or use or allow the Premises to be
used for any unlawful or objectionable purpose, as determined by Landlord, in
its reasonable discretion, for the benefit, quiet enjoyment and use by
Landlord and all other tenants or occupants of the Building or other
buildings in the Park; nor shall Tenant cause, maintain or permit any private
or public nuisance in, on or about the Premises, Building, Park and/or the
Common Areas, including, but not limited to, any offensive odors, noises,
fumes or vibrations. Tenant shall not damage or deface or otherwise commit or
suffer to be committed any waste in, upon or about the Premises. Tenant shall
not place or store, nor permit any other person or entity to place or store,
any property, equipment, materials, supplies, personal property or any other
items or goods outside of the Premises for any period of time. Except for
mice on a short term basis, Tenant shall not permit any live animals,
including, but not limited to, any household pets, to be brought or kept in
or about the Premises. Tenant shall place no loads upon the floors, walls, or
ceilings in excess of the maximum designed load permitted by the applicable
Uniform Building Code or which may damage the Building or outside areas; nor
place any harmful liquids in the drainage systems; nor dump or store waste
materials, refuse or other such materials, or allow such to remain outside
the Building area, except for any non-hazardous or non-harmful materials
which may be stored in refuse dumpsters or in any enclosed trash areas
-12-
<PAGE>
provided. Tenant shall honor the terms of all Recorded Matters relating to
the Premises, the Building, the Lot and/or the Park. Tenant shall honor the
Rules and Regulations. If Tenant fails to comply with such Laws, Recorded
Matters, Rules and Regulations or the provisions of this Lease, Landlord
shall have the right to collect from Tenant a reasonable sum as a penalty, in
addition to all rights and remedies of Landlord hereunder including, but not
limited to, the payment by Tenant to Landlord of all Enforcement Expenses and
Landlord's costs and expenses, if any, to cure any of such failures of
Tenant, if Landlord, at its sole option, elects to undertake such cure.
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES
10.1 ALTERATIONS AND ADDITIONS: Tenant shall not install any
signs, fixtures, improvements, nor make or permit any other alterations or
additions to the Premises without the prior written consent of Landlord. If
any such alteration or addition is expressly permitted by Landlord, Tenant
shall deliver at least twenty (20) days prior notice to Landlord, from the
date Tenant intends to commence construction, sufficient to enable Landlord
to post a Notice of Non-Responsibility. In all events, Tenant shall obtain
all permits or other governmental approvals prior to commencing any of such
work and deliver a copy of same to Landlord. All alterations and additions
shall be installed by a licensed contractor approved by Landlord, at Tenant's
sole expense in compliance with all applicable Laws (including, but not
limited to, the ADA as defined herein), Recorded Matters, and Rules and
Regulations. Tenant shall keep the Premises and the property on which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by or on behalf of Tenant. As a
condition to Landlord's consent to the installation of any fixtures,
additions or other improvements, if Tenant has been continually late in
payment of rent, or prior to making the application to install improvements
Landlord has requested Tenant to make payments of rent on cashiers check,
pursuant to Section 8 of the Lease or Tenant is in material default and has
not cured such default with in the cure periods defined in the lease,
Landlord may require Tenant to post and obtain a completion and indemnity
bond for up to one hundred percent (100%) of the cost of the work.
10.2 SURRENDER OF PREMISES: Upon the termination of this Lease,
whether by forfeiture, lapse of time or otherwise, or upon the termination of
Tenant's right to possession of the Premises, Tenant will at once surrender
and deliver up the Premises, together with the fixtures (other than trade
fixtures), additions and improvements which Landlord has notified Tenant, in
writing, that Landlord will require Tenant not to remove, to Landlord in good
condition and repair (including, but not limited to, replacing all light
bulbs and ballasts not in good working condition) and in the condition in
which the Premises existed as of the Commencement Date, except for reasonable
wear and tear. Reasonable wear and tear shall not include any damage or
deterioration to the floors of the Premises arising from the use of forklifts
in, on or about the Premises (including, without limitation, any marks or
stains of any portion of the floors), and any damage or deterioration that
would have been prevented by proper maintenance by Tenant or Tenant otherwise
performing all of its obligations under this Lease. Upon such termination of
this Lease, Tenant shall remove all tenant signage, trade fixtures,
furniture, furnishings, personal property, additions, and other improvements
unless Landlord requests, in writing, that Tenant not remove some or all of
such fixtures (other than trade fixtures itemized or similar to those
itemized in Exhibit I), additions or improvements installed by, or on behalf
of Tenant or situated in or about the Premises. By the date which is twenty
(20) days prior to such termination of this
-13-
<PAGE>
Lease, Landlord shall notify Tenant in writing of those fixtures (other than
trade fixtures), alterations, additions and other improvements which Landlord
shall require Tenant not to remove from the Premises. Tenant shall repair any
damage caused by the installation or removal of such signs, trade fixtures,
furniture, furnishings, fixtures, additions and improvements which are to be
removed from the Premises by Tenant hereunder. If Landlord fails to so notify
Tenant at least twenty (20) days prior to such termination of this Lease,
then Tenant shall remove all tenant signage, alterations, furniture,
furnishings, trade fixtures, additions and other improvements installed in or
about the Premises by, or on behalf of Tenant. Tenant shall ensure that the
removal of such items and the repair of the Premises will be completed prior
to such termination of this Lease.
11. REPAIRS AND MAINTENANCE
11.1 TENANT'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for
those portions of the Building to be maintained by Landlord, as provided in
Sections 11.2 and 11.3 below, Tenant shall, at Tenant's sole cost and
expense, keep and maintain the Premises and the adjacent dock and staging
areas in good, clean and safe condition and repair to the reasonable
satisfaction of Landlord including, but not limited to, repairing any damage
caused by Tenant or Tenant's Representatives and replacing any property so
damaged by Tenant or Tenant's Representatives. Without limiting the
generality of the foregoing, Tenant shall be solely responsible for
maintaining, repairing and replacing (a) all mechanical systems, heating,
ventilation and air conditioning systems exclusively serving the Premises,
(b) all plumbing, electrical wiring and equipment serving the Premises, (c)
all interior lighting (including, without limitation, light bulbs and/or
ballasts) and exterior lighting serving the Premises or adjacent to the
Premises, (d) all glass, windows, window frames, window casements, skylights,
interior and exterior doors, door frames and door closers, (e) all roll-up
doors, ramps and dock equipment, including without limitation, dock bumpers,
dock plates, dock seals, dock levelers and dock lights, (f) all tenant
signage, (g) lifts for disabled persons serving the Premises, (h) sprinkler
systems, fire protection systems and security systems, (i) all partitions,
fixtures, equipment, interior painting, and interior walls and floors of the
Premises and every part thereof (including, without limitation, any demising
walls contiguous to any portion of the Premises).
11.2 REIMBURSABLE REPAIRS AND MAINTENANCE OBLIGATIONS: Subject
to the provisions of Sections 6 and 9 of this Lease and except for (i) the
obligations of Tenant set forth in Section 11.1 above, (ii) the obligations
of Landlord set forth in Section 11.3 below, and (iii) the repairs rendered
necessary by the intentional or negligent acts or omissions of Tenant or any
of Tenant's Representatives, Landlord agrees, at Landlord's expense, subject
to reimbursement pursuant to Section 6 above, to keep in good repair the
plumbing and mechanical systems exterior to the Premises, any rail spur and
rail crossing, the roof, roof membranes, exterior walls of the Building,
signage (exclusive of tenant signage), and exterior electrical wiring and
equipment, exterior lighting, exterior glass, exterior doors/entrances and
door closers, exterior window casements, exterior painting of the Building
(exclusive of the Premises), and underground utility and sewer pipes outside
the exterior walls of the Building. For purposes of this Section 11.2, the
term "exterior" shall mean outside of and not exclusively serving the
Premises. Unless otherwise notified by Landlord, in writing, that Landlord
has elected to procure and maintain the following described contract(s),
Tenant shall procure and maintain (a) the heating, ventilation and air
conditioning systems preventative maintenance and repair contract(s); such
contract(s) to
-14-
<PAGE>
be on a bimonthly or quarterly basis, as reasonably determined by Landlord,
and (b) the fire and sprinkler protection services and preventative
maintenance and repair contract(s) (including, without limitation, monitoring
services); such contract(s) to be on a bi-monthly or quarterly basis, as
reasonably determined by Landlord. Landlord reserves the right, but without
the obligation to do so, to procure and maintain (i) the heating, ventilation
and air conditioning systems preventative maintenance and repair contract(s),
and/or (ii) the fire and sprinkler protection services and preventative
maintenance and repair contract(s) (including, without limitation, monitoring
services). If Landlord so elects to procure and maintain any such
contract(s), Tenant will reimburse Landlord for the cost thereof in
accordance with the provisions of Section 6 above. If Tenant procures and
maintains any of such contract(s), Tenant will promptly deliver to Landlord a
true and complete copy of each such contract and any and all renewals or
extensions thereof, and each service report or other summary received by
Tenant pursuant to or in connection with such contract(s).
11.3 LANDLORD'S REPAIRS AND MAINTENANCE OBLIGATIONS: Except for
repairs rendered necessary by the intentional or negligent acts or omissions
of Tenant or any of Tenant's Representatives, Landlord agrees, at Landlord's
sole cost and expense, to (a) keep in good repair the structural portions of
the floors, foundations and exterior perimeter walls of the Building
(exclusive of glass and exterior doors), and (b) replace the structural
portions of the roof of the Building (excluding the roof membrane) as, and
when, Landlord determines such replacement to be necessary in Landlord's sole
discretion.
11.4 TENANT'S FAILURE TO PERFORM REPAIRS AND MAINTENANCE
OBLIGATIONS: Except for normal maintenance and repair of the items described
above, Tenant shall have no right of access to or right to install any device
on the roof of the Building nor make any penetrations of the roof of the
Building without the express prior written consent of Landlord. If Tenant
refuses or neglects to repair and maintain the Premises and the adjacent
areas properly as required herein and to the reasonable satisfaction of
Landlord, Landlord may, but without obligation to do so, at any time make
such repairs and/or maintenance without Landlord having any liability to
Tenant for any loss or damage that may accrue to Tenant's merchandise,
fixtures or other property, or to Tenant's business by reason thereof, except
to the extent any damage is caused by the willful misconduct or gross
negligence of Landlord or its authorized agents and representatives. In the
event Landlord makes such repairs and/or maintenance, upon completion thereof
Tenant shall pay to Landlord, as additional rent, the Landlord's costs for
making such repairs and/or maintenance, plus twenty percent (20%) for
overhead, upon presentation of a bill therefor, plus any Enforcement
Expenses. The obligations of Tenant hereunder shall survive the expiration of
the Term of this Lease or the earlier termination thereof. Tenant hereby
waives any right to repair at the expense of Landlord under any applicable
Laws now or hereafter in effect respecting the Premises.
12. INSURANCE
12.1 TYPES OF INSURANCE: Tenant shall maintain in full force
and effect at all times during the Term of this Lease, at Tenant's sole cost
and expense, for the protection of Tenant and Landlord, as their interests
may appear, policies of insurance issued by a carrier or carriers reasonably
acceptable to Landlord and its lender(s) which afford the following
coverages: (i) worker's compensation: statutory limits; (ii) employer's
liability, as required by law, with a
-15-
<PAGE>
minimum limit of $100,000 per employee and $500,000 per occurrence; (iii)
commercial general liability insurance (occurrence form) providing coverage
against any and all claims for bodily injury and property damage occurring
in, on or about the Premises arising out of Tenant's and Tenant's
Representatives' use and/or occupancy of the Premises. Such insurance shall
include coverage for blanket contractual liability, fire damage, premises,
personal injury, completed operations, products liability, personal and
advertising, and a plate-glass rider to provide coverage for all glass in, on
or about the Premises including, without limitation, skylights. Such
insurance shall have a combined single limit of not less than One Million
Dollars ($1,000,000) per occurrence with a Two Million Dollar ($2,000,000)
aggregate limit and excess/umbrella insurance in the amount of Two Million
Dollars ($2,000,000). If Tenant has other locations which it owns or leases,
the policy shall include an aggregate limit per location endorsement. If
necessary, as reasonably determined by Landlord, Tenant shall provide for
restoration of the aggregate limit; (iv) comprehensive automobile liability
insurance: a combined single limit of not less than $2,000,000 per occurrence
and insuring Tenant against liability for claims arising out of the
ownership, maintenance, or use of any owned, hired or non-owned automobiles;
(v) "all risk" or "special purpose" property insurance, including without
limitation, sprinkler leakage, boiler and machinery comprehensive form, if
applicable, covering damage to or loss of any personal property, trade
fixtures, inventory, fixtures and equipment located in, on or about the
Premises, and in addition, coverage for flood, earthquake, and business
interruption of Tenant, together with, if the property of Tenant's invitees
is to be kept in the Premises, warehouser's legal liability or bailee
customers insurance for the full replacement cost of the property belonging
to invitees and located in the Premises. Such insurance shall be written on a
replacement cost basis (without deduction for depreciation) in an amount
equal to one hundred percent (100%) of the full replacement value of the
aggregate of the items referred to in this subparagraph (v); and (vi) such
other insurance as Landlord deems necessary and prudent or as may otherwise
be required by any of Landlord's lenders or joint venture partners.
12.2 INSURANCE POLICIES: Insurance required to be maintained by
Tenant shall be written by companies (i) licensed to do business in the State
of California, (ii) domiciled in the United States of America, and (iii)
having a "General Policyholders Rating" of at least A:X (or such higher
rating as may be required by a lender having a lien on the Premises) as set
forth in the most current issue of "A.M. Best's Rating Guides." Any
deductible amounts under any of the insurance policies required hereunder
shall not exceed One Thousand Dollars ($1,000). Tenant shall deliver to
Landlord certificates of insurance and true and complete copies of any and
all endorsements required herein for all insurance required to be maintained
by Tenant hereunder at the time of execution of this Lease by Tenant. Tenant
shall, at least thirty (30) days prior to expiration of each policy, furnish
Landlord with certificates of renewal or "binders" thereof. Each certificate
shall expressly provide that such policies shall not be cancelable or
otherwise subject to modification except after thirty (30) days prior written
notice to the parties named as additional insureds as required in this Lease
(except for cancellation for nonpayment of premium, in which event
cancellation shall not take effect until at least ten (10) days' notice has
been given to Landlord). Tenant shall have the right to provide insurance
coverage which it is obligated to carry pursuant to the terms of this Lease
under a blanket insurance policy, provided such blanket policy expressly
affords coverage for the Premises and for Landlord as required by this Lease.
-16-
<PAGE>
12.3 ADDITIONAL INSUREDS AND COVERAGE: Landlord, any property
management company and/or agent of Landlord for the Premises, the Building,
the Lot or the Park, and any lender(s) of Landlord having a lien against the
Premises, the Building, the Lot or the Park shall be named as additional
insureds under all of the policies required in Section 12.1(iii) above.
Additionally, such policies shall provide for severability of interest. All
insurance to be maintained by Tenant shall, except for workers' compensation
and employer's liability insurance, be primary, without right of contribution
from insurance maintained by Landlord. Any umbrella/excess liability policy
(which shall be in "following form") shall provide that if the underlying
aggregate is exhausted, the excess coverage will drop down as primary
insurance. The limits of insurance maintained by Tenant shall not limit
Tenant's liability under this Lease. It is the parties' intention that the
entrance to be procured and maintained by Tenant as required herein shall
provide coverage for any and all damage or injury arising from or related to
Tenant's operations of its business and/or Tenant's or Tenant's
Representatives' use of the Premises and/or any of the areas within the Park,
whether such events occur within the Premises (as described in Exhibit A
hereto) or in any other areas of the Park. It is not contemplated or
anticipated by the parties that the aforementioned risks of loss be borne by
Landlord's insurance carriers, rather it is contemplated and anticipated by
Landlord and Tenant that such risks of loss be borne by Tenant's insurance
carriers pursuant to the insurance policies procured and maintained by Tenant
as required herein.
12.4 FAILURE OF TENANT TO PURCHASE AND MAINTAIN INSURANCE: In
the event Tenant does not purchase the insurance required in this Lease or
keep the same in full force and effect throughout the Term of this Lease
(including any renewals or extensions), Landlord may, but without obligation
to do so, purchase the necessary insurance and pay the premiums therefor. If
Landlord so elects to purchase such insurance, Tenant shall promptly pay to
Landlord as Additional Rent, the amount so paid by Landlord, upon Landlord's
demand therefor. In addition, Landlord may recover from Tenant and Tenant
agrees to pay, as Additional Rent, any and all Enforcement Expenses and
damages which Landlord may sustain by reason of Tenant's failure to obtain
and maintain such insurance. If Tenant fails to maintain any insurance
required in this Lease, Tenant shall be liable for all losses, damages and
costs resulting from such failure.
13. WAIVER OF SUBROGATION
Landlord and Tenant hereby mutually waive their respective rights of
recovery against each other for any loss of, or damage to, either parties'
property to the extent that such loss or damage is insured by an insurance
policy required to be in effect at the time of such loss or damage. Each
party shall obtain any special endorsements, if required by its insurer
whereby the insurer waives its rights of subrogation against the other party.
This provision is intended to waive fully, and for the benefit of the parties
hereto, any rights and/or claims which might give rise to a right of
subrogation in favor of any insurance carrier. The coverage obtained by
Tenant pursuant to Section 12 of this Lease shall include, without
limitation, a waiver of subrogation endorsement attached to the certificate
of insurance. The provisions of this Section 13 shall not apply in those
instances in which such waiver of subrogation would invalidate such insurance
coverage or would cause either party's insurance coverage to be voided or
otherwise uncollectible.
14. LIMITATION OF LIABILITY AND INDEMNITY
-17-
<PAGE>
Except to the extent of damage resulting from the sole active
negligence or willful misconduct of Landlord or its authorized
representatives, Tenant agrees to protect, defend (with counsel acceptable to
Landlord) and hold Landlord and Landlord's lenders, partners, members,
property management company (if other than Landlord), agents, directors,
officers, employees, representatives, contractors, shareholders, successors
and assigns and each of their respective partners, members, directors,
employees, representatives, agents, contractors, shareholders, successors and
assigns (collectively, the "Indemnitees") harmless and indemnify the
Indemnitees from and against all liabilities, damages, claims, losses,
judgments, charges and expenses (including reasonable attorneys' fees, costs
of court and expenses necessary in the prosecution or defense of any
litigation including the enforcement of this provision) arising from or in
any way related to, directly or indirectly, (i) Tenant's or Tenant's
Representatives' use of the Premises, Building and/or the Park, (ii) the
conduct of Tenant's business, (iii) from any activity, work or thing done,
permitted or suffered by Tenant in or about the Premises, (iv) in any way
connected with the Premises or with the improvements or personal property
therein, including, but not limited to, any liability for injury to person or
property of Tenant, Tenant's Representatives, or third party persons, and/or
(v) Tenant's failure to perform any covenant or obligation of Tenant under
this Lease. Tenant agrees that the obligations of Tenant herein shall survive
the expiration or earlier termination of this Lease.
Except to the extent of damage resulting from the sole active
negligence or willful misconduct of Landlord or its authorized
representatives, to the fullest extent permitted by law, Tenant agrees that
neither Landlord nor any of Landlord's lender(s), partners, members,
employees, representatives, legal representatives, successors or assigns
shall at any time or to any extent whatsoever be liable, responsible or in
any way accountable for any loss, liability, injury, death or damage to
persons or property which at any time may be suffered or sustained by Tenant
or by any person(s) whomsoever who may at any time be using, occupying or
visiting the Premises, the Building or the Park, including, but not limited
to, any acts, errors or omissions by or on behalf of any other tenants or
occupants of the Building and/or the Park. Tenant shall not, in any event or
circumstance, be permitted to offset or otherwise credit against any payments
of Rent required herein for matters for which Landlord may be liable
hereunder. Landlord and its authorized representatives shall not be liable
for any interference with light or air, or for any latent defect in the
Premises or the Building.
15. ASSIGNMENT AND SUBLEASING
15.1 PROHIBITION: Tenant shall not assign, mortgage,
hypothecate, encumber, grant any license or concession, pledge or otherwise
transfer this Lease (collectively, "assignment"), in whole or in part,
whether voluntarily or involuntarily or by operation of law, nor sublet or
permit occupancy by any person other than Tenant of all or any portion of the
Premises without first obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Tenant hereby agrees that
Landlord may withhold its consent to any proposed sublease or assignment if
the proposed sublessee or assignee or its business is subject to compliance
with additional requirements of the ADA (defined below) and/or Environmental
Laws (defined below) beyond those requirements which are applicable to
Tenant, unless the proposed sublessee or assignee shall (a) first deliver
plans and specifications for complying with such additional requirements and
obtain Landlord's written consent thereto, and (b) comply with all Landlord's
conditions for or contained in such consent, including without limitation,
-18-
<PAGE>
requirements for security to assure the lien-free completion of such
improvements. If Tenant seeks to sublet or assign all or any portion of the
Premises, Tenant shall deliver to Landlord at least thirty (30) days prior to
the proposed commencement of the sublease or assignment (the "Proposed
Effective Date") the following: (i) the name of the proposed assignee or
sublessee; (ii) such information as to such assignee's or sublessee's
financial responsibility and standing as Landlord may reasonably require; and
(iii) the aforementioned plans and specifications, if any. Within ten (10)
days after Landlord's receipt of a written request from Tenant that Tenant
seeks to sublet or assign all or any portion of the Premises, Landlord shall
deliver to Tenant a copy of Landlord's standard form of sublease or
assignment agreement (as applicable), which instrument shall be utilized for
each proposed sublease or assignment (as applicable), and such instrument
shall include a provision whereby the assignee or sublessee assumes all of
Tenant's obligations hereunder and agrees to be bound by the terms hereof. As
Additional Rent hereunder, Tenant shall pay to Landlord a fee in the amount
of five hundred dollars ($500) plus Tenant shall reimburse Landlord for
actual legal and other expenses incurred by Landlord in connection with any,
actual or proposed assignment or subletting. In the event the sublease or
assignment (1) by itself or -taken together with prior sublease(s) or partial
assignment(s) covers or totals, as the case may be, more than twenty-five
percent (25%) of the rentable square feet of the Premises or (2) is for a
term which by itself or taken together with prior or other subleases or
partial assignments is greater than fifty percent (50%) of the period
remaining in the Term of this Lease as of the time of the Proposed Effective
Date, then Landlord shall have the right, to be exercised by giving written
notice to Tenant, to recapture the space described in the sublease or
assignment. If such recapture notice is given, it shall serve to terminate
this Lease with respect to the proposed sublease or assignment space, or, if
the proposed sublease or assignment space covers all the Premises, it shall
serve to terminate the entire term of this Lease in either case, as of the
Proposed Effective Date. However, no termination of this Lease with respect
to part or all of the Premises shall become effective without the prior
written consent, where necessary, of the holder of each deed of trust
encumbering the Premises or any part thereof. If this Lease is terminated
pursuant to the foregoing with respect to less than the entire Premises, the
Rent shall be adjusted on the basis of the proportion of square feet retained
by Tenant to the square feet originally demised and this Lease as so amended
shall continue thereafter in full force and effect. Each permitted assignee
or sublessee shall assume and be deemed to assume this Lease and shall be and
remain liable jointly and severally with Tenant for payment of Rent and for
the due performance of, and compliance with all the terms, covenants,
conditions and agreements herein contained on Tenant's part to be performed
or complied with, for the term of this Lease. No assignment or subletting
shall affect the continuing primary liability of Tenant (which, following
assignment, shall be joint and several with the assignee), and Tenant shall
not be released from performing any of the terms, covenants and conditions of
this Lease. Tenant hereby acknowledges and agrees that it understands that
Landlord's accounting department may process and accept Rent payments without
verifying that such payments are being made by Tenant, a permitted sublessee
or a permitted assignee in accordance with the, provisions of this Lease.
Although such payments may be processed and accepted by such accounting
department personnel, any and all actions or omissions by the personnel of
Landlord's accounting department shall not be
-19-
<PAGE>
considered as acceptance by Landlord of any proposed assignee or sublessee
nor shall such actions or omissions be deemed to be a substitute for the
requirement that Tenant obtain Landlord's prior written consent to any such
subletting or assignment, and any such actions or omissions by the personnel
of Landlord's accounting department shall not be considered as a voluntary
relinquishment by Landlord of any of its rights hereunder nor shall any
voluntary relinquishment of such rights be inferred therefrom. For purposes
hereof, in the event Tenant is a corporation, partnership, joint venture,
trust or other entity other than a natural person, any change in the direct
or indirect ownership of Tenant (whether pursuant to one or more transfers)
which results in a change of more than fifty percent (50%) in the direct or
indirect ownership of Tenant shall be deemed to be an assignment within the
meaning of this Section 15 and shall be subject to all the provisions hereof.
Any and all options, first rights of refusal, tenant improvement allowances
and other similar rights granted to Tenant in this Lease, if any, shall not
be assignable by Tenant unless expressly authorized in writing by Landlord.
15.2 EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the
event of any sublease or assignment of all or any portion of the Premises
where the rent or other consideration provided for in the sublease or
assignment either initially or over the term of the sublease or assignment
exceeds the Rent or pro rata portion of the Rent, as the case may be, for
such space reserved in the Lease, Tenant shall pay the Landlord monthly, as
Additional Rent, at the same time as the monthly installments of Rent are
payable hereunder, seventy-five percent (75%) of the excess of each such
payment of rent or other consideration in excess of the Rent called for
hereunder, less Tenant's cost to effect such sublease.
15.3 WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any
assignee or sublessee, or failure by Landlord to take action against any
assignee or sublessee, Tenant waives notice of any default of any assignee or
sublessee and agrees that Landlord may, at its option, proceed against Tenant
without having taken action against or joined such assignee or sublessee,
except that Tenant shall have the benefit of any indulgences, waivers and
extensions of time granted to any such assignee or sublessee.
16. AD VALOREM TAXES
Prior to delinquency, Tenant shall pay all taxes and assessments
levied upon trade fixtures, alterations, additions, improvements, inventories
and personal property located and/or installed on or in the Premises by, or
on behalf of, Tenant; and if requested by Landlord, Tenant shall promptly
deliver to Landlord copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or
billed to Tenant, Tenant shall pay the amount thereof as invoiced by Landlord.
17. SUBORDINATION
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any bona fide mortgagee or deed of trust beneficiary with a lien
on all or any portion of the Premises or any ground lessor with respect to
the land -of which the Premises are a part, the rights of Tenant under this
Lease and this Lease shall be subject and subordinate at all times to: (i)
all ground leases or underlying leases which may now exist or hereafter be
executed affecting the Building or the land upon which the Building is
situated or both, and (ii) the lien of any mortgage or deed of trust which
may now exist or hereafter be executed in any amount for which the Building,
the Lot, ground leases or underlying leases, or Landlord's interest or estate
in any of said items is specified as
-20-
<PAGE>
security. Notwithstanding the foregoing, Landlord or any such ground lessor,
mortgagee, or any beneficiary shall have the right to subordinate or cause to
be subordinated any such ground leases or underlying leases or any such liens
to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu
of foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination and upon the request of such successor to Landlord, attorn to
and become the Tenant of the successor in interest to Landlord, provided such
successor in interest will not disturb Tenant's use, occupancy or quiet
enjoyment of the Premises so long as Tenant is not in default of the terms
and provisions of this Lease. The successor in interest to Landlord following
foreclosure, sale or deed in lieu thereof shall not be (a) liable for any act
or omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (b) subject to any offsets or defenses which Tenant
might have against any prior lessor; (c) bound by prepayment of more than one
(1) month's Rent, except in those instances when Tenant pays Rent quarterly
in advance pursuant to Section 8 hereof, then not more than three months'
Rent; or (d) liable to Tenant for any Security Deposit not actually received
by such successor in interest to the extent any portion or all of such
Security Deposit has not already been forfeited by, or refunded to, Tenant.
Landlord shall be liable to Tenant for all or any portion of the Security
Deposit not forfeited by, or refunded to, Tenant until and unless Landlord
transfers such Security Deposit to the successor in interest. Tenant
covenants and agrees to execute (and acknowledge if required by Landlord, any
lender or ground lessor) and deliver, within five (5) business days of a
demand or request by Landlord and in the form requested by Landlord, ground
lessor, mortgagee or beneficiary, any additional documents evidencing the
priority or subordination of this Lease with respect to any such ground
leases or underlying leases or the lien of any such mortgage or deed of
trust. Tenant's failure to timely execute and deliver such additional
documents shall, at Landlord's option, constitute a material default
hereunder. It is further agreed that Tenant shall be liable to Landlord, and
shall indemnify Landlord from and against any loss, cost, damage or expense,
incidental, consequential, or otherwise, arising or accruing directly or
indirectly, from any failure of Tenant to execute or deliver to Landlord any
such additional documents, together with any and all Enforcement Expenses.
Notwithstanding anything to the contrary contained in this Lease, (a)
promptly following the execution of this Lease, Landlord shall use reasonable
efforts to obtain from the beneficiary under the existing deed of trust
encumbering the Premises, a subordination, non-disturbance and attornment
agreement for the benefit of Tenant in commercially reasonable form, and (b)
until Landlord has obtained such non-disturbance agreement, the amount of the
Letter of Credit to be obtained by Tenant pursuant to Section 4 above shall
be One Hundred Fifty Thousand Dollars ($150,000.00), rather than Three
Hundred Thousand Dollars ($300,000.00).
