<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 31, 1997
REGISTRATION NO. 333-[ ]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LJL BIOSYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3826 77-0360183
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
Incorporation or Organization) Number)
</TABLE>
404 TASMAN DRIVE
SUNNYVALE, CA 94089
(408) 541-8787
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------------------
LEV J. LEYTES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
404 TASMAN DRIVE
SUNNYVALE, CA 94089
(408) 541-8787
(Name, Address Including Zip Code, and Telephone Number Including Area Code, of
Agent for Service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
MARK B. WEEKS PATRICK A. POHLEN
VENTURE LAW GROUP COOLEY GODWARD LLP
A Professional Corporation 5 Palo Alto Square
2800 Sand Hill Road Palo Alto, CA 94306
Menlo Park, CA 94025
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.001................. 2,875,000 $13.00 $37,375,000 $11,026.00
</TABLE>
(1) Includes 375,000 shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 31, 1997
2,500,000 SHARES
[LOGO]
COMMON STOCK
ALL OF THE 2,500,000 SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY
LJL BIOSYSTEMS, INC. ("LJL" OR THE "COMPANY"). PRIOR TO THIS OFFERING, THERE HAS
BEEN NO PUBLIC MARKET FOR THE COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE FOR THE COMMON STOCK WILL BE
BETWEEN $11.00 AND $13.00 PER SHARE. SEE "UNDERWRITING" FOR A DISCUSSION OF THE
FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
APPLICATION HAS BEEN MADE TO HAVE THE COMMON STOCK APPROVED FOR QUOTATION ON THE
NASDAQ NATIONAL MARKET UNDER THE SYMBOL "LJLB."
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN PURCHASING THE SHARES OF COMMON
STOCK OFFERED HEREBY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
PER SHARE.................................................... $ $ $
TOTAL (3).................................................... $ $ $
</TABLE>
(1) SEE "UNDERWRITING" FOR INFORMATION CONCERNING INDEMNIFICATION OF
UNDERWRITERS AND OTHER MATTERS.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $700,000.
(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP
TO AN ADDITIONAL 375,000 SHARES OF COMMON STOCK SOLELY TO COVER
OVER-ALLOTMENTS, IF ANY. IF THE UNDERWRITERS EXERCISE THIS OPTION IN FULL,
THE PRICE TO PUBLIC WILL TOTAL $ , THE UNDERWRITING DISCOUNT WILL
TOTAL $ AND THE PROCEEDS TO COMPANY WILL TOTAL $ . SEE
"UNDERWRITING."
THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS NAMED
HEREIN, SUBJECT TO RECEIPT AND ACCEPTANCE BY THEM AND SUBJECT TO THEIR RIGHT TO
REJECT ANY ORDER IN WHOLE OR IN PART. IT IS EXPECTED THAT DELIVERY OF THE
CERTIFICATES REPRESENTING SUCH SHARES WILL BE MADE AGAINST PAYMENT THEREFOR AT
THE OFFICE OF NATIONSBANC MONTGOMERY SECURITIES LLC ON OR ABOUT ,
1998.
-------------------
NATIONSBANC MONTGOMERY SECURITIES LLC
HAMBRECHT & QUIST
VOLPE BROWN WHELAN & COMPANY
, 1998
<PAGE>
<TABLE>
<S> <C>
[LJL BIOSYSTEMS LOGO] PROPRIETARY TECHNOLOGIES AND PRODUCTS TO ACCELERATE AND
ENHANCE THE DRUG DISCOVERY PROCESS
[Drawing of drug discovery process with Recent advances in molecular biology and genomics as well
compounds and targets going into funnel and as combinatorial chemistry have resulted in the generation
coming out of funnel into drug leads] of large numbers of targets and compounds, shifting the
rate-limiting step in the drug discovery process to
screening.
FIRST HTS PRODUCTS UNDER DEVELOPMENT [photograph of the LJL Analyst]
ANALYST -- a four-mode analyzer specifically
designed to address the needs of the high
throughput screening ("HTS") setting
POTENTIAL BENEFITS
-higher throughput
-improved analytical performance and
flexibility
-lower compound and reagent costs
HIGH VALUE-ADDED REAGENTS AND ASSAY KITS
POTENTIAL BENEFITS
-ease of implementation and use in HTS
-improved performance LJL ANALYST
Commercial launch is expected in the first half of 1998.
[Drawing of drug discovery process with LJL believes that its technology platform addresses many
compounds and targets going into funnel and of the limitations associated with current HTS systems,
coming out of funnel into drug leads] allowing its customers to accelerate the identification
and optimization of lead compounds for development into
new medicines.
</TABLE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN ACTIVITIES THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER- ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. THESE TRANSACTIONS MAY BE EFFECTED ON
NASDAQ OR OTHERWISE AND, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
Analyst-TM-, CRITERION-TM-, FLARe-TM-, LJL-TM-, SmartOptics-TM-, The High
Throughput Company-TM- and the logo of the Company are trademarks of the
Company. This Prospectus also includes trade names and trademarks of companies
other than LJL, whose mention herein is with due recognition of and without
intent to misappropriate their marks.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED IN
THIS PROSPECTUS ASSUMES: (I) A 1-FOR-2 REVERSE STOCK SPLIT OF THE COMMON STOCK
AND PREFERRED STOCK TO BE EFFECTED PRIOR TO THIS OFFERING, (II) THE CONVERSION
OF ALL THE OUTSTANDING SHARES OF PREFERRED STOCK INTO SHARES OF COMMON STOCK TO
BE EFFECTED UPON THE CLOSING OF THIS OFFERING AND (III) NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION. EXCEPT FOR THE HISTORICAL INFORMATION
CONTAINED HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND "BUSINESS," AS WELL AS THOSE DISCUSSED ELSEWHERE
IN THIS PROSPECTUS.
THE COMPANY
LJL is developing and marketing proprietary technologies and products to
accelerate and enhance the drug discovery process. LJL's proprietary integrated
technology platform is comprised of instrumentation and fluorescence-based and
other assay technologies designed to provide a flexible solution to the current
and evolving high throughput screening ("HTS") requirements of drug discovery
laboratories. The drug discovery process involves several stages including
target identification, compound synthesis, assay development, screening and lead
optimization. Target identification and compound synthesis historically have
been the rate-limiting steps in the drug discovery process. Recent advancements
in genomics and molecular biology as well as combinatorial chemistry have
resulted in the generation of large numbers of targets and compounds. This
growth in the number of targets and compounds has shifted the rate-limiting
steps in the drug discovery process to assay development, screening and lead
optimization. To address these bottlenecks, LJL is developing instrumentation
and assays to provide integrated HTS solutions. LJL believes that its technology
platform addresses the major limitations associated with current HTS systems and
will allow its customers to accelerate the identification and optimization of
lead compounds for development into new medicines.
The Company's first HTS product, ANALYST, is a four-mode analyzer designed
specifically for use in the HTS setting. The Company believes that ANALYST will
provide several important advantages over currently available multi-mode
analyzers, including increased throughput, improved analytical performance and
flexibility, lower reagents costs and the ability to be quickly integrated into
the existing HTS laboratory and to evolve with changing HTS needs. ANALYST is
currently undergoing beta testing at two major pharmaceutical companies and two
biotechnology companies. The Company expects to commence shipments of ANALYST in
the first half of 1998.
LJL's integrated technology platform also includes proprietary
fluorescence-based and other assay technologies. Currently, LJL is developing a
line of high value-added, application-specific reagents and assay kits optimized
for use in HTS and specifically for use with ANALYST. The Company intends to
develop its reagent and assay kits in a single-step format. The Company believes
that a single step format is better suited for the HTS environment because of
its speed, automation capability and lower cost. Additionally, LJL has licensed
a platform of novel fluorescence-based assay technologies known as Fluorescence
Lifetime Assay Repertoire ("FLARe") which it believes will address a number of
the current limitations associated with fluorescence-based HTS assays. The
Company believes that its proprietary FLARe technology, which includes methods
of assay detection using long-lifetime fluorescent reagents and phase/
modulation, will address the signal-to-noise problems normally associated with
intensity-based fluorescence assays. LJL's first reagents and assay kits are
expected to be introduced in 1998.
LJL is an established developer and manufacturer of automated instruments.
The Company believes these instruments are in use in more than 500 clinical
diagnostics and research laboratories worldwide. LJL intends to leverage its
proven product development and manufacturing track record to be the first to
market with effective solutions to the problems facing HTS users. The Company
believes that by
3
<PAGE>
establishing an installed base of instruments it will be able to generate
recurring revenue from the sale of reagents and assay kits. Additionally, the
Company believes that the market for its screening products can be extended into
other stages of the drug discovery process, such as assay development and lead
optimization. To further strengthen its market position, the Company plans to
develop and acquire additional screening technologies and to provide early
technology access to strategic customers.
The Company's office is located at 404 Tasman Drive, Sunnyvale, CA 94089 and
its telephone number is (408) 541-8787.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... 2,500,000 shares
Common Stock to be outstanding after the
offering................................... 10,622,003 shares(1)(2)
Use of proceeds.............................. For commercialization of ANALYST, research
and development of future products,
acquisition of technologies and businesses
and working capital and general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol....... LJLB
</TABLE>
- ------------------------
(1) Based on 8,122,003 shares outstanding as of November 30, 1997. Excludes as
of November 30, 1997 (i) 479,250 shares issuable upon exercise of options
outstanding under the 1994 Equity Incentive Plan with a weighted average
exercise price of $0.19 per share, (ii) 283,750 shares issuable upon
exercise of options outstanding under the 1997 Stock Plan with a weighted
average exercise price of $1.00 per share, and (iii) 37,203 shares issuable
upon the net exercise of outstanding warrants. See "Management--Stock
Plans," "Description of Capital Stock--Warrants," and Notes 4 and 6 of Notes
to Financial Statements.
(2) On December 16, 1997, the Board of Directors of the Company approved: (i)
subject to stockholder approval, an increase of 1,250,000 shares of Common
Stock reserved pursuant to the 1997 Stock Plan, (ii) option grants to
purchase an aggregate of 105,250 shares of Common Stock to employees and
directors, (iii) restricted stock grants in an aggregate amount of 45,000
shares to directors, (iv) the reservation of 300,000 shares for future
issuance under the 1998 Employee Stock Purchase Plan and (v) the reservation
of 150,000 shares for future issuance under the 1998 Directors' Plan. See
"Management--Stock Plans" and "--Director Compensation."