18. RIGHT OF ENTRY
Tenant grants Landlord or its agents the right to enter the Premises
at all reasonable times for purposes of inspection, exhibition, posting of
notices, repair or alteration. At Landlord's option, Landlord shall at all
times have and retain a key with which to unlock all the doors in, upon and
about the Premises, excluding Tenant's vaults and safes. It is further agreed
that Landlord shall have the right to use any and all means Landlord deems
necessary to enter the Premises in an emergency. Landlord shall have the
right to place "for rent" or "for lease" signs on the outside of the
Premises, the Building and in the Common Areas. Landlord shall also have the
right to place "for sale" signs on the outside of the Building and in the
Common Areas.
-21-
<PAGE>
Tenant hereby waives any claim from damages or for any injury or
inconvenience to or interference with Tenant's business, or any other loss
occasioned thereby except for any claim for any of the foregoing arising out
of the sole active negligence or willful misconduct of Landlord or its
authorized representatives.
19. ESTOPPEL CERTIFICATE
Tenant shall execute (and acknowledge if required by any lender or
ground lessor) and deliver to Landlord, within five (5) business days after
Landlord provides such to Tenant, a statement in writing certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification), the date to which the Rent and other
charges are paid in advance, if any, acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of Landlord hereunder or
specifying such defaults as are claimed, and such other matters as Landlord
may reasonably require. Any such statement may be conclusively relied upon by
Landlord and any prospective purchaser or encumbrancer of the Premises.
Tenant's failure to deliver such statement within such time shall be
conclusive upon the Tenant that (a) this Lease is in full force and effect,
without modification except as may be represented by Landlord; (b) there are
no uncured defaults in Landlord's performance; and (c) not more than one
month's Rent has been paid in advance, except in those instances when Tenant
pays Rent quarterly in advance pursuant to Section 8 hereof, then not more
than three month's Rent has been paid in advance. Failure by Tenant to so
deliver such certified estoppel certificate shall be a material default of
the provisions of this Lease. Tenant shall be liable to Landlord, and shall
indemnify Landlord from and against any loss, cost, damage or expense,
incidental, consequential, or otherwise, arising or accruing directly or
indirectly, from any failure of Tenant to execute or deliver to Landlord any
such certified estoppel certificate, together with any and all Enforcement
Expenses.
20. TENANT'S DEFAULT
The occurrence of any one or more of the following events shall, at
Landlord's option, constitute a material default by Tenant of the provisions
of this Lease:
20.1 The abandonment of the Premises by Tenant or the vacation
of the Premises by Tenant which would cause any insurance policy to be
invalidated or otherwise lapse. Tenant agrees to notice and service of notice
as provided for in this Lease and waives any right to any other or further
notice or service of notice which Tenant may have under any statute or law
now or hereafter in effect;
20.2 The failure by Tenant to make any payment of Rent,
Additional Rent or any other payment required hereunder on the date said
payment is due. Tenant agrees to notice and service of notice as provided for
in this Lease and waives any right to any other or further notice or service
of notice which Tenant may have under any statute or law now or hereafter in
effect;
20.3 The failure by Tenant to observe, perform or comply with
any of the conditions, covenants or provisions of this Lease (except failure
to make any payment of Rent and/or Additional Rent) and such failure is not
cured within the time period required under the provisions of this Lease. If
such failure is susceptible of cure but cannot reasonably be cured
-22-
<PAGE>
within the aforementioned time period (if any), as determined solely by
Landlord, Tenant shall promptly commence the cure of such failure and
thereafter diligently prosecute such cure to completion within the time
period specified by Landlord in any written notice regarding such failure as
may be delivered to Tenant by Landlord. In no event or circumstance shall
Tenant have more than fifteen (15) days to complete any such cure, unless
otherwise expressly agreed to in writing by Landlord (in Landlord's sole
discretion);
20.4 The making of a general assignment by Tenant for the
benefit of creditors, the filing of a voluntary petition by Tenant or the
filing of an involuntary petition by any of Tenant's creditors seeking the
rehabilitation, liquidation, or reorganization of Tenant under any law
relating to bankruptcy, insolvency or other relief of debtors and, in the
case of an involuntary action, the failure to remove or discharge the same
within sixty (60) days of such filing, the appointment of a receiver or other
custodian to take possession of substantially all of Tenant's assets or this
leasehold, Tenant's insolvency or inability to pay Tenant's debts or failure
generally to pay Tenant's debts when due, any court entering a decree or
order directing the winding up or liquidation of Tenant or of substantially
all of Tenant's assets, Tenant taking any action toward the dissolution or
winding up of Tenant's affairs, the cessation or suspension of Tenant's use
of the Premises, or the attachment, execution or other judicial seizure of
substantially all of Tenant's assets or this leasehold;
20.5 Tenant's use or storage of Hazardous Materials in, on or
about the Premises, the Building, the Lot and/or the Park other than as
expressly permitted by the provisions of Section 29 below; or
20.6 The making of any material misrepresentation or omission
by Tenant in any materials delivered by or on behalf of Tenant to Landlord
pursuant to this Lease.
21. REMEDIES FOR TENANT'S DEFAULT
21.1 LANDLORD'S RIGHTS: In the event of Tenant's material
default under this Lease, Landlord may terminate Tenant's right to possession
of the Premises by any lawful means in which case upon delivery of written
notice by Landlord this Lease shall terminate on the date specified by
Landlord in such notice and Tenant shall immediately surrender possession of
the Premises to Landlord. In addition, the Landlord shall have the immediate
right of re-entry whether or not this Lease is terminated, and if this right
of re-entry is exercised following abandonment of the Premises by Tenant,
Landlord may consider any personal property belonging to Tenant and left on
the Premises to also have been abandoned. No re-entry or taking possession of
the Premises by Landlord pursuant to this Section 21 shall be construed as an
election to terminate this Lease unless a written notice of such intention is
given to Tenant. If Landlord relets the Premises or any portion thereof, (i)
Tenant shall be liable immediately to Landlord for all costs Landlord incurs
in reletting the Premises or any part thereof, including, without limitation,
broker's commissions, expenses of cleaning, redecorating, and further
improving the Premises and other similar costs (collectively, the "Reletting
Costs"), and (ii) the rent received by Landlord from such reletting shall be
applied to the payment of, first, any indebtedness from Tenant to Landlord
other than Base Rent, Operating Expenses, Tax Expenses,
-23-
<PAGE>
Common Area Utility Costs, and Utility Expenses; second, all costs including
maintenance, incurred by Landlord in reletting; and, third, Base Rent,
Operating Expenses, Tax Expenses, Common Area Utility Costs, Utility
Expenses, and all other sums due under this Lease. Any and all of the
Reletting Costs shall be fully chargeable to Tenant and shall not be prorated
or otherwise amortized in relation to any new lease for the Premises or any
portion thereof. After deducting the payments referred to above, any sum
remaining from the rental Landlord receives from reletting shall be held by
Landlord and applied in payment of future Rent as Rent becomes due under this
Lease. In no event shall Tenant be entitled to any excess rent received by
Landlord. Reletting may be for a period shorter or longer than the remaining
term of this Lease. No act by Landlord other than giving written notice to
Tenant shall terminate this Lease. Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. So long as this Lease is not terminated,
Landlord shall have the right to remedy any default of Tenant, to maintain or
improve the Premises, to cause a receiver to be appointed to administer the
Premises and new or existing subleases and to add to the Rent payable
hereunder all of Landlord's reasonable costs in so doing, with interest at
the maximum rate permitted by law from the date of such expenditure.
21.2 DAMAGES RECOVERABLE: If Tenant breaches this Lease and
abandons the Premises before the end of the Term, or if Tenant's right to
possession is terminated by Landlord because of a breach or default under
this Lease, then in either such case, Landlord may recover from Tenant all
damages suffered by Landlord as a result of Tenant's failure to perform its
obligations hereunder, including, but not limited to, the portion of any
broker's or leasing agent's commission incurred with respect to the leasing
of the Premises to Tenant for the balance of the Term of the Lease remaining
after the date on which Tenant is in default of its obligations hereunder,
and all Reletting Costs, and the worth at the time of the award (computed in
accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the
California Civil Code) of the amount by which the Rent then unpaid hereunder
for the balance of the Lease Term exceeds the amount of such loss of Rent for
the same period which Tenant proves could be reasonably avoided by Landlord
and in such case, Landlord prior to the award, may relet the Premises for the
purpose of mitigating damages suffered by Landlord because of Tenant's
failure to perform its obligations hereunder; provided, however, that even
though Tenant has abandoned the Premises following such breach, this Lease
shall nevertheless continue in full force and effect for as long as Landlord
does not terminate Tenant's right of possession, and until such termination,
Landlord shall have the remedy described in Section 1951.4 of the California
Civil Code (Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover Rent as it becomes due, if Tenant has the right
to sublet or assign, subject only to reasonable limitations) and may enforce
all its rights and remedies under this Lease, including the right to recover
the Rent from Tenant as it becomes due hereunder. The "worth at the time of
the award" within the meaning of Subparagraphs (a)(1) and (a)(2) of Section
1951.2 of the California Civil Code shall be computed by allowing interest at
the rate of ten percent (10%) per annum. Tenant waives redemption or relief
from forfeiture under California Code of Civil Procedure Sections 1174 and
1179, or under any other present or future law, in the event Tenant is
evicted or Landlord takes possession of the Premises by reason of any default
of Tenant hereunder.
21.3 RIGHTS AND REMEDIES CUMULATIVE: The foregoing rights and
remedies of Landlord are not exclusive; they are cumulative in addition to
any rights and remedies now or hereafter existing at law, in equity by
statute or otherwise, or to any equitable remedies Landlord may
-24-
<PAGE>
have, and to any remedies Landlord may have under bankruptcy laws or laws
affecting creditor's rights generally. In addition to all remedies set forth
above, if Tenant materially defaults under this Lease, any and all Base Rent
waived by Landlord under Section 3 above shall be immediately due and payable
to Landlord and all options granted to Tenant hereunder shall automatically
terminate, unless otherwise expressly agreed to in writing by Landlord.
21.4 WAIVER OF A DEFAULT: The waiver by Landlord of any default
of any provision of this Lease shall not be deemed or construed a waiver of
any other default by Tenant hereunder or of any subsequent default of this
Lease, except for the default specified in the waiver.
22. HOLDING OVER
If Tenant holds possession of the Premises after the expiration of
the Term of this Lease with Landlord's consent, Tenant shall become a tenant
from month-to-month upon the terms and provisions of this Lease, provided the
monthly Base Rent during such hold over period shall be 150% of the Base Rent
due on the last month of the Lease Term, payable in advance on or before the
first day of each month. Acceptance by Landlord of the monthly Base Rent
without the additional fifty percent (50%) increase of Base Rent -shall not
be deemed or construed as a waiver by Landlord of any of its rights to
collect the increased amount of the Base Rent as provided herein at any time.
Such month-to-month tenancy shall not constitute a renewal or extension for
any further term. All options, if any, granted under the terms of this Lease
shall be deemed automatically terminated and be of no force or effect during
said month-to-month tenancy. Tenant shall continue in possession until such
tenancy shall be terminated by either Landlord or Tenant giving written
notice of termination to the other party at least thirty (30) days prior to
the effective date of termination. This paragraph shall not be construed as
Landlord's permission for Tenant to hold over. Acceptance of Base Rent by
Landlord following expiration or termination of this Lease shall not
constitute a renewal of this Lease.
23. LANDLORD'S DEFAULT
Landlord shall not be deemed in breach or default of this Lease
unless Landlord fails within a reasonable time to perform an obligation
required to be performed by Landlord hereunder. For purposes of this
provision, a reasonable time shall not be less than thirty (30) days after
receipt by Landlord of written notice specifying the nature of the obligation
Landlord has not performed; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days, after receipt
of written notice, is reasonably necessary for its performance, then Landlord
shall not be in breach or default of this Lease if performance of such
obligation is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.
24. PARKING
Tenant shall have a license to use the number of non-designated and
non-exclusive parking spaces specified in the Basic Lease Information.
Landlord shall exercise reasonable efforts to insure that such spaces are
available to Tenant for its use, but Landlord shall not be required to
enforce Tenant's right to use the same.
25. SALE OF PREMISES
-25-
<PAGE>
In the event of any sale of the Premises by Landlord or the
cessation otherwise of Landlord's interest therein, Landlord shall be and is
hereby entirely released from any and all of its obligations to perform or
further perform under this Lease and from all liability hereunder accruing
from or after the date of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any
and all of the covenants and obligations of the Landlord under this Lease.
For purposes of this Section 25, the term "Landlord" means only the owner
and/or agent of the owner as such parties exist as of the date on which
Tenant executes this Lease. A ground lease or similar long term lease by
Landlord of the entire Building, of which the Premises are a part, shall be
deemed a sale within the meaning of this Section 25. Tenant agrees to attorn
to such new owner provided such new owner does not disturb Tenant's use,
occupancy or quiet enjoyment of the Premises so long as Tenant is not in
default of any of the provisions of this Lease.
26. WAIVER
No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance of Rent by Landlord after
default by Tenant of any covenant or term of this Lease shall not be deemed a
waiver of such default, other than a waiver of timely payment for the
particular Rent payment involved, and shall not prevent Landlord from
maintaining an unlawful detainer or other action based on such breach. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
Rent and other sums due hereunder shall be deemed to be other than on account
of the earliest Rent or other sums due, nor shall any endorsement or
statement on any check or accompanying any check or payment be deemed an
accord and satisfaction; and Landlord may accept such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or
other sum or pursue any other remedy provided in this Lease. No failure,
partial exercise or delay on the part of the Landlord in exercising any
right, power or privilege hereunder shall operate as a waiver thereof.
27. CASUALTY DAMAGE
If the Premises or any part thereof shall be damaged by fire or
other casualty, Tenant shall give prompt written notice thereof to Landlord.
In case the Building shall be so damaged by fire or other casualty that
substantial alteration or reconstruction of the Building shall, in Landlord's
sole opinion, be required (whether or not the Premises shall have been
damaged by such fire or other casualty), Landlord may, at its option,
terminate this Lease by notifying Tenant in writing of such termination
within ninety (90) days after the date of such damage, in which event the
Rent shall be abated as of the date of such damage. If Landlord does not
elect to terminate this Lease, and provided insurance proceeds and any
contributions from Tenant, if necessary, are available to fully repair the
damage, Landlord shall within one hundred twenty (120) days after the date of
such damage commence to repair and restore the Building and shall proceed
with reasonable diligence to restore the Building (except that Landlord shall
not be responsible for delays outside its control) to substantially the same
condition in which it was immediately prior to the happening of the casualty;
provided, Landlord shall not be required to rebuild, repair, - or replace any
part of Tenant's furniture, furnishings, fixtures and/or equipment
-26-
<PAGE>
removable by Tenant or any improvements, alterations or additions installed
by or for the benefit of Tenant under the provisions of this Lease. Landlord
shall not in any event be required to spend for such work an amount in excess
of the insurance proceeds (excluding any deductible) and any contributions
from Tenant, if necessary, actually received by Landlord as a result of the
fire or other casualty. Landlord shall not be liable for any inconvenience or
annoyance to Tenant, injury to the business of Tenant, loss of use of any
part of the Premises by the Tenant or loss of Tenant's personal property
resulting in any way from such damage or the repair thereof, except that,
subject to the provisions of the next sentence, Landlord shall allow Tenant a
fair diminution of Rent during the time and to the extent the Premises are
unfit for occupancy. Notwithstanding anything to the contrary contained
herein, if the Premises or any other portion of the Building be damaged by
fire or other casualty resulting from the intentional or negligent acts or
omissions of Tenant or any of Tenant's Representatives, (i) the Rent shall
not be diminished during the repair of such damage, (ii) Tenant shall not
have any right to terminate this Lease due to the occurrence of such casualty
or damage, and (iii) Tenant shall be liable to Landlord for the cost and
expense of the repair and restoration of all or any portion of the Building
caused thereby (including, without limitation, any deductible) to the extent
such cost and expense is not covered by insurance proceeds. In the event the
holder of any indebtedness secured by 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 thirty (30) days after the date of notice to Tenant of any
such event, whereupon all rights and obligations shall cease and terminate
hereunder except for those obligations expressly intended to survive any such
termination of this Lease. Except as otherwise provided in this Section 27,
Tenant hereby waives the provisions of Sections 1932(2.), 1933(4.), 1941 and
1942 of the California Civil Code.
28. CONDEMNATION
If twenty-five percent (25%) or more of the Premises is condemned by
eminent domain, inversely condemned or sold in lieu of condemnation for any
public or quasi-public use or purpose ("Condemned"), then Tenant or Landlord
may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent
shall be adjusted to the date of termination. Tenant shall not because of
such condemnation assert any claim against Landlord or the condemning
authority for any compensation because of such condemnation, and Landlord
shall be entitled to receive the entire amount of any award without deduction
for any estate of interest or other interest of Tenant. If neither party
elects to terminate this Lease, Landlord shall, if necessary, promptly
proceed to restore the Premises or the Building to substantially its same
condition prior to such partial condemnation, allowing for the reasonable
effects of such partial condemnation, and a proportionate allowance shall be
made to Tenant, as solely determined by Landlord, for the Rent corresponding
to the time during which, and to the part of the Premises of which, Tenant is
deprived on account of such partial condemnation and restoration. Landlord
shall not be required to spend funds for restoration in excess of the amount
received by Landlord as compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS
29.1 HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE: Prior to
executing this Lease, Tenant has completed, executed and delivered to
Landlord Tenant's initial Hazardous Materials
-27-
<PAGE>
Disclosure Certificate (the "Initial HazMat Certificate"), a copy of which is
attached hereto as Exhibit G and incorporated herein by this reference.
Tenant covenants, represents and warrants to Landlord that the information on
the Initial HazMat Certificate is true and correct and accurately describes
the use(s) of Hazardous Materials which will be made and/or used on the
Premises by Tenant. Tenant shall commencing with the date which is one year
from the Commencement Date and continuing every year thereafter, complete,
execute, and deliver to Landlord, a Hazardous Materials Disclosure
Certificate ("the "HazMat Certificate") describing Tenant's present use of
Hazardous Materials on the Premises, and any other reasonably necessary
documents as requested by Landlord. The HazMat Certificate required hereunder
shall be in substantially the form as that which is attached hereto as
Exhibit E.
29.2 DEFINITION OF HAZARDOUS MATERIALS: As used in this Lease,
the term Hazardous Materials shall mean and include (a) any hazardous or
toxic wastes, materials or substances, and other pollutants or contaminants,
which are or become regulated by any Environmental Laws; (b) petroleum,
petroleum by products, gasoline, diesel fuel, crude oil or any fraction
thereof; (c) asbestos and asbestos containing material, in any form, whether
friable or non-friable; (d) polychlorinated biphenyls; (e) radioactive
materials; (f) lead and lead-containing materials; (g) any other material,
waste or substance displaying toxic, reactive, ignitable or corrosive
characteristics, as all such terms are used in their broadest sense, and are
defined or become defined by any Environmental Law (defined below); or (h)
any materials which cause or threatens to cause a nuisance upon or waste to
any portion of the Premises, the Building, the Lot, the Park or any
surrounding property; or poses or threatens to pose a hazard to the
health-and safety of persons on the Premises or any surrounding property.
29.3 PROHIBITION; ENVIRONMENTAL LAWS: Tenant shall not be
entitled to use nor store any Hazardous Materials on, in, or about the
Premises, the Building, the Lot and the Park, or any portion of the
foregoing, without, in each instance, obtaining Landlord's prior written
consent thereto. If Landlord consents to any such usage or storage, then
Tenant shall be permitted to use and/or store only those Hazardous Materials
that are necessary for Tenant's business and to the extent disclosed in the
HazMat Certificate and as expressly approved by Landlord in writing, provided
that such usage and storage is only to the extent of the quantities of
Hazardous Materials as specified in the then applicable HazMat Certificate as
expressly approved by Landlord and provided further that such usage and
storage is in full compliance with any and all local, state and federal
environmental, health and/or safety-related laws statutes, orders, standards,
courts' decisions, ordinances, rules and regulations (as interpreted by
judicial and administrative decisions), decrees, directives, guidelines,
permits or permit conditions, currently existing and as amended, enacted,
issued or adopted in the future which are or become applicable to Tenant or
all or any portion of the Premises (collectively, the "Environmental Laws").
Tenant agrees that any changes to the type and/or quantities of Hazardous
Materials specified in the most recent HazMat Certificate may be implemented
only with the prior written consent of Landlord, which consent may be given
or withheld in Landlord's sole discretion. Tenant shall not be entitled nor
permitted to install any tanks under, on or about the Premises for the
storage of Hazardous Materials without the express written consent of
Landlord, which may be given or withheld in Landlord's sole discretion.
Landlord shall have the right at all times during the Term of this
Lease to (i) inspect the Premises, (ii) conduct tests and investigations to
determine whether Tenant is in compliance with
-28-
<PAGE>
the provisions of this Section 29, and (iii) request lists of all Hazardous
Materials used, stored or otherwise located on, under or about any portion of
the Premises and/or the Common Areas. The cost of all such inspections, tests
and investigations shall be borne solely by Tenant, if Landlord reasonably
determines that Tenant or any of Tenant's Representatives are directly or
indirectly responsible in any manner for any contamination revealed by such
inspections, tests and investigations. The aforementioned rights granted
herein to Landlord and its representatives shall not create (a) a duty on
Landlord's part to inspect, test, investigate, monitor or otherwise observe
the Premises or the activities of Tenant and Tenant's Representatives with
respect to Hazardous Materials, including without limitation, Tenant's
operation, use and any remediation related thereto, or (b) liability on the
part of Landlord and its representatives for Tenant's use, storage, disposal
or remediation of Hazardous Materials, it being understood that Tenant shall
be solely responsible for all liability in connection therewith.
29.4 TENANT'S ENVIRONMENTAL OBLIGATIONS: Tenant shall give to
Landlord immediate verbal and follow-up written notice of any spills,
releases, discharges, disposals, emissions, migrations, removals or
transportation of Hazardous Materials on, under or about any portion of the
Premises or in any Common Areas. Tenant, at its sole cost and expense,
covenants and warrants to promptly investigate, clean up, remove, restore and
otherwise remediate (including, without limitation, preparation of any
feasibility studies or reports and the performance of any and all closures)
any spill, release, discharge, disposal, emission, migration or
transportation of Hazardous Materials arising from or related to the
intentional or negligent acts or omissions of Tenant or Tenant's
Representatives such that the affected portions of the Park and any adjacent
property are returned to the condition existing prior to the appearance of
such Hazardous Materials. Any such investigation, clean up, removal,
restoration and other remediation shall only be performed after Tenant has
obtained Landlord's prior written consent, which consent shall not be
unreasonably withheld so long as such actions would not potentially have a
material adverse long-term or short-term effect on any portion of the
Premises, the Building, the Lot or the Park. Notwithstanding the foregoing,
Tenant shall be entitled to respond immediately to an emergency without first
obtaining Landlord's prior written consent. Tenant, at its sole cost and
expense, shall conduct and perform, or cause to be conducted and performed,
all closures as required by any Environmental Laws or any agencies or other
governmental authorities having jurisdiction thereof. If Tenant fails to so
promptly investigate, clean up, remove, restore, provide closure or otherwise
so remediate, Landlord may, but without obligation to do so, take any and all
steps necessary to rectify the same and Tenant shall promptly reimburse
Landlord, upon demand, for all costs and expenses to Landlord of performing
investigation, clean up, removal, restoration, closure and remediation work.
All such work undertaken by Tenant, as required herein, shall be performed in
such a manner so as to enable Landlord to make full economic use of the
Premises, the Building, the Lot and the Park after the satisfactory
completion of such work.
29.5 ENVIRONMENTAL INDEMNITY: In addition to Tenant's
obligations as set forth hereinabove, Tenant and Tenant's officers and
directors agree to, and shall, protect, indemnify, defend (with counsel
acceptable to Landlord) and hold Landlord and the other Indemnitees harmless
from and against any and all claims, judgments, damages, penalties, fines,
liabilities, losses (including, without limitation, diminution in value of
any portion of the Premises, the Building, the Lot or the Park, damages for
the loss of or restriction on the use of rentable or usable space, and from
any adverse impact of Landlord's marketing of any space within the
-29-
<PAGE>
Building and/or Park), suits, administrative proceedings and costs
(including, but not limited to, attorneys' and consultant fees and court
costs) arising at any time during or after the Term of this Lease in
connection with or related to, directly or indirectly, the use, presence,
transportation, storage, disposal, migration, removal, spill, release or
discharge of Hazardous Materials on, in or about any portion of the Premises,
the Common Areas, the Building, the Lot or the Park as a result (directly or
indirectly) of the intentional or negligent acts or omissions of Tenant or
any of Tenant's Representatives. Neither the written consent of Landlord to
the presence, use or storage of Hazardous Materials in, on, under or about
any portion of the Premises, the Building, the Lot and/or the Park, nor the
strict compliance by Tenant with all Environmental Laws shall excuse Tenant
and Tenant's officers and directors from its obligations of indemnification
pursuant hereto. Tenant shall not be relieved of its indemnification
obligations under the provisions of this Section 29.5 due to Landlord's
status as either an "owner" or "operator" under any Environmental Laws.
29.6 SURVIVAL: Tenant's obligations and liabilities pursuant to
the provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the condition
of all or any portion of the Premises, the Building, the Lot and/or the Park
is not in compliance with the provisions of this Lease with respect to
Hazardous Materials, including without limitation all Environmental Laws at
the expiration or earlier termination of this Lease, then in Landlord's sole
discretion, Landlord may require Tenant to hold over possession of the
Premises until Tenant can surrender the Premises to Landlord in the condition
in which the Premises existed as of the Commencement Date and prior to the
appearance of such Hazardous Materials except for reasonable wear and tear,
including without limitation, the conduct or performance of any closures as
required by any Environmental Laws. The burden of proof hereunder shall be
upon Tenant. For purposes hereof, the term "reasonable wear and tear" shall
not include any deterioration in the condition or diminution of the value of
any portion of the Premises, the Building, the Lot and/or the Park in any
manner whatsoever related to directly, or indirectly, Hazardous Materials.
Any such holdover by Tenant will be with Landlord's consent, will not be
terminable by Tenant in any event or circumstance and will otherwise be
subject to the provisions of Section 22 of this Lease.
29.7 DISCLOSURE: The land described herein contains residual
hazardous substances. Such condition renders the land and the owner, Tenant
or other possessor of the land subject to requirements, restrictions,
provisions, and liabilities contained in chapter 6.5 and chapter 6.8 of
division 20 of the Health and Safety Code as same may be amended from time,
and any successor statutes thereof. This statement is not a declaration that
a hazard to public health, safety and welfare exists. Notwithstanding
anything to the contrary contained herein, nothing contained in this Section
29 shall be deemed to make Tenant responsible for any Hazardous Materials
existing at the Premises as of the date of Landlord's delivery of possession
of the Premises.
30. FINANCIAL STATEMENTS
Tenant, for the reliance of Landlord, any lender holding or
anticipated to acquire a lien upon the Premises, the Building or the Park or
any portion thereof, or any prospective purchaser of the Building or the Park
or any portion thereof, within ten (10) days after Landlord's request
therefor, but not more often than once annually so long as Tenant is not in
default of this Lease,
-30-
<PAGE>
shall deliver to Landlord the then current audited financial statements of
Tenant (including interim periods following the end of the last fiscal year
for which annual statements are available) which statements shall be prepared
or compiled by a certified public accountant and shall present fairly the
financial condition of Tenant at such dates and the result of its operations
and changes in its financial positions for the periods ended on such dates.
If an audited financial statement has not been prepared, Tenant shall provide
Landlord with an unaudited financial statement and/or such other information,
the type and form of which are acceptable to Landlord in Landlord's
reasonable discretion, which reflects the financial condition of Tenant. If
Landlord so requests, Tenant shall deliver to Landlord an opinion of a
certified public accountant, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared in accordance with
generally accepted accounting principles consistently applied. Any and all
options granted to Tenant hereunder shall be subject to and conditioned upon
Landlord's reasonable approval of Tenant's financial condition at the time of
Tenant's exercise of any such option, if Tenant is not yet profitable.
31. GENERAL PROVISIONS
31.1 TIME. Time is of the essence in this Lease and with
respect to each and all of its provisions in which performance is a factor.
31.2 SUCCESSORS AND ASSIGNS. The covenants and conditions
herein contained, subject to the provisions as to assignment, apply to and
bind the heirs, successors, executors, administrators and assigns of the
parties hereto.
31.3 RECORDATION. Tenant shall not record this Lease or a short
form memorandum hereof without the prior written consent of the Landlord.
31.4 LANDLORD'S PERSONAL LIABILITY. The liability of Landlord
(which, for purposes of this Lease, shall include Landlord and the owner of
the Building if other than Landlord) to Tenant for any default by Landlord
under the terms of this Lease shall be limited to the actual interest of
Landlord and its present or future partners or members in the Premises or the
Building, and Tenant agrees to look solely to the Premises for satisfaction
of any liability and shall not look to other assets of Landlord nor seek any
recourse against the assets of the individual partners, members, directors,
officers, shareholders, agents or employees of Landlord (including without
limitation, any property management company of Landlord); it being intended
that Landlord and the individual partners, members, directors, officers,
shareholders, agents and employees of Landlord (including without limitation,
any property management company of Landlord) shall not be personally liable
in any manner whatsoever for any judgment or deficiency. The liability of
Landlord under this Lease is limited to its actual period of ownership of
title to the Building, and Landlord shall be automatically released from
further performance under this Lease upon transfer of Landlord's interest in
the Premises or the Building.
31.5 SEPARABILITY. Any provisions of this Lease which shall
prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provisions hereof and such other provision shall remain
in full force and effect.
-31-
<PAGE>
31.6 CHOICE OF LAW. This Lease shall be governed by, and
construed in accordance with, the laws of the State of California.
31.7 ATTORNEYS' FEES. In the event any dispute between the
parties results in litigation or other proceeding, the prevailing party shall
be reimbursed by the party not prevailing for all reasonable costs and
expenses, including, without limitation, reasonable attorneys' and experts'
fees and costs incurred by the prevailing party in connection with such
litigation or other proceeding, and any appeal thereof. Such costs, expenses
and fees shall be included in and made a part of the judgment recovered by
the prevailing party, if any.
31.8 ENTIRE AGREEMENT. This Lease supersedes any prior
agreements, representations, negotiations or correspondence between the
parties, and contains the entire agreement of the parties on matters covered.
No other agreement, statement or promise made by any party, that is not in
writing and signed by all parties to this Lease, shall be binding.
31.9 WARRANTY OF AUTHORITY. On the date that Tenant executes
this Lease, Tenant shall deliver to Landlord an original certificate of
status for Tenant issued by the California Secretary of State or statement of
partnership for Tenant recorded in the county in which the Premises are
located, as applicable, and such other documents as Landlord may reasonably
request with regard to the lawful existence of Tenant. Each person executing
this Lease on behalf of a party represents and warrants that (1) such person
is duly and validly authorized to do so on behalf of the entity it purports
to so bind, and (2) if such party is a partnership, corporation or trustee,
that such partnership, corporation or trustee has full right and authority to
enter into this Lease and perform all of its obligations hereunder. Tenant
hereby warrants that this Lease is valid and binding upon Tenant and
enforceable against Tenant in accordance with its terms.
31.10 NOTICES. Any and all notices and demands required or
permitted to be given hereunder to Landlord shall be in writing and shall be
sent: (a) by United States mail, certified and postage prepaid; or (b) by
personal delivery; or (c) by overnight courier, addressed to Landlord at 101
Lincoln Centre Drive, Fourth Floor, Foster City, California 94404-1167, with
a copy to AMB Property L.P., c/o AMB Property Corporation at 505 Montgomery
Street, San Francisco, California 94111. Any and all notices and demands
required or permitted to be given hereunder to Tenant shall be in writing and
shall be sent: (i) by United States mail, certified and postage prepaid; or
(ii) by personal delivery to any employee or agent of Tenant over the age of
eighteen (18) years of age; or (iii) by overnight courier, all of which shall
be addressed to Tenant at the Premises. Notice and/or demand shall be deemed
given upon the earlier of actual receipt or the third day following deposit
in the United States mail. Any notice or requirement of service required by
any statute or law now or hereafter in effect, including, but not limited to,
California Code of Civil Procedure Sections 1161, 1161.1, and 1162 (including
any amendments, supplements or substitutions thereof), is hereby waived by
Tenant.
31.11 JOINT AND SEVERAL. If Tenant consists of more than one
person or entity, the obligations of all such persons or entities shall be
joint and several.
31.12 COVENANTS AND CONDITIONS. Each provision to be performed
by Tenant hereunder shall be deemed to be both a covenant and a condition.
-32-
<PAGE>
31.13 WAIVER OF JURY TRIAL. The parties hereto shall and they
hereby do waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way related to this Lease, the
relationship of Landlord and Tenant ` Tenant's use or occupancy of the
Premises, the Building or the Park, and/or any claim of injury, loss or
damage.
31.14 COUNTERCLAIMS. In the event Landlord commences any
proceedings for nonpayment of Rent, Additional Rent, or any other sums or
amounts due hereunder, Tenant shall not interpose any counterclaim of
whatever nature or description in any such proceedings, provided, however,
nothing contained herein shall be deemed or construed as a waiver of the
Tenant's right to assert such claims in any separate action brought by Tenant
or the right to offset the amount of any final judgment owed by Landlord to
Tenant.
31.15 UNDERLINING. The use of underlining within the Lease is
for Landlord's reference purposes only and no other meaning or emphasis is
intended by this use, nor should any be inferred.
31.16 MERGER. The voluntary or other surrender of this Lease by
Tenant, the mutual termination or cancellation hereof by Landlord and Tenant,
or a termination of this Lease by Landlord for a material default by Tenant
hereunder, shall not work a merger, and, at the sole option of Landlord, (i)
shall terminate all or any existing subleases or subtenancies, or (ii) may
operate as an assignment to Landlord of any or all of such subleases or
subtenancies. Landlord's election of either or both of the foregoing options
shall be exercised by delivery by Landlord of written notice thereof to
Tenant and all known subtenants under any sublease.
32. SIGNS
All signs and graphics of every kind visible in or from public view
or corridors or the exterior of the Premises shall be subject to Landlord's
prior written approval and shall be subject to any applicable governmental
laws, ordinances, and regulations and in compliance with Landlord's sign
criteria as same may exist from time to time or as set forth in Exhibit H
hereto and made a part hereof. Tenant shall remove all such signs and
graphics prior to the termination of this Lease. Such installations and
removals shall be made in a manner as to avoid damage or defacement of the
Premises; and Tenant shall repair any damage or defacement, including without
limitation, discoloration caused by such installation or removal. Landlord
shall have the right, at its option, to deduct from the Security Deposit such
sums as are reasonably necessary to remove such signs, including, but not
limited to, the costs and expenses associated with any repairs necessitated
by such removal. Notwithstanding the foregoing, in no event shall any: (a)
neon, flashing or moving sign(s) or (b) sign(s) which shall interfere with
the visibility of any sign, awning, canopy, advertising matter, or decoration
of any kind of any other business or occupant of the Building or the Park be
permitted hereunder. Tenant further agrees to maintain any such sign, awning,
canopy, advertising matter, lettering, decoration or other thing as may be
approved in good condition and repair at all times.
33. MORTGAGEE PROTECTION
-33-
<PAGE>
Upon any default on the part of Landlord, Tenant will give written
notice by registered or certified mail to any beneficiary of a deed of trust
or mortgagee of a mortgage covering the Premises who has provided Tenant with
notice of their interest together with an address for receiving notice, and
shall offer such beneficiary or mortgagee a reasonable opportunity to cure
the default (which, in no event shall be less than ninety (90) days),
including time to obtain possession of the Premises by power of sale or a
judicial foreclosure, if such should prove necessary to effect a cure. If
such default cannot be cured within such time period, then such additional
time as may be necessary will be given to such beneficiary or mortgagee to
effect such cure so long as such beneficiary or mortgagee has commenced the
cure within the original time period and thereafter diligently pursues such
cure to completion, in which event this Lease shall not be terminated while
such cure is being diligently pursued. Tenant agrees that each lender to whom
this Lease has been assigned by Landlord is an express third party
beneficiary hereof. Tenant shall not make any prepayment of Rent more than
one (1) month in advance without the prior written consent of each such
lender, except if Tenant is required to make quarterly payments of Rent in
advance pursuant to the provisions of Section 8 above. Tenant waives the
collection of any deposit from such lender(s) or any purchaser at a
foreclosure sale of such lender(s)' deed of trust unless the lender(s) or
such purchaser shall have actually received and not refunded the deposit.
Tenant agrees to make all payments under this Lease to the lender with the
most senior encumbrance upon receiving a direction, in writing, to pay said
amounts to such lender. Tenant shall comply with such written direction to
pay without determining whether an event of default exists under such
lender's loan to Landlord.
34. QUITCLAIM
Upon any termination of this Lease, Tenant shall, at Landlord's
request, execute, have acknowledged and deliver to Landlord a quitclaim deed
of Tenant's interest in and to the Premises. If Tenant fails to so deliver to
Landlord such a quitclaim deed, Tenant hereby agrees that Landlord shall have
the full authority and right to record such a quitclaim deed signed only by
Landlord and such quitclaim deed shall be deemed conclusive and binding upon
Tenant.
35. MODIFICATIONS FOR LENDER
If, in connection with obtaining financing for the Premises or any
portion thereof, Landlord's lender shall request reasonable modification(s)
to this Lease as a condition to such financing, Tenant shall not unreasonably
withhold, delay or defer its consent thereto, provided such modifications do
not materially adversely affect Tenant's rights hereunder or the use,
occupancy or quiet enjoyment of Tenant hereunder.
35. WARRANTIES OF TENANT
Tenant hereby warrants and represents to Landlord, for the express
benefit of Landlord, that Tenant has undertaken a complete and independent
evaluation of the risks inherent in the execution of this Lease and the
operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Tenant has elected to enter into this Lease and
hereby assumes all risks with respect thereto. Tenant hereby further warrants
and represents to Landlord, for the express benefit of Landlord, that in
entering into this Lease, Tenant has not relied upon any statement, fact,
promise or representation (whether express or implied, written or
-34-
<PAGE>
oral) not specifically set forth herein in writing and that any statement,
fact, promise or representation (whether express or implied, written or oral)
made at any time to Tenant, which is not expressly incorporated herein in
writing, is hereby waived by Tenant.
36. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Landlord and Tenant hereby agree and acknowledge that the Premises,
the Building and/or the Park may be subject to the requirements of the
Americans with Disabilities Act, a federal law codified at 42 U.S.C. 12101 et
seq, including, but not limited to Title HI thereof, all regulations and
guidelines related thereto, together with any and all laws, rules,
regulations, ordinances, codes and statutes now or hereafter enacted by local
or state agencies having jurisdiction thereof, including all requirements of
Title 24 of the State of California, as the same may be in effect on the date
of this Lease and may be hereafter modified, amended or supplemented
(collectively, the "ADA"). Tenant shall be solely responsible for conducting
its own independent investigation of this matter and for ensuring that the
design of all improvements or alterations to be made to the Premises by, or
on behalf of, Tenant strictly comply with all requirements of the ADA.
Subject to reimbursement pursuant to Section 6 of the Lease, if any barrier
removal work or other work is required to the Building, the Common Areas or
the Park under the ADA, then such work shall be the responsibility of
Landlord; provided, if such work is required under the ADA as a result of
Tenant's use of the Premises or any work or alteration made to the Premises
by or on behalf of Tenant, then such work shall be performed by Landlord at
the sole cost and expense of Tenant. Except as otherwise expressly provided
in this provision, Tenant shall be responsible at its sole cost and expense
for fully and faithfully complying with all applicable requirements of the
ADA, including without limitation, not discriminating against any disabled
persons in the operation of Tenant's business in or about the Premises, and
offering or otherwise providing auxiliary aids and services as, and when,
required by the ADA. Within ten (10) days after receipt, Landlord and Tenant
shall advise the other party in writing, and provide the other with copies of
(as applicable), any notices alleging violation of the ADA relating to any
portion of the Premises or the Building; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion of
the Premises or the Building; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with the ADA
and relating to any portion of the Premises or the Building. Tenant shall and
hereby agrees to protect, defend (with counsel acceptable to Landlord) and
hold Landlord and the other Indemnitees harmless and indemnify the
Indemnitees from and against all liabilities, damages, claims, losses,
penalties, judgments, charges and expenses (including reasonable attorneys'
fees, costs of court and expenses necessary in the prosecution or defense of
any litigation including the enforcement of this provision) arising from or
in any way related to, directly or indirectly, Tenant's or Tenant's
Representatives' violation or alleged violation of the ADA. Tenant agrees
that the obligations of Tenant herein shall survive the expiration or earlier
termination of this Lease.
37. BROKERAGE COMMISSION
Landlord and Tenant each represents and warrants for the benefit of
the other that it has had no dealings with any real estate broker, agent or
finder in connection with the Premises and/or the negotiation of this Lease,
except for the Broker(s) (as set forth on Page 1), and that it knows of no
other real estate broker, agent or finder who is or might be entitled to a
real estate
-35-
<PAGE>
brokerage commission or finder's fee in connection with this Lease or
otherwise based upon contacts between the claimant and Tenant. Each party
shall indemnify and hold harmless the other from and against any and all
liabilities or expenses arising out of claims made for a fee or commission by
any real estate broker, agent or finder in connection with the Premises and
this Lease other than Broker(s), if any, resulting from the actions of the
indemnifying party. Any real estate brokerage commission or finder's fee
payable to the Broker(s) in connection with this Lease shall only be payable
and applicable to the extent of the initial Term of the Lease and to the
extent of the Premises as same exist as of the date on which Tenant executes
this Lease. Unless expressly agreed to in writing by Landlord and Broker(s),
no real estate brokerage commission or finder's fee shall be owed to, or
otherwise payable to, the Broker(s) for any renewals or other extensions of
the initial Term of this Lease or for any additional space leased by Tenant
other than the Premises as same exists as of the date on which Tenant
executes this Lease. Tenant further represents and warrants to Landlord that
Tenant will not receive (i) any portion of any brokerage commission or
finder's fee payable to the Broker(s) in connection with this Lease or (ii)
any other form of compensation or incentive from the Broker(s) with respect
to this Lease.
38. QUIET ENJOYMENT
Landlord covenants with Tenant, upon the paying of Rent and
observing and keeping the covenants, agreements and conditions of this Lease
on its part to be kept, and during the periods that Tenant is not otherwise
in default of any of the terms or provisions of this Lease, and subject to
the rights of any of Landlord's lenders, (i) that Tenant shall and may
peaceably and quietly hold, occupy and enjoy the Premises and the Common
Areas during the Term of this Lease, and (ii) neither Landlord, nor any
successor or assign of Landlord, shall disturb Tenant's occupancy or
enjoyment of the Premises and the Common Areas.
39. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED
OBLIGATIONS
Notwithstanding anything to the contrary contained in this Lease, if
Tenant shall fail to perform any of the terms, provisions, covenants or
conditions to be performed or complied with by Tenant pursuant to this Lease,
and/or if the failure of Tenant relates to a matter which in Landlord's
judgment reasonably exercised is of an emergency nature and such failure
shall remain uncured for a period of time commensurate with such emergency,
then Landlord may, at Landlord's option without any obligation to do so, and
in its sole discretion as to the necessity therefor, perform any such term,
provision, covenant, or condition, or make any such payment and Landlord by
reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant. If
Landlord so performs any of Tenant's obligations hereunder, the full amount
of the cost and expense entailed or the payment so made or the amount of the
loss so sustained shall immediately be owing by Tenant to Landlord, and
Tenant shall promptly pay to Landlord upon demand, as Additional Rent, the
full amount thereof with interest thereon from the date of payment at the
greater of
-36-
<PAGE>
(i) ten percent (10%) per annum, or (ii) the highest rate permitted by
applicable law and Enforcement Expenses.
IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced on Page 1 of this Lease.
TENANT:
DELTAGEN, INC., a Delaware corporation
By: /s/ William Matthews
------------------------------------
Its: Chief Executive Officer
-----------------------------------
Date: May 15, 1999
----------------------------------
LANDLORD:
WILLOW PARK HOLDING COMPANY II, LLC
By: AMB Property, L.P., its Manager
By: AMB Property Corporation, its General Partner
By: /s/ Gayle Stars
------------------------------
Its: Vice President
------------------------------
Date: May 26, 1999
----------------------------
If Tenant is a CORPORATION, the authorized officers must sign
on behalf of the corporation and indicate the capacity in which they are
signing. The Lease must be executed by the president or vice-president and
the secretary or assistant secretary, unless the bylaws or a resolution of
the board of directors shall otherwise provide, in which event, the bylaws or
a certified copy of the resolution, as the case may be, must be attached to
this Lease.
-37-
<PAGE>
EXHIBIT A
PREMISES
This exhibit, entitled "Premises", is and shall constitute EXHIBIT A
to that certain Lease Agreement dated April 9, 1999 (the "Lease"), by and
between Willow Park Holding Company II, a Delaware limited liability company
("Landlord") and Deltagen, Inc., a California corporation ("Tenant") for the
leasing of certain premises located in the Willow Park at Building E, 1003
Hamilton Court, Menlo Park, California (the "Premises").
The Premises consist of the rentable square footage of space
specified in the Basic Lease Information and has the address specified in the
Basic Lease Information. The Premises are a part of and are contained in the
Building specified in the Basic Lease Information. The area below depicts the
Premises within the Building:
<PAGE>
EXHIBIT B
TENANT IMPROVEMENTS
This exhibit, entitled "Tenant Improvements", is and shall
constitute EXHIBIT B to that certain Lease Agreement dated April 9, 1999 (the
"Lease"), by and between Willow Park Holding Company H, a Delaware limited
liability company ("Landlord") and Deltagen, Inc., a California corporation
("Tenant") for the leasing of certain premises located in the Willow Park at
Building E, 1003 Hamilton Court, Menlo Park, California (the "Premises"). The
terms, conditions and provisions of this EXHIBIT B are hereby incorporated
into and are made a part of the Lease. Any capitalized terms used herein and
not otherwise defined herein shall have the meaning ascribed to such terms as
set forth in the Lease:
TENANT IMPROVEMENTS, AS-IS CONDITION: Tenant hereby accepts the
Premises as suitable for Tenant's intended use and as being in good operating
order, condition and repair, "AS-IS", and without representation or warranty
by Landlord nor any of Landlord's agents, representatives or employees as to
the suitability, fitness, condition, use or occupancy which may be made
thereof. Tenant further acknowledges and agrees that neither Landlord nor any
of Landlord's agents, representatives or employees has agreed to undertake
any alterations or construct any improvements ("Tenant Improvements") to the
Premises. Any exceptions to the foregoing must be by written agreement
executed by Landlord and Tenant.
<PAGE>
EXHIBIT C TO LEASE AGREEMENT
RULES & REGULATIONS
This exhibit, entitled "Rules & Regulations", is and shall
constitute EXHIBIT C to that certain Lease Agreement dated April 9, 1999 (the
"Lease"), by and between Willow Park Holding Company II, a Delaware limited
liability company ("Landlord") and Deltagen, Inc., a California corporation
("Tenant") for the leasing of certain premises located in the Willow Park at
Building E, 1003 Hamilton Court, Menlo Park, California (the "Premises"). The
terms, conditions and provisions of this EXHIBIT C are hereby incorporated
into and are made a part of the Lease. Any capitalized terms used herein and
not otherwise defined herein shall have the meaning ascribed to such terms as
set forth in the Lease:
1. No advertisement, picture or sign of any sort shall be
displayed on or outside the Premises or the Building without the prior
written consent of Landlord. Landlord shall have the right to remove any such
unapproved item without notice and at Tenant's expense.
2. Tenant shall not regularly park motor vehicles in
designated parking areas after the conclusion of normal daily business
activity.
3. Tenant shall not use any method of heating or air
conditioning other than that supplied by Landlord without the prior written
consent of Landlord.
4. All window coverings installed by Tenant and visible from
the outside of the Building require the prior written approval of Landlord.
5. Tenant shall not use, keep or permit to be used or kept
any foul or noxious gas or substance or any flammable or combustible
materials on or around the Premises, the Building or the Park.
6. Tenant shall not alter any lock or install any new locks
or bolts on any door at the Premises without the prior consent of Landlord.
7. Tenant agrees not to make any duplicate keys without the
prior consent of Landlord.
8. Tenant shall park motor vehicles in those general parking
areas as designated by Landlord except for loading and unloading. During
those periods of loading and unloading, Tenant shall not unreasonably
interfere with traffic flow within the Park and loading and unloading areas
of other Tenants.
9. Tenant shall not disturb, solicit or canvas any occupant
of the Building or Park and shall cooperate to prevent same.
10. No person shall go on the roof without Landlord's
permission.
-1-
<PAGE>
11. Business machines and mechanical equipment belonging to
Tenant which cause noise or vibration that may be transmitted to the
structure of the Building, to such a degree as to be objectionable to
Landlord or other Tenants, shall be placed and maintained by Tenant, at
Tenant's expense, on vibration eliminators or other devices sufficient to
eliminate noise or vibration.
12. All goods, including material used to store goods,
delivered to the Premises of Tenant shall be immediately moved into the
Premises and shall not be left in parking or receiving areas overnight.
13. Tractor trailers which must be unhooked or parked with
dolly wheels beyond the concrete loading areas must use steel plates or wood
blocks under the dolly wheels to prevent damage to the asphalt paving
surfaces. No parking or storing of such trailers will be permitted in the
auto parking areas of the Park or on streets adjacent thereto.
14. Forklifts which operate on asphalt paving areas shall not
have solid rubber tires and shall only use tires that do not damage the
asphalt.
15. Tenant is responsible for the storage and removal of all
trash and refuse. All such trash and refuse shall be contained in suitable
receptacles stored behind screened enclosures at locations approved by
Landlord.
16. Tenant shall not store or permit the storage or placement
of goods, or merchandise or pallets or equipment of any sort in or around the
Premises, the Building, the Park or any of the Common Areas of the foregoing.
No displays or sales of merchandise shall be allowed in the parking lots or
other Common Areas.
17. Tenant shall not permit any animals, including, but not
limited to, any household pets, to be brought or kept in or about the
Premises, the Building, the Park or any of the Common Areas of the foregoing.
18. Tenant shall not permit any motor vehicles to be washed on
any portion of the Premises or in the Common Areas of the Park, nor shall
Tenant permit mechanical work or maintenance of motor vehicle's to be
performed on any portion of the Premises or in the Common Areas of the Park.
-2-
<PAGE>
EXHIBIT D
WILLOWPARK
DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS
This Declaration of Covenants, Conditions and Restrictions
(hereinafter called "Declaration") is made this twenty-fifth day of August
1979, by LINCOLN PROPERTY COMPANY NO. 238, A CALIFORNIA LIMITED PARTNERSHIP
(PHASES 1 & 2); LINCOLN PROPERTY COMPANY NO. 287, LTD., A CALIFORNIA LIMITED
PARTNERSHIP (PHASE 3); LINCOLN PROPERTY COMPANY NO. 355, LTD., A CALIFORNIA
LIMITED PARTNERSHIP (PHASE 4); LINCOLN PROPERTY COMPANY NO. 440, LTD., A
CALIFORNIA LIMITED PARTNERSHIP (PHASE 5); LINCOLN PROPERTY COMPANY NO. 1179,
A CALIFORNIA LIMITED PARTNERSHIP (PHASE 6); LINCOLN PROPERTY COMPANY NO. 2036
LIMITED PARTNERSHIP, A CALIFORNIA LIMITED PARTNERSHIP (PHASE 7) (hereinafter
called "Lincoln Property Company").
RECITALS
1. Declarant is, or at the time of recording this Declaration will
be, the Owner in fee of all that certain real property which is situated in
the City of Menlo Park, County of San Mateo, State of California, described
on the map (hereinafter called "Map") entitled "Menlo Industrial Center,
Menlo Park, California" which Map is filed in the office of the Recorder of
the County of San Mateo, State of California, on October 1, 1979, in Book No.
99 of Maps, at pages 81, 82 and 83.
2. As Owner of the real property described in Paragraph 1 of these
Recitals, Declarant has executed this Declaration for the purpose of imposing
upon all portions of said real property (other than Parcel E as shown on the
Map) a general plan of improvement for the benefit of said real property
(other than said Parcel E) and its present and future owners. Said real
property (other than Parcel E) is hereinafter called the "Property."
NOW, THEREFORE, Declarant hereby declares that the Property is now
held, and shall hereafter be held, developed, encumbered, hypothecated,
transferred, sold, leased, conveyed, improved, used and occupied subject to
the covenants, conditions, restrictions and limitations hereinafter set
forth, all of which are declared to be in furtherance of a plan for the
development and operation of a landscaped business and industrial park and
are established for the purpose of enhancing and protecting the value,
attractiveness and desirability of the Property and every part thereof. Each
of the covenants, conditions, restrictions and limitations set forth herein
shall run with the land, and every part thereof, and shall burden as well as
inure to the benefit of and pass with each and every portion of the Property
hereinafter developed, encumbered, hypothecated, transferred, sold, leased,
conveyed, improved, used or occupied and shall apply to and bind any and all
parties having or acquiring any right, title, license or interest in the
Property or any part thereof.
-1-
<PAGE>
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies or requires, the terms
defined in this Article I shall, for all purposes of this Declaration, have
the meanings herein specified.
1.1 BUILDING. "Building" shall mean the principal structure or
structures on any Site, including all garages, outside platforms,
outbuildings, docks and the like.
1.2 DECLARANT. "Declarant shall mean Lincoln Property Company,
its successors and assigns, Declarant's assigns shall be deemed to include
any party whom Declarant designates, by means of a notice recorded in the
Official Records of San Mateo County, as the party who, from and after the
date such notice is recorded, will perform Declarant's functions under this
Declaration.
1.3 DEED OF TRUST. "Deed of Trust" shall mean, with respect to
any portion of the property, a duly recorded Deed of Trust, mortgage or other
instrument which created a lien on the portion of the Property is describes.
1.4 IMPROVEMENTS. "Improvements" shall mean and include
without limitation buildings, outbuildings, pedestrian and vehicle access
facilities, parking areas, loading areas, fences, walls, hedged mass
plantings, landscaping, poles, signs and any structures of any type or kind.
1.5 OWNER. "Owner" shall mean any person, firm, corporation or
other legal entity (including Declarant) which owns fee title to a Site, as
shown by the Official Records of the County of San Mateo; provided, however,
that the term "Owner" shall not include a mortgage or beneficiary under a
deed of trust holding a security interest in a Site unless such mortgagee or
beneficiary is in actual physical possession of the Site.
Whenever this Declaration creates or imposes an obligation with
respect to a Site, the Owner of the Site shall be responsible for the timely
and proper performance of the obligation, notwithstanding any delegation of
such responsibility by lease, contract, or otherwise to another party.
1.6 PROPERTY. "Property" shall mean that certain real property
subject to the covenants, conditions and restrictions set forth herein,
namely, that real property described on Exhibit A attached hereto and
incorporated herein.
1.7 SITE. "Site" shall mean a continuous area of land within
the Property which is owned of record by the same Owner, whether shown as one
parcel on any recorded map or as a combination of parcels or of portions
thereof.
ARTICLE II
REGULATION OF USES
2.1 PERMITTED USES. Unless otherwise specifically prohibited
herein, or by applicable law, any business/industrial use will be permissible
if it does not constitute a nuisance to adjacent
-2-
<PAGE>
Sites. Permitted uses will include, but not be limited to, manufacturing,
warehousing, distribution, cartage, processing, storage, wholesaling, office,
laboratory, professional and research and development.
2.2 NUISANCE. No noxious or offensive activity shall be
carried on nor shall anything be done on any Site which may be or become an
annoyance or nuisance to the Owners or occupants of other Sites, or which
will be offensive to the Owners or occupants of other Sites by reason of
odor, fumes, discharge of any chemical or industrial waste above or below
ground, dust, dirt, fly-ash, smoke, noise, glare or which will be hazardous
by reason of danger of fire or explosion or any other hazard.
2.3 RIGHT OF ENTRY. During reasonable hours and subject to
reasonable security requirements, Declarant or its authorized representative
shall have the right to enter upon and inspect any Building and/or Site and
the Improvements thereon for the purpose of ascertaining whether or not the
provisions of this Declaration have been or are being complied with and shall
not be deemed guilty of trespass by reason of such entry.
ARTICLE III
REGULATION OF IMPROVEMENTS
3.1 MINIMUM SETBACK LINES.
(a) GENERAL. No Improvement and no part thereof shall be
placed on any Site closer to a property line than herein provided. The
following Improvements are specifically excluded from these setback
provisions:
(1) Roof overhang, subject to the specific approval
of Declarant in writing.
(2) Steps and walks.
(3) Paving and associated curbing, except that
vehicle parking areas shall not be permitted within ten (10) feet of the
street property line or lines.
(4) Fences, except that no fence shall be placed
within the street setback area unless specific approval is given by Declarant
in writing.
(5) Landscaping.
(6) Planters, not to exceed three (3) feet in height.
(7) Railroad spur tracks, switches and bumpers,
provided that the location of such tracks, switches and bumpers is
specifically approved by Declarant in writing.
(8) Displays identifying the Owner, Lessee or
occupant, subject to the specific approval of Declarant in writing.
-3-
<PAGE>
(b) SETBACK FROM INTERIOR PROPERTY LINES. No setback
is established from a rear or side interior property line. The interior lot
lines for a comer lot shall be considered to have a real property line.
(c) SETBACK STREET PROPERTY LINES. The setback line
is established as twenty (20) feet from property line on all streets on the
property.
3.2 COMPLETION OF CONSTRUCTION. After commencement
of construction of any Improvement, the Owner shall diligently prosecute the
work thereon to the end that the Improvement shall not remain in a partly
finished condition any longer than reasonably necessary for the completion
thereof.