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
--------- ---------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues:
Product sales......................... $ 1,256 $ 1,536 $ 3,551 $ 2,236 $ 5,622 $ 3,180 $ 4,233
Development agreements................ 4,282 2,932 2,659 2,915 3,663 3,538 642
--------- ---------- --------- ---------- ---------- ---------- -----------
Total revenues...................... 5,538 4,468 6,210 5,151 9,285 6,718 4,875
--------- ---------- --------- ---------- ---------- ---------- -----------
Costs and operating expenses:
Product sales......................... 1,042 971 1,581 1,174 2,755 1,595 2,035
Research and development.............. 2,380 1,524 1,810 1,740 2,384 1,816 2,426
Selling, general and administrative... 2,066 1,576 2,822 1,963 4,062 3,110 1,541
--------- ---------- --------- ---------- ---------- ---------- -----------
Total costs and operating
expenses.......................... 5,488 4,071 6,213 4,877 9,201 6,521 6,002
--------- ---------- --------- ---------- ---------- ---------- -----------
Income (loss) from operations........... 50 397 (3) 274 84 197 (1,127)
Interest and other income, net.......... 33 12 54 82 176 147 146
--------- ---------- --------- ---------- ---------- ---------- -----------
Income (loss) before provision for
income taxes.......................... 83 409 51 356 260 344 (981)
Provision for income taxes.............. 27 7 7 4 2 2 12
--------- ---------- --------- ---------- ---------- ---------- -----------
Net income (loss)....................... $ 56 $ 402 $ 44 $ 352 $ 258 $ 342 $ (993)
--------- ---------- --------- ---------- ---------- ---------- -----------
--------- ---------- --------- ---------- ---------- ---------- -----------
PRO FORMA DATA(2):
Pro forma net income (loss)............. $ 50 $ 245 $ 31 $ 214 $ 156 $ 206 $ (781)
--------- ---------- --------- ---------- ---------- ---------- -----------
--------- ---------- --------- ---------- ---------- ---------- -----------
Pro forma net income (loss) per share... $ 0.02 $ (0.09)
---------- -----------
---------- -----------
Shares used in computation of pro forma
net income (loss) per share........... 8,631 8,631
---------- -----------
---------- -----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------------------
ACTUAL PRO FORMA(3) AS ADJUSTED(4)
--------- ------------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 7,122 $ 7,122 $ 34,322
Working capital........................................................ 6,095 6,095 33,295
Total assets........................................................... 7,850 7,850 35,050
Long-term debt......................................................... 50 50 50
Mandatorily redeemable convertible preferred stock..................... 8,989 -- --
Accumulated deficit.................................................... (1,869) (1,869) (1,869)
Total stockholders' equity (deficit)................................... (2,571) 6,418 33,618
</TABLE>
- ------------------------
(1) The statement of operations data for the years ended December 31, 1992 and
1993 reflect the combined results and financial position of two
commonly-controlled companies which were merged into, and survived by, LJL
BioSystems, Inc. on January 1, 1994.
(2) See Note 1 of Notes to Financial Statements for a description of pro forma
statement of operations data.
(3) Pro forma for the conversion of all outstanding shares of Preferred Stock
into Common Stock upon the closing of the offering.
(4) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered by
the Company at an assumed initial public offering price of $12.00 per share
(after deduction of the estimated underwriting discount and offering
expenses) and the receipt and application of the net proceeds thereof, and
reflects the anticipated net exercise of outstanding warrants. See "Use of
Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING FACTORS, TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS
PROSPECTUS, IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE
SHARES OF COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISK AND UNCERTAINTY. ACTUAL RESULTS AND THE TIMING OF
CERTAIN EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF THE RISK FACTORS SET FORTH BELOW AND
OTHER FACTORS DISCUSSED ELSEWHERE IN THIS PROSPECTUS. SEE "SPECIAL NOTE
REGARDING FORWARD-LOOKING STATEMENTS."
NEW BUSINESS STRATEGY; NEW AND UNDEFINED MARKET FOR HIGH THROUGHPUT SCREENING
PRODUCTS
In the second half of 1996, the Company implemented a new strategic business
model to develop products for the HTS market. In connection with this change in
strategy, the Company shifted its focus from developing and manufacturing
clinical diagnostic and research products on an original equipment manufacturing
("OEM") basis to developing, manufacturing and marketing products for the HTS
market. As a result, the Company's historical operating and financial
performance is not indicative of future financial and business results. The
Company incurred operating losses for the nine months ended September 30, 1997
as a result of its change in business strategy and anticipates that it will
continue to incur losses for at least the next several years. To date, the
Company has not commercially launched a product for the HTS market. Accordingly,
the Company is subject to the risks inherent in the operation of a new business,
such as the failure to develop an effective sales, marketing and distribution
channel, failure to achieve market acceptance and demand for its HTS products,
failure to implement commercial scale-up of developed HTS products, if any, and
failure to attract and retain key personnel. Furthermore, the HTS market is new
and undefined, and the use of HTS by pharmaceutical and biotechnology companies
is limited. Demand for the Company's HTS products will depend upon the extent to
which pharmaceutical and biotechnology companies adopt HTS as a drug discovery
tool. If HTS does not become a widely used method in drug discovery, demand for
the Company's products will not develop as the Company currently expects or at
all. The lack of demand for the Company's HTS products would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Selected Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business--Pharmaceutical
Research and Development" and "Business--Competition."
EARLY STAGE OF INSTRUMENTATION DEVELOPMENT
The Company's success will depend on its ability to develop and
commercialize its HTS instruments. The Company's first HTS instrument, ANALYST,
has recently entered beta testing and has not yet been implemented in a fully
operational HTS system. The Company has not previously developed or
commercialized products for the HTS market. Much of the instrumentation and
software expected to be incorporated into the Company's HTS products has not
previously been used in HTS applications. The successful implementation and
operation of the Company's HTS products will be a complex process requiring the
integration of advanced robotics, microfluidics, automated storage and retrieval
systems, fluorescence detector technologies and software and information
systems. Even if ANALYST appears to be promising at an early stage of
development or at commercial launch, it may not achieve market acceptance. In
addition, ANALYST may be difficult or uneconomical to produce, fail to achieve
expected performance levels, have a price level that is unacceptable in the
industry or be precluded from commercialization by the proprietary rights of
others. There can be no assurance that the Company will be able to successfully
develop, manufacture and market ANALYST or any other HTS products on a timely
basis, achieve anticipated performance levels or throughputs, gain industry
acceptance of the Company's products or develop a profitable business. The
failure to achieve any of these objectives would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Products Under Development--Analyst."
6
<PAGE>
RISKS ASSOCIATED WITH THE DEVELOPMENT AND COMMERCIALIZATION OF REAGENTS AND
ASSAY KITS
The Company expects that a substantial portion of its revenues will be
derived from the sale of reagents and assay kits. The Company has no experience
in the development, manufacture or marketing of reagents or assay kits. The
Company intends to license assay technologies from third parties and to develop
reagents and assay kits internally. There can be no assurance that the Company
will succeed in licensing any additional assay technologies on acceptable terms,
if at all, or that it will successfully commercialize any reagents that it
licenses. In addition, the Company is internally developing reagents and assay
kits, but has no previous experience in this area. There can be no assurance
that the Company will successfully develop reagents or assay kits internally or
that, if developed, such reagents and assay kits will achieve market acceptance.
The Company currently intends to outsource the manufacture of reagents and
assays kits. There can be no assurance that the Company will be able to enter
into agreements with third parties for the manufacture of reagents and assay
kits on terms commercially favorable to the Company or at all. In addition, the
Company intends to sell reagents and assay kits to purchasers of HTS
instruments, including ANALYST. There can be no assurance that sales of ANALYST
will be sufficient to support this strategy. A failure to achieve commercial
acceptance of its reagents and assay kits would have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business--Products Under Development--Reagents and Assays," "--Products Under
Development--FLARe Technology" and "--Patents and Proprietary Rights."
DEPENDENCE ON NEW PRODUCTS; RAPID TECHNOLOGICAL CHANGE
The pharmaceutical and biotechnology instrumentation and reagents market is
characterized by rapid technological change and frequent new product
introductions. The Company's future success will depend on its ability to
enhance its current and planned HTS products and to develop and introduce, on a
timely basis, new products that address the evolving needs of its customers
including its higher-density, ultra high throughput analyzer and microplates and
its fluorescence-based reagents and assay kits. The Company does not anticipate
that prototypes for these ultra high throughput products will be available for
several years, if at all. Production of an ultra high throughput analyzer and
associated microplates, fluorescence-based reagents and assay kits will present
significant development and manufacturing challenges. The Company may experience
difficulties that could delay or prevent the successful development,
introduction and marketing of its new products or its product enhancements. Any
failure to develop and introduce products in a timely manner in response to
changing market demands or customer requirements could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business--Products Under Development."
LACK OF SALES AND MARKETING EXPERIENCE
The Company has no experience in direct marketing, sales or distribution.
The Company's future profitability will depend on its ability to develop a
direct sales force to sell its HTS products to pharmaceutical and biotechnology
companies. The Company's products are technical in nature and the Company
therefore believes it is necessary to develop a direct sales force consisting of
people with scientific backgrounds and expertise. Competition for such employees
is intense. There can be no assurance that the Company will be able to attract
and retain qualified salespeople or that the Company will be able to build an
efficient and effective sales and marketing organization. Failure to attract or
retain qualified salespeople or to build such a sales and marketing organization
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company intends to market its HTS products in certain international
markets through distributors. The Company does not currently have distributors
in any international markets, and there can be no assurance that the Company
will be able to engage qualified distributors. Such distributors, if engaged,
may fail to satisfy financial or contractual obligations to the Company, fail to
adequately market the Company's products, cease operations with little or no
notice to the Company or offer, design, manufacture or promote competing product
lines. The failure to develop and maintain effective distribution channels
7
<PAGE>
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Sales and Marketing."
COMPETITION
The market for HTS products is highly competitive. The Company expects that
competition will increase significantly as more biotechnology and pharmaceutical
companies adopt high throughput screening instruments as a drug discovery tool
and as new companies enter the market with advanced technologies. The Company
will compete in many areas, including high throughput screening instruments,
assay development and reagent sales. The Company competes with companies which
directly market HTS products. In addition, pharmaceutical and biotechnology
companies, academic institutions, governmental agencies and other research
organizations are conducting research and developing products in various areas
which compete with the Company's technology platform, either on their own or in
collaboration with others. Many of these competitors have greater financial,
operational and sales and marketing resources, and more experience in research
and development, than the Company. Further, certain companies offer screening
services on a contract or collaborative basis, and these services could
eliminate the need for a potential customer to purchase the Company's products.
The Company's technological approaches may be rendered obsolete or uneconomical
by advances in existing technological approaches or the development of different
approaches by one or more of the Company's current or future competitors. See
"Business-- Competition."