3.3 No excavation shall be made except in connection
with construction of an Improvement, and upon completion thereof, exposed
openings shall be backfilled and disturbed ground shall be graded and leveled.
3.4 LANDSCAPING.
(a) Every Site on which a Building shall have been
placed shall, be landscaped according to plans approved as specified herein
and maintained thereafter in a slightly and well-kept condition.
(b) An Owner, Lessee or occupant shall landscape and
maintain unpaved areas between the property lines and the setback lines.
(c) An Owner, Lessee or occupant shall provide hose
bibs and maintenance facilities in the vicinity of the landscaped areas.
(d) Landscape as approved by Declarant shall be
installed within ninety (90) days of occupancy or completion of the Building,
whichever occurs first,
3.5 SITE MAINTENANCE. All Improvements on each Site
including, without limitation, all walks, driveways, fences, parking areas,
landscaping and the exterior of all structures on each Site, shall be
maintained free of litter and debris and in good condition, order and repair.
Landscaping shall be kept in thriving condition, weed-free and neatly
trimmed. All undeveloped Sites shall be kept clean, mowed and in a condition
so as not to be a dust or weed problem.
3.6 SIGNS AND LIGHTING. No signs or displays shall
be created on any Site, other than the following:
(a) Signs identifying the name, building and
business of any person or firm occupying a Site, the size, design and color
of which has been specifically approved by Declarant in writing; and
(b) Offering a Site for sale or lease if Declarant
has specifically approved said signs.
All signs and displays shall be located below the roof
line of the building and shall comply with all applicable laws and ordinances.
-4-
<PAGE>
Lighting shall be restricted to parking and security lights, fire
lighting and low-level sign illumination and floodlighting of buildings or
landscaping. All lighting shall be shielded and contained within property
lines.
3.7 PARKING AREAS. Adequate parking on a Site shall be
provided to accommodate all parking needs for employees, visitors and company
vehicles. There shall also be adequate areas provided for truck loading and
unloading. The intent of this provision is to eliminate the need for any
on-street parking. If parking or loading requirements increase as a result of
a change in use or number of employees, additional off-street parking shall
be provided to satisfy the intent of this section.
3.8 BUILDING REGULATIONS. Any building erected on a Site
shall conform to the following construction practices:
(a) Exterior walls of sheet or corrugated iron, steel,
aluminum or asbestos will be permitted only upon specific approval in writing
by Declarant.
(b) Exterior walls shall be painted, or suitably treated in a
manner acceptable to Declarant.
ARTICLE IV
APPROVAL OF PLANS
4.1 No Improvement shall be erected, placed, altered,
maintained or permitted to remain on any land subject to these restrictions
until plans and specifications showing plot layout, including parking and all
exterior elevations, with materials and colors, have been submitted to and
approved in writing by Declarant. Said approval shall be in addition to any
approvals and/or permits required by the City of Menlo Park or any other
legal entity having jurisdiction. Such plans and specifications shall be
submitted in writing over the signature of the Owner of Lessee of the Site or
his authorized agent.
4.2 Approval shall be based, among other things, on adequacy
of Site dimensions, adequacy of structural design, conformity and harmony of
external design with neighboring Improvements, effect of location and use of
Improvements on neighboring Sites; proper facing of main elevation with
respect to nearby streets; and conformity of the plans and specifications to
the purpose and general plan and intent of these restrictions. Declarant
shall not arbitrarily or unreasonably withhold its approval of such plans and
specifications.
4.3 If Declarant fails either to approve or to disapprove such
plans and specifications within thirty (30) days after the same have been
submitted to it, it shall be conclusively presumed that Declarant has
approved said plans and specifications, subject, however, to the restrictions
contained in ARTICLE III hereof.
4.4 Notwithstanding anything to the contrary herein contained,
after the expiration of one year from the date of issuance of a building
permit by municipal or other governmental authority for any Improvement, said
Improvement shall, in favor of purchasers and encumbrancers in good faith and
for value, be deemed to be in compliance with all provisions of this ARTICLE
IV, unless actual notice of such non-compliance or non-completion executed by
-5-
<PAGE>
Declarant shall appear of record in the office of the County Recorder of San
Mateo County, California, or unless legal proceedings shall have been
instituted to enforce compliance or completion.
4.5 FEE. An architectural review fee shall be paid to
Declarant at the time plans are submitted for approval based upon the
following schedule:
(a) When the plans submitted are prepared by an architect
licensed to practice in the State of California, the architectural review fee
shall be $100.00.
(b) In all other cases, the architectural review fee shall be
$200.00.
ARTICLE V
DURATION AND MODIFICATION AND REPEAL
5.1 TERM. This Declaration, every provision hereof and every
covenant, conditions and restriction contained herein shall continue in full
force and effect for a period of sixty (60) years from the date hereof.
5.2 TERMINATION AND MODIFICATION. This Declaration or any
provisions thereof or any covenant, condition or restriction contained herein
may be terminated, extended, modified or amended as to the whole of said
property or any portion thereof, with the written consent of the Owners of
sixty-five percent (65%) in area of the Property; provided that so long as
Declarant owns at least twenty percent (20%) in area of the Property, no such
termination, extension, modification or amendment shall be effective without
Declarant's written approval. No termination, extension, modification or
amendment hereof shall be effective until a written instrument embodying the
same has been executed and recorded in the Official Records of San Mateo
County.
ARTICLE VI
ENFORCEMENT
6.1 ABATEMENT AND SUIT. Violation or breach of any restriction
herein contained shall give to Declarant the right to enter upon the Property
upon or as to which said violation or breach exists and summarily to abate
and remove at the expense of the Owner, Lessee or occupant thereof any
structure, thing or condition that may be or exist thereon contrary to the
intent and meaning of the provisions hereof, or to prosecute a proceeding at
law or in equity against the person or persons who have violated or are
attempting to violate any of these restrictions to enjoin or prevent them
from doing so, to cause said violation to be remedied or to recover damages
for said violation. In addition, every Owner of a Site shall have the right,
in the event of violation or breach of any restriction herein contained, to
prosecute a proceeding at law or in equity against the person or persons who
have violated or are attempting to violate any of these restrictions to
enjoin or to recover damages for said violation. All remedies provided herein
or at law or in equity shall be cumulative and not exclusive.
6.2 DEEMED TO CONSTITUTE A NUISANCE. The result of every
action or omission whereby any restriction herein contained is violated in
whole or in part is hereby declared to be and to constitute a nuisance. Every
remedy allowed by law or equity against an Owner, either
-6-
<PAGE>
public or private, shall be applicable against every such result and may be
exercised by Declarant or by any Owner of property subject hereto. Any costs
or expenses paid or incurred by Declarant or an Owner (collectively referred
to as "Declarant" in this Section 6.2) in abating such nuisance or
prosecuting any such remedy (including all reasonable attorneys' fees and
costs of collection), together with interest thereon at the rate of ten
percent (10%) per annum, shall be a charge against the Site on which the
nuisance has occurred or is occurring, shall be a continuing lien thereon
until paid, and shall also be the personal obligation of the Owner of such
Site when such charges became due and who committed such breach or violation.
In addition to any other rights or remedies hereunder, Declarant may deliver
to the Owner of the Site on which the nuisance has occurred or is occurring
and record with the San Mateo County Recorder a certificate of notice of
claim of lien. If the violation recited in such lien claim has not been cured
to Declarant's satisfaction and any recited amounts so charged have not been
paid within thirty (30) days thereafter, Declarant or its authorized
representative may foreclose such lien by a sale conducted pursuant to
Sections 2924, 2924b and 2924c of the California Civil Code, as amended from
time to time, or other statues applicable to the exercise of powers of sales
in mortgages or Deeds of Trust, or in any other manner permitted by law.
Declarant, through its authorized representatives, may bid on and acquire any
land subject to such lien at any such foreclosure sale. If the violations
recited in such lien claim are timely cured and any recited amounts timely
paid as provided above, Declarant shall forthwith record an appropriate
release of such lien at Declarant's sole expense.
6.3 ATTORNEYS' FEES. In any legal or equitable proceeding for
the enforcement or to restrain the violation of this Declaration or any
provision hereof, the losing party or parties shall pay the attorneys' fees
of the prevailing party or parties, in such amount as may be fixed by the
court in such proceedings.
6.4 FAILURE TO ENFORCE NOT A WAIVER OF RIGHTS. The failure of
Declarant or any Owner to enforce any restriction herein contained shall in
no event be deemed to be a waiver of the right to do so thereafter nor of the
right to enforce any other restriction.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 ASSIGNMENT OF DECLARANT'S RIGHTS AND DUTIES. Declarant
may assign any and all of its rights, powers, reservations and obligations
hereunder to any person, corporation or association. To be effective, any
such assignments must be accepted in writing by the assignee and the
acceptance must be recorded in the Official Records of San Mateo County. To
the extent of the assignment, the assignee shall have the same rights,
obligations, duties and powers and be subject to the same obligations and
duties as given to and assumed by Declarant herein. The term Declarant as
used herein includes all such assignees and their heirs, successors and
assigns. Declarant may also resign as Declarant by recording a written notice
of resignation in the Official Records of San Mateo County and mailing a copy
thereof to each then Owner. The resignation shall be effective on the date it
is recorded and Declarant shall thereafter have no further rights, powers,
reservations, obligation or liabilities hereunder. If at any time Declarant
either resigns or ceases to exist without making an assignment of its
authority as Declarant, a
-7-
<PAGE>
successor Declarant may be appointed in the same manner as this Declaration
may be terminated, extended, modified or amended under Section 2 of
ARTICLE IV.
7.2 CONSTRUCTIVE NOTICE AND ACCEPTANCE. Every person or other
entity who now or hereafter owns or acquires any right, title or interest in
or to any portion of the Property is and shall be conclusively deemed to have
consented and agreed to every covenant, condition and restriction contained
herein, whether or not any reference to this Declaration is contained in the
instrument by which such person or entity acquired an interest in said
property.
7.3 WAIVER. Neither Declarant nor its successors or assigns
shall be liable to any Owner, Lessee, licensee or occupant of land subject to
his Declarant by reason of any mistake in judgment, negligence, nonfeasance,
action or inaction and/or for the enforcement or failure to enforce any
provision of this Declaration. Every Owner, Lessee, licensee or occupant of
any of said property by acquiring his interest therein agrees that he will
not bring any action or suit against Declarant to recover any damages or to
seek equitable relief because of any mistake in judgment, negligence,
nonfeasance, action or inaction and/or the enforcement or failure to enforce
any provision of this Declaration.
7.4 MUTUALITY, RECIPROCITY, RUNS WITH LAND. All covenants,
conditions, restrictions and agreements contained herein are made for the
direct, mutual and reciprocal benefit of each and every part and parcel of
the property now or hereafter made subject to this Declaration, shall create
reciprocal rights and obligations between the respective Owners of all
parcels and private of contract and estate between all grantees of said
parcels, their heirs, successors and assigns, and shall, as to the Owner of
each parcel, his heirs, successors and assigns, operate as covenants running
with the land for the benefit of all other parcels.
7.5 RIGHTS OF BENEFICIARIES. No breach of the restrictions and
other provisions contained herein shall defeat or render invalid the lien of
any Deed of Trust now or hereafter executed upon land subject to these
restrictions; provided, however, that if any portion of said property is sold
under a foreclosure of any mortgage or under the provisions of any deed of
trust, any purchaser at such sale and his successors and assigns shall hold
any and all property so purchased subject to all of the restrictions and
other provisions of this Declaration.
7.6 PARAGRAPH HEADINGS. Paragraph headings, where used herein,
are inserted for convenience only and are not intended to be a part of this
Declaration or in any way to define, limit or describe the scope and intent
to the particular paragraphs to which they refer.
7.7 EFFECT OF INVALIDATION. If any provision of this
Declaration is held to be invalid by any court, the invalidity of such
provision shall not affect the validity of the remaining provisions hereof.
7.8 EXISTING IMPROVEMENTS. Improvements which are completely
constructed on the date this Declaration is recorded are deemed to satisfy
all the requirements hereof.
7.9 ESTOPPEL CERTIFICATE. At the request of an Owner,
Declarant shall supply to such Owner or any actual or potential encumbrancer
or purchaser of a Site a written certificate stating that there are no
violations hereof, or if there are any such violations, the nature of such
-8-
<PAGE>
violations. Such certificate shall be delivered within ten (10) working days
after such request by an Owner.
-9-
<PAGE>
EXHIBIT E
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the
information provided by you in this Hazardous Materials Disclosure
Certificate is necessary for the Landlord (identified below) to evaluate and
finalize a lease agreement with you as Tenant. After a lease agreement is
signed by you and the Landlord (the "Lease Agreement"), on an annual basis in
accordance with the provisions of Section 29 of the signed Lease Agreement,
you are to provide an update to the information initially provided by you in
this certificate. The information contained in the initial Hazardous
Materials Disclosure Certificate and each annual certificate provided by you
thereafter will be maintained in confidentiality by Landlord subject to
release and disclosure as required by (i) any lenders and owners and their
respective environmental consultants, (ii) any prospective purchaser(s) of
all or any portion of the property on which the Premises are located, (iii)
Landlord to defend itself or its lenders, partners or representatives against
any claim or demand, and (iv) any laws, rules, regulations, orders, decrees,
or ordinances, including, without limitation, court orders or subpoenas. Any
and all capitalized terms used herein, which are not otherwise defined
herein, shall have the same meaning ascribed to such term in the signed Lease
Agreement. Any questions regarding this certificate should be directed to,
and when completed, the certificate should be delivered to:
Landlord:
-----------------------------------------------------
-----------------------------------------------------
c/o Legacy Partners Commercial, Inc.
101 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn:
Phone: (650) 571-2200
Name of (Prospective) Tenant:
------------------------------------------------
Mailing Address:
-------------------------------------------------------------
Contact Person, Title and Telephone Number(s):
-------------------------------
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
--------------------------------------------------------
- ----------------------------------------------------------------------------
-1-
<PAGE>
Address of (Prospective) Premises:
------------------------------------------
Length of (Prospective) Initial Term:
---------------------------------------
1. General Information:
Describe the initial proposed operations to take place in,
on, or about the Premises, including, without limitation,
principal products processed, manufactured or assembled
services and activities to be provided or otherwise
conducted. Existing Tenants should describe any proposed
changes to on-going operations.
2. Use, Storage and Disposal of Hazardous Materials
2.1 Will any Hazardous Materials be used, generated,
stored or disposed of in, on or about the
Premises? Existing Tenants should describe any
Hazardous Materials which continue to be used,
generated, stored or disposed of in, on or about
the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
If Yes is marked, please explain:
------------------
---------------------------------------------------
2.2 If Yes is marked in Section 2.1, attach a list of
any Hazardous Materials to be used, generated,
stored or disposed of in, on or about the
Premises, including the applicable hazard class
and an estimate of the quantities of such
Hazardous Materials at any given time; estimated
annual throughput; the proposed location(s) and
method of storage (excluding nominal amounts of
ordinary household cleaners and janitorial
supplies which are not regulated by any
Environmental Laws); and the proposed location(s)
and method of disposal for each Hazardous
Material, including, the estimated frequency, and
the proposed contractors or subcontractors.
Existing Tenants should attach a list setting
forth the information requested above and such
list should include actual data from on going
operations and the identification of any
variations in such information from the prior
year's certificate.
-2-
<PAGE>
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline,
diesel, petroleum, or other Hazardous Materials in
tanks or sumps proposed in, on or about the
Premises? Existing Tenants should describe any
such actual or proposed activities.
Yes [ ] No [ ]
If yes, please explain:
----------------------------
---------------------------------------------------
---------------------------------------------------
4. Waste Management
4.1 Has your company been issued an EPA Hazardous
Waste Generator I.D. Number? Existing Tenants
should describe any additional identification
numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly
reports as a hazardous waste generator? Existing
Tenants should describe any new reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report
filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other
wastes to:
_____ storm drain? _____ sewer?
_____ surface water? _____ no wastewater
or other wastes
discharged.
Existing Tenants should indicate any actual discharges. If
so, describe the nature of any proposed or actual
discharge(s).
5.2 Will any such wastewater or waste be treated
before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to
be conducted. Existing Tenants should describe the
actual treatment conducted.
-3-
<PAGE>
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or
stacks to be used in your company's operations in,
on or about the Premises that will discharge into
the air; and will such air emissions be monitored?
Existing Tenants should indicate whether or not
there are any such air filtration systems or
stacks in use in, on or about the Premises which
discharge into the air and whether such air
emissions are being monitored.
Yes [ ] No [ ]
If yes, please describe:
6.2 Do you propose to operate any of the following
types of equipment, or any other equipment
requiring an air emissions permit? Existing
Tenants should specify any such equipment being
operated in, on or about the Premises.
_____ Spray booth(s) _____ Incinerator(s)
_____ Dip tank(s) _____ Other (Please describe)
_____ Drying oven(s) _____ No Equipment Requiring
Air Permits
If yes, please describe:
---------------------------------------------------
---------------------------------------------------
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required
to prepare a Hazardous Materials management plan
("Management Plan") pursuant to Fire Department or
other governmental or regulatory agencies'
requirements? Existing Tenants should indicate
whether or not a Management Plan is required and
has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan.
Existing Tenants should attach a copy of any
required updates to the Management Plan.
7.2 Are any of the Hazardous Materials, and in
particular chemicals, proposed to be used in your
operations in, on or about the Premises regulated
under Proposition 65? Existing Tenants should
indicate whether or not there are any new
Hazardous Materials being so used which are
regulated under Proposition 65.
-4-
<PAGE>
Yes [ ] No [ ]
If yes, please explain:
----------------------------
---------------------------------------------------
---------------------------------------------------
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or
Environmental Laws, has your company ever been
subject to any agency enforcement actions,
administrative orders, or consent decrees or has
your company received requests for information,
notice or demand letters, or any other inquiries
regarding its operations? Existing Tenants should
indicate whether or not any such actions, orders
or decrees have been, or are in the process of
being, undertaken or if any such requests have
been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees
and any continuing compliance obligations imposed
as a result of these actions, orders or decrees
and also describe any requests, notices or
demands, and attach a copy of all such documents.
Existing Tenants should describe and attach a copy
of any new actions, orders, decrees, requests,
notices or demands not already delivered to
Landlord pursuant to the provisions of Section 29
of the signed Lease Agreement.
8.2 Have there ever been, or are there now pending,
any lawsuits against your company regarding any
environmental or health and safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach
copies of the complaint(s), cross-complaint(s),
pleadings and all other documents related thereto
as requested by Landlord. Existing Tenants should
describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and
other related documents not already delivered to
Landlord pursuant to the provisions of Section 29
of the signed Lease Agreement.
8.3 Have there been any problems or complaints from
adjacent Tenants, owners or other neighbors at
your company's current facility with regard to
environmental or health and safety concerns?
Existing Tenants should indicate whether or not
there have been any such problems or complaints
from adjacent Tenants, owners or other neighbors
at, about or near the Premises.
-5-
<PAGE>
Yes [ ] No [ ]
If yes, please describe. Existing Tenants should
describe any such problems or complaints not
already disclosed to Landlord under the provisions
of the signed Lease Agreement.
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits
and licenses including a Transporter Permit number
issued to your company with respect to its
proposed operations in, on or about the Premises,
including, without limitation, any wastewater
discharge permits, air emissions permits, and use
permits or approvals. Existing Tenants should
attach copies of any new permits and licenses as
well as any renewals of permits or licenses
previously issued.
The undersigned hereby acknowledges and agrees that (A) this
Hazardous Materials Disclosure Certificate is being delivered in connection
with, and as required by, Landlord in connection with the evaluation and
finalization of a Lease Agreement and will be attached thereto as an exhibit;
(B) that this Hazardous Materials Disclosure Certificate is being delivered
in accordance with, and as required by, the provisions of Section 29 of the
Lease Agreement; and (C) that Tenant shall have and retain full and complete
responsibility and liability with respect to any of the Hazardous Materials
disclosed in the HazMat Certificate notwithstanding Landlord's/Tenant's
receipt and/or approval of such certificate. Tenant further agrees that none
of the following described acts or events shall be construed or otherwise
interpreted as either (a) excusing, diminishing or otherwise limiting Tenant
from the requirement to fully and faithfully perform its obligations under
the Lease with respect to Hazardous Materials, including, without limitation,
Tenant's indemnification of the Indemnitees and compliance with all
Environmental Laws, or (by imposing upon Landlord, directly or indirectly,
any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or
otherwise verify the accuracy of the representations and statements made
therein or to ensure that Tenant is in compliance with all Environmental
Laws; (i) the delivery of such certificate to Landlord and/or Landlord's
acceptance of such certificate, (ii) Landlord's review and approval of such
certificate, (iii) Landlord's failure to obtain such certificate from Tenant
at any time, or (iv) Landlord's actual or constructive knowledge of the types
and quantities of Hazardous Materials being used, stored, generated, disposed
of or transported on or about the Premises by Tenant or Tenant's
Representatives. Notwithstanding the foregoing or anything to the contrary
contained herein, the undersigned acknowledges and agrees that Landlord and
its partners, lenders and representatives may, and will, rely upon the
statements, representations, warranties, and certifications made herein and
the truthfulness thereof in entering into the Lease Agreement and the
continuance thereof throughout the term, and any renewals thereof, of the
Lease Agreement.
-6-
<PAGE>
I (print name) ____________________ acting with full authority to
bind the (proposed) Tenant and on behalf of the (proposed) Tenant, certify,
represent and warrant that the information contained in this certificate is
true and correct.
(Prospective) Tenant:
By:
---------------------------------------------
Title:
------------------------------------------
Date:
-------------------------------------------
-7-
<PAGE>
EXHIBIT F
FIRST AMENDMENT TO LEASE AGREEMENT
CHANGE OF COMMENCEMENT DATE
This First Amendment to Lease Agreement (the "Amendment") is made
and entered into to be effective by and between ("LANDLORD"), and ("TENANT"),
with reference to the following facts:
RECITALS
A. Landlord and Tenant have entered into that certain Lease
Agreement dated "Lease"), for the leasing of certain premises containing
approximately, rentable square feet of space located at California (the
"Premises") as such Premises are more fully described in the Lease.
B. Landlord and Tenant wish to amend the Commencement Date of the
Lease.
NOW, THEREFORE, in consideration of the foregoing and ?or other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:
1. RECITALS: Landlord and Tenant agree that the above
recitals are true and correct.
2. The Commencement Date of the Lease shall be
__________.
3. The last day of the Term of the Lease (the
"Expiration Date") shall be_________________________.
4. The dates on which the Base Rent will be adjusted are:
for the period _____ to _____ the monthly Base Rent
shall be $______;
for the period _____to _____ the monthly Base Rent
shall be $_______; and
for the period _____to _____ the monthly Base Rent
shall be $ _______.
5. EFFECT OF AMENDMENT: Except as modified herein, the
terms and conditions of the Lease shall remain
unmodified and continue in full force and effect. In
the event of any conflict between the terms and
conditions of the Lease and this Amendment, the terms
and conditions of this Amendment shall prevail.
6. DEFINITIONS: Unless otherwise defined in this
Amendment, all terms not defined in this Amendment
shall have the meaning set forth in the Lease.
7. AUTHORITY: Subject to the provisions of the Lease,
this Amendment shall be binding upon and inure to the
benefit of the parties hereto, their
-1-
<PAGE>
respective heirs, legal representatives, successors
and assigns. Each party hereto and the persons
signing below warrant that the person signing below
on such party's behalf is authorized to do so and to
bind such party to the terms of this Amendment.
8. The terms and provisions of the Lease are hereby
incorporated in this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date and year first above written.
[PROPERTY MANAGER: Please provide Tenant information and Word
Processing will complete the signature block]
-2-
<PAGE>
EXHIBIT G
TENANT'S INITIAL HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the
information provided by you in this Hazardous Materials Disclosure
Certificate is necessary for the Landlord (identified below) to evaluate and
finalize a lease agreement with you as Tenant. After a lease agreement is
signed by you and the Landlord (the "Lease Agreement"), on an annual basis in
accordance with the provisions of Section 29 of the signed Lease Agreement,
you are to provide an update to the information initially provided by you in
this certificate. The information contained in the initial Hazardous
Materials Disclosure Certificate and each annual certificate provided by you
thereafter will be maintained in confidentiality by Landlord subject to
release and disclosure as required by (i) any lenders and owners and their
respective environmental consultants, (ii) any prospective purchaser(s) of
all or any portion of the property on which the Premises are located, (iii)
Landlord to defend itself or its lenders, partners or representatives against
any claim or demand, and (iv) any laws, rules, regulations, orders, decrees,
or ordinances, including, without limitation, court orders or subpoenas. Any
and all capitalized terms used herein, which are not otherwise defined
herein, shall have the same meaning ascribed to such term in the signed Lease
Agreement. Any questions regarding this certificate should be directed to,
and when completed, the certificate should be delivered to:
Landlord:
--------------------------------------
--------------------------------------
c/o Legacy Partners Commercial, Inc.
10 1 Lincoln Centre Drive, Fourth Floor
Foster City, California 94404
Attn: _____________________________
Phone: (650) 571-2200
Name of (Prospective) Tenant:
------------------------------------------------
Mailing Address:
-------------------------------------------------------------
- -----------------------------------------------------------------------------
Contact Person, Title and Telephone Number(s):
-------------------------------
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
---------------------------------------------------------
- -----------------------------------------------------------------------------
Address of (Prospective) Premises:
-------------------------------------------
- -----------------------------------------------------------------------------
Length of (Prospective) Initial Term:
----------------------------------------
- -----------------------------------------------------------------------------
-1-
<PAGE>
1. General Information:
Describe the initial proposed operations to take place in,
on, or about the Premises, including, without limitation,
principal products processed, manufactured or assembled
services and activities to be provided or otherwise
conducted. Existing Tenants should describe any proposed
changes to on-going operations.
2. Use, Storage and Disposal of Hazardous Materials
2.1 Will any Hazardous Materials be used, generated,
stored or disposed of in, on or about the
Premises? Existing Tenants should describe any
Hazardous Materials which continue to be used,
generated, stored or disposed of in, on or about
the Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
If Yes is marked, please explain:
------------------
---------------------------------------------------
---------------------------------------------------
2.2 If Yes is marked in Section 2.1, attach a list of
any Hazardous Materials to be used, generated,
stored or disposed of in, on or about the
Premises, including the applicable hazard class
and an estimate of the quantities of such
Hazardous Materials at any given time; estimated
annual throughput; the proposed location(s) and
method of storage (excluding nominal amounts of
ordinary household cleaners and janitorial
supplies which are not regulated by any
Environmental Laws); and the proposed location(s)
and method of disposal for each Hazardous
Material, including, the estimated frequency, and
the proposed contractors or subcontractors.
Existing Tenants should attach a list setting
forth the information requested above and such
list should include actual data from on going
operations and the identification of any
variations in such information from the prior
year's certificate.
3. Storage Tanks and Sumps
3.1 Is any above or below ground storage of gasoline,
diesel, petroleum, or other Hazardous Materials in
tanks or sumps proposed in, on or about the
Premises? Existing Tenants should describe any
such actual or proposed activities.
Yes [ ] No [ ]
-2-
<PAGE>
If yes, please explain:
4. Waste Management
4.1 Has your company been issued an EPA Hazardous
Waste Generator I.D. Number? Existing Tenants
should describe any additional identification
numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly
reports as a hazardous waste generator? Existing
Tenants should describe any new reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report
filed.
5. Wastewater Treatment and Discharge
5.1 Will your company discharge wastewater or other
wastes to:
- _______ storm drain? ______ sewer?
_______ surface water? ______ no wastewater or
other wastes
discharged.
Existing Tenants should indicate any actual discharges. If
so, describe the nature of any proposed or actual
discharge(s).
------------------------------------------------------------
------------------------------------------------------------
5.2 Will any such wastewater or waste be treated
before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to
be conducted. Existing Tenants should describe the
actual treatment conducted.
6. Air Discharges
6.1 Do you plan for any air filtration systems or
stacks to be used in your company's operations in,
on or about the Premises that will discharge into
the air; and will such air emissions be monitored?
Existing Tenants should indicate whether or not
there are any such air filtration systems or
stacks in use in, on or about the Premises which
discharge into the air and whether such air
emissions are being monitored.
Yes [ ] No [ ]
-3-
<PAGE>
If yes, please describe:
---------------------------
---------------------------------------------------
---------------------------------------------------
6.2 Do you propose to operate any of the following
types of equipment, or any other equipment
requiring an air emissions permit? Existing
Tenants should specify any such equipment being
operated in, on or about the Premises.
_______ Spray booth(s)_______ Incinerator(s)
________Dip tank(s) ______ Other (Please
describe)
________Drying oven(s) ______No Equipment Requiring
Air Permits
If yes, please describe:
---------------------------
7. Hazardous Materials Disclosures
7.1 Has your company prepared or will it be required
to prepare a Hazardous Materials management plan
("Management Plan") pursuant to Fire Department or
other governmental or regulatory agencies'
requirements? Existing Tenants should indicate
whether or not a Management Plan is required and
has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan.
Existing Tenants should attach a copy of any
required updates to the Management Plan.
7.2 Are any of the Hazardous Materials, and in
particular chemicals, proposed to be used in your
operations in, on or about the Premises regulated
under Proposition 65? Existing Tenants should
indicate whether or not there are any new
Hazardous Materials being so used which are
regulated under Proposition 65.
Yes [ ] No [ ]
If yes, please explain:
----------------------------
---------------------------------------------------
---------------------------------------------------
8. Enforcement Actions and Complaints
8.1 With respect to Hazardous Materials or
Environmental Laws, has your company ever been
subject to any agency enforcement actions,
administrative orders, or consent decrees or has
your company received requests for information,
notice or demand letters, or any other inquiries
regarding its operations? Existing Tenants should
indicate whether or not
-4-
<PAGE>
any such actions, orders or decrees have been, or
are in the process of being, undertaken or if any
such requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees
and any continuing compliance obligations imposed
as a result of these actions, orders or decrees
and also describe any requests, notices or
demands, and attach a copy of all such documents.
Existing Tenants should describe and attach a copy
of any new actions, orders, decrees, requests,
notices or demands not already delivered to
Landlord pursuant to the provisions of Section 29
of the signed Lease Agreement.
8.2 Have there ever been, or are there now pending,
any lawsuits against your company regarding any
environmental or health and safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach
copies of the complaint(s), cross-complaint(s),
pleadings and all other documents related thereto
as requested by Landlord. Existing Tenants should
describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and
other related documents not already delivered to
Landlord pursuant to the provisions of Section 29
of the signed Lease Agreement.
------------------------------------------------------------
------------------------------------------------------------
8.3 Have there been any problems or complaints from
adjacent Tenants, owners or other neighbors at
your company's current facility with regard to
environmental or health and safety concerns?
Existing Tenants should indicate whether or not
there have been any such problems or complaints
from adjacent Tenants, owners or other neighbors
at, about or near the Premises.
Yes [ ] No [ ]
If yes, please describe. Existing Tenants should
describe any such problems or complaints not
already disclosed to Landlord under the provisions
of the signed Lease Agreement.
------------------------------------------------------------
------------------------------------------------------------
9. Permits and Licenses
9.1 Attach copies of all Hazardous Materials permits
and licenses including a Transporter Permit number
issued to your company with respect to its
-5-
<PAGE>
proposed operations in, on or about the Premises,
including, without limitation, any wastewater
discharge permits, air emissions permits, and use
permits or approvals. Existing Tenants should
attach copies of any new permits and licenses as
well as any renewals of permits or licenses
previously issued.
The undersigned hereby acknowledges and agrees that (A) this
Hazardous Materials Disclosure Certificate is being delivered in connection
with, and as required by, Landlord in connection with the evaluation and
finalization of a Lease Agreement and will be attached thereto as an exhibit;
(B) that this Hazardous Materials Disclosure Certificate is being delivered
in accordance with, and as required by, the provisions of Section 29 of the
Lease Agreement; and (C) that Tenant shall have and retain full and complete
responsibility and liability with respect to any of the Hazardous Materials
disclosed in the HazMat Certificate notwithstanding Landlord's/Tenant's
receipt and/or approval of such certificate. Tenant further agrees that none
of the following described acts or events shall be construed or otherwise
interpreted as either (a) excusing, diminishing or otherwise limiting Tenant
from the requirement to fully and faithfully perform its obligations under
the Lease with respect to Hazardous Materials, including, without limitation,
Tenant's indemnification of the Indemnitees and compliance with all
Environmental Laws, or (b) imposing upon Landlord, directly or indirectly,
any duty or liability with respect to any such Hazardous Materials,
including, without limitation, any duty on Landlord to investigate or
otherwise verify the accuracy of the representations and statements made
therein or to ensure that Tenant is in compliance with all Environmental
Laws; (i) the delivery of such certificate to Landlord and/or Landlord's
acceptance of such certificate, (ii) Landlord's review and approval of such
certificate, (iii) Landlord's failure to obtain such certificate from Tenant
at any time, or (iv) Landlord's actual or constructive knowledge of the types
and quantities of Hazardous Materials being used, stored, generated, disposed
of or transported on or about the Premises by Tenant or Tenant's
Representatives. Notwithstanding the foregoing or anything to the contrary
contained herein, the undersigned acknowledges and agrees that Landlord and
its partners, lenders and representatives may, and will, rely upon the
statements, representations, warranties, and certifications made herein and
the truthfulness thereof in entering into the Lease Agreement and the
continuance thereof throughout the term, and any renewals thereof, of the
Lease Agreement.
I (print name) _______________ acting with full authority to bind
the (proposed) Tenant and on behalf of the (proposed) Tenant, certify,
represent and warrant that the information contained in this certificate is
true and correct.
(Prospective) Tenant:
By:
------------------------------------------
Title:
--------------------------------------
Date:
---------------------------------------
-6-
<PAGE>
EXHIBIT I
Tenant's Trade Fixtures
EQUIPMENT FOR WILLOW PARK FACILITY
Vacuum pump
Glassware Washer
Autoclaves(2)
Deionized water system
X-ray film processor
Warm. room
Cold room
Emergency power generator
Steam generator
Lab benches
<PAGE>
ADDENDUM I
OPTION To EXTEND THE LEASE
This Addendum 1 ("Addendum") is incorporated as a part of that
certain Lease Agreement dated April 9, 1999 (the "Lease"), by and between
Deltagen, Inc., a California corporation ("Tenant"), and Willow Park Holding
Company II, a Delaware limited liability company ("Landlord"), for the
leasing of those certain premises located at 1003 Hamilton Court, Menlo Park,
California 94025 as more particularly described in Exhibit A to the Lease
(the "Premises"). Any capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to such terms as set forth in the
Lease.
1. GRANT OF EXTENSION OPTION. Subject to the provisions,
limitations and conditions set forth in Paragraph 5 below, Tenant shall have
an Option ("Option") to extend the term of the Lease for five (5) years (the
"Extended Term").
2. TENANT'S OPTION NOTICE. If Landlord does not receive
written notice from Tenant of its exercise of this Option on a date which is
not more than three hundred sixty (360) days nor less than two hundred
seventy (270) days prior to the end of the initial term of the Lease (the
"Option Notice"), all rights under this Option shall automatically terminate
and shall be of no further force or effect.
3. ESTABLISHING THE INITIAL MONTHLY BASE RENT FOR THE
EXTENDED TERM. The initial monthly Base Rent for the Extended Term shall be
the then current market rent for similar space within the competitive market
area of the Premises (the "Fair Rental Value"). "Fair Rental Value" of the
Premises means the fair market rental value of the Premises as of the
commencement of the Extended Term, taking into consideration all relevant
factors, including length of term, the uses permitted under the Lease, the
quality, size, design and location of the Premises, including the condition
and value of existing tenant improvements, and the monthly base rent paid by
tenants for premises comparable to the Premises, and located within the
competitive market area of the Premises as reasonably determined by Landlord.
Neither Landlord nor Tenant shall have the right to have a court or
any other third party entity establish the Fair Rental Value. If Landlord and
Tenant are unable to agree on the Fair Rental Value for the Extended Term
within ten (10) days of receipt by Landlord of the Option Notice, Landlord
and Tenant being obligated only to act in good faith, this Option shall
automatically terminate and the Lease shall terminate at the end of its
initial term.
In no event shall the monthly Base Rent for any period of the
Extended Term less than the highest monthly Base Rent charged during the
initial term of the Lease. Upon determination of the initial monthly Base
Rent for the Extended Term in accordance with the terms outlined above,
Landlord and Tenant shall immediately execute, at Landlord's sole option,
either the standard lease agreement then in use by Landlord, or an amendment
to this Lease. Such new lease agreement or amendment, as the case may be,
shall set forth among other things, the initial monthly Base Rent for the
Extended Term, the amount of the required Security Deposit, and the actual
commencement date and expiration date of the Extended Term. Tenant shall have
no other right to extend the term of the Lease under this Addendum unless
Landlord and Tenant otherwise agree in writing.
-1-
<PAGE>
4. CONDITION OF PREMISES AND BROKERAGE COMMISSIONS FOR THE
EXTENDED TERM. If Tenant timely and properly exercises this Option, in strict
accordance with the terms contained herein: (1) Tenant shall accept the
Premises in its then "As-Is" condition and, accordingly, Landlord shall not
be required to perform any additional improvements to the Premises; and (2)
Tenant hereby agrees that it will be solely responsible for any and all
brokerage commissions and finder's fees payable to any broker now, or
hereafter procured or hired by Tenant or who otherwise claims a commission
based on any act or statement of Tenant ("Tenant's Broker") in connection
with the Option; and Tenant hereby further agrees that Landlord shall in no
event or circumstance be responsible for the payment of any such commissions
and fees to Tenant's Broker.
5. LIMITATIONS ON, AND CONDITIONS TO, EXTENSION OPTION. This
Option is personal to Tenant and may not be assigned, voluntarily or
involuntarily, separate from or as part of the Lease. At Landlord's option,
all rights of Tenant under this Option shall terminate and be of no force or
effect if any of the following individual events occur or any combination
thereof occur: (1) Tenant has been in default at any time during the initial
term of the Lease, or is currently in default of any provision of the Lease;
and/or (2) Tenant has assigned its rights and obligations under all or part
of the Lease or Tenant has subleased all or part of the Premises; and/or (3)
Tenant's financial condition is unacceptable to Landlord at the time the
Option Notice is delivered to Landlord; and/or (4) Tenant has failed to
properly exercise this Option in a timely manner in strict accordance with
the provisions of this Addendum; and/or (5) Tenant no longer has possession
of all or any part of the Premises under the Lease, or if the Lease has been
terminated earlier, pursuant to the terms of the Lease.
6. TIME IS OF THE ESSENCE. Time is of the essence with
respect to each and every time period described in this Addendum.
-2-
<PAGE>
EXHIBIT 10.7
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement"), is entered into and
made effective this ___ day of ________, 1999, by and between Deltagen, Inc., a
Delaware corporation (the "Corporation"), and ________________________ (the
"Indemnitee").
W I T N E S S E T H:
WHEREAS, Indemnitee is a member of the board of directors of the
Corporation (the "Board of Directors") or is an officer of the Corporation, and
in such capacity is performing a valuable service for the Corporation; and
WHEREAS, Indemnitee is willing to serve, continue to serve, and take on
additional service for or on behalf of the Corporation on the condition that he
or she be indemnified as herein provided; and
WHEREAS, it is intended that Indemnitee shall be paid promptly by the
Corporation all amounts necessary to effectuate in full the indemnity provided
herein:
NOW THEREFORE, in consideration of the premises and the covenants in
this Agreement, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as a
director or officer of the Corporation so long as he or she is duly appointed or
elected and qualified in accordance with the applicable provisions of the
Amended and Restated Certificate of Incorporation, as amended (the "Restated
Certificate of Incorporation"), and Bylaws of the Corporation or any subsidiary
of the Corporation and until such time as he or she resigns or fails to stand
for election or is removed from his or her position. Indemnitee may at any time
and for any reason resign or be removed from such position (subject to any other
contractual obligation or other obligation imposed by operation of law), in
which event the Corporation shall have no obligation under this Agreement to
continue Indemnitee in any such position.
2. INDEMNIFICATION.
(a) The Corporation shall indemnify Indemnitee against Expenses
and Liabilities in connection with any Proceeding arising out of acts or
omissions of Indemnitee occurring during Indemnitee's service as a director or
as an officer of the Corporation to the fullest extent permitted by applicable
law or the Restated Certificate of Incorporation of the Corporation in effect on
the date hereof or as such law or Restated Certificate of Incorporation may from
time to time be amended (but, in the case of any such amendment, only to the
extent such amendment permits the Corporation to provide broader indemnification
rights than the law or Restated Certificate of Incorporation permitted the
Corporation to provide before such amendment). The right to indemnification
provided in the Restated Certificate of Incorporation shall be presumed to have
been relied upon by Indemnitee in serving or continuing to serve the Corporation
and shall be enforceable as a contract right. Without diminishing the scope of
the indemnification provided by this Section 2, the Corporation shall indemnify
Indemnitee whenever he or she is or was a party or is threatened to be made a
party to any Proceeding, including without limitation any such Proceeding
brought by or in the right of the Corporation, because he or she is or was a
<PAGE>
director or officer of the Corporation or because of anything done or not done
by Indemnitee in such capacity, against Expenses and Liabilities actually and
reasonably incurred by Indemnitee or on his or her behalf in connection with
such Proceeding, including the costs of any investigation, defense, settlement
or appeal, except that no indemnification shall be made with respect to any
claim, issue or matter if Indemnitee was finally adjudged to be liable to the
Corporation by a court of competent jurisdiction due to his or her gross
negligence or willful misconduct unless and to the extent that a Delaware Court
of Chancery or the court in which the action was heard determines that
Indemnitee is entitled to indemnification for such amounts as the court deems
proper. In addition to, and not as a limitation of, the foregoing, the rights of
indemnification of Indemnitee provided under this Agreement shall include those
rights set forth in Sections 3, 7, 8 and 13 below.
(b) Indemnitee shall be paid promptly by the Corporation all
amounts necessary to effectuate the foregoing indemnity.
3. ADVANCEMENT OF EXPENSES. All reasonable Expenses incurred by
or on behalf of Indemnitee shall be advanced from time to time by the
Corporation to Indemnitee within thirty (30) days after the Corporation's
receipt of a written request for an advance of Expenses, whether prior to or
after final disposition of a Proceeding (except to the extent that there has
been a Final Adverse Determination that Indemnitee is not entitled to be
indemnified for such Expenses), including without limitation any Proceeding
brought by or in the right of the Corporation. The written request for an
advancement of any and all Expenses under this paragraph shall contain
reasonable detail of the Expenses incurred by Indemnitee. If required by law at
the time of such advance, Indemnitee hereby agrees to repay the amounts advanced
if it is ultimately determined that Indemnitee is not entitled to be indemnified
pursuant to the terms of this Agreement.
4. LIMITATIONS. The foregoing indemnity and advancement of
Expenses shall apply only to the extent that Indemnitee has not been indemnified
and reimbursed pursuant to such insurance as the Corporation may maintain for
Indemnitee's benefit, or otherwise; provided, however, that notwithstanding the
availability of such other indemnification and reimbursement, Indemnitee may
claim indemnification and advancement of Expenses pursuant to this Agreement by
assigning to the Corporation, at its request, Indemnitee's claims under such
insurance to the extent Indemnitee has been paid by the Corporation.
5. INSURANCE AND FUNDING. The Corporation may purchase and
maintain insurance to protect itself and/or Indemnitee against any Expenses and
Liabilities in connection with any Proceeding to the fullest extent permitted by
applicable laws. The Corporation may create a trust fund, grant an interest or
use other means (including, without limitation, a letter of credit) to ensure
the payment of such amounts as may be necessary to effect indemnification or
advancement of Expenses as provided in this Agreement.
6. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) Whenever Indemnitee believes that he or she is entitled to
indemnification pursuant to this Agreement, Indemnitee shall submit a written
request for indemnification to the Corporation. Any request for indemnification
shall include sufficient documentation or
- 2 -
<PAGE>
information reasonably available to Indemnitee to support his or her claim for
indemnification. Indemnitee shall submit such claim for indemnification within a
reasonable time not to exceed five years after any judgment, order, settlement,
dismissal, arbitration award, conviction, acceptance of a plea of nolo
contendere or its equivalent, final termination or other disposition or partial
disposition of any Proceeding, whichever is the later date for which Indemnitee
requests indemnification. The President or the Secretary or other appropriate
officer shall, promptly upon receipt of Indemnitee's request for
indemnification, advise the Board of Directors in writing that Indemnitee has
made such request. Determination of Indemnitee's entitlement to indemnification
shall be made not later than ninety (90) days after the Corporation's receipt of
his or her written request for such indemnification.
(b) The Indemnitee shall be entitled to select the forum in which
Indemnitee's request for indemnification will be heard, which selection shall be
included in the written request for indemnification required in Section 6(a).
The forum shall be any one of the following:
(i) The stockholders of the Corporation;
(ii) A quorum of the Board of Directors consisting of
Disinterested Directors;
(iii) Independent Legal Counsel, who shall make the
determination in a written opinion; or
(iv) A panel of three arbitrators, one selected by the
Corporation, another by Indemnitee and the third by the first two
arbitrators selected. If for any reason three arbitrators are not
selected within thirty (30) days after the appointment of the first
arbitrator, then selection of additional arbitrators shall be made by
the American Arbitration Association. If any arbitrator resigns or is
unable to serve in such capacity for any reason, the American
Arbitration Association shall select such arbitrator's replacement. The
arbitration shall be conducted pursuant to the commercial arbitration
rules of the American Arbitration Association now in effect.
If Indemnitee fails to make such designation, his or her claim shall be
determined by an appropriate court of the State of Delaware.
7. FEES AND EXPENSES OF INDEPENDENT LEGAL COUNSEL. The
Corporation agrees to pay the reasonable fees and expenses of Independent Legal
Counsel or a panel of three arbitrators should such Counsel or such panel of
arbitrators be retained to make a determination of Indemnitee's entitlement to
indemnification pursuant to Section 6 of this Agreement, and to fully indemnify
such Counsel or arbitrators against any and all expenses and losses incurred by
any of them arising out of or relating to this Agreement or their engagement
pursuant hereto.
8. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination pursuant to Section 6
hereof is made that Indemnitee is not entitled to indemnification, (ii) advances
of Expenses are not made pursuant to this Agreement, (iii) payment has not been
timely made following a determination of entitlement
- 3 -
<PAGE>
to indemnification pursuant to this Agreement, or (iv) Indemnitee otherwise
seeks enforcement of this Agreement, Indemnitee shall be entitled to a final
adjudication in an appropriate court of the State of Delaware of his or her
rights. The Corporation shall not oppose Indemnitee's right to seek any such
adjudication.
(b) In the event that a determination that Indemnitee is not
entitled to indemnification, in whole or in part, has been made pursuant to
Section 6 hereof, the decision in the judicial proceeding provided in paragraph
(a) of this Section 8 shall be made de novo and Indemnitee shall not be
prejudiced by reason of a determination that he or she is not entitled to
indemnification.
(c) If a determination that Indemnitee is entitled to
indemnification has been made pursuant to Section 6 hereof or otherwise pursuant
to the terms of this Agreement, the Corporation shall be bound by such
determination in the absence of (i) a misrepresentation or omission of a
material fact by Indemnitee or (ii) a specific finding (which has become final)
by an appropriate court of the State of Delaware that all or any part of such
indemnification is expressly prohibited by law.
(d) In any court proceeding pursuant to this Section 8, the
Corporation shall be precluded from asserting that the procedures and
presumptions of this Agreement are not valid, binding and enforceable. The
Corporation shall stipulate in any such court that the Corporation is bound by
all the provisions of this Agreement and is precluded from making any assertion
to the contrary.
(e) Expenses reasonably incurred by Indemnitee in connection with
his or her request for indemnification under this Agreement, seeking enforcement
of this Agreement or to recover damages for breach of this Agreement shall be
borne by the Corporation.
9. MODIFICATION, WAIVER, TERMINATION AND CANCELLATION. No supplement,
modification, termination, cancellation or amendment of this Agreement shall be
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Corporation effectively to
bring suit to enforce such rights.
11. NOTICE BY INDEMNITEE AND DEFENSE OF CLAIM. Indemnitee shall
promptly notify the Corporation in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter, whether civil, criminal, administrative or
investigative, but the omission so to notify the Corporation will not relieve it
from any liability which it may have to Indemnitee if such omission does not
prejudice the Corporation's rights. If such omission does prejudice the
Corporation's rights, the Corporation will be relieved from liability only to
the extent of such prejudice; nor will such omission relieve
- 4 -
<PAGE>
the Corporation from any liability which it may have to Indemnitee otherwise
than under this Agreement. For any Proceeding as to which Indemnitee notifies
the Corporation of the commencement thereof:
(a) The Corporation will be entitled to participate therein at its
own expense; and
(b) The Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Indemnitee; provided, however, that the Corporation
shall not be entitled to assume the defense of any Proceeding if Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Corporation and Indemnitee with respect to such Proceeding. After notice
from the Corporation to Indemnitee of its election to assume the defense
thereof, the Corporation will not be liable to Indemnitee under this Agreement
for any Expenses subsequently incurred by Indemnitee in connection with the
defense thereof, other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ his or her own counsel
in such Proceeding but the fees and expenses of such counsel incurred after
notice from the Corporation of its assumption of the defense thereof shall be at
the expense of Indemnitee unless:
(i) The employment of counsel by Indemnitee has been
authorized by the Corporation;
(ii) Indemnitee shall have reasonably concluded that
counsel engaged by the Corporation may not adequately represent
Indemnitee; or
(iii) The Corporation shall not in fact have employed
counsel to assume the defense in such Proceeding or shall not in fact
have assumed such defense and be acting in connection therewith with
reasonable diligence;
in each of which cases the fees and expenses of such counsel shall be at the
expense of the Corporation.
(c) The Corporation shall not settle any Proceeding in any manner
which would impose any penalty or limitation on Indemnitee without Indemnitee's
written consent; provided, however, that Indemnitee will not unreasonably
withhold his or her consent to any proposed settlement.
12. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
- 5 -
<PAGE>
(a) If to Indemnitee, to:
----------------------------------
c/o Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
Telephone: (650) 752-0200
Telefax: (650) 752-0202
(b) If to the Corporation, to:
c/o Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
Attention: President and Chief Executive Officer
Telephone: (650) 752-0200
Telefax: (650) 752-0202
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
13. NONEXCLUSIVITY. The rights of Indemnitee hereunder shall not
be deemed exclusive of any other rights to which Indemnitee may now or in the
future be entitled under the Delaware General Corporation Law, the Corporation's
Restated Certificate of Incorporation or Bylaws, or any agreements, vote of
stockholders, resolution of the Board of Directors or otherwise.
14. CERTAIN DEFINITIONS.
(a) "Disinterested Director" shall mean a director of the
Corporation who is not or was not a party to the Proceeding in respect of which
indemnification is being sought by Indemnitee.
(b) "Expenses" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating costs,
printing and binding costs, telephone charges, postage, delivery service fees,
all other disbursements or out-of-pocket expenses and reasonable compensation
for time spent by Indemnitee for which he or she is otherwise not compensated by
the Corporation) actually and reasonably incurred in connection with a
Proceeding or establishing or enforcing a right to indemnification under this
Agreement, applicable law or otherwise; provided, however, that "Expenses" shall
not include any Liabilities.
(c) "Final Adverse Determination" shall mean that a determination
that Indemnitee is not entitled to indemnification shall have been made pursuant
to Section 6 hereof and either (1) a final adjudication in a Delaware court
pursuant to Section 8(a) hereof shall have denied Indemnitee's right to
indemnification hereunder, or (2) Indemnitee shall have failed to file a
- 6 -
<PAGE>
complaint in a Delaware court pursuant to Section 8(a) for a period of one
hundred twenty (120) days after the determination made pursuant to Section 6
hereof.
(d) "Indemnification Period" shall mean the period of time during
which Indemnitee shall continue to serve as a director or as an officer of the
Corporation, and thereafter so long as Indemnitee shall be subject to any
possible Proceeding arising out of acts or omissions of Indemnitee as a director
or as an officer of the Corporation.
(e) "Independent Legal Counsel" shall mean a law firm or a member
of a law firm selected by the Corporation and approved by Indemnitee (which
approval shall not be unreasonably withheld) and that neither is presently nor
in the past five (5) years has been retained to represent: (i) the Corporation,
in any material matter, or (ii) any other party to the Proceeding giving rise to
a claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Legal Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Corporation or Indemnitee in an
action to determine Indemnitee's right to indemnification under this Agreement.
(f) "Liabilities" shall mean liabilities of any type whatsoever
including, but not limited to, any judgments, fines, ERISA excise taxes and
penalties, penalties and amounts paid in settlement (including all interest
assessments and other charges paid or payable in connection with or in respect
of such judgments, fines, penalties or amounts paid in settlement) of any
proceeding.
(g) "Proceeding" shall mean any threatened, pending or completed
action, claim, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding whether civil,
criminal, administrative or investigative, including any appeal therefrom.
15. BINDING EFFECT, DURATION AND SCOPE OF AGREEMENT. This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns (including any direct
or indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Corporation), spouses, heirs
and personal and legal representatives. This Agreement shall continue in effect
during the Indemnification Period, regardless of whether Indemnitee continues to
serve as a director or as an officer.
16. SEVERABILITY. If any provision or provisions of this Agreement
(or any portion thereof) shall be held to be invalid, illegal or unenforceable
for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby; and
(b) to the fullest extent legally possible, the provisions of this
Agreement shall be construed so as to give effect to the intent of any provision
held invalid, illegal or unenforceable.
17. GOVERNING LAW AND INTERPRETATION OF AGREEMENT. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of Delaware, as applied
- 7 -
<PAGE>
to contracts between Delaware residents entered into and to be performed
entirely within Delaware. If the laws of the State of Delaware are hereafter
amended to permit the Corporation to provide broader indemnification rights than
said laws permitted the Corporation to provide prior to such amendment, the
rights of indemnification and advancement of expenses conferred by this
Agreement shall automatically be broadened to the fullest extent permitted by
the laws of the State of Delaware, as so amended.
18. CONSENT TO JURISDICTION. The Corporation and Indemnitee each
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
19. ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties hereto, and there are no other agreements,
contracts or understandings between the parties hereto with respect to the
subject matter of this Agreement, except as specifically referred to herein or
as provided in Section 13 hereof.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
DELTAGEN, INC.
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
INDEMNITEE
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- 8 -
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of April 7, 2000, is made by and
between DELTAGEN, INC., a Delaware corporation (hereinafter the "Company"),
and WILLIAM MATTHEWS, PH.D. (hereinafter "Executive").
RECITALS
WHEREAS, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive will continue to be
employed by the Company; and
WHEREAS, the Company wishes to be assured that Executive will be
available to the Company for an additional three (3) years after April 7, 2000.
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE I.
TERM OF AGREEMENT
A. COMMENCEMENT DATE. The terms of this Agreement shall govern
Executive's employment with the Company from April 7, 2000 ("Commencement
Date") and this Agreement shall expire after a period of three (3) years from
the Commencement Date, unless terminated earlier pursuant to Article 6.
B. RENEWAL. The term of this Agreement shall be automatically
renewed for successive, additional one (1) year term unless either party
delivers written notice to the other at least ninety (90) days prior to the
expiration date of this Agreement of an intention to terminate this Agreement
or to renew it for a term of less than (1) year.
ARTICLE II.
EMPLOYMENT DUTIES
A. TITLE/RESPONSIBILITIES. Executive hereby accepts employment with
the Company pursuant to the terms and conditions hereof. Executive agrees to
serve the Company in the position of Chief Executive Officer and President.
Executive shall have the powers and duties commensurate with such position,
including but not limited to, hiring personnel necessary (in the judgment of
the Board of Directors) to carry out the responsibilities for such position.
B. FULL TIME ATTENTION. Executive shall devote his best efforts and
his full business time and attention to the performance of the services
customarily incident to such office and to such other services as the Board
may reasonably request, provided that Executive may also serve on the Boards
of Directors of a limited number of other companies with the prior written
consent of the Board.
C. OTHER ACTIVITIES. Except upon the prior written consent of the
Board of Directors, Executive shall not during the period of employment
engage, directly or indirectly, in any other business activity (whether or
not pursued for pecuniary advantage) that is or may be competitive with, or
that might place him in a competing position to that of the Company or
<PAGE>
any other corporation or entity that directly or indirectly controls, is
controlled by, or is under common control with the Company (an "Affiliated
Company"), provided that Executive may own less than two percent of the
outstanding securities of any such publicly traded competing corporation.
D. DIRECTORSHIPS. Executive will be nominated for reelection to the
Company's Board of Directors if the By-Laws so require it. At the pleasure of
the Company's stockholders, Executive agrees to serve as a Director on the
Company's Board of Directors at no additional compensation.
ARTICLE III.
COMPENSATION
A. BASE SALARY. Executive shall receive a Base Salary at an annual
rate of two hundred thirty-five thousand dollars ($235,000), payable in
accordance with the Company's customary payroll practices. The Company's
Board of Directors shall provide Executive with annual performance reviews,
and, thereafter, Executive shall be entitled to such Base Salary as the Board
of Directors may from time to time establish in its sole discretion.
B. ANNUAL BONUS. Executive shall be eligible for an annual bonus as
determined by the Board of Directors in its sole discretion.
C. ACCELERATED VESTING OF OPTIONS. If the Company enters into a
transaction which is a Change in Control Transaction, then all of the
Executive's stock options granted prior to the date of completion of the
Change in Control Transaction shall become fully vested and exercisable.
D. WITHHOLDINGS. All compensation and benefits to Executive
hereunder shall be subject to all federal, state, local and other
withholdings and similar taxes and payments required by applicable law.
2
<PAGE>
ARTICLE IV.
EXPENSE ALLOWANCES AND FRINGE BENEFITS
A. VACATION. Executive shall be entitled to three (3) weeks of
annual paid vacation during the term of this Agreement.