CONCENTRATION OF HTS MARKET
The market for HTS products is highly concentrated, with approximately 50
large pharmaceutical companies operating a substantial portion of the Company's
targeted drug discovery laboratories. Accordingly, the Company expects a
relatively small number of customers will account for a substantial portion of
its revenues. The Company will face risks associated with a highly concentrated
customer base when and if it begins to sell its HTS products, including the
failure to establish or maintain relationships within a limited customer pool,
or substantial financial difficulties or decreased capital spending by its
customers, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. Further, the Company
faces the risk that customers will negotiate price discounts or other
unfavorable terms, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
LENGTHY SALES CYCLE
The sale of HTS products typically involves a significant technical
evaluation and commitment of capital by customers. Accordingly, the sales cycle
associated with the Company's HTS products is expected to be lengthy and subject
to a number of significant risks, including customers' budgetary constraints and
internal acceptance reviews, that are beyond the Company's control. Due to this
lengthy and unpredictable sales cycle, the Company's operating results could
fluctuate significantly from quarter to quarter. See "--Future Fluctuations in
Operating Results" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
MANUFACTURING RISK
The Company has never manufactured HTS products in commercial quantities.
The Company may encounter difficulties in scaling up production of its HTS
products relating to, among other things, quality control and assurance,
component supply and availability of qualified personnel. There can be no
assurance that, even if successfully developed and introduced to market, any of
the Company's products can be manufactured in sufficient quantities while
meeting quality control standards or at acceptable cost. Difficulties
encountered by the Company in manufacturing scale-up could have a material
adverse effect on its business, financial condition and results of operations.
See "--Dependence upon Key Personnel;
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Need to Hire Additional Qualified Personnel" and "--Risks Associated with
Reagents and Assay Development and Commercialization." See also
"Business--Manufacturing."
MANAGEMENT OF GROWTH
The Company's success will depend on the expansion of its operations and the
effective management of growth, which will place a significant strain on the
Company's management, operational and financial resources. To manage such
growth, the Company must expand its facilities, augment its operational,
financial and management systems and hire and train additional qualified
personnel. The Company's failure to manage growth effectively would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "--Dependence upon Key Personnel; Need to Hire
Additional Qualified Personnel."
DEPENDENCE UPON KEY PERSONNEL; NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL
The Company's success will depend to a significant degree upon the continued
services of key management, technical, and scientific personnel, including Lev
J. Leytes, the Company's Chairman of the Board of Directors, President and Chief
Executive Officer. In addition, the Company's success will depend on its ability
to attract and retain other highly skilled personnel. Currently, the Company is
seeking to hire certain senior executives, including a Chief Financial Officer.
Competition for qualified personnel is intense, and the process of hiring such
qualified personnel is often lengthy. There can be no assurance that the Company
can recruit such personnel on a timely basis, if at all. The Company's
management and other employees may voluntarily terminate their employment with
the Company at any time. The loss of the services of key personnel, or the
inability to attract and retain additional qualified personnel, could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Employees" and "Management."
DEPENDENCE ON SUPPLIERS AND CONTRACT MANUFACTURERS
Certain components used in the Company's HTS instruments are currently
purchased from a single or a limited number of outside sources. The reliance on
a sole or limited number of suppliers could result in time delays associated
with redesigning a product due to a failure to obtain a single source component,
an inability to obtain an adequate supply of required components and reduced
control over pricing, quality and timely delivery. The Company does not maintain
long-term agreements with any of its suppliers, and therefore the supply of a
particular component could be terminated at any time without penalty to the
supplier. Any interruption in supply of single source components could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company intends to rely on contract manufacturers,
some of which may be single-source vendors, for the development, manufacture and
supply of certain of its reagents and assay kits. There can be no assurance the
Company will be able to enter into such manufacturing contracts on commercially
reasonable terms, if at all, or that the Company's current or future contract
manufacturers will meet the Company's requirements for quality, quantity or
timeliness. If the supply of any such instrumentation components, reagents or
assay kits is interrupted, components, reagents and assay kits from alternative
suppliers and contract manufacturers may not be available in sufficient volumes
within required timeframes, if at all, to meet the Company's production needs.
See "Business--Manufacturing."
ACCUMULATED DEFICIT; UNCERTAINTY OF FUTURE PROFITABILITY
As of September 30, 1997, the Company had an accumulated deficit of
approximately $1.9 million. To date, the Company has not yet generated any
revenue from its HTS products, and the Company's expansion of its operations and
continued development of its HTS products will require a substantial increase in
marketing and sales and research and development expenditures for at least the
next several years. As a result, the Company expects to continue to incur
operating losses for the next several years. The Company's profitability will
depend on its ability to successfully develop and commercialize its HTS
products. Accordingly, the extent of future losses and the time required to
achieve profitability, if achieved
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at all, is highly uncertain. Moreover, if profitability is achieved, the level
of such profitability cannot be predicted and may vary significantly from
quarter to quarter. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company may be required to raise substantial additional capital over a
period of several years in order to develop and commercialize its products. The
Company's future capital requirements will depend on numerous factors, including
the costs associated with developing and commercializing its products,
developing a direct marketing and sales force, maintaining existing, or entering
into future, licensing and distribution agreements, protecting intellectual
property rights, entering the reagents and assay kits business, expanding
facilities and consummating possible future acquisitions of technologies,
products or businesses. The Company may consume available resources more rapidly
than currently anticipated, resulting in the need for additional funding. The
Company may be required to raise additional capital through a variety of
sources, including the public equity market, private equity financings,
collaborative arrangements, and public or private debt. There can be no
assurance that additional capital will be available on favorable terms, if at
all. If adequate funds are not available, the Company may be required to
significantly reduce or refocus its operations or to obtain funds through
arrangements that may require the Company to relinquish rights to certain of its
products, technologies or potential markets, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
To the extent that additional capital is raised through the sale of equity, the
issuance of such securities would result in ownership dilution to the Company's
existing stockholders. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
RISK OF INTERNATIONAL SALES AND OPERATIONS
The Company expects that international sales will account for a significant
portion of the Company's total revenues. International sales and operations are
subject to a number of risks, including the imposition of government controls,
export license requirements, restrictions on the export of critical technology,
political and economic instability or conflicts, trade restrictions, changes in
tariffs and taxes, difficulties in staffing and managing international
operations, problems in establishing or managing distributor relationships and
general economic conditions. In addition, as the Company expands its
international operations, it may be required to invoice its sales in local
currencies. Consequently, fluctuations in the value of foreign currencies
relative to the U.S. dollar may adversely affect the Company's business,
financial condition and results of operations. See "Business--Sales and
Marketing" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS OF TECHNOLOGIES AND BUSINESSES
The Company may acquire certain technologies, products or businesses to
broaden the scope of its existing and planned product lines and technologies.
Such acquisitions would expose the Company to the risks associated with the
assimilation of new technologies, operations, sites and personnel, the diversion
of resources from the Company's existing business and technologies, the
inability to generate revenues to offset associated acquisition costs, the
maintenance of uniform standards, controls, and procedures and the impairment of
relationships with employees and customers as a result of any integration of new
management personnel. Acquisitions may also result in the issuance of dilutive
equity securities, the incurrence or assumption of debt or additional expenses
associated with amortization of acquired intangible assets or potential
businesses. The Company's failure to successfully address such risks could have
a material adverse effect on the Company's business, financial condition and
results of operations.
INTELLECTUAL PROPERTY RISKS
The Company's success will depend in part on its ability to obtain patents,
maintain trade secret protection and operate without infringing the proprietary
rights of others. The Company has two U.S. patents. The Company has filed four
U.S. patent applications and four provisional patent applications, all
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of which are currently pending. To supplement its proprietary technology, the
Company has licensed ten patents from FluorRx, Inc. ("FluorRx") pursuant to a
June 1997 agreement. Under this license, the Company obtained certain worldwide
rights relating to FluorRx's FLARe technology. Certain of these rights have been
licensed on an exclusive basis. Certain other rights have been licensed on a
non-exclusive basis, and therefore could be or are licensed to third parties. In
accordance with such agreement, the Company pays one-time fees as well as
royalties based on sales of its products that incorporate this technology. The
license may be terminated in the event of a material breach by the Company.
Furthermore, FluorRx may elect to convert the exclusive rights into
non-exclusive rights in the event the Company fails to make certain minimum
royalty payments. If the license were terminated by FluorRx due to a material
breach of the license by the Company, the Company would lose the right to
incorporate FLARe technology into its HTS products. In such event, the Company
would be required to exclude FLARe technology from the Company's existing and
future products and either license or develop internally alternative
technologies. There can be no assurance that the Company would be able to
license alternative technologies on commercially reasonable terms, or at all, or
that the Company would be capable of developing internally such technologies.
Furthermore, there can be no assurance that other companies may not
independently develop technology with functionality similar or superior to the
FLARe technology that does not or is claimed not to infringe the FLARe patents,
or that otherwise circumvents the technology licensed to the Company.
The Company is aware of third party patents that contain issued claims that
may cover certain aspects of the Company's reagent technologies. There can be no
assurance that the Company would not be required to license any such patents to
produce certain reagents, assay kits and related products or that such licenses
would be available on commercially reasonable terms, if at all. Any action
against the Company claiming damages and seeking to enjoin commercial activities
relating to the affected technologies could subject the Company to potential
liability for damages. The Company could incur substantial costs in defending
patent infringement claims, obtaining patent licenses, engaging in interference
and opposition proceedings or other challenges to its patent rights or
intellectual property rights made by third parties, or in bringing such
proceedings or enforcing any patent rights against third parties. The Company's
inability to obtain necessary licenses or its involvement in proceedings
concerning patent rights could have a material adverse effect on the business,
financial condition and results of operations of the Company.
The patent positions of bioanalytical product companies, including the
Company, are uncertain and involve complex legal and factual questions. In
addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, there can be no assurance
that the patent applications of the Company or its licensor will result in
patents being issued or that any issued patents will provide protection against
competitive technologies or will be held valid if challenged or circumvented.
Others may independently develop products similar to those of the Company or
design around or otherwise circumvent patents issued to the Company. In the
event that any relevant claims of third-party patents are upheld as valid and
enforceable, the Company could be prevented from practicing the subject matter
claimed in such patents, or would be required to obtain licenses from the patent
owners of each of such patents or to redesign its products or processes to avoid
infringement. There can be no assurance that such licenses would be available
or, if available, would be on terms acceptable to the Company or that the
Company would be successful in any attempt to redesign its products or processes
to avoid infringement. If the Company does not obtain necessary licenses, it
could be subject to litigation and encounter delays in product introductions
while it attempts to design around such patents. Alternatively, the development,
manufacture or sale of such products could be prevented. Litigation would result
in significant cost to the Company as well as diversion of management time.