B. BENEFITS. During the term of this Agreement, the Company shall
also provide Executive with the usual health insurance benefits it generally
provides to its other senior management employees, other than life insurance
(which shall be paid directly by Executive). As Executive becomes eligible in
accordance with criteria to be adopted by the Company, the Company shall
provide Executive with the right to participate in and to receive benefits
from accident, disability, medical, pension, bonus, stock, profit-sharing and
savings plans and similar benefits made available generally to employees of
the Company as such plans and benefits may be adopted by the Company,
provided that Executive shall during the term of this Agreement be entitled
to receive at a minimum standard medical and dental benefits similar to those
typically afforded to Chief Executive Officer in similar sized biotechnology
companies, excluding life insurance. The amount and extent of benefits to
which Executive is entitled shall be governed by the specific benefit plan as
it may be amended from time to time.
C. BUSINESS EXPENSE REIMBURSEMENT. During the term of this
Agreement, Executive shall be entitled to receive proper reimbursement for
all reasonable out-of-pocket expenses incurred by him (in accordance with the
policies and procedures established by the Company for its senior executive
officers) in performing services hereunder, provided Executive properly
accounts therefor.
ARTICLE V.
CONFIDENTIALITY
A. PROPRIETARY INFORMATION. Executive represents and warrants that
he has executed and delivered to the Company the Company's standard
Proprietary Information and Inventions Agreement in form acceptable to the
Company's counsel.
B. RETURN OF PROPERTY. All documents, records, apparatus, equipment
and other physical property which is furnished to or obtained by Executive in
the course of his employment with the Company shall be and remain the sole
property of the Company. Executive agrees that, upon the termination of his
employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and
Inventions Agreement), and agrees not to make or retain copies, reproductions
or summaries of any such property.
3
<PAGE>
ARTICLE VI.
TERMINATION
A. BY DEATH. The period of employment shall terminate automatically
upon the death of Executive. In such event, the Company shall pay to
Executive's beneficiaries or his estate, as the case may be, any accrued Base
Salary, any bonus compensation to the extent earned, any vested deferred
compensation (other than pension plan or profit-sharing plan benefits which
will be paid in accordance with the applicable plan), any benefits under any
plans of the Company in which Executive is a participant to the full extent
of Executive's rights under such plans, any accrued vacation pay and any
appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination (collectively "Accrued
Compensation"), but no other compensation or reimbursement of any kind,
including, without limitation, severance compensation, and thereafter, the
Company's obligations hereunder shall terminate.
B. BY DISABILITY. If Executive is prevented from properly performing
his duties hereunder by reason of any physical or mental incapacity for a
period of more than 180 days in the aggregate in any 365-day period, then, to
the extent permitted by law, the Company may terminate the employment on the
180th day of such incapacity. In such event, the Company shall pay to
Executive all Accrued Compensation, and shall continue to pay to Executive
the Base Salary until such time as Executive shall become entitled to receive
disability insurance payments under the disability insurance policy
maintained by the Company.
C. BY COMPANY FOR CAUSE. The Company may terminate Executive's
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all
Accrued Compensation, but no other compensation or reimbursement of any kind,
including without limitation, severance compensation, and thereafter the
Company's obligations hereunder shall terminate. Termination shall be for
"Cause" in the event of the occurrence of any of the following: (a) any
intentional action or intentional failure to act by Executive which was
performed in bad faith and to the material detriment of the Company; (b)
Executive intentionally refuses or intentionally fails to act in accordance
with any lawful and proper direction or order of the Board; (c) Executive
willfully and habitually neglects the duties of employment; or (d) Executive
is convicted of a felony crime involving moral turpitude, provided that in
the event that any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the nature of
such event and Executive shall thereafter have five (5) business days to cure
such event.
D. AT WILL. At any time, the Company may terminate Executive's
employment without liability other than as set forth below, for any reason
not specified in Section 6.C above, by giving thirty (30) days advance
written notice to Executive. If the Company elects to terminate Executive
pursuant to this Section 6.D, the Company shall pay to Executive all Accrued
Compensation and shall continue to pay to Executive as provided herein
Executive's Salary for nine (9) months from the date of such termination as
severance compensation. Upon payment of the severance benefits described
herein, all obligations of the Company (or its successor) shall terminate.
4
<PAGE>
During the period when such severance compensation is being paid to
Executive, Executive shall not (i) engage, directly or indirectly, in any
other business activity that is competitive with, or that places him in a
competing position to that of the Company or any Affiliated Company (provided
that Executive may own less than two percent (2%) of the outstanding
securities of any publicly traded corporation), or (ii) hire, solicit, or
attempt to hire on behalf of himself or any other party any employee or
exclusive consultant of the Company. If the Company terminates this Agreement
or the employment of Executive with the Company other than pursuant to
Section 6.A, 6.B or 6.C, then this Section 6.D shall apply.
E. CONSTRUCTIVE TERMINATION. In the event that the Company shall
materially reduce the powers and duties of employment of Executive resulting
in a material decrease in Base Salary or in the responsibilities of Executive
which are inconsistent with Executive acting as Chief Executive Officer and
President of the Company, such action shall be deemed to be a termination of
employment of Executive without cause pursuant to Section 6.D.
F. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
1. The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization;
2. A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either (1)
had been directors of the Company 24 months prior to such change; or (2) were
elected, or nominated for election, to the Board with the affirmative votes
of at least a majority of the directors who had been directors of the Company
24 months prior to such change and who were still in office at the time of
the election or nomination; or
3. Any "person" (as such term is used in Section 13(d) and Section
14 of the Exchange Act) by the acquisition of securities is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors
(the "Base Capital Stock") except that any change in the relative beneficial
ownership of the Company's securities resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. Thus, for example, any person who owns less than 50% of the
Company's outstanding shares, shall cause a Change in Control to occur as of
any subsequent date if such person then acquires an additional interest in
the Company which, when added to the person's previous holdings, causes the
person to hold more than 50% of the Company's outstanding shares.
5
<PAGE>
The term "Change in Control" shall not include a transaction, the
sole purpose of which is to change the state of the Company's incorporation.
ARTICLE VII.
GENERAL PROVISIONS
A. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall
be interpreted and enforced under California law without reference to
principles of conflicts of laws. The parties expressly agree that inasmuch as
the Company's headquarters and principal place of business are located in
California, it is appropriate that California law govern this Agreement.
B. ASSIGNMENT; SUCCESSORS; BINDING AGREEMENT.
1. Executive may not assign, pledge or encumber his interest in this
Agreement or any part thereof.
2. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, operation of
law or by agreement in form and substance reasonably satisfactory to
Executive, to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place.
3. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees. If Executive should
die while any amount is at such time payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's devisee, legates or other designee
or, if there be no such designee, to his estate.
C. NO WAIVER OF BREACH. The waiver by any party of the breach of any
provision of this Agreement shall not be deemed to be a waiver of any
subsequent breach.
D. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
6
<PAGE>
To the Company: Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
To Executive: William Matthews, Ph.D.
c/o Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
E. MODIFICATION; WAIVER; ENTIRE AGREEMENT. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Executive and
such officer as may be specifically designated by the Board of the Company.
No waiver by either party hereto at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
F. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
G. CONTROLLING DOCUMENT. In case of conflict between any of the
terms and conditions of this Agreement and any prior employment or option
agreement between the Company and Executive, the terms and conditions of this
Agreement shall control.
H. EXECUTIVE ACKNOWLEDGMENT. Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel
of his own choice concerning this Agreement, and has been advised to do so by
the Company, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based on his own
judgment.
I. REMEDIES.
1. INJUNCTIVE RELIEF. The parties agree that the services to be
rendered by Executive hereunder are of a unique nature and that in the event
of any breach or threatened breach of any of the covenants contained herein,
the damage or imminent damage to the value and the goodwill of the Company's
business will be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, the parties agree that
the Company shall be entitled to injunctive relief against Executive in the
event of any breach or threatened breach of any such provisions by Executive,
in addition to any other relief (including damages) available to the Company
under this Agreement or under law.
2. EXCLUSIVE. Both parties agree that the remedy specified in
Section 7.I.1 above is not exclusive of any other remedy for the breach by
Executive of the terms hereof.
7
<PAGE>
J. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
Executed by the parties as of the day and year first above written.
DELTAGEN, INC.
By:
--------------------------------
Its:
--------------------------------
EXECUTIVE:
/s/ William Matthews
------------------------------------
William Matthews, Ph.D.
8
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of April 8, 2000, is made by and
between DELTAGEN, INC., a Delaware corporation (hereinafter the "Company"),
and MARK W. MOORE, PH.D. (hereinafter "Executive").
RECITALS
WHEREAS, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive will continue to be
employed by the Company; and
WHEREAS, the Company wishes to be assured that Executive will be
available to the Company for an additional three (3) years after April 8,
2000.
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE I.
TERM OF AGREEMENT
A. COMMENCEMENT DATE. The terms of this Agreement shall govern
Executive's employment with the Company from April 8, 2000 ("Commencement
Date") and this Agreement shall expire after a period of three (3) years from
the Commencement Date, unless terminated earlier pursuant to Article 6.
B. RENEWAL. The term of this Agreement shall be automatically
renewed for successive, additional one (1) year term unless either party
delivers written notice to the other at least ninety (90) days prior to the
expiration date of this Agreement of an intention to terminate this Agreement
or to renew it for a term of less than (1) year.
ARTICLE II.
EMPLOYMENT DUTIES
A. TITLE/RESPONSIBILITIES. Executive hereby accepts employment with
the Company pursuant to the terms and conditions hereof. Executive agrees to
serve the Company in the position of Chief Scientific Officer. Executive
shall have the powers and duties commensurate with such position, including
but not limited to, hiring personnel necessary (in the judgment of the Board
of Directors) to carry out the responsibilities for such position.
B. FULL TIME ATTENTION. Executive shall devote his best efforts and
his full business time and attention to the performance of the services
customarily incident to such office and to such other services as the Board
may reasonably request, provided that Executive may also serve on the Boards
of Directors of a limited number of other companies with the prior written
consent of the Board.
<PAGE>
C. OTHER ACTIVITIES. Except upon the prior written consent of the
Board of Directors, Executive shall not during the period of employment
engage, directly or indirectly, in any other business activity (whether or
not pursued for pecuniary advantage) that is or may be competitive with, or
that might place him in a competing position to that of the Company or any
other corporation or entity that directly or indirectly controls, is
controlled by, or is under common control with the Company (an "Affiliated
Company"), provided that Executive may own less than two percent of the
outstanding securities of any such publicly traded competing corporation.
ARTICLE III.
COMPENSATION
A. BASE SALARY. Executive shall receive a Base Salary at an annual
rate of two hundred twenty-five thousand dollars ($225,000), payable in
accordance with the Company's customary payroll practices. The Company's
Board of Directors shall provide Executive with annual performance reviews,
and, thereafter, Executive shall be entitled to such Base Salary as the Board
of Directors may from time to time establish in its sole discretion.
B. ANNUAL BONUS. Executive shall be eligible for an annual bonus as
determined by the Board of Directors in its sole discretion.
C. ACCELERATED VESTING OF OPTIONS. If the Company enters into a
transaction which is a Change in Control Transaction, then all of the
Executive's options granted prior to the date of completion of the Change in
Control Transaction shall become fully vested and exercisable.
D. WITHHOLDINGS. All compensation and benefits to Executive
hereunder shall be subject to all federal, state, local and other
withholdings and similar taxes and payments required by applicable law.
2
<PAGE>
ARTICLE IV.
EXPENSE ALLOWANCES AND FRINGE BENEFITS
A. VACATION. Executive shall be entitled to three (3) weeks of
annual paid vacation during the term of this Agreement.
B. BENEFITS. During the term of this Agreement, the Company shall
also provide Executive with the usual health insurance benefits it generally
provides to its other senior management employees, other than life insurance
(which shall be paid directly by Executive). As Executive becomes eligible in
accordance with criteria to be adopted by the Company, the Company shall
provide Executive with the right to participate in and to receive benefits
from accident, disability, medical, pension, bonus, stock, profit-sharing and
savings plans and similar benefits made available generally to employees of
the Company as such plans and benefits may be adopted by the Company,
provided that Executive shall during the term of this Agreement be entitled
to receive at a minimum standard medical and dental benefits similar to those
typically afforded to Chief Scientific Officer in similar sized biotechnology
companies, excluding life insurance. The amount and extent of benefits to
which Executive is entitled shall be governed by the specific benefit plan as
it may be amended from time to time.
C. BUSINESS EXPENSE REIMBURSEMENT. During the term of this
Agreement, Executive shall be entitled to receive proper reimbursement for
all reasonable out-of-pocket expenses incurred by him (in accordance with the
policies and procedures established by the Company for its senior executive
officers) in performing services hereunder, provided Executive properly
accounts therefor.
ARTICLE V.
CONFIDENTIALITY
A. PROPRIETARY INFORMATION. Executive represents and warrants that
he has executed and delivered to the Company the Company's standard
Proprietary Information and Inventions Agreement in form acceptable to the
Company's counsel.
B. RETURN OF PROPERTY. All documents, records, apparatus, equipment
and other physical property which is furnished to or obtained by Executive in
the course of his employment with the Company shall be and remain the sole
property of the Company. Executive agrees that, upon the termination of his
employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and
Inventions Agreement), and agrees not to make or retain copies, reproductions
or summaries of any such property.
3
<PAGE>
ARTICLE VI.
TERMINATION
A. BY DEATH. The period of employment shall terminate automatically
upon the death of Executive. In such event, the Company shall pay to
Executive's beneficiaries or his estate, as the case may be, any accrued Base
Salary, any bonus compensation to the extent earned, any vested deferred
compensation (other than pension plan or profit-sharing plan benefits which
will be paid in accordance with the applicable plan), any benefits under any
plans of the Company in which Executive is a participant to the full extent
of Executive's rights under such plans, any accrued vacation pay and any
appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination (collectively "Accrued
Compensation"), but no other compensation or reimbursement of any kind,
including, without limitation, severance compensation, and thereafter, the
Company's obligations hereunder shall terminate.
B. BY DISABILITY. If Executive is prevented from properly performing
his duties hereunder by reason of any physical or mental incapacity for a
period of more than 180 days in the aggregate in any 365-day period, then, to
the extent permitted by law, the Company may terminate the employment on the
180th day of such incapacity. In such event, the Company shall pay to
Executive all Accrued Compensation, and shall continue to pay to Executive
the Base Salary until such time as Executive shall become entitled to receive
disability insurance payments under the disability insurance policy
maintained by the Company.
C. BY COMPANY FOR CAUSE. The Company may terminate Executive's
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all
Accrued Compensation, but no other compensation or reimbursement of any kind,
including without limitation, severance compensation, and thereafter the
Company's obligations hereunder shall terminate. Termination shall be for
"Cause" in the event of the occurrence of any of the following: (a) any
intentional action or intentional failure to act by Executive which was
performed in bad faith and to the material detriment of the Company; (b)
Executive intentionally refuses or intentionally fails to act in accordance
with any lawful and proper direction or order of the Board; (c) Executive
willfully and habitually neglects the duties of employment; or (d) Executive
is convicted of a felony crime involving moral turpitude, provided that in
the event that any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the nature of
such event and Executive shall thereafter have five (5) business days to cure
such event.
D. AT WILL. At any time, the Company may terminate Executive's
employment without liability other than as set forth below, for any reason
not specified in Section 6.C above, by giving thirty (30) days advance
written notice to Executive. If the Company elects to terminate Executive
pursuant to this Section 6.D, the Company shall pay to Executive all Accrued
Compensation and shall continue to pay to Executive as provided herein
Executive's Salary for six (6) months from the date of such termination as
severance compensation. Upon payment of the severance benefits described
herein, all obligations of the Company (or its successor) shall terminate.
4
<PAGE>
During the period when such severance compensation is being paid to
Executive, Executive shall not (i) engage, directly or indirectly, in any
other business activity that is competitive with, or that places him in a
competing position to that of the Company or any Affiliated Company (provided
that Executive may own less than two percent (2%) of the outstanding
securities of any publicly traded corporation), or (ii) hire, solicit, or
attempt to hire on behalf of himself or any other party any employee or
exclusive consultant of the Company. If the Company terminates this Agreement
or the employment of Executive with the Company other than pursuant to
Section 6.A, 6.B or 6.C, then this Section 6.D shall apply.
E. CONSTRUCTIVE TERMINATION. In the event that the Company shall
materially reduce the powers and duties of employment of Executive resulting
in a material decrease in Base Salary or in the responsibilities of Executive
which are inconsistent with Executive acting as Chief Scientific Officer of
the Company, such action shall be deemed to be a termination of employment of
Executive without cause pursuant to Section 6.D.
F. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
1. The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization;
2. A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either (1)
had been directors of the Company 24 months prior to such change; or (2) were
elected, or nominated for election, to the Board with the affirmative votes
of at least a majority of the directors who had been directors of the Company
24 months prior to such change and who were still in office at the time of
the election or nomination; or
3. Any "person" (as such term is used in Section 13(d) and Section
14 of the Exchange Act) by the acquisition of securities is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors
(the "Base Capital Stock") except that any change in the relative beneficial
ownership of the Company's securities resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. Thus, for example, any person who owns less than 50% of the
Company's outstanding shares, shall cause a Change in Control to occur as of
any subsequent date if such person then acquires an additional interest in
the Company which, when added to the person's previous holdings, causes the
person to hold more than 50% of the Company's outstanding shares.
5
<PAGE>
The term "Change in Control" shall not include a transaction, the
sole purpose of which is to change the state of the Company's incorporation.
ARTICLE VII.
GENERAL PROVISIONS
A. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall
be interpreted and enforced under California law without reference to
principles of conflicts of laws. The parties expressly agree that inasmuch as
the Company's headquarters and principal place of business are located in
California, it is appropriate that California law govern this Agreement.
B. ASSIGNMENT; SUCCESSORS; BINDING AGREEMENT.
1. Executive may not assign, pledge or encumber his interest in this
Agreement or any part thereof.
2. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, operation of
law or by agreement in form and substance reasonably satisfactory to
Executive, to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place.
3. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees. If Executive should
die while any amount is at such time payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's devisee, legates or other designee
or, if there be no such designee, to his estate.
C. NO WAIVER OF BREACH. The waiver by any party of the breach of any
provision of this Agreement shall not be deemed to be a waiver of any
subsequent breach.
D. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
6
<PAGE>
To the Company: Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
To Executive: Mark W. Moore, Ph.D.
c/o Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
E. MODIFICATION; WAIVER; ENTIRE AGREEMENT. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Executive and
such officer as may be specifically designated by the Board of the Company.
No waiver by either party hereto at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
F. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
G. CONTROLLING DOCUMENT. In case of conflict between any of the
terms and conditions of this Agreement and any prior employment or option
agreement between the Company and Executive, the terms and conditions of this
Agreement shall control.
H. EXECUTIVE ACKNOWLEDGMENT. Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel
of his own choice concerning this Agreement, and has been advised to do so by
the Company, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based on his own
judgment.
I. REMEDIES.
1. INJUNCTIVE RELIEF. The parties agree that the services to be
rendered by Executive hereunder are of a unique nature and that in the event
of any breach or threatened breach of any of the covenants contained herein,
the damage or imminent damage to the value and the goodwill of the Company's
business will be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, the parties agree that
the Company shall be entitled to injunctive relief against Executive in the
event of any breach or threatened breach of any such provisions by Executive,
in addition to any other relief (including damages) available to the Company
under this Agreement or under law.
2. EXCLUSIVE. Both parties agree that the remedy specified in
Section 7.I.1 above is not exclusive of any other remedy for the breach by
Executive of the terms hereof.
7
<PAGE>
J. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
Executed by the parties as of the day and year first above written.
DELTAGEN, INC.
/s/ William Matthews
-----------------------------------
By: William Matthews, Ph.D.
Title: Chief Executive Officer and
President
EXECUTIVE:
/s/ Mark W. Moore
-----------------------------------
Mark W. Moore, Ph.D.
8
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of April 7, 2000, is made by and between
DELTAGEN, INC., a Delaware corporation (hereinafter the "Company"), and
AUGUSTINE G. YEE (hereinafter "Executive").
RECITALS
WHEREAS, the Company and Executive wish to set forth in this Agreement
the terms and conditions under which Executive will continue to be employed by
the Company; and
WHEREAS, the Company wishes to be assured that Executive will be
available to the Company for an additional three (3) years after April 7, 2000.
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE I.
TERM OF AGREEMENT
A. COMMENCEMENT DATE. The terms of this Agreement shall govern
Executive's employment with the Company from April 7, 2000 ("Commencement Date")
and this Agreement shall expire after a period of three (3) years from the
Commencement Date, unless terminated earlier pursuant to Article 6.
B. RENEWAL. The term of this Agreement shall be automatically renewed
for successive, additional one (1) year term unless either party delivers
written notice to the other at least ninety (90) days prior to the expiration
date of this Agreement of an intention to terminate this Agreement or to renew
it for a term of less than (1) year.
ARTICLE II.
EMPLOYMENT DUTIES
A. TITLE/RESPONSIBILITIES. Executive hereby accepts employment with the
Company pursuant to the terms and conditions hereof. Executive agrees to serve
the Company in the position of Vice President of Corporate Development and
General Counsel. Executive shall have the powers and duties commensurate with
such position, including but not limited to, hiring personnel necessary (in the
judgment of the Board of Directors) to carry out the responsibilities for such
position.
B. FULL TIME ATTENTION. Executive shall devote his best efforts and his
full business time and attention to the performance of the services customarily
incident to such office and to such other services as the Board may reasonably
request, provided that Executive may also serve on the Boards of Directors of a
limited number of other companies with the prior written consent of the Board.
<PAGE>
C. OTHER ACTIVITIES. Except upon the prior written consent of the Board
of Directors, Executive shall not during the period of employment engage,
directly or indirectly, in any other business activity (whether or not pursued
for pecuniary advantage) that is or may be competitive with, or that might place
him in a competing position to that of the Company or any other corporation or
entity that directly or indirectly controls, is controlled by, or is under
common control with the Company (an "Affiliated Company"), provided that
Executive may own less than two percent of the outstanding securities of any
such publicly traded competing corporation.
ARTICLE III.
COMPENSATION
A. BASE SALARY. Executive shall receive a Base Salary at an annual rate
of one hundred seventy-five thousand dollars ($175,000), payable in accordance
with the Company's customary payroll practices. The Company's Board of Directors
shall provide Executive with annual performance reviews, and, thereafter,
Executive shall be entitled to such Base Salary as the Board of Directors may
from time to time establish in its sole discretion.
B. ANNUAL BONUS. Executive shall be eligible for an annual bonus as
determined by the Board of Directors in its sole discretion.
C. ACCELERATED VESTING OF OPTIONS. If the Company enters into a
transaction which is a Change in Control Transaction, then fifty percent (50%)
of all options held by Executive as of the date of completion of the Change in
Control Transaction shall become fully vested and exercisable (provided that
such provision shall not apply if, as of such date, more than 50% of the options
held by Executive are already fully vested).
D. WITHHOLDINGS. All compensation and benefits to Executive hereunder
shall be subject to all federal, state, local and other withholdings and similar
taxes and payments required by applicable law.
2
<PAGE>
ARTICLE IV.
EXPENSE ALLOWANCES AND FRINGE BENEFITS
A. VACATION. Executive shall be entitled to three (3) weeks of annual
paid vacation during the term of this Agreement.
B. BENEFITS. During the term of this Agreement, the Company shall also
provide Executive with the usual health insurance benefits it generally provides
to its other senior management employees, other than life insurance (which shall
be paid directly by Executive). As Executive becomes eligible in accordance with
criteria to be adopted by the Company, the Company shall provide Executive with
the right to participate in and to receive benefits from accident, disability,
medical, pension, bonus, stock, profit-sharing and savings plans and similar
benefits made available generally to employees of the Company as such plans and
benefits may be adopted by the Company, provided that Executive shall during the
term of this Agreement be entitled to receive at a minimum standard medical and
dental benefits similar to those typically afforded to Vice President of
Corporate Development or General Counsel in similar sized biotechnology
companies, excluding life insurance. The amount and extent of benefits to which
Executive is entitled shall be governed by the specific benefit plan as it may
be amended from time to time.
C. BUSINESS EXPENSE REIMBURSEMENT. During the term of this Agreement,
Executive shall be entitled to receive proper reimbursement for all reasonable
out-of-pocket expenses incurred by him (in accordance with the policies and
procedures established by the Company for its senior executive officers) in
performing services hereunder, provided Executive properly accounts therefor.
ARTICLE V.
CONFIDENTIALITY
A. PROPRIETARY INFORMATION. Executive represents and warrants that he
has executed and delivered to the Company the Company's standard Proprietary
Information and Inventions Agreement in form acceptable to the Company's
counsel.
B. RETURN OF PROPERTY. All documents, records, apparatus, equipment and
other physical property which is furnished to or obtained by Executive in the
course of his employment with the Company shall be and remain the sole property
of the Company. Executive agrees that, upon the termination of his employment,
he shall return all such property (whether or not it pertains to Proprietary
Information as defined in the Proprietary Information and Inventions Agreement),
and agrees not to make or retain copies, reproductions or summaries of any such
property.
3
<PAGE>
ARTICLE VI.
TERMINATION
A. BY DEATH. The period of employment shall terminate automatically
upon the death of Executive. In such event, the Company shall pay to Executive's
beneficiaries or his estate, as the case may be, any accrued Base Salary, any
bonus compensation to the extent earned, any vested deferred compensation (other
than pension plan or profit-sharing plan benefits which will be paid in
accordance with the applicable plan), any benefits under any plans of the
Company in which Executive is a participant to the full extent of Executive's
rights under such plans, any accrued vacation pay and any appropriate business
expenses incurred by Executive in connection with his duties hereunder, all to
the date of termination (collectively "Accrued Compensation"), but no other
compensation or reimbursement of any kind, including, without limitation,
severance compensation, and thereafter, the Company's obligations hereunder
shall terminate.
B. BY DISABILITY. If Executive is prevented from properly performing
his duties hereunder by reason of any physical or mental incapacity for a period
of more than 180 days in the aggregate in any 365-day period, then, to the
extent permitted by law, the Company may terminate the employment on the 180th
day of such incapacity. In such event, the Company shall pay to Executive all
Accrued Compensation, and shall continue to pay to Executive the Base Salary
until such time as Executive shall become entitled to receive disability
insurance payments under the disability insurance policy maintained by the
Company.
C. BY COMPANY FOR CAUSE. The Company may terminate Executive's
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all Accrued
Compensation, but no other compensation or reimbursement of any kind, including
without limitation, severance compensation, and thereafter the Company's
obligations hereunder shall terminate. Termination shall be for "Cause" in the
event of the occurrence of any of the following: (a) any intentional action or
intentional failure to act by Executive which was performed in bad faith and to
the material detriment of the Company; (b) Executive intentionally refuses or
intentionally fails to act in accordance with any lawful and proper direction or
order of the Board; (c) Executive willfully and habitually neglects the duties
of employment; or (d) Executive is convicted of a felony crime involving moral
turpitude, provided that in the event that any of the foregoing events is
capable of being cured, the Company shall provide written notice to Executive
describing the nature of such event and Executive shall thereafter have five (5)
business days to cure such event.
D. AT WILL. At any time, the Company may terminate Executive's
employment without liability other than as set forth below, for any reason not
specified in Section 6.C above, by giving thirty (30) days advance written
notice to Executive. If the Company elects to terminate Executive pursuant to
this Section 6.D, the Company shall pay to Executive all Accrued Compensation
and shall continue to pay to Executive as provided herein Executive's Salary for
six (6) months from the date of such termination as severance compensation. Upon
payment of the severance benefits described herein, all obligations of the
Company (or its successor) shall terminate.
4
<PAGE>
During the period when such severance compensation is being paid to
Executive, Executive shall not (i) engage, directly or indirectly, in any other
business activity that is competitive with, or that places him in a competing
position to that of the Company or any Affiliated Company (provided that
Executive may own less than two percent (2%) of the outstanding securities of
any publicly traded corporation), or (ii) hire, solicit, or attempt to hire on
behalf of himself or any other party any employee or exclusive consultant of the
Company. If the Company terminates this Agreement or the employment of Executive
with the Company other than pursuant to Section 6.A, 6.B or 6.C, then this
Section 6.D shall apply.
E. CONSTRUCTIVE TERMINATION. In the event that the Company shall
materially reduce the powers and duties of employment of Executive resulting in
a material decrease in Base Salary or in the responsibilities of Executive which
are inconsistent with Executive acting as Vice President Corporate Development
and General Counsel of the Company, such action shall be deemed to be a
termination of employment of Executive without cause pursuant to Section 6.D.
F. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
1. The consummation of a merger or consolidation of the Company with or
into another entity or any other corporate reorganization, if more than 50% of
the combined voting power of the continuing or surviving entity's securities
outstanding immediately after such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the Company immediately prior
to such merger, consolidation or other reorganization;
2. A change in the composition of the Board, as a result of which fewer
than one-half of the incumbent directors are directors who either (1) had been
directors of the Company 24 months prior to such change; or (2) were elected, or
nominated for election, to the Board with the affirmative votes of at least a
majority of the directors who had been directors of the Company 24 months prior
to such change and who were still in office at the time of the election or
nomination; or
3. Any "person" (as such term is used in Section 13(d) and Section 14
of the Exchange Act) by the acquisition of securities is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of directors (the "Base
Capital Stock") except that any change in the relative beneficial ownership of
the Company's securities resulting solely from a reduction in the aggregate
number of outstanding shares of Base Capital Stock, and any decrease thereafter
in such person's ownership of securities shall be disregarded until such person
increases in any manner, directly or indirectly, such person's beneficial
ownership of any securities of the Company. Thus, for example, any person who
owns less than 50% of the Company's outstanding shares, shall cause a Change in
Control to occur as of any subsequent date if such person then acquires an
additional interest in the Company which, when added to the person's previous
holdings, causes the person to hold more than 50% of the Company's outstanding
shares.
5
<PAGE>
The term "Change in Control" shall not include a transaction, the sole
purpose of which is to change the state of the Company's incorporation.
ARTICLE VII.
GENERAL PROVISIONS
A. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall be
interpreted and enforced under California law without reference to principles of
conflicts of laws. The parties expressly agree that inasmuch as the Company's
headquarters and principal place of business are located in California, it is
appropriate that California law govern this Agreement.
B. ASSIGNMENT; SUCCESSORS; BINDING AGREEMENT.
1. Executive may not assign, pledge or encumber his interest in this
Agreement or any part thereof.
2. The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, operation of law or by agreement in
form and substance reasonably satisfactory to Executive, to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
3. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees. If Executive should die
while any amount is at such time payable to him hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Executive's devisee, legates or other designee or, if there be
no such designee, to his estate.
C. NO WAIVER OF BREACH. The waiver by any party of the breach of any
provision of this Agreement shall not be deemed to be a waiver of any subsequent
breach.
D. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
6
<PAGE>
<TABLE>
<S> <C>
To the Company: Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
To Executive: Augustine G. Yee
c/o Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
</TABLE>
E. MODIFICATION; WAIVER; ENTIRE AGREEMENT. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by Executive and such officer as may
be specifically designated by the Board of the Company. No waiver by either
party hereto at any time of any breach by the other party of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
F. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
G. CONTROLLING DOCUMENT. In case of conflict between any of the terms
and conditions of this Agreement and any prior employment or option agreement
between the Company and Executive, the terms and conditions of this Agreement
shall control.
H. EXECUTIVE ACKNOWLEDGMENT. Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel of
his own choice concerning this Agreement, and has been advised to do so by the
Company, and (b) that he has read and understands the Agreement, is fully aware
of its legal effect, and has entered into it freely based on his own judgment.
I. REMEDIES.
1. INJUNCTIVE RELIEF. The parties agree that the services to be
rendered by Executive hereunder are of a unique nature and that in the event of
any breach or threatened breach of any of the covenants contained herein, the
damage or imminent damage to the value and the goodwill of the Company's
business will be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, the parties agree that the
Company shall be entitled to injunctive relief against Executive in the event of
any breach or threatened breach of any such provisions by Executive, in addition
to any other relief (including damages) available to the Company under this
Agreement or under law.
2. EXCLUSIVE. Both parties agree that the remedy specified in Section
7.I.1 above is not exclusive of any other remedy for the breach by Executive of
the terms hereof.
7
<PAGE>
J. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
Executed by the parties as of the day and year first above written.
DELTAGEN, INC.
/s/ William Matthews
--------------------------------------------
By: William Matthews, Ph.D.
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ Augustine G. Yee
-------------------------------------------
Augustine G. Yee
8
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of April 7, 2000, is made by and between
DELTAGEN, INC., a Delaware corporation (hereinafter the "Company"), and TERRY
COLEY, PH.D. (hereinafter "Executive").
RECITALS
WHEREAS, the Company and Executive wish to set forth in this
Agreement the terms and conditions under which Executive will continue to be
employed by the Company; and
WHEREAS, the Company wishes to be assured that Executive will be
available to the Company for an additional three (3) years after April 7,
2000.
NOW, THEREFORE, the Company and Executive, in consideration of the
mutual promises set forth herein, agree as follows:
ARTICLE I.
TERM OF AGREEMENT
A. COMMENCEMENT DATE. The terms of this Agreement shall govern
Executive's employment with the Company from April 7, 2000 ("Commencement
Date") and this Agreement shall expire after a period of three (3) years from
the Commencement Date, unless terminated earlier pursuant to Article 6.
B. RENEWAL. The term of this Agreement shall be automatically
renewed for successive, additional one (1) year term unless either party
delivers written notice to the other at least ninety (90) days prior to the
expiration date of this Agreement of an intention to terminate this Agreement
or to renew it for a term of less than (1) year.
ARTICLE II.
EMPLOYMENT DUTIES
A. TITLE/RESPONSIBILITIES. Executive hereby accepts employment with
the Company pursuant to the terms and conditions hereof. Executive agrees to
serve the Company in the position of Vice President of Information
Technology. Executive shall have the powers and duties commensurate with such
position, including but not limited to, hiring personnel necessary (in the
judgment of the Board of Directors) to carry out the responsibilities for
such position.
B. FULL TIME ATTENTION. Executive shall devote his best efforts and
his full business time and attention to the performance of the services
customarily incident to such office and to such other services as the Board
may reasonably request, provided that Executive may also serve on the Boards
of Directors of a limited number of other companies with the prior written
consent of the Board.
<PAGE>
C. OTHER ACTIVITIES. Except upon the prior written consent of the
Board of Directors, Executive shall not during the period of employment
engage, directly or indirectly, in any other business activity (whether or
not pursued for pecuniary advantage) that is or may be competitive with, or
that might place him in a competing position to that of the Company or any
other corporation or entity that directly or indirectly controls, is
controlled by, or is under common control with the Company (an "Affiliated
Company"), provided that Executive may own less than two percent of the
outstanding securities of any such publicly traded competing corporation.
ARTICLE III.
COMPENSATION
A. BASE SALARY. Executive shall receive a Base Salary at an annual
rate of one hundred seventy-five thousand dollars ($175,000), payable in
accordance with the Company's customary payroll practices. The Company's
Board of Directors shall provide Executive with annual performance reviews,
and, thereafter, Executive shall be entitled to such Base Salary as the Board
of Directors may from time to time establish in its sole discretion.
B. ANNUAL BONUS. Executive shall be eligible for an annual bonus as
determined by the Board of Directors in its sole discretion.
C. ACCELERATED VESTING OF OPTIONS. If the Company enters into a
transaction which is a Change in Control Transaction, then fifty percent
(50%) of all options held by Executive as of the date of completion of the
Change in Control Transaction shall become fully vested and exercisable
(provided that such provision shall not apply if, as of such date, more than
50% of the options held by Executive are already fully vested).
D. WITHHOLDINGS. All compensation and benefits to Executive
hereunder shall be subject to all federal, state, local and other
withholdings and similar taxes and payments required by applicable law.
2
<PAGE>
ARTICLE IV.
EXPENSE ALLOWANCES AND FRINGE BENEFITS
A. VACATION. Executive shall be entitled to three (3) weeks of
annual paid vacation during the term of this Agreement.
B. BENEFITS. During the term of this Agreement, the Company shall
also provide Executive with the usual health insurance benefits it generally
provides to its other senior management employees, other than life insurance
(which shall be paid directly by Executive). As Executive becomes eligible in
accordance with criteria to be adopted by the Company, the Company shall
provide Executive with the right to participate in and to receive benefits
from accident, disability, medical, pension, bonus, stock, profit-sharing and
savings plans and similar benefits made available generally to employees of
the Company as such plans and benefits may be adopted by the Company,
provided that Executive shall during the term of this Agreement be entitled
to receive at a minimum standard medical and dental benefits similar to those
typically afforded to Vice President of Information Technology in similar
sized biotechnology companies, excluding life insurance. The amount and
extent of benefits to which Executive is entitled shall be governed by the
specific benefit plan as it may be amended from time to time.
C. BUSINESS EXPENSE REIMBURSEMENT. During the term of this
Agreement, Executive shall be entitled to receive proper reimbursement for
all reasonable out-of-pocket expenses incurred by him (in accordance with the
policies and procedures established by the Company for its senior executive
officers) in performing services hereunder, provided Executive properly
accounts therefor.
ARTICLE V.
CONFIDENTIALITY
A. PROPRIETARY INFORMATION. Executive represents and warrants that
he has executed and delivered to the Company the Company's standard
Proprietary Information and Inventions Agreement in form acceptable to the
Company's counsel.
B. RETURN OF PROPERTY. All documents, records, apparatus, equipment
and other physical property which is furnished to or obtained by Executive in
the course of his employment with the Company shall be and remain the sole
property of the Company. Executive agrees that, upon the termination of his
employment, he shall return all such property (whether or not it pertains to
Proprietary Information as defined in the Proprietary Information and
Inventions Agreement), and agrees not to make or retain copies, reproductions
or summaries of any such property.
3
<PAGE>
ARTICLE VI.
TERMINATION
A. BY DEATH. The period of employment shall terminate automatically
upon the death of Executive. In such event, the Company shall pay to
Executive's beneficiaries or his estate, as the case may be, any accrued Base
Salary, any bonus compensation to the extent earned, any vested deferred
compensation (other than pension plan or profit-sharing plan benefits which
will be paid in accordance with the applicable plan), any benefits under any
plans of the Company in which Executive is a participant to the full extent
of Executive's rights under such plans, any accrued vacation pay and any
appropriate business expenses incurred by Executive in connection with his
duties hereunder, all to the date of termination (collectively "Accrued
Compensation"), but no other compensation or reimbursement of any kind,
including, without limitation, severance compensation, and thereafter, the
Company's obligations hereunder shall terminate.
B. BY DISABILITY. If Executive is prevented from properly performing
his duties hereunder by reason of any physical or mental incapacity for a
period of more than 180 days in the aggregate in any 365-day period, then, to
the extent permitted by law, the Company may terminate the employment on the
180th day of such incapacity. In such event, the Company shall pay to
Executive all Accrued Compensation, and shall continue to pay to Executive
the Base Salary until such time as Executive shall become entitled to receive
disability insurance payments under the disability insurance policy
maintained by the Company.
C. BY COMPANY FOR CAUSE. The Company may terminate Executive's
employment for Cause (as defined below) without liability at any time with or
without advance notice to Executive. The Company shall pay Executive all
Accrued Compensation, but no other compensation or reimbursement of any kind,
including without limitation, severance compensation, and thereafter the
Company's obligations hereunder shall terminate. Termination shall be for
"Cause" in the event of the occurrence of any of the following: (a) any
intentional action or intentional failure to act by Executive which was
performed in bad faith and to the material detriment of the Company; (b)
Executive intentionally refuses or intentionally fails to act in accordance
with any lawful and proper direction or order of the Board; (c) Executive
willfully and habitually neglects the duties of employment; or (d) Executive
is convicted of a felony crime involving moral turpitude, provided that in
the event that any of the foregoing events is capable of being cured, the
Company shall provide written notice to Executive describing the nature of
such event and Executive shall thereafter have five (5) business days to cure
such event.
D. AT WILL. At any time, the Company may terminate Executive's
employment without liability other than as set forth below, for any reason
not specified in Section 6.C above, by giving thirty (30) days advance
written notice to Executive. If the Company elects to terminate Executive
pursuant to this Section 6.D, the Company shall pay to Executive all Accrued
Compensation and shall continue to pay to Executive as provided herein
Executive's Salary for six (6) months from the date of such termination as
severance compensation. Upon payment of the severance benefits described
herein, all obligations of the Company (or its successor) shall terminate.
4
<PAGE>
During the period when such severance compensation is being paid to
Executive, Executive shall not (i) engage, directly or indirectly, in any
other business activity that is competitive with, or that places him in a
competing position to that of the Company or any Affiliated Company (provided
that Executive may own less than two percent (2%) of the outstanding
securities of any publicly traded corporation), or (ii) hire, solicit, or
attempt to hire on behalf of himself or any other party any employee or
exclusive consultant of the Company. If the Company terminates this Agreement
or the employment of Executive with the Company other than pursuant to
Section 6.A, 6.B or 6.C, then this Section 6.D shall apply.
E. CONSTRUCTIVE TERMINATION. In the event that the Company shall
materially reduce the powers and duties of employment of Executive resulting
in a material decrease in Base Salary or in the responsibilities of Executive
which are inconsistent with Executive acting as Vice President of Information
Technology of the Company, such action shall be deemed to be a termination of
employment of Executive without cause pursuant to Section 6.D.
F. CHANGE IN CONTROL. For purposes of this Agreement, a "Change in
Control" shall have occurred if at any time during the term of Executive's
employment hereunder, any of the following events shall occur:
1. The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who were not stockholders of the Company
immediately prior to such merger, consolidation or other reorganization;
2. A change in the composition of the Board, as a result of which
fewer than one-half of the incumbent directors are directors who either (1)
had been directors of the Company 24 months prior to such change; or (2) were
elected, or nominated for election, to the Board with the affirmative votes
of at least a majority of the directors who had been directors of the Company
24 months prior to such change and who were still in office at the time of
the election or nomination; or
3. Any "person" (as such term is used in Section 13(d) and Section
14 of the Exchange Act) by the acquisition of securities is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors
(the "Base Capital Stock") except that any change in the relative beneficial
ownership of the Company's securities resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. Thus, for example, any person who owns less than 50% of the
Company's outstanding shares, shall cause a Change in Control to occur as of
any subsequent date if such person then acquires an additional interest in
the Company which, when added to the person's previous holdings, causes the
person to hold more than 50% of the Company's outstanding shares.
5
<PAGE>
The term "Change in Control" shall not include a transaction, the
sole purpose of which is to change the state of the Company's incorporation.
ARTICLE VII.
GENERAL PROVISIONS
A. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement and the rights of the parties thereunder shall
be interpreted and enforced under California law without reference to
principles of conflicts of laws. The parties expressly agree that inasmuch as
the Company's headquarters and principal place of business are located in
California, it is appropriate that California law govern this Agreement.
B. ASSIGNMENT; SUCCESSORS; BINDING AGREEMENT.
1. Executive may not assign, pledge or encumber his interest in this
Agreement or any part thereof.
2. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, operation of
law or by agreement in form and substance reasonably satisfactory to
Executive, to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place.
3. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees. If Executive should
die while any amount is at such time payable to him hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's devisee, legates or other designee
or, if there be no such designee, to his estate.
C. NO WAIVER OF BREACH. The waiver by any party of the breach of any
provision of this Agreement shall not be deemed to be a waiver of any
subsequent breach.
D. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
6
<PAGE>
To the Company: Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
To Executive: Terry Coley, Ph.D.
c/o Deltagen, Inc.
1003 Hamilton Avenue
Menlo Park, CA 94025
E. MODIFICATION; WAIVER; ENTIRE AGREEMENT. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Executive and
such officer as may be specifically designated by the Board of the Company.
No waiver by either party hereto at any time of any breach by the other party
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or any prior or subsequent
time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement.
F. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
G. CONTROLLING DOCUMENT. In case of conflict between any of the
terms and conditions of this Agreement and any prior employment or option
agreement between the Company and Executive, the terms and conditions of this
Agreement shall control.
H. EXECUTIVE ACKNOWLEDGMENT. Executive acknowledges (a) that he has
consulted with or has had the opportunity to consult with independent counsel
of his own choice concerning this Agreement, and has been advised to do so by
the Company, and (b) that he has read and understands the Agreement, is fully
aware of its legal effect, and has entered into it freely based on his own
judgment.
I. REMEDIES.
1. INJUNCTIVE RELIEF. The parties agree that the services to be
rendered by Executive hereunder are of a unique nature and that in the event
of any breach or threatened breach of any of the covenants contained herein,
the damage or imminent damage to the value and the goodwill of the Company's
business will be irreparable and extremely difficult to estimate, making any
remedy at law or in damages inadequate. Accordingly, the parties agree that
the Company shall be entitled to injunctive relief against Executive in the
event of any breach or threatened breach of any such provisions by Executive,
in addition to any other relief (including damages) available to the Company
under this Agreement or under law.
2. EXCLUSIVE. Both parties agree that the remedy specified in
Section 7.I.1 above is not exclusive of any other remedy for the breach by
Executive of the terms hereof.
7
<PAGE>
J. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
Executed by the parties as of the day and year first above written.
DELTAGEN, INC.
/s/ William Matthews
-------------------------------------
By: William Matthews, Ph.D.
Title: Chief Executive Officer and
President
EXECUTIVE:
/s/ Terry Coley
-------------------------------------
Terry Coley, Ph.D.
8
<PAGE>
EXHIBIT 10.12
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: DELTAGEN, INC., a Delaware corporation
Number of Shares: (see below)
Class of Stock: Series B Preferred
Initial Exercise Price: $1.75 per share
Issue Date: March 25, 1999
Expiration Date: March 25, 2006
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the `Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant.
For purposes of the foregoing:
The Number of Shares shall be determined as follows: $1,500,000 divided
by the Initial Exercise Price multiplied by 2%.
ARTICLE 1
EXERCISE
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering
a duty executed Notice of Exercise in substantially the form attached as
Appendix 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.4.
1.3 INTENTIONALLY OMITTED.
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's
-1-
<PAGE>
stock into which the Shares are convertible) reported for the business day
immediately before Holder delivers its Notice of Exercise to the Company. If
the Shares are not traded in a public market, the Board of Directors of the
Company shall determine fair market value in its reasonable good faith
judgment. The foregoing notwithstanding, if Holder advises the Board of
Directors in writing that Holder disagrees with such determination, then the
Company and Holder shall promptly agree upon a reputable investment banking
firm to undertake such valuation. If the valuation of such investment banking
firm is greater than that determined by the Board of Directors, then all fees
and expenses of such investment banking firm shall be paid by the Company. In
all other circumstances, such fees and expenses shall be paid by Holder.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.7.1 "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 ASSUMPTION OF WARRANT. Upon the closing of any Acquisition
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3 PURCHASE RIGHT. Notwithstanding the foregoing, at the
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
<PAGE>
ARTICLE 2
ADJUSTMENTS TO THE SHARES
2.1 STOCK DIVIDENDS. SPLITS ETC.. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION. EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. he new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC.. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit
A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights
-3-
<PAGE>
under this Warrant the Warrant Price shall be adjusted downward and the
number of Shares issuable upon exercise of this Warrant shall be adjusted
upward in such a manner that the aggregate Warrant Price of this Warrant is
unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3
REPRESENTATIONS AND COVENANTS OF THE COMPANY
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this
Warrant is not greater than (i) the price per share at which the Shares were
last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duty authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(c) The Capitalization table attached hereto is true and correct.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event the Company shall give Holder
(1) at least 20 days prior written notice of the date on which a record will be
taken for such dividend, distribution, or subscription rights (and specifying
the date on which the holders of common stock will be entitled thereto) or for
determining rights to vote, if any, in respect of
-4-
<PAGE>
the matters referred to in (c) and (d) above; (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the
holders of common stock will be entitled to exchange their common stock for
securities or other property deliverable upon the occurrence of such event);
and (3) in the case of the matter referred to in (e) above, the same notice
as is given to the holders of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) such other financial statements required under and in accordance with any
loan documents between Holder and the Company (or if there are no such
requirements [or if the subject loan(s) no longer are outstanding]), then within
forty-five (45) days after the end of each of the first three quarters of each
fiscal year, the Company's quarterly, unaudited financial statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933 AS AMENDED. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4
MISCELLANEOUS
4.1 TERM; NOTICE OF EXPIRATION. This Warrant is exercisable, in whole
or in part, at any time and from time to time on or before the Expiration Date
set forth above.
4.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any)
shall be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an
-5-
<PAGE>
affiliate of Holder if there is no material question as to the availability
of current information as referenced in Rule 144(c), Holder represents that
it has complied with Rule 144(d) and (e) in reasonable detail, the selling
broker represents that it has complied with Rule 144(f), and the Company is
provided with a copy of Holder s notice of proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.3 Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) at any time to Silicon Valley Bancshares or
The Silicon Valley Bank Foundation , or, to any other transferree by giving the
Company notice of the portion of the Warrant being transferred setting forth the
name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferee(s)
(and Holder if applicable). Unless the Company is filing financial information
with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall
have the right to refuse to transfer any portion of this Warrant to any person
who directly competes with the Company. Notwithstanding the foregoing, any
single transfer of a portion of this Warrant or the Shares issuable upon
exercise of this Warrant shall not comprise less than 10% of the original Number
of Shares.
4.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVE. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
-6-
<PAGE>
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
DELTAGEN, INC.
By: /S/ AUGUSTINE YEE, VICE PRESIDENT
Name: AUGUSTINE YEE
Title: Chairman of the Board, President or
Vice President
By: MARK W. MOORE
Name: MARK W. MOORE / CSO
Title: Chief Financial Officer, Secretary,
Assistant Treasurer or Assistant Secretary
-7-
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _______ shares of the
Common/Preferred Series ____ [Strike one] Stock of DELTAGEN, INC. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
2. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ________________ of the Shares covered by the
Warrant.
[Strike paragraph that does not apply.)
3. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
-----------------------------------------------
(Name)
-----------------------------------------------
------------------------------------------------
(Address)
4. The undersigned represents it is acquiring the shares solely for
its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with
applicable securities laws.
--------------------------------------
(Signature)
- ---------------------------
(Date)
-8-
<PAGE>
EXHIBIT A
Anti-Dilution Provisions
(FOR PREFERRRED STOCK WARRANTS WITH EXISTING ANTI-DILUTION PROTECTION)
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions!') of the Company's Articles (Certificate) of Incorporation
which apply to Diluting Issuances.
The Company agrees that the Provisions, as in effect on the Issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders, unless such subsequent amendment, waiver or
termination thereof applies to each and every shareholder of Preferred Stock (as
defined in that certain Investors' Rights Agreement dated may 27, 1999) of the
Company.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
-9-
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS
The Shares (if common stock) or the common stock issuable upon
conversion of the Shares, shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of
Section 1 of the following agreement (the "Agreement") between the Company and
its investor(s):
Investors' Rights Agreement dated May 27, 1999 by and among
Deltagen, Inc. and the investors listed on Schedule A attached
thereto.
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration rights thereunder,
in a different manner from other holders of registrable securities under the
Agreement without the consent of Holder. By acceptance of the Warrant to which
this Exhibit B is attached, Holder shall be deemed to be a party to the
Agreement.
-10-
<PAGE>
EXHIBIT 10.13
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER
SAID ACT OR WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER
FROM THE SECURITIES AND EXCHANGE COMMISSION.
WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED STOCK
January 8 1999
THIS. CERTIFIES THAT, for value received, Lease Management Services,
Inc. ("Holder") is entitled to subscribe for and purchase shares of the fully
paid and nonassessable Series B Preferred Stock (the "Shares" or the
"Preferred Stock") of Deltagen, Inc., a Delaware corporation (the "Company"),
at the Warrant Price (as hereinafter defined), subject to the provisions and
upon the terms and conditions hereinafter set forth. As used herein, the term
"Series B Preferred Stock" shall mean the Company's presently authorized
Series B Preferred Stock and any stock into which such Series B Preferred
Stock may hereafter be converted or exchanged.
1. WARRANT PRICE. The Warrant Price shall initially be One and
75/100 dollars ($1.75) per share, subject to adjustment as provided in
Section 7 below. The number of shares for which this Warrant shall be
exercisable shall be equal to the greater of (i) ten thousand two hundred
eighty-five (10,28 5) or (ii) the number of shares obtained by multiplying
the amount of the credit facility utilized by the Company during the funding
period by two percent (2%) and then dividing by One and 75/100 dollars
($1.75). [For example, if $1,200,000 of the line is utilized, the Warrant will
be for 13,714 shares (i.e. $1,200,000 x 2.0% / $1.75).]
2. CONDITIONS TO EXERCISE. The purchase right represented by this
Warrant may be exercised at any time, or from time to time, in whole or in
part during the term commencing on the date hereof and ending on the earlier
of-
(a) 5:00 P.M. Pacific time on the seventh annual anniversary of this
Warrant; or
(b) the effective date of the merger of the Company with or into, the
consolidation of the Company with, or the sale by the Company of all or
substantially all of its assets or all or substantially all of its shares to
another corporation or other entity (other than such a transaction wherein
the shareholders of the Company retain or obtain a majority of the voting
capital stock of the surviving, resulting, or purchasing corporation);
provided that the Company shall notify the registered Holder of this Warrant
of the proposed effective date of the merger, consolidation, or sale at least
30 days prior to such proposed date.
In the event that, although the Company shall have given notice of a
transaction pursuant to subparagraph (b) hereof, any exercise of the Warrant
subsequent to the giving of such notice shall be conditioned upon the
effectiveness of the merger or other transaction so noticed.
-1-
<PAGE>
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF SHARES; ISSUANCE OF NEW
WARRANT.
(a) CASH EXERCISE. Subject to Section 2 hereof, the purchase right
represented by this Warrant may be exercised by the Holder hereof, in whole
or in part, by the surrender of this Warrant (with a duly executed Notice of
Exercise in the form attached hereto) at the principal office of the Company
(as set forth in Section 18 below) and by payment to the Company, by
certified bank check, of an amount equal to the then applicable Warrant Price
per share multiplied by the number of shares then being purchased. In the
event of any exercise of the rights represented by this Warrant, certificates
for the shares of-stock so purchased shall be in the name of, and delivered
to, the Holder hereof, or as such Holder may direct (subject to the terms of
transfer contained herein and upon payment by such Holder hereof of any
applicable transfer taxes). Such delivery shall be made within 30 days after
exercise of the Warrant and at the Company's expense and, unless this Warrant
has been fully exercised or expired, a new Warrant having terms and
conditions substantially identical to this Warrant and representing the
portion of the Shares, if any, with respect to which this Warrant shall not
have been exercised, shall also be issued to the Holder hereof within 30 days
after exercise of the Warrant.
(b) NET ISSUE EXERCISE. In lieu of exercising this Warrant pursuant
to Section 3(a), Holder may elect to receive shares equal to the value of
this Warrant (or of any portion thereof remaining unexercised) by surrender
of this Warrant at the principal office of the Company together with notice
of such election, in which event the Company shall issue to Holder the number
of shares of the Company's Preferred Stock computed using the following
formula:
X = Y (A-B)
---------
A
Where X = the number of shares of Preferred Stock to be issued to Holder.
Y = the number of shares of Preferred Stock purchasable under this
Warrant (at the date of such calculation).
A = the Fair Market Value of one share of the Company's Preferred Stock
(at the date of such calculation).
B = Warrant Price (as adjusted to the date of such calculation).
(c) FAIR MARKET VALUE. For purposes of this Section 3, Fair Market
Value of one share of the Company's Preferred Stock shall mean:
(i) In the event of an exercise in connection with an Initial
Public Offering, the per share Fair Market Value for the Preferred Stock
shall be the Offering Price at which the underwriters initially sell
Common Stock to the public multiplied by the number of shares of Common
Stock into which each share of Preferred Stock is then convertible; or
(ii) The average of the closing bid and asked prices of Common
Stock quoted in the Over-The-Counter Market Summary, the last reported
sale price quoted on the NASDAQ National Market ("NNM") or on any exchange
on which the stock is listed,
-2-
<PAGE>
whichever is applicable, as published in the Western Edition of the WALL
STREET JOURNAL for the ten (10) trading days prior to the date of
determination of fair market value, multiplied by the number of shares of
Common Stock into which each share of Preferred Stock is then convertible;
or
(iii) In the event of an exercise in connection with a merger,
acquisition or other consolidation in which the Company is not the
surviving entity, as described in Section 2(b), the per share Fair Market
Value for the Preferred Stock shall be the value to be received per share
of Preferred Stock by all Holders of the Preferred Stock in such
transaction as determined by the Board of Directors; or
(iv) In any other instance, the per share Fair Market Value for the
Preferred Stock shall be as determined in good faith by the Company's
Board of Directors.
In the event of 3(c)(iii) or 3(c)(iv), above, the Company's Board of
Directors shall prepare a certificate, to be signed by an authorized
Officer of the Company, setting forth in reasonable detail the basis for
and method of determination of the per share Fair Market Value of the
Preferred Stock. The Board will also certify to the Holder that this per
share Fair Market Value will be applicable to all holders of the Company's
Preferred Stock. Such certification must be made to Holder at least thirty
(30) days prior to the proposed effective date of the merger,
consolidation, sale, or other triggering event as defined in 3(c)(iii) and
3(c)(iv).
(d) AUTOMATIC EXERCISE. To the extent this Warrant is not previously
exercised, it shall be automatically exercised in accordance with Sections
3(b) and 3(c) hereof (even if not surrendered) immediately before: (i) its
expiration or (ii) the consummation of any consolidation or merger of the
Company, or any sale or transfer of all or substantially all of the Company's
assets or shares pursuant to Section 2(b).
4. REPRESENTATIONS AND WARRANTIES OF HOLDER AND RESTRICTIONS ON
TRANSFER IMPOSED BY THE SECURITIES ACT OF 1933.
(a) REPRESENTATIONS AND WARRANTIES BY HOLDER. Holder represents and
warrants to the Company with respect to this purchase as follows:
(i) The Holder has substantial experience in evaluating and
investing in private placement transactions of securities of companies
similar to the Company so that the Holder is capable of evaluating the
merits and risks of its investment in the Company and has the capacity to
protect its interests.