Adverse determinations in any such proceedings could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company also relies on trade secret and copyright law, and employee and
third-party nondisclosure agreements to protect its intellectual property rights
in its products and technology. There can be no assurance that these agreements
and measures will provide meaningful protection of the Company's trade secrets,
copyrights, know-how, or other proprietary information in the event of any
unauthorized use,
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misappropriation or disclosure or that others will not independently develop
substantially equivalent proprietary technologies. Litigation to protect the
Company's trade secrets or copyrights would result in significant cost to the
Company as well as diversion of management time. Adverse determinations in any
such proceedings or unauthorized disclosure of the Company's trade secrets could
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the laws of certain foreign countries do
not protect the Company's intellectual property rights to the same extent as do
the laws of the United States. There can be no assurance that the Company will
be able to protect its intellectual property in these markets. See
"Business--Intellectual Property," and "--Products Under Development--FLARe
Technology."
GOVERNMENT REGULATION
The Company's clinical diagnostics products, including Luminometer, Q2000
and Horizon, are subject to FDA regulation as medical devices, as well as
similar foreign regulation. The process of obtaining and maintaining required
regulatory clearances and approvals and otherwise remaining in regulatory
compliance in the United States and certain other countries is lengthy,
expensive and uncertain. Although the Company has phased out production of
Luminometer and Q2000, the Company will continue to manufacture Horizon on an
OEM basis. Horizon is used in research and clinical laboratories to perform IN
VITRO diagnostic ("IVD") tests, which are exempt from investigational device
exemption ("IDE") requirements, including the need to obtain the FDA's prior
approval, provided that, among other things, the testing is noninvasive, the
product is not used as a diagnostic procedure without confirmation by another
medically established test or procedure, and distribution controls are
established to assure that IVDs distributed for research are used only for those
purposes. To the Company's knowledge, its OEM customers have met these
conditions. There can be no assurance that the FDA would agree that the OEM
customers' distribution of the Company's clinical diagnostic products meet and
have met the requirements for IDE exemption. Failure by the Company, its OEM
customers or the recipients of the Company's clinical diagnostic products to
comply with the IDE exemption requirements could result in enforcement action by
the FDA, which could adversely affect the Company's or its OEM customers'
ability to gain marketing clearance or approval of these products or could
result in the recall of previously distributed products.
Applicable law requires that LJL comply with the FDA's current GMP
regulations for the manufacture of its clinical diagnostics products. The FDA
monitors compliance with its GMP regulations by subjecting medical product
manufacturers to periodic FDA inspections of their manufacturing facilities. The
FDA has recently revised the GMP regulations. The new Quality System Regulation
imposes design controls and makes other significant changes in the requirements
applicable to manufacturers. LJL is also subject to other regulatory
requirements, and may need to submit reports to the FDA including adverse event
reporting. Failure to comply with GMP regulations or other applicable legal
requirements can lead to, among other things, warning letters, seizure of
violative products, suspension of manufacturing, government injunctions and
potential civil or criminal liability on the part of the Company and the
responsible officers and employees. In addition, the government may halt or
restrict continued sale of such instruments. Any such actions could have a
material, adverse effect on the business, financial condition and results of
operations of the Company.
In order to export its clinical diagnostics instruments, the Company
maintains International Organization for Standardization ("ISO") 9001
certification and applies the CE mark to certain products that are exported,
which subjects LJL's operations to periodic surveillance audits. There can be no
assurance that the Company's operations will be found to comply with GMP
regulations, ISO standards or other applicable legal requirements or that the
Company will not be required to incur substantial costs to maintain its
compliance with existing or future manufacturing regulations, standards or other
requirements. Any such noncompliance or increased cost of compliance could have
a material adverse effect on the Company's business, results of operations and
financial condition.
LJL also is subject to numerous federal, state and local laws relating to
safe working conditions, manufacturing practices, environmental protection,
storage, use and disposal of hazardous or potentially hazardous substances. Any
material failure to comply with such laws could require the Company to incur
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<PAGE>
significant costs and would have a material, adverse effect upon the Company's
ability to do business. Changes in existing requirements or adoption of new
requirements or policies relating to government regulations could materially and
adversely affect the ability of LJL to comply with such requirements.
HAZARDOUS MATERIALS
The Company's research and development and manufacturing operations involve
the use of hazardous materials, biological samples, chemicals and various
radioactive compounds. In the future, the Company plans to manufacture certain
reagents, some of which likely will contain hazardous materials including
carcinogens. The Company is subject to federal, state and local laws and
regulations governing the storage, use, and disposal of such materials and
certain waste products. The risk of accidental contamination or injury from the
use of these materials cannot be completely eliminated. In the event of an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company, which would have a
material adverse effect on the Company. The Company may incur substantial costs
to comply with environmental regulations if the Company develops its own
commercial reagents manufacturing facility.
FUTURE FLUCTUATIONS IN OPERATING RESULTS
The Company's future operating results are likely to fluctuate substantially
from period to period. The degree of fluctuation will depend on a number of
factors, including the timing and level of sales, the mix of products sold
through direct sales channels and third party distributors, and any change in
the product mix among the Company's planned product lines. Such fluctuations
could have a material adverse effect on its business, financial condition and
results of operations. Because a significant portion of the Company's business
is expected to be derived from orders placed by a limited number of large
customers, variations in the timing of such orders could cause significant
fluctuations in the Company's operating results. Other factors that may result
in fluctuations in operating results include industry acceptance of HTS as a
drug discovery tool, market acceptance of the Company's products, the timing of
new product announcements and the introduction of new products and new
technologies by the Company or its competitors, delays in research and
development of new products, increased research and development expenses,
increased marketing and sales expenses associated with the implementation of the
Company's direct marketing of its products, availability and cost of component
parts from its suppliers, competitive pricing pressures, and developments with
respect to regulatory matters. In connection with future introductions of new
products, the Company may be required to establish or increase reserves or
record charges for inventory obsolescence in connection with unsold inventory,
if any, of older generations of products.
The Company's expenditures for research and development, selling and
marketing, and general and administrative functions are based in part on future
revenue projections. The Company may be unable to adjust spending in a timely
manner in response to any unanticipated declines in revenues, which may have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company may be required to reduce prices in response
to competitive pressures or other factors or increase spending to pursue new
market opportunities. Any decline in average selling prices of a product which
is not offset by a reduction in product costs or by sales of other products with
higher gross margins would decrease the Company's overall gross profit and
adversely affect the Company's business, financial condition and results of
operations. In addition, the Company's operating results may vary from the
expectations of public market analysts and investors, and, as a result, the
price of the Common Stock would be materially and adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
PRODUCT LIABILITY EXPOSURE; AVAILABILITY OF INSURANCE
The manufacture and sale of products involves an inherent risk of product
liability claims and associated adverse publicity. A successful product
liability claim brought against the Company in excess of its insurance coverage
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company currently only has limited
product liability insurance. There can
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be no assurance that the Company will be able to maintain product liability
insurance on acceptable terms, if at all, or that such insurance will provide
adequate coverage against potential liabilities. Furthermore, an inability to
obtain sufficient insurance coverage on reasonable terms or to otherwise protect
against potential product liability claims could prevent or inhibit the
commercialization and development of the Company's products.
CONTROL BY MANAGEMENT AND EXISTING STOCKHOLDERS
Upon completion of this offering, the Company's principal stockholders,
executive officers and directors together will beneficially own approximately
74.3% of the outstanding shares of Common Stock (71.8% if the Underwriters'
over-allotment option is exercised in full). As a result, these stockholders
will be able to control matters requiring approval by the stockholders of the
Company, including approvals of amendments to the Company's Certificate of
Incorporation, certain mergers, a sale of all or substantially all of the assets
of the Company, going private transactions and other fundamental transactions.
In addition, the Company's Certificate of Incorporation, as it is proposed to be
amended and restated concurrently with the closing of this offering (the
"Restated Certificate"), does not provide for cumulative voting with respect to
the election of directors. Consequently, the present directors and executive
officers of the Company, together with the Company's principal stockholders,
will be able to control the election of the members of the Board of Directors of
the Company. Such a concentration of ownership may have the effect of delaying
or preventing a change in control of the Company, including transactions in
which stockholders might otherwise receive a premium for their shares over
current market prices. See "Principal Stockholders."
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE; ANTI-TAKEOVER PROVISIONS
The Restated Certificate authorizes the Board of Directors of the Company,
without stockholder approval, to issue additional shares of Common Stock and to
fix the rights preferences and privileges of and issue up to 2,000,000 shares of
Preferred Stock with voting, conversion, dividends and other rights and
preferences that could adversely affect the voting power or other rights of the
holders of Common Stock. The issuance of preferred stock, rights to purchase
preferred stock or additional shares of Common Stock may have the effect of
delaying or preventing a change in control of the Company. In addition, the
possible issuance of preferred stock or additional shares of Common Stock could
discourage a proxy contest, make more difficult the acquisition of a substantial
block of the Company's Common Stock or limit the price that investors might be
willing to pay for shares of the Company's Common Stock. Further, the Restated
Certificate provides that any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders and may not be effected by any consent in writing.
Special meetings of the stockholders of the Company may be called only by the
Chairman of the Board of Directors, the President of the Company, by the Board
of Directors pursuant to resolution adopted by a majority of the total number of
authorized directors, or by the holders of 10% of the outstanding voting stock
of the Company. These and other provisions contained in the Restated Certificate
and the Company's Bylaws, as well as certain provisions of Delaware law, could
delay or make more difficult certain types of transactions involving an actual
or potential change in control of the Company or its management (including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices) and may limit the ability of
stockholders to remove current management of the Company or approve transactions
that stockholders may deem to be in their best interests and, therefore, could
adversely effect the price of the Company's Common Stock. See "Description of
Capital Stock."
BROAD DISCRETION IN APPLICATION OF NET PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are estimated to be approximately $27,200,000 ($31,385,000 if the
Underwriters' overallotment option is exercised in full) after deducting the
underwriting discount and estimated offering expenses. The Company intends to
use the net proceeds from this offering principally for commercialization of its
HTS products,
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research and development of future products, acquisition of technologies and
businesses and working capital and general corporate purposes. The Company's
management and Board of Directors will have broad discretion with respect to the
application of such proceeds, and the amounts actually expended by the Company
for working capital purposes may vary significantly depending on a number of
factors, including future revenue growth, if any, and the amount of cash, if
any, generated by the Company's operations. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common Stock
and there can be no assurance that an active public market for the Common Stock
will develop or be sustained after this offering. The initial public offering
price, which will be determined by negotiations between the Company and the
Underwriters, will not necessarily be indicative of the market price at which
the Common Stock of the Company will trade after this offering. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. In addition, in recent years the stock market in
general, and the shares of biotechnology companies in particular, have
experienced extreme price fluctuations. These broad market and industry
fluctuations may have a material adverse effect on the market price of the
Common Stock. In the future, the Company's operating results may vary from the
expectations of public market analysts and investors, and, as a result, the
price of the Common Stock would be materially and adversely affected.