(ii) The Holder is acquiring the Warrant and the Shares of
Preferred Stock issuable upon exercise of the Warrant (collectively the
"Securities") for investment for its own account and not with a view to,
or for resale in connection with, any distribution thereof. The Holder
understands that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Act") by reason of a specific
exemption from the registration provisions of the Act which depends upon,
among other things, the bona fide nature of the investment intent as
expressed herein. In this connection, the Holder understands that, in the
view of the Securities and Exchange Commission (the "SEC"),
-3-
<PAGE>
the statutory basis for such exemption may be unavailable if this
representation was predicated solely upon a present intention to hold the
Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in
the market price of the Securities or for a period of one year or any
other fixed period in the future.
(iii) The Holder acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or an exemption
from such registration is available. The Holder is aware of the provisions
of Rule 144 promulgated under the Act ("Rule 144") which permits limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions, including, in case the securities have
been held for more than one but less than two years, the existence of a
public market for the shares, the availability of certain public
information about the Company, the resale occurring not less than one year
after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in a transaction directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares or
other securities being sold during any three-month period not exceeding
specified limitations.
(iv) The Holder further understands that at the time the Holder
wishes to sell the Securities there may be no public market upon which
such a sale may be effected, and that even if such a public market exists,
the Company may not be satisfying the current public information
requirements of Rule 144, and that in such event, the Holder may be
precluded from selling the Securities under Rule 144 unless (a) a one-year
minimum holding period has been satisfied and (b) the Holder was not at
the time of the sale nor at any time during the three-month period prior
to such sale an affiliate of the Company.
(v) The Holder has had an opportunity to discuss the Company's
business, management and financial affairs with its management and an
opportunity to review the Company's facilities. The Holder understands
that such discussions, as well as the written information issued by the
Company, were intended to describe the aspects of the Company's business
and prospects which it believes to be material but were not necessarily a
thorough or exhaustive description.
(b) LEGENDS. Each certificate representing the Securities shall be
endorsed with the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A
TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND
EXCHANGE COMMISSION, OR (IF REASONABLY REQUIRED BY THE COMPANY) AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
-4-
<PAGE>
The Company need not enter into its stock records a transfer of Securities
unless the conditions specified in the foregoing legend are satisfied. The
Company may also instruct its transfer agent not to allow the transfer of any
of the Shares unless the conditions specified in the foregoing legend are
satisfied.
(c) REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. The legend relating
to the Act endorsed on a certificate pursuant to paragraph 4(b) of this
Warrant and the stop transfer instructions with respect to the Securities
represented by such certificate shall be removed and the Company shall issue
a certificate without such legend to the Holder of the Securities if (i) the
Securities are registered under the Act and a prospectus meeting the
requirements of Section 10 of the Act is available or (ii) the Holder
provides to the Company an opinion of counsel for the Holder reasonably
satisfactory to the Company, or a no-action letter or interpretive opinion of
the staff of the SEC reasonably satisfactory to the Company, to the effect
that public sale, transfer or assignment of the Securities may be made
without registration and without compliance with any restriction such as Rule
144.
5. CONDITION OF TRANSFER OR EXERCISE OF WARRANT. It shall be a
condition to any transfer or exercise of this Warrant that at the time of
such transfer or exercise, the Holder and any transferor shall provide the
Company with a representation in writing that the Holder or transferee is
acquiring this Warrant and the shares of Preferred Stock to be issued upon
exercise for investment purposes only and not with a view to any sale or
distribution, or will provide the Company with a statement of pertinent facts
covering any proposed distribution. As a further condition to any transfer of
this Warrant or any or all of the shares of Preferred Stock issuable upon
exercise of this Warrant, other than a transfer registered under the Act, the
Company must have received a legal opinion, in form and substance
satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such
transfer is exempt from the registration and prospectus delivery requirements
of the Act. Each certificate evidencing the shares issued upon exercise of
the Warrant or upon any transfer of the shares (other than a transfer
registered under the Act or any subsequent transfer of shares so registered)
shall, at the Company's option, contain a legend in form and substance
satisfactory to the Company and its counsel, restricting the transfer of the
shares to sales or other dispositions exempt from the requirements of the Act.
As further condition to each transfer, the Holder shall surrender this
Warrant to the Company and the transferee shall receive and accept a Warrant,
of like tenor and date, executed by the Company.
6. STOCK FULLY PAID, RESERVATION OF SHARES. All Shares which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens,
and charges with respect to the issue thereof. During the period within which
the rights represented by this Warrant may be exercised, the Company will at
all times have authorized, and reserved for issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of
its Preferred Stock to provide for the exercise of the rights represented by
this Warrant.
7. ADJUSTMENT FOR CERTAIN EVENTS. In the event of changes in the
outstanding Common Stock by reason of stock dividends, split-ups,
recapitalizations, reclassifications,
-5-
<PAGE>
mergers, consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations, or the like, the number and class of shares
available under the Warrant in the aggregate and the Warrant Price shall be
correspondingly adjusted, as appropriate, by the Board of Directors of the
Company. The adjustment shall be such as will give the Holder of this Warrant
upon exercise for the same aggregate Warrant Price the total number, class
and kind of shares as it would have owned had the Warrant been exercised
prior to the event and had it continued to hold such shares until after the
event requiring adjustment.
8. NOTICE OF ADJUSTMENTS. Whenever any Warrant Price shall be
adjusted pursuant to Section 7 hereof, the Company shall prepare a
certificate signed by an officer of the Company setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price and
number of shares issuable upon exercise of the Warrant after giving effect to
such adjustment, and shall cause copies of-such certificate to be mailed (by
certified or registered mail, return receipt required, postage prepaid)
within thirty (30) days of such adjustment to the Holder of this Warrant as
set forth in Section 18 hereof.
9. "MARKET STAND-OFF" AGREEMENT. Holder hereby agrees that for a
period of up to 180 days following the effective date of the first
registration statement of the Company covering common stock (or- other
securities) to be sold on behalf of the Company in an underwritten public
offering, it will not, to the extent requested by the Company and any
underwriter, sell or otherwise transfer or dispose of (other than to donees
or transferees who agree to be similarly bound) any of the Shares at any time
during such period except common stock included in such registration;
provided, however, that all officers and directors of the Company who hold
securities of the Company or options to acquire securities of the Company and
all other persons with registration rights enter into similar agreements.
10. TRANSFERABILITY OF WARRANT. This Warrant is transferable in its
entirety upon the books of the Company.
11. NO FRACTIONAL SHARES. No fractional share of Preferred Stock will
be issued in connection with any exercise hereunder, but in lieu of such
fractional share the Company shall make a cash payment therefor upon the
basis of the Warrant Price then in effect.
12. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares
of Preferred Stock upon the exercise of this Warrant shall be made without
charge to the Holder for any United States or state of the United States
documentary stamp tax or other incidental expense with respect to the
issuance of such certificate, all of which taxes and expenses shall be paid
by the Company, and such certificates shall be issued in the name of the
Holder.
13. NO SHAREHOLDER RIGHTS UNTIL EXERCISE. This Warrant does not
entitle the Holder hereof to any voting rights or other rights as a
shareholder of the Company prior to the exercise hereof.
14. REGISTRY OF WARRANT. The Company shall maintain a registry
showing the name and address of the registered Holder of this Warrant. This
Warrant may be surrendered for exchange or exercise, in accordance with its
terms, at such office or agency of the Company, and
-6-
<PAGE>
the Company and Holder shall be entitled to rely in all respects, prior to
written notice to the contrary, upon such registry.
15. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. Upon receipt
by the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft,
or destruction, of indemnity reasonably satisfactory to it, and, if
mutilated, upon surrender and cancellation of this Warrant, the Company will
execute and deliver a new Warrant, having terms and conditions substantially
identical to this Warrant, in lieu hereof.
16. MISCELLANEOUS.
(a) ISSUEDATE. The provisions of this Warrant shall be construed and
shall be given effect in all respect as if it had been issued and delivered
by the Company on the date hereof.
(b) SUCCESSORS. This Warrant shall be binding upon any successors or
assigns of the Company.
(c) GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California.
(d) HEADINGS. The headings used in this Warrant are used for
convenience only and are not to be considered in construing or interpreting
this Warrant.
(e) SATURDAYS, SUNDAYS, HOLIDAYS. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a legal holiday in the
State of California, then such action may be taken or such right may be
exercised on the next succeeding day not a legal holiday.
17. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or any other voluntary action,, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Holder hereof against impairment.
18. ADDRESSES. Any notice required or permitted hereunder shall be in
writing and shall be mailed by overnight courier, registered or certified
mail, return receipt required, and postage prepaid, or otherwise delivered by
hand or by messenger, addressed as set forth below, or at such other address
as the Company or the Holder hereof shall have furnished to the other party.
If to the Company: Deltagen, Inc.
1031 Bing Street
San Carlos, CA 94070
Attn: President
-7-
<PAGE>
If to the Holder: Lease Management Services, Inc.
2500 Sand Hill Road, Suite 101
Menlo Park, CA 94025
Attn: Barbara B. Kaiser, EVP/GM
IN WITNESS WHEREOF, Deltagen, Inc. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated as of January 8, 1999.
By: /s/ William Matthews
----------------------------------
Name: William Matthews
--------------------------------
Title: President
-------------------------------
-8-
<PAGE>
NOTICE OF EXERCISE
1. The undersigned Warrantholder ("Holder") elects to acquire shares
of the Series __ Preferred Stock (the "Preferred Stock") of (the "Company"),
pursuant to the terms of the Stock Purchase Warrant dated _______________,
1998, (the "Warrant).
2. The Holder exercises its rights under the Warrant as set forth
below:
( ) The Holder elects to purchase ________ shares of
Preferred Stock as provided in Section 3(a) and
tenders herewith a check in the amount of
$_________ as payment of the purchase price.
( ) The Holder elects to convert the purchase rights
into shares of Preferred Stock as provided in
Section 3(b) of the Warrant.
3. The Holder surrenders the Warrant with this Notice of Exercise.
4. The Holder represents that it is acquiring the aforesaid shares
of Preferred Stock for investment and not with a view to or for resale in
connection with distribution and that the Holder has no present intention of
distributing or reselling the shares.
5. Please issue a certificate representing the shares of the
Preferred Stock in the name of the Holder or in such other name as is
specified below:
Names:
Address:
Taxpayer I.D.:
--------------------------------------
(Holder)
By:
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
<PAGE>
[DELTAGEN LETTERHEAD]
EXHIBIT 10.14
15 March 2000
Dr. Pierre Chambon
The Association for Research at IGBMC
1, rue Laurant Fries
67404 ILLKIRCH
C.U. de Strasbourg, FRANCE
Dear Professor Chambon:
We are pleased to present you with this letter confirming the basic
terms on which we are engaging IGBMC to provide consulting and other services
to Deltagen. The basic terms are as follows:
- The area of consultation and research is functional genomics,
particularly knockout animal and gene disruption technologies.
Deltagen will identify projects to be performed within the area of
consultation and research, with the specific details (objectives,
milestones, timetable, etc.) of individual projects to be jointly
agreed in writing.
- The consultation period will be three (3) years, starting the date
of commencement of the first project, renewable by mutual agreement.
- The work on each project will be undertaken at IGBMC by you and
persons under your supervision and direction. The division of costs
and expenses between Deltagen and IGBMC for each project will be
negotiated in good faith.
- Deltagen will own the results and the intellectual property rights
of each project, unless the written project documents specifically
provide otherwise.
- The consideration to IGBMC for these consulting services and
projects is the granting (subject to board approval) of a three (3)
year warrant to purchase 400,000 shares of the Series C Preferred
Stock of Deltagen, at an exercise price of US$3.58 per share. The
warrant will vest in its entirety on the four (4) month anniversary
of the commencement date of the first project, and may be exercised
only after such vesting date. The warrant will expire on the three
(3) year anniversary of the commencement date of the first project.
The vesting schedule is:
----------------------------------------------------------------------
TIME PERIOD PERCENTAGE VESTED
----------------------------------------------------------------------
Until four months after the commencement 0%
date of the first project
----------------------------------------------------------------------
At such four month anniversary date 100%
----------------------------------------------------------------------
Page 1 of 2
<PAGE>
Complete documentation, including a warrant instrument, confidentiality
agreement and detailed consulting agreement will be forthcoming. In the
interim, however, this letter will be our binding agreement. We are looking
forward to a mutually successful relationship with you. Please acknowledge
that this letter accurately sets forth our agreement by signing and returning
a copy of this letter by fax to us.
Sincerely,
/s/ William Matthews/by Robert J. Discroll
- ---------------------------------------------------
William Matthews
/s/ Pierre Chambon Date: 03/17/00
- ----------------------------------- ---------------
Pierre Chambon
Page 2 of 2
<PAGE>
EXHIBIT A
PROMISSORY NOTE
Loan Amount: $536,700 Menlo Park, California
Interest Rate: 6.8% March 16, 2000
(date)
FOR VALUE RECEIVED, the undersigned, WILLIAM MATTHEWS, Ph.D. ("Borrower")
hereby promises to pay to the order of DELTAGEN, INC., a Delaware corporation
("Lender"), at 1003 Hamilton, Menlo Park, California, 94025 or such other place
as Lender may designate by written notice to Borrower, in lawful money of the
United States of America, the principal sum of FIVE HUNDRED THIRTY SIX THOUSAND
SEVEN HUNDRED DOLLARS ($536,700), with interest, to be paid as set forth below.
1. PAYMENTS. The entire principal balance of this Promissory Note
(this "Note"), together with all accrued and unpaid interest thereon, shall
be due and payable on fourth anniversary of the date hereof (the "Maturity
Date"), provided however, that if such day is not a Business Day (as defined
below) then on the next succeeding Business Day. Interest on the outstanding
principal balance hereunder shall accrue at the rate of six and eight-tenths
percent (6.8%) per annum, calculated on the basis of a three hundred and
sixty day year. Interest shall accrue on this Note and be payable by Borrower
on the Maturity Date.
2. PURPOSE OF NOTE. Borrower acknowledges that the purpose of the
loan evidenced by this Note is to provide financing for Borrower's purchase
of common stock of the Lender pursuant to the terms of a Notice of Exercise
and Common Stock Purchase Agreement of even date herewith between the parties
(the "Common Stock Purchase Agreement").
3. PREPAYMENT. Borrower may prepay all or any portion of this Note at
any time without penalty, fee or acceleration prior to the Maturity Date of
this Note.
4. SECURITY. Payment of this Note is secured by a certain Pledge and
Security Agreement (the "Security Agreement") of even date herewith from
Borrower, as Pledgor, to Lender, as Pledgee, whereby Borrower has pledged
certain shares of capital stock as security for Borrower's obligations under
this Note, as more particularly described in the Security Agreement.
5. ACCELERATION OF DUE DATE. The entire unpaid principal balance of
this Note, together with all accrued and unpaid interest thereon, shall, at
the election of Lender, become immediately due and payable upon the
occurrence of any of the following, irrespective of the payment schedule set
forth in Paragraph 1 of this Note:
a. Any failure on the part of Borrower to make any payment under
this Note when the same is due;
A-1
<PAGE>
b. Any failure on the part of Borrower to perform or observe any of
his obligations under the Security Agreement or any other security instrument
which secures this Note, as and when performance is due;
c. On such date as Borrower's employment relationship with Lender or
any wholly-owned subsidiary of Lender is terminated, or deemed terminated
pursuant to the terms of the Common Stock Purchase Agreement, for any reason; or
d. If at any time Borrower shall admit in writing his inability to
pay his debts as they become due, or shall make any assignment for the benefit
of any creditors, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment or similar release under any present or
future statute, law or regulation, or on the filing or commencement of any
petition, action, case or proceeding, voluntary or involuntary, under any state
or federal law regarding bankruptcy or insolvency.
6. OFFSET TO COMPENSATION. To the fullest extent permitted by law, upon
any termination of Borrower's employment with Lender, Borrower hereby directs
Lender to offset any unpaid principal balance due under this Note against any
amounts owed by Lender to Borrower, including, but not limited to, any wages,
salary, or bonuses, and any other employment or consulting compensation or stock
repurchase payments. Lender shall promptly notify Borrower in writing of any
such offset, including an itemization of the amounts offset and the balance, if
any, due and payable pursuant to this Note.
7. COLLECTION COSTS BORNE BY BORROWER. Borrower agrees to pay all costs
and expenses, including without limitation reasonable attorneys' fees, incurred
by Lender in any action brought to enforce the terms of this Note and/or to
collect this Note, and any appeal thereof.
8. MISCELLANEOUS.
a. No delay or omission on the part of Lender in exercising any
right under this Note or under the Security Agreement or any other security
agreement given to secure this Note shall operate as a waiver of such right or
of any other right under this Note.
b. In the event of default, under this Note, Borrower shall have
fifteen (15) days from the date of notice of default and demand for payment in
which to cure such default. Such notice may be by written notice mailed to
Borrower at the last address given to Lender by Borrower and shall be deemed
received three (3) days after being mailed by certified, first-class mail,
return receipt requested or the next day mailed by overnight delivery.
c. Borrower hereby waives presentment for payment, demand, notice of
demand and of dishonor and nonpayment of this Note, notice of intention to
accelerate the maturity of this Note, protest and notice of protest, diligence
in collecting, and the bringing of suit against any other party. The pleading
of any statute of limitations as a defense to any demand against the Borrower,
any endorsers, guarantors and sureties of this Note is expressly waived by each
and all of such parties to the extent permitted by law. Time is of the essence
under this Note. Any payment hereunder shall first be applied to any collection
costs, then
A-2
<PAGE>
against accrued and unpaid interest hereunder and then against the
outstanding principal balance of this Note.
9. LATE CHARGE. If payment of principal or interest under this Note
shall not be made within ten (10) days after the date due, Borrower agrees to
pay, in addition to the unpaid principal or interest, a sum equal to three
percent (3%) of the unpaid principal or interest, which sum Borrower agrees
represents a fair and reasonable estimate, considering all of the circumstances
existing on the date of this Note, of the costs and expenses incident to
handling and collecting such delinquent payment that will be sustained by Lender
due to the failure of Borrower to make timely payment. The parties further
agree that proof of actual damages would be costly and impracticable. Such
charge shall be paid without prejudice to the right of Lender to collect any
other amounts provided to be paid or to declare a default under this Note or
under the Security Agreement referred to in this Note or from exercising any of
the other rights and remedies of Lender.
10. GOVERNING LAW. The Note shall be governed by the laws of the State of
California and shall be construed in accordance therewith, irrespective of its
choice of law principles.
11. DEFINITIONS.
a. BUSINESS DAY. As used in this Note the term "Business Day" shall
mean any day other than a Saturday, Sunday or a legal holiday observed by
employees of the State of California.
12. SUCCESSORS. This Note shall be binding upon Borrower and the personal
representatives, heirs, successors and assigns of Borrower.
13. SEVERABILITY. If any part of this Note is determined to be illegal or
unenforceable, all other parts shall remain in full force and effect.
14. MAXIMUM INTEREST PAYABLE. All agreements between the undersigned and
the holder hereof, whether now existing or hereafter arising and whether written
or oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity hereof or otherwise, shall the interest contracted
for, charged, received, paid or agreed to be paid to the holder hereof exceed
the maximum amount permissible under applicable law. If, from any circumstance
whatsoever, interest would otherwise be payable to the holder hereof in excess
of the maximum lawful amount, the interest payable to the holder hereof shall be
reduced to the maximum amount permitted under applicable law; and if from any
circumstance the holder hereof shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to the undersigned. All interest paid or agreed to be paid to the
holder hereof shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in full
of the principal (including the period of any renewal or extension hereof) so
that the interest hereon for such full period shall not exceed the maximum
amount permitted by
A-3
<PAGE>
applicable law. This paragraph shall control all agreements
between the undersigned and the holder hereof.
/s/ William Matthews
-----------------------------------
Borrower:WILLIAM MATTHEWS, Ph.D.
I, KATHRYN E. MATTHEWS, the spouse of Borrower, do hereby consent to the
borrowing by Borrower of the loan evidenced by this Note on the terms and
conditions set forth herein, and to the pledge evidenced by the Security
Agreement referred to in Paragraph 4 of this Note, and any extensions,
modifications or amendments thereto, as security for the obligations of Borrower
under this Note.
/s/ Kathryn E. Matthews
-----------------------
<PAGE>
EXHIBIT A
PROMISSORY NOTE
Loan Amount: $268,350 Menlo Park, California
Interest Rate: 6.8% March 16, 2000
(date)
FOR VALUE RECEIVED, the undersigned, Mark W. Moore, Ph.D. ("Borrower")
hereby promises to pay to the order of DELTAGEN, INC., a Delaware corporation
("Lender"), at 1003 Hamilton, Menlo Park, California, 94025 or such other place
as Lender may designate by written notice to Borrower, in lawful money of the
United States of America, the principal sum of TWO HUNDRED SIXTY EIGHT THOUSAND
THREE HUNDRED FIFTY DOLLARS ($268,350), with interest, to be paid as set forth
below.
1. PAYMENTS. The entire principal balance of this Promissory Note (this
"Note"), together with all accrued and unpaid interest thereon, shall be due and
payable on fourth anniversary of the date hereof (the "Maturity Date"), provided
however, that if such day is not a Business Day (as defined below) then on the
next succeeding Business Day. Interest on the outstanding principal balance
hereunder shall accrue at the rate of six and eight-tenths percent (6.8%) per
annum, calculated on the basis of a three hundred and sixty day year. Interest
shall accrue on this Note and be payable by Borrower on the Maturity Date.
2. PURPOSE OF NOTE. Borrower acknowledges that the purpose of the loan
evidenced by this Note is to provide financing for Borrower's purchase of common
stock of the Lender pursuant to the terms of a Notice of Exercise and Common
Stock Purchase Agreement of even date herewith between the parties (the "Common
Stock Purchase Agreement").
3. PREPAYMENT. Borrower may prepay all or any portion of this Note at
any time without penalty, fee or acceleration prior to the Maturity Date of this
Note.
4. SECURITY. Payment of this Note is secured by a certain Pledge and
Security Agreement (the "Security Agreement") of even date herewith from
Borrower, as Pledgor, to Lender, as Pledgee, whereby Borrower has pledged
certain shares of capital stock as security for Borrower's obligations under
this Note, as more particularly described in the Security Agreement.
5. ACCELERATION OF DUE DATE. The entire unpaid principal balance of this
Note, together with all accrued and unpaid interest thereon, shall, at the
election of Lender, become immediately due and payable upon the occurrence of
any of the following, irrespective of the payment schedule set forth in
Paragraph 1 of this Note:
a. Any failure on the part of Borrower to make any payment under
this Note when the same is due;
A-1
<PAGE>
b. Any failure on the part of Borrower to perform or observe any of
his obligations under the Security Agreement or any other security instrument
which secures this Note, as and when performance is due;
c. On such date as Borrower's employment relationship with Lender or
any wholly-owned subsidiary of Lender is terminated, or deemed terminated
pursuant to the terms of the Common Stock Purchase Agreement, for any reason; or
d. If at any time Borrower shall admit in writing his inability to
pay his debts as they become due, or shall make any assignment for the benefit
of any creditors, or shall file a petition seeking any reorganization,
arrangement, composition, readjustment or similar release under any present or
future statute, law or regulation, or on the filing or commencement of any
petition, action, case or proceeding, voluntary or involuntary, under any state
or federal law regarding bankruptcy or insolvency.
6. OFFSET TO COMPENSATION. To the fullest extent permitted by law, upon
any termination of Borrower's employment with Lender, Borrower hereby directs
Lender to offset any unpaid principal balance due under this Note against any
amounts owed by Lender to Borrower, including, but not limited to, any wages,
salary, or bonuses, and any other employment or consulting compensation or stock
repurchase payments. Lender shall promptly notify Borrower in writing of any
such offset, including an itemization of the amounts offset and the balance, if
any, due and payable pursuant to this Note.
7. COLLECTION COSTS BORNE BY BORROWER. Borrower agrees to pay all costs
and expenses, including without limitation reasonable attorneys' fees, incurred
by Lender in any action brought to enforce the terms of this Note and/or to
collect this Note, and any appeal thereof.
8. MISCELLANEOUS.
a. No delay or omission on the part of Lender in exercising any
right under this Note or under the Security Agreement or any other security
agreement given to secure this Note shall operate as a waiver of such right or
of any other right under this Note.
b. In the event of default, under this Note, Borrower shall have
fifteen (15) days from the date of notice of default and demand for payment in
which to cure such default. Such notice may be by written notice mailed to
Borrower at the last address given to Lender by Borrower and shall be deemed
received three (3) days after being mailed by certified, first-class mail,
return receipt requested or the next day mailed by overnight delivery.
c. Borrower hereby waives presentment for payment, demand, notice of
demand and of dishonor and nonpayment of this Note, notice of intention to
accelerate the maturity of this Note, protest and notice of protest, diligence
in collecting, and the bringing of suit against any other party. The pleading
of any statute of limitations as a defense to any demand against the Borrower,
any endorsers, guarantors and sureties of this Note is expressly waived by each
and all of such parties to the extent permitted by law. Time is of the essence
under this Note. Any payment hereunder shall first be applied to any collection
costs, then
A-2
<PAGE>
against accrued and unpaid interest hereunder and then against the
outstanding principal balance of this Note.
9. LATE CHARGE. If payment of principal or interest under this Note
shall not be made within ten (10) days after the date due, Borrower agrees to
pay, in addition to the unpaid principal or interest, a sum equal to three
percent (3%) of the unpaid principal or interest, which sum Borrower agrees
represents a fair and reasonable estimate, considering all of the circumstances
existing on the date of this Note, of the costs and expenses incident to
handling and collecting such delinquent payment that will be sustained by Lender
due to the failure of Borrower to make timely payment. The parties further
agree that proof of actual damages would be costly and impracticable. Such
charge shall be paid without prejudice to the right of Lender to collect any
other amounts provided to be paid or to declare a default under this Note or
under the Security Agreement referred to in this Note or from exercising any of
the other rights and remedies of Lender.
10. GOVERNING LAW. The Note shall be governed by the laws of the State of
California and shall be construed in accordance therewith, irrespective of its
choice of law principles.
11. DEFINITIONS.
a. BUSINESS DAY. As used in this Note the term "Business Day" shall
mean any day other than a Saturday, Sunday or a legal holiday observed by
employees of the State of California.
12. SUCCESSORS. This Note shall be binding upon Borrower and the personal
representatives, heirs, successors and assigns of Borrower.
13. SEVERABILITY. If any part of this Note is determined to be illegal or
unenforceable, all other parts shall remain in full force and effect.
14. MAXIMUM INTEREST PAYABLE. All agreements between the undersigned and
the holder hereof, whether now existing or hereafter arising and whether written
or oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity hereof or otherwise, shall the interest contracted
for, charged, received, paid or agreed to be paid to the holder hereof exceed
the maximum amount permissible under applicable law. If, from any circumstance
whatsoever, interest would otherwise be payable to the holder hereof in excess
of the maximum lawful amount, the interest payable to the holder hereof shall be
reduced to the maximum amount permitted under applicable law; and if from any
circumstance the holder hereof shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to the undersigned. All interest paid or agreed to be paid to the
holder hereof shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full period until payment in full
of the principal (including the period of any renewal or extension hereof) so
that the interest hereon for such full period shall not exceed the maximum
amount permitted by
A-3
<PAGE>
applicable law. This paragraph shall control all agreements between the
undersigned and the holder hereof.
/s/ Mark W. Moore
------------------------------------
Borrower: Mark W. Moore, Ph.D.
--------------------------
I, Karen Carver-Moore, the spouse of Borrower, do hereby consent to the
borrowing by Borrower of the loan evidenced by this Note on the terms and
conditions set forth herein, and to the pledge evidenced by the Security
Agreement referred to in Paragraph 4 of this Note, and any extensions,
modifications or amendments thereto, as security for the obligations of Borrower
under this Note.
/s/ Karen Carver-Moore
----------------------
A-4
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated April 6, 2000 relating to the financial statements of Deltagen,
Inc., which appears in such Registration Statement. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data" in
such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 12, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 11-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-28-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 848 8,635 987
<SECURITIES> 0 0 0
<RECEIVABLES> 689 357 0
<ALLOWANCES> (104) 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 1,638 9,054 1,021
<PP&E> 5,974 2,509 993
<DEPRECIATION> (1,001) (296) (69)
<TOTAL-ASSETS> 6,774 11,280 1,958
<CURRENT-LIABILITIES> 5,439 1,313 192
<BONDS> 0 0 0
0 0 0
14,447 14,447 2,980
<COMMON> 2 1 1
<OTHER-SE> (15,369) (4,546) (1,213)
<TOTAL-LIABILITY-AND-EQUITY> 6,774<F1> 11,280 1,958
<SALES> 0 0 0
<TOTAL-REVENUES> 1,240 381 0
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> (14,972) (3,998) (1,295)
<LOSS-PROVISION> (104) 0 0
<INTEREST-EXPENSE> (11) 265 40
<INCOME-PRETAX> (13,847) (3,352) (1,255)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (13,847) (3,352) (1,255)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (13,847) (3,352) (1,255)
<EPS-BASIC> (14.79) (9.13) 0
<EPS-DILUTED> (14.79) (9.13) 0
<FN>
<F1>Includes redeemable convertible preferred stock
</FN>
</TABLE>