Announcements of technological innovations or new commercial products by the
Company or its competitors, disputes or other developments concerning
proprietary rights, including patents and litigation matters, publicity
regarding new products or technologies under development by the Company, its
licensors or its competitors, general market conditions, quarterly fluctuations
in the Company's revenues and financial results, as well as the other factors
described in these "Risk Factors" and elsewhere in this Prospectus, may have a
significant impact on the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE AND POTENTIAL ADVERSE EFFECT ON MARKET PRICE;
REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public market
following this offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act of
1933, as amended (the "Securities Act"), and lock-up agreements pursuant to
which all directors and executive officers and stockholders of the Company have
agreed not to sell or otherwise dispose of any of their shares without the prior
written consent of NationsBanc Montgomery Securities LLC. However, NationsBanc
Montgomery Securities LLC may at any time without notice, release all or any
portion of the securities subject to lock-up agreements. The Company has agreed
with NationsBanc Montgomery Securities LLC not to release any stockholder from
such lock-up agreement between the stockholder and the Company without the
consent of NationsBanc Montgomery Securities LLC. As a result of such
restrictions and based upon the number of shares outstanding on November 30,
1997, on the date of this Prospectus approximately no shares, other than the
2,500,000 shares offered hereby, will be eligible for sale pursuant to Rule 144
promulgated under the Securities Act. An additional 8,122,003 shares and 364,962
shares issuable upon exercise of outstanding vested options will be eligible for
sale 180 days after the date of this Prospectus upon expiration of the lock-up
agreements and in compliance with certain limitations set forth in the
Securities Act. After this offering, the holders of approximately 8,122,003
shares of Common Stock will be entitled to certain demand and piggyback
registration rights with respect to registration of such shares under the
Securities Act. If such holders, by exercising their demand or piggyback
registration rights, cause a large number of securities to be registered and
sold in the public market such sales could have an adverse effect on the market
price for the Company's Common Stock. If the Company were to include in a
Company-initiated registration shares held by such holders pursuant to the
exercise of their piggyback registration rights, such sales may have an adverse
effect on the Company's ability to raise needed capital. See "Shares Eligible
For Future Sale" and "Description of Capital Stock--Registration Rights."
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IMMEDIATE AND SUBSTANTIAL DILUTION; ABSENCE OF DIVIDENDS
Purchasers of the shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
investment from the initial public offering price. Additional dilution will
occur upon exercise of outstanding options. See "Dilution" and "Shares Eligible
for Future Sale." Prior to June 1997, the Company operated as an S corporation
for federal and state income tax purposes and distributed its taxable income to
its stockholders in the form of dividends. Since June 1997, the Company has
operated as a C corporation, and does not anticipate paying dividends in the
future. See "Dividend Policy."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Prospectus, including without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import, constitute "forward-looking statements." Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others: the early state
of development of the Company's high throughput screening products; uncertainty
in the emerging high throughput screening market and uncertainty of commercial
acceptance of the Company's high throughput screening products; intense
competition; dependence on proprietary technology; dependence on in-licensed
technology; existing government regulation and changes in, or the failure to
comply with, government regulations; the Company's need for additional
financing; dependence on key personnel; limited manufacturing experience; and
other factors referenced in this Prospectus. Certain of these factors are
discussed in more detail elsewhere in this Prospectus, including, without
limitation, under the captions "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Given these uncertainties, prospective investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
being offered by the Company hereby at an assumed public offering price of
$12.00 per share are estimated to be $27,200,000 ($31,385,000 if the
Underwriters' overallotment option is exercised in full). The Company intends to
use the net proceeds of the offering to accelerate the commercialization of
ANALYST, including investments in manufacturing, sales and marketing
infrastructure, and to fund research and development of future products, to
acquire complementary technologies and businesses, and for working capital and
general corporate purposes. Although the Company intends to use a portion of net
proceeds to fund the acquisition of complementary technologies and businesses,
the Company has no present understandings, commitments or arrangements with
respect to any such acquisitions. Pending application of the net proceeds of the
offering as described above, the Company intends to invest such proceeds in
short-term, investment-grade, interest-bearing financial instruments.
DIVIDEND POLICY
Prior to June 1997, the Company operated as an S corporation for federal and
state income tax purposes and distributed its taxable income to its stockholders
in the form of dividends. Since June 1997, the Company has operated as a C
corporation and does not anticipate paying cash dividends in the foreseeable
future. The Company currently intends to retain all available funds and any
future earnings for use in the operation of its business.
17
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 (i) on an actual basis, (ii) pro forma to reflect the
conversion of all outstanding shares of Preferred Stock into Common Stock and
transfer of the S corporation accumulated deficit into additional paid-in
capital upon closing of the offering and (iii) as adjusted to give effect to the
sale by the Company of 2,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $12.00 per share and the application of
the net proceeds therefrom and 37,203 shares of Common Stock to be issued upon
the net exercise of outstanding warrants. See "Use of Proceeds." This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
Notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt............................................................. $ 50 $ 50 $ 50
----------- ----------- -----------
Mandatorily redeemable convertible preferred stock; $0.001 par value;
7,400,000 shares authorized; 3,621,503 shares issued and outstanding
actual; no shares issued and outstanding pro forma or as adjusted........ 8,989 -- --
----------- ----------- -----------
Stockholders' equity (deficit)(1)(2):
Common stock, $0.001 par value 19,000,000 shares authorized; 4,500,500
shares issued and outstanding actual; 8,122,003 shares issued and
outstanding pro forma; 10,659,206 shares issued and outstanding as
adjusted............................................................... 5 8 11
Additional paid-in capital............................................... -- 8,334 35,531
Deferred compensation.................................................... (55) (55) (55)
S corporation accumulated deficit........................................ (652) -- --
Accumulated deficit...................................................... (1,869) (1,869) (1,869)
----------- ----------- -----------
Total stockholders' equity (deficit)................................... (2,571) 6,418 33,618
----------- ----------- -----------
Total capitalization............................................... $ 6,468 $ 6,468 $ 33,668
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------------
(1) Excludes as of September 30, 1997, 1,300,000 shares of Common Stock reserved
for issuance under the Company's stock option plans, of which 731,000 shares
were issuable upon exercise of outstanding options at a weighted average
exercise price of $0.47 per share. See "Management--Stock Plans," "Certain
Relationships and Related Transactions," and "Underwriting" and Notes 1, 4
and 6 of Notes to Financial Statements.
(2) On December 16, 1997, the Board of Directors of the Company approved: (i) an
increase of 1,250,000 shares of Common Stock reserved pursuant to the 1997
Stock Plan, (ii) option grants to purchase an aggregate of 105,250 shares of
Common Stock to employees and directors, (iii) restricted stock grants in an
aggregate amount of 45,000 shares to directors, (iv) the reservation of
300,000 shares for future issuance under the 1998 Employee Stock Purchase
Plan and (v) the reservation of 150,000 shares for future issuance under the
1998 Directors' Plan. See "Management--Stock Plans" and "--Director
Compensation."
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of September 30,
1997 (assuming the conversion of all outstanding shares of Preferred Stock into
Common Stock and 37,203 shares of Common Stock to be issued upon the net
exercise of outstanding warrants) was approximately $6,418,000, or $0.79 per
share of Common Stock. Pro forma net tangible book value per share is determined
by dividing the net tangible book value (tangible assets less total liabilities)
of the Company by the number of shares of Common Stock outstanding, including
shares of Common Stock to be issued from the conversion of the Preferred Stock
immediately prior to the consummation of the offering and 37,203 shares of
Common Stock to be issued upon the net exercise of outstanding warrants. Without
taking into account any other changes in the net tangible book value after
September 30, 1997, other than to give effect to the receipt by the Company of
the estimated net proceeds from the sale of 2,500,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$12.00 per share, the pro forma net tangible book value of the Company as of
September 30, 1997 would have been $33,618,000, or $3.15 per share. This
represents an immediate increase in the pro forma net tangible book value of
$2.36 per share to existing stockholders and an immediate dilution of $8.85 per
share to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price........................ $ 12.00
Pro forma net tangible book value before the offering...... $ 0.79
Increase attributable to new investors(1).................. 2.36
---------
Pro forma net tangible book value after offering............. 3.15
---------
Dilution to new investors.................................... $ 8.85
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1997, the difference between existing stockholders and purchasers of shares in
the offering (at an assumed initial public offering price of $12.00 per share
and before deducting underwriting discounts and estimated offering expenses
payable by the Company) with respect to the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
------------------------- -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. 8,159,206 76.5% $ 9,455,000 24.0% $ 1.16
New investors..................... 2,500,000 23.5% 30,000,000 76.0% 12.00
------------ ----- ------------- -----
Total......................... 10,659,206 100.0% $ 39,455,000 100.0% 3.70
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- ------------------------
(1) The foregoing tables assume no exercise of the Underwriters' over-allotment
option and no exercise of outstanding options under the 1994 Equity
Incentive Plan and the 1997 Stock Plan. As of September 30, 1997, options to
purchase 731,000 shares were outstanding under the Company's 1994 Equity
Incentive Plan and 1997 Stock Plan with a weighted average exercise price of
$0.47 per share and 569,000 shares were available for issuance under the
1994 Equity Incentive Plan and the 1997 Stock Plan. On December 16, 1997,
the Board of Directors of the Company approved: (i) subject to stockholder
approval, an increase of 1,250,000 shares of Common Stock reserved pursuant
to the 1997 Stock Plan, (ii) option grants to purchase an aggregate of
105,250 shares of Common Stock to employees and directors, (iii) restricted
stock grants in an aggregate amount of 45,000 shares to directors, (iv) the
reservation of 300,000 shares for future issuance under the 1998 Employee
Stock Purchase Plan and (v) the reservation of 150,000 shares for future
issuance under the 1998 Directors' Plan. To the extent that options are
exercised and shares of Common Stock are issued, there will be further
dilution to new investors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Management--Stock Plans" and "Description of Capital Stock."
19
<PAGE>
SELECTED FINANCIAL DATA
The selected balance sheet data as of December 31, 1995 and 1996 and the
selected statement of operations data for the years ended December 31, 1994,
1995 and 1996 have been derived from the financial statements of the Company
audited by Price Waterhouse LLP, independent accountants, which are included
elsewhere in this Prospectus. The statement of operations data for the years
ended December 31, 1992 and 1993, and the balance sheet data at December 31,
1992, 1993 and 1994 have been derived from audited financial statements not
included in this Prospectus. The selected balance sheet data as of September 30,
1997 and the selected statement of operations data for the nine months ended
September 30, 1996 and 1997 have been derived from unaudited financial
statements of the Company included in this Prospectus. The unaudited financial
statements have been prepared by the Company on a basis consistent with the
audited financial statements appearing elsewhere in this Prospectus and, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for fair presentation of such data. The results
of operations for the nine months ended September 30, 1997 are not necessarily
indicative of results to be expected for any future period. The data set forth
below should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Financial Statements and
related Notes thereto included in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues:
Product sales........................... $ 1,256 $ 1,536 $ 3,551 $ 2,236 $ 5,622 $ 3,180 $ 4,233
Development agreements.................. 4,282 2,932 2,659 2,915 3,663 3,538 642
--------- --------- --------- --------- --------- --------- ---------
Total revenues........................ 5,538 4,468 6,210 5,151 9,285 6,718 4,875
--------- --------- --------- --------- --------- --------- ---------
Costs and operating expenses:
Product sales........................... 1,042 971 1,581 1,174 2,755 1,595 2,035
Research and development................ 2,380 1,524 1,810 1,740 2,384 1,816 2,426
Selling, general and administrative..... 2,066 1,576 2,822 1,963 4,062 3,110 1,541
--------- --------- --------- --------- --------- --------- ---------
Total costs and operating expenses.... 5,488 4,071 6,213 4,877 9,201 6,521 6,002
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations............. 50 397 (3) 274 84 197 (1,127)
Interest and other income, net............ 33 12 54 82 176 147 146
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision for income
taxes................................... 83 409 51 356 260 344 (981)
Provision for income taxes................ 27 7 7 4 2 2 12
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)......................... $ 56 $ 402 $ 44 $ 352 $ 258 $ 342 $ (993)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PRO FORMA DATA(2):
Income (loss) before provision (benefit)
for income taxes...................... $ 83 $ 409 $ 51 $ 356 $ 260 $ 344 $ (981)
Pro forma provision (benefit) for income
taxes................................. 33 164 20 142 104 138 (200)
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income (loss)............. $ 50 $ 245 $ 31 $ 214 $ 156 $ 206 $ (781)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Pro forma net income (loss) per
share(3).............................. $ 0.02 $ (0.09)
--------- ---------
--------- ---------
Shares used in computation of pro forma
net income (loss) per share(3)........ 8,631 8,631
--------- ---------
--------- ---------
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Cash and cash equivalents....................... $ 1,595 $ 510 $ 3 $ 1,773 $ 1,166 $ 7,122
Working capital (deficit)....................... 738 175 (27) (4) (295) 6,095
Total assets.................................... 2,152 1,367 1,358 2,483 2,458 7,850
Long-term debt.................................. 44 22 22 32 43 50
Mandatorily redeemable convertible preferred
stock......................................... -- -- -- -- -- 8,989
S corporation accumulated deficit............... -- -- -- -- -- (652)
Retained earnings (accumulated deficit)......... 877 211 9 46 (226) (1,869)
Total stockholders' equity (deficit)............ 916 250 48 85 (187) (2,571)
</TABLE>
- ------------------------
(1) The statement of operations data for the years ended December 31, 1992 and
1993, and the balance sheet data at December 31, 1992 and 1993, reflect the
combined results and financial position of two commonly-controlled companies
which were merged into, and survived by, LJL BioSystems, Inc. on January 1,
1994.
(2) Prior to June 1997, the Company operated under the S corporation provisions
of the Internal Revenue Code and comparable provisions of certain state
income tax laws. The pro forma statement of operations data reflect
provisions (benefit) for income taxes as if the Company had been subject to
federal and state income taxation as a C corporation during each of the
periods presented. See Note 1 of Notes to Financial Statements.
(3) See Note 1 of Notes to Financial Statements for a description of the
computation of pro forma net income (loss) per share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE DISCUSSION BELOW CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT ARE
BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT, AS WELL AS ASSUMPTIONS MADE
BY, AND INFORMATION CURRENTLY AVAILABLE TO, THE COMPANY'S MANAGEMENT. THE
COMPANY'S FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY
FROM THOSE EXPRESSED IN, OR IMPLIED BY, ANY SUCH FORWARD-LOOKING STATEMENTS. SEE
"RISK FACTORS" FOR A DISCUSSION OF FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH MATERIAL DIFFERENCES. THE FOLLOWING PRESENTATION OF MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN
CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO AND OTHER
FINANCIAL INFORMATION INCLUDED THEREIN.
OVERVIEW
From inception in 1988 through 1991, the Company derived its revenues from
the development of clinical diagnostics and research instruments for customers.
Beginning in 1992, the Company began manufacturing and shipping these clinical
diagnostics and research instruments to customers either for their internal use
or for resale on an OEM basis. In the second half of 1996, the Company
implemented a new strategic business model to develop products for the HTS
market. In connection with this change in strategy, the Company shifted its
focus from developing and manufacturing clinical diagnostic and research
products on an OEM basis to developing, manufacturing and marketing its own HTS
products.
As part of its shift in focus, the Company has discontinued its OEM
development activities entirely and has phased out production of all but one of
its OEM products. These OEM products included Luminometer (a microplate reader),
Q2000 (a clinical analyzer) and a microplate heater, all of which were sold to
Chiron Corporation ("Chiron"), and Horizon (a clinical specimen processor) sold
to Ventana Medical Systems, Inc. ("Ventana"). Product sales to Chiron and
Ventana, as well as revenues from development agreements with CombiChem, Inc.
("CombiChem"), accounted for approximately 90% of total revenues for each of the
years ended December 31, 1994, 1995 and 1996 and for the nine months ended
September 30, 1997. Although the Company intends to continue to manufacture the
Horizon through 1998 under its agreement with Ventana, sales of this remaining
OEM product are expected to substantially decline in future periods. In
addition, revenues from development agreements declined significantly during the
nine months ended September 30, 1997, and the Company does not expect to derive
revenues from OEM development activities in the future.
Due to the high costs associated with the development and commercial launch
of ANALYST, the development of a sales and marketing function, the development
and commercialization of assays and reagents and the development of additional
generations of HTS products, the Company expects to continue to incur operating
losses for at least the next several years. The Company's ability to achieve
profitability will depend in part on its ability to successfully develop,
manufacture, market and achieve industry acceptance of ANALYST, and to
successfully develop, manufacture and market reagents and assays. In 1996, the
Company shifted its business strategy to the HTS market, and accordingly LJL is
subject to the risks inherent in both the operation of a new business model and
the entry into a new and uncertain industry. The Company's high-density analyzer
is in the early feasibility and conceptual design stage and will present
significant development and manufacturing challenges and, if developed and
manufactured, may not achieve industry acceptance. Although LJL expects that a
substantial portion of its future revenues will be derived from reagents and
assay sales, the Company has no experience in the development, manufacture or
marketing of reagents and assays. The Company's FLARe technology will require a
significant investment in research and development, and the Company faces the
risks associated with new and uncertain technology in developing, manufacturing
and commercializing any FLARe products. Accordingly, the extent of future losses
and the time required to achieve profitability, if any, is highly uncertain. The
Company's failure to successfully and timely design, develop, manufacture and
commercialize its HTS products would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company's operating results are likely to fluctuate substantially from
period to period, and a change in the product mix among the Company's different
planned product
22
<PAGE>
lines from the Company's current expectations, among other factors, could result
in the failure to meet analysts' expectations regarding revenues or earnings.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
REVENUES. Total revenues decreased by $1.8 million, from $6.7 million for
the nine months ended September 30, 1996 to $4.9 million for the nine months
ended September 30, 1997. Revenues recognized under development agreements
decreased from $3.5 million during the nine months ended September 30, 1996 to
$642,000 for the nine months ended September 30, 1997. This decrease was due to
the Company's decision in 1996 to focus its future efforts on internal
development of a proprietary HTS product platform, the completion of its
existing OEM development agreements, and its decision not to pursue additional
development agreements. Revenues from product sales increased by $1.0 million,
from $3.2 million during the nine months ended September 30, 1996 to $4.2
million for the nine months ended September 30, 1997, due to increased unit
sales of Luminometer and Horizon products. Although the Company intends to
continue to manufacture Horizon through 1998 under its agreement with Ventana,
sales of this remaining OEM product are expected to substantially decline in
future periods. The Company expects that total revenues for the year ended
December 31, 1997 will be significantly less than total revenues for the year
ended December 31, 1996 due to the Company's increasing focus on the HTS market.
In addition, the Company expects this decline in revenues to continue due to the
completion of OEM development projects and the phasing out of OEM products.
COST OF PRODUCT SALES. Cost of product sales increased from $1.6 million
for the nine months ended September 30, 1996 to $2.0 million for the nine months
ended September 30, 1997. This increase was primarily due to increased unit
sales of Luminometer and Horizon products. Gross profit, as a percentage of
product sales, increased from 50% during the nine months ended September 30,
1996 to 52% for the nine months ended September 30, 1997, primarily as a result
of improved absorption of manufacturing overhead resulting from increased
production volume. The Company expects per unit cost of sales will
increase and gross profit will substantially decrease as unit sales continue to
decrease, resulting in decreased absorption of manufacturing overhead. In
addition, cost of product sales of ANALYST is expected to be high for at least
the next year as a result of low absorption of manufacturing overhead resulting
from low production volume.
RESEARCH AND DEVELOPMENT. Research and development expense increased from
$1.8 million for the nine months ended September 30, 1996 to $2.4 million for
the nine months ended September 30, 1997. This increase was primarily due to
costs associated with the development of the Company's HTS product platform,
partially offset by a significantly lower level of research and development
expenses incurred in connection with development agreements for OEM customers.
Costs incurred in connection with such development agreements were $1.5 million
and $165,000 for the nine months ended September 30, 1996 and 1997,
respectively. The Company expects research and development expenditures to
increase significantly in future periods to support the development of its HTS
products.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs decreased from $3.1 million for the nine months ended September 30, 1996
to $1.5 million for the nine months ended September 30, 1997. This decrease was
primarily due to a decrease in the amount of S corporation distributions to the
Company's stockholders as compensation due to the Company's change in tax status
to a C corporation, which was partially offset by an increase in marketing and
sales expense associated with the addition of sales and marketing personnel and
HTS product marketing expenses. The Company expects selling, general and
administrative expenses to increase substantially in future periods due to the
increased marketing and selling resources necessary to promote the Company's HTS
products, as well as additional administrative costs associated with being a
public company.
INTEREST AND OTHER INCOME, NET. Net interest and other income for the nine
months ended September 30, 1996 and 1997 was $147,000 and $146,000,
respectively, and primarily consisted of income earned on invested cash
balances.
23
<PAGE>
YEARS ENDED DECEMBER 31, 1995 AND 1996
REVENUES. Total revenues increased by $4.1 million, from $5.2 million for
the year ended December 31, 1995 to $9.3 million for the year ended December 31,
1996. Of this increase, $3.4 million was attributable to higher product sales,
which increased from $2.2 million during 1995 to $5.6 million for 1996, due to
higher unit sales of Luminometer and, to a lesser extent, from commencement of
shipments of Q2000 and Horizon. Revenues from development agreements increased
from $2.9 million for the year ended December 31, 1995 to $3.7 million for the
year ended December 31, 1996. This increase was primarily attributable to a new
OEM development agreement and the sale of certain manufacturing rights to
Chiron.
COST OF PRODUCT SALES. The Company's cost of product sales increased from
$1.2 million for the year ended December 31, 1995 to $2.8 million for the year
ended December 31, 1996. This increase was primarily attributable to higher unit
sales of Luminometer, Q2000 and Horizon products. Gross profit percentage
increased from 47% in 1995 to 51% in 1996 primarily as a result of improved
absorption of manufacturing overhead resulting from increased production volume.
RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$1.7 million for the year ended December 31, 1995 to $2.4 million for the year
ended December 31, 1996. This increase was due primarily to costs associated
with the Company's HTS research and development program which commenced in the
second half of 1996. Research and development expenses also increased due to
costs associated with the Company's development agreements. Costs incurred in
connection with development agreements were $1.5 million and $1.7 million for
the years ended December 31, 1995 and 1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
costs increased from $2.0 million for the year ended December 31, 1995 to $4.1
million for the year ended December 31, 1996. This increase was primarily due to
an increase in the amount of S corporation distributions to the Company's
stockholders as compensation and additional administrative expenses incurred in
connection with the Company's new strategic business model.
INTEREST AND OTHER INCOME, NET. Net interest and other income increased
from $82,000 for the year ended December 31, 1995 to $176,000 for the year ended
December 31, 1996. This increase was primarily due to a higher level of interest
earned on invested cash balances.
YEARS ENDED DECEMBER 31, 1994 AND 1995
REVENUES. Total revenues decreased by $1.0 million, from $6.2 million for
the year ended December 31, 1994 to $5.2 million for the year ended December 31,
1995. This decrease related primarily to a reduction in product sales, which
decreased from $3.6 million in 1994 to $2.2 million in 1995 due to a decrease in
unit sales of the Luminometer. Revenues from development agreements remained
relatively constant at $2.7 million for the year ended December 31, 1994 and
$2.9 million for the year ended December 31, 1995.
COST OF PRODUCT SALES. Cost of product sales decreased from $1.6 million
for the year ended December 31, 1994 to $1.2 million for the year ended December
31, 1995. This decrease was due primarily to the reduction in costs associated
with lower unit sales of Luminometer. Gross profit percentage decreased from 55%
in 1994 to 47% in 1995, primarily as a result of decreased absorption of
manufacturing overhead due to reduced unit sales.
RESEARCH AND DEVELOPMENT. Research and development expenses remained
relatively constant at $1.8 million for the year ended December 31, 1994
compared to $1.7 million for the year ended December 31, 1995. Costs incurred in
connection with development agreements were $1.6 million and $1.5 million for
the years ended December 31, 1994 and 1995, respectively.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses decreased from $2.8 million for the year ended December 31, 1994 to
$2.0 million for the year ended December 31, 1995.
24
<PAGE>
This decrease was primarily due to a reduction in S corporation distributions to
the Company's stockholders as compensation.
INTEREST AND OTHER INCOME, NET. Net interest and other income increased
from $54,000 for the year ended December 31, 1994 to $82,000 for the year ended
December 31, 1995. This increase was primarily due to an increase in the amount
of late charges collected on past due payments received from the Company's
customers, partially offset by a lower level of interest earned on invested cash
balances.
INCOME TAXES
Prior to June 1997, the Company had been taxed as an S corporation for
federal and state income tax purposes. Under the Internal Revenue Code
provisions regarding S corporations, the Company had not been subject to federal
income taxes but had been subject to state income taxes at a reduced rate. As an
S corporation, the Company's stockholders paid taxes on their share of the
Company's taxable income in their individual tax returns. In June 1997, in
connection with the Preferred Stock financing, the Company became subject to the
C corporation provisions of the Internal Revenue Code pursuant to which the
Company's earnings are taxed for federal and state income tax purposes at the
corporate level. Through June 1997, the Company's profits were distributed to
the Company's stockholders through a combination of compensation, which was
treated as expense in the Statement of Operations, and dividends. Future
distributions are not expected. At September 30, 1997, the Company had a net
operating loss ("NOL") carryforward of $1.4 million for federal income tax
purposes, which expires in 2012. A full valuation allowance has been provided
for the NOL and all other deferred tax assets as management does not consider
their realization more likely than not.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 1997, the Company funded its operations
primarily through cash flows generated from operations, bank loans for equipment
purchases and loans from stockholders. In June 1997, the Company completed a
private placement of Preferred Stock, generating approximately $8.7 million in
cash, net of expenses.
Net cash used in operations totaled $1.4 million during the nine months
ended September 30, 1997 compared to net cash provided by operating activities
of $2.9 million during the comparable 1996 period. The decrease in net cash
provided by operations is primarily due to the Company's net loss during the
nine months ended September 30, 1997 compared to net income earned during the
comparable 1996 period and the Company's reduced emphasis on development
arrangements and OEM manufacturing, which resulted in certain changes in working
capital, including lower customer deposits, partially offset by reduced
inventory balances.
Net cash used in operations during the year ended December 31, 1996 of
$10,000 compares to cash provided by operations of $2.2 million and $304,000 in
1995 and 1994, respectively. Cash provided by operating activities has
historically fluctuated based on the timing of receipt of customer deposits,
working capital changes resulting from varying levels of OEM manufacturing
activities and fluctuations in the Company's net income. The decrease in net
cash provided by operations in 1996 was due primarily to an increase in
inventories and other assets, partially offset by increases in accounts payable
and accrued expenses.
Cash flows used in investing activities for the purchase of property and
equipment prior to 1997 were not significant. The increase in equipment
purchases during the nine months ended September 30, 1997 relates primarily to
the additional equipment needed for the development and manufacture of the
Company's new HTS products.
Net cash used in financing activities for the years ended December 31, 1996,
1995 and 1994 totaled $504,000, $290,000 and $768,000, respectively, and
consisted primarily of the repayment of a note payable in 1994 and distributions
to the Company's stockholders as an S corporation. Net cash provided by
financing activities for the nine months ended September 30, 1997 totaled $7.6
million and consisted of the
25
<PAGE>
net proceeds from the sale of shares of Preferred Stock, partially offset by
dividends paid to stockholders during 1997.
At September 30, 1997, the Company had cash and cash equivalents of $7.1
million and an accumulated deficit of $1.9 million. The Company had three bank
loans, with cumulative outstanding balances of $98,000, bearing interest rates
of approximately 10.5%. Such loans are payable in annual installments of
approximately $30,000. The Company had no material capital commitments as of
September 30, 1997. In connection with the manufacture of ANALYST, during the
fourth quarter of 1997 the Company entered into approximately $400,000 of
non-cancelable purchase orders for material components. The Company may be
required to raise substantial additional capital over a period of several years
in order to develop and commercialize its products. The Company's future capital
requirements will depend on numerous factors, including the costs associated
with developing and commercializing its products, developing a direct marketing
and sales force, maintaining existing, or entering into future licensing and
distribution agreements, protecting intellectual property rights, entering the
reagents and assay kits business, expanding facilities and consummating possible
future acquisitions of technologies, products or businesses. The Company
believes the net proceeds of this offering, combined with cash from operations,
will be sufficient to fund operations for at least the next 18 months. The
Company may consume available resources more rapidly than currently anticipated,
resulting in the need for additional funding. The Company may be required to
raise additional capital through a variety of sources, including the public
equity market, private equity financings, collaborative arrangements, and public
or private debt. There can be no assurance that additional capital will be
available on favorable terms, if at all. If adequate funds are not available,
the Company may be required to significantly reduce or refocus its operations or
to obtain funds through arrangements that may require the Company to relinquish
rights to certain of its products, technologies or potential markets, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. To the extent that additional capital is
raised through the sale of equity, the issuance of such securities would result
in ownership dilution to the Company's existing stockholders.
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BUSINESS
LJL is developing and marketing proprietary technologies and products to
accelerate and enhance the drug discovery process. LJL's proprietary integrated
technology platform is comprised of instrumentation and fluorescence-based and
other assay technologies designed to provide a flexible solution to the current
and evolving HTS requirements of drug discovery laboratories. The drug discovery
process involves several stages including target identification, compound
synthesis, assay development, screening and lead optimization. Target
identification and compound synthesis historically have been the rate-limiting
steps in the drug discovery process. Recent advancements in genomics and
molecular biology as well as combinatorial chemistry have resulted in the
generation of large numbers of targets and compounds. This growth in the number
of targets and compounds has shifted the rate-limiting steps of the drug
discovery process to assay development, screening and lead optimization. To
address these bottlenecks, LJL is developing instrumentation and assays to
provide integrated HTS solutions. LJL believes that its technology platform
addresses the major limitations associated with current HTS systems and will
allow its customers to accelerate the identification and optimization of lead
compounds for development into new medicines.
The Company's first HTS product, ANALYST, is a four-mode analyzer designed
specifically for use in the HTS setting. The Company believes that ANALYST will
provide several important advantages over currently available multi-mode
analyzers, including increased throughput, improved analytical performance and
flexibility, lower reagents costs and the ability to be quickly integrated into
the existing HTS laboratory and to evolve with changing HTS needs. ANALYST is
currently undergoing beta testing at two major pharmaceutical companies and two
biotechnology companies. The Company expects to commence shipments of ANALYST in
the first half of 1998.
PHARMACEUTICAL RESEARCH AND DEVELOPMENT
THE DRUG DISCOVERY PROCESS
The drug discovery process involves the synthesis and testing, or screening,
of compounds against a target. A compound is a molecule that might mediate a
disease by its effect on a target. Targets are biological molecules, such as
enzymes, receptors, other proteins and nucleic acids, that are believed to play
a role in the onset or progression of a disease. The stages of the drug
discovery process include target identification, compound synthesis, assay
development, screening, secondary screening of hits, and lead compound
screening, or optimization.
[CHART]
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Targets are identified based on their anticipated role in the progression or
prevention of a disease. Until recently, scientists using conventional methods
had identified only a few hundred targets, many of which have not been
comprehensively screened. Recent developments in molecular biology and genomics
have led to a dramatic increase in the number of targets available for drug
discovery.
After a target is chosen, the researcher selects a library of compounds to
screen against this target. Compounds have historically been obtained from
natural sources or synthesized one at a time. Compound libraries were compiled
over decades by pharmaceutical companies using conventional synthesis
techniques. Recent technology advancements in combinatorial chemistry and other
chemical synthesis techniques, as well as licensing arrangements, enable
industrial and academic groups to greatly increase the supply and diversity of
compounds available for screening against targets. As a result, many researchers
are gaining access to libraries of hundreds of thousands of compounds in months
rather than years.
Following target and compound library selection, the compounds must be
screened to determine their effect on the target, if any. A compound that has an
effect on the target is defined as a hit. A greater number of compounds screened
against a given target results in a higher statistical probability that a hit
will be identified. Prior to screening targets against a compound, a biological
test or assay must be developed. An assay is a combination of reagents which
measures the effect of a compound on the activity of a target. Assay development
involves screening the assays to optimize performance against the selected
target. Assays are broadly classified as either biochemical or cellular.
Biochemical assays are usually performed with purified molecular targets and
generally have certain advantages, such as speed, convenience, simplicity and
specificity. Cellular assays are performed with living cells, which may
sacrifice speed and simplicity, but may deliver more biologically relevant
information. Scientists use both cellular and biochemical assays in their drug
discovery efforts. Both types of assays use a variety of detection modalities,
including absorbence, radioisotopic, luminescence, and a variety of fluorometric
technologies, such as fluorescence intensity, fluorescence polarization and
time-resolved fluorescence.
Once a compound is identified as a hit, a number of secondary screens are
performed to evaluate its potency and specificity for the intended target. This
cycle of repeated screening continues until a small number of lead compounds is
selected. These lead compounds are optimized by further screening. Optimized
lead compounds with the greatest therapeutic potential may be selected for
clinical evaluation. Due to the recent dramatic increase in the number of
available compounds and targets, a bottleneck has resulted at the screening
stage of the drug discovery process. Historically, screening has been a manual,
time-consuming process. Screening significantly larger numbers of compounds
against an increasing number of targets requires a system that can operate with
a high degree of automation and analytical flexibility.
CURRENT SCREENING SYSTEMS
Current screening systems operate with varying degrees of automation. Full
automation--from sample dispensing to data collection--enables round-the-clock
operation, thereby increasing the screening rate. Fully-automated HTS systems
consist of assay analyzers, liquid handling systems, robotics, a computerized
system for data management, reagents and assay kits and microplates. In the HTS
process, a robot moves a microplate among preparatory stations and then delivers
the microplate to the analyzer, which detects and measures possible bioactivity
of a compound against a target.
Most screening systems utilize off-the-shelf, general purpose assay
analyzers which were originally designed for low throughput use. The Company
believes most screening systems in use today have the following limitations:
LACK OF ANALYTICAL FLEXIBILITY. Most analyzers do not provide analytical
flexibility because they operate in only one type of assay detection mode.
In order to perform assays using different detection modes, researchers
generally must switch single-mode analyzers and reconfigure the HTS line.
Alternatively, researchers may set up the HTS line with multiple single-mode
analyzers which often results in critical space constraints.
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INADEQUATE SENSITIVITY. As researchers continue to use smaller assay
volumes to reduce reagents costs and increase throughput, many analyzers are
inadequate because they are not sensitive enough to read results based on
these smaller volumes. Inadequate sensitivity may result in missed hits,
limited research capabilities, increased costs of compounds, assays and
reagents and lower throughput.
POOR HTS SYSTEM INTEGRATION. Most analyzers have not been designed
specifically for an HTS environment. They are difficult and expensive to
integrate into an HTS line. Even after the analyzer is integrated into the
HTS line, there are often many problems, including increased probability of
system failures, loss of data, time delays and loss of costly compounds and
reagents.
INABILITY TO OPERATE IN DENSER FORMAT. Most analyzers detect assays solely
in the standard 96-well microplate format. However, drug discovery companies
are beginning to move to a denser, 384-well format to reduce costs of
reagents, assays and compounds while increasing throughput. Most existing
analyzers cannot accommodate the need for this denser format.
LIMITATIONS OF CURRENT ASSAYS. Many assays in use today are performed in a
complex, multi-step process and are expensive, time-consuming and difficult
to implement in an HTS setting. In addition, certain assays use
radioisotopes, which result in problematic waste-disposal issues.
Fluorescence-based assays constitute a growing assay format in HTS due to
the relative lack of waste-disposal problems, as well as their sensitivity,
versatility and adaptability to HTS. However, the use of fluorescence-based
assays in HTS has been limited due to the relative insensitivity of
available analyzers. Certain assays are also unsuitable for HTS because of
the low sensitivity of both the assay and analyzer.
The HTS laboratory today must balance the needs for sensitivity and
analytical flexibility. The increasing use of HTS and need for higher throughput
further exposes the limitations of current screening systems. These limitations
result in higher costs, lower throughput and lower productivity.
THE LJL SOLUTION
LJL is developing products specifically designed for both the current and
evolving HTS market. Since 1988, LJL has designed, developed and manufactured
high performance clinical diagnostics analyzers and other automated instruments.
To develop these products, the Company has assembled an integrated team of
scientists and engineers with expertise in fluorescence chemistry, biophysics,
biochemistry, chemical and mechanical engineering, electronics and software.
The Company's first HTS product, ANALYST, is a four-mode analyzer designed
to address many of the current limitations of available multi-mode analyzers.
The Company believes ANALYST will be the only multi-mode analyzer that enables
higher throughput, improved analytical performance and flexibility, lower
compound, assay and reagents costs, allows quick integration into the existing
HTS laboratory and meets evolving HTS needs. ANALYST is currently undergoing
beta testing at two major pharmaceutical companies and two biotechnology
companies. The Company expects to commence shipments of ANALYST in the first
half of 1998.
The Company is also developing high value-added, application-specific
reagents and assay kits, which are being optimized for use in HTS and
specifically for use with ANALYST. The Company believes that customers will
prefer to purchase reagents and instruments from one source for convenience,
ongoing support and accountability.
In addition to ANALYST, the Company is currently developing an analyzer
capable of reading 1,536-well microplates. The Company believes this higher
density format will greatly improve the user's throughput and productivity and
decrease costs. This high-density analyzer will be an evolution of the ANALYST
technology platform. The Company also plans to develop additional assays which
will be optimized to perform in the higher density format and intends to scale
down certain of its first generation assays and reagents for use in this same
format.
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LJL STRATEGY
LJL's objective is to become a leader in the development and
commercialization of advanced technologies and products that accelerate the pace
and improve the productivity of the drug discovery process. To implement this
strategy, the Company intends to:
PROVIDE FIRST-TO-MARKET HTS SOLUTIONS. LJL's technology platform is
comprised of two principal proprietary components: instrumentation and assay
technologies. LJL intends to leverage this technology platform and its
proven expertise in rapid product development and manufacturing of automated
instrumentation systems to be the first to market with effective HTS
solutions.
PURSUE AN EVOLUTIONARY APPROACH TO PRODUCT DEVELOPMENT. The Company
anticipates that the HTS needs of the pharmaceutical industry will continue
to change rapidly over the next three to five years and are difficult to
predict at this time. LJL intends to offer products with features and
capabilities that provide solutions to the current and evolving HTS needs of
drug discovery laboratories. For example, the Company's first HTS analyzer
can perform four major types of optically-detected assays in both the
industry standard 96-well microplate and 384-well microplate formats.
Additionally, the Company is designing a high-density analyzer to read
1,536-well microplates.
EXTEND INSTRUMENTATION AND ASSAY PRODUCTS INTO OTHER STAGES OF THE DRUG
DISCOVERY PROCESS. LJL believes that its screening products are well-suited
for primary and secondary screening and other closely-related stages of the
drug discovery process such as assay development and lead optimization,
which require repetitive screening. The Company believes that users will
benefit from using the same, high performance screening products.
GENERATE RECURRING REVENUE THROUGH THE SALE OF REAGENTS, ASSAY KITS AND
CONSUMABLES. LJL believes that establishing an installed base of HTS
analyzers will enable the Company to generate recurring revenue from the
sale of reagents, assay kits and consumables. These products will be high
value-added, application-specific tools that are optimized for use in HTS
and specifically with the Company's analyzers. The Company believes that
customers will prefer to purchase reagents and instruments from one source
for convenience, ongoing support and accountability.
DEVELOP AND ACQUIRE NOVEL SCREENING TECHNOLOGIES. LJL recently licensed
FLARe, a platform of patented bioassay technologies, which it believes will
address a number of the current limitations associated with
fluorescence-based HTS assays. LJL is also developing internally certain
reagent technologies and intends to license or acquire additional screening
technologies to establish and maintain a market advantage for its products.
PROVIDE EARLY ACCESS TO STRATEGIC CUSTOMERS. LJL intends to provide
strategic customers with early access to certain of its technologies which
will provide insight into next generation product requirements and
technology needs. The Company believes this insight will allow the Company
to provide products that more closely meet the needs of its customers.
PRODUCTS UNDER DEVELOPMENT
The Company's first HTS products under development are ANALYST and
consumables, including high value-added, application-specific reagents and assay
kits. ANALYST is currently undergoing beta testing at two major pharmaceutical
companies and two biotechnology companies. The Company expects to commence
shipments of ANALYST in the first half of 1998, and the first accompanying
reagents and assay kits are expected to be introduced in 1998.
ANALYST
ANALYST is a four-mode analyzer designed specifically for use in the HTS
setting. ANALYST can read luminescence assays and the three major types of
fluorescence-based assays, fluorescence intensity, fluorescence polarization
("FP") and time resolved fluorescence assays. ANALYST allows users to perform
both cellular and biochemical assays in all four detection formats. To operate
ANALYST, the user specifies the detection mode and other parameters through
either a local host computer running LJL's graphical
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<PAGE>
interface software or an external system controller. A 96-well or 384-well
microplate is placed in the microplate gripper by a user or robot and is
automatically aligned with the optical detection component, SmartOptics.
Depending on the type of assay detection mode selected by the user,
SmartOptics' system of optical switches, lenses and fiber optic cables focuses
the excitation light source (either a high intensity, constant light in the case
of fluorescence intensity and FP assays or a flashing light in the case of
time-resolved fluorescence assays) into either the middle or bottom of the fluid
in the microwell. This focusing flexibility enables the user to optimize assay
performance for a variety of assays regardless of the location of the optimal
focal area. For example, the optimal focal area for the excitation source in FP
assays is in the middle of the well, whereas the optimal focal area for cellular
assays is the bottom of the well. In addition, this focusing precision allows
these assays to be read at lower reagent concentrations. The Company believes
that certain assays that have previously not been able to be performed because
of existing analyzers' relative insensitivity will now be able to be used with
ANALYST. In addition, because of this increased sensitivity, certain assays can
be read faster, which increases throughput for this assay class. The light
emitted from the well is fed into a photo-multiplier tube where the intensity of
the light is quantitatively measured. The light emitted in a luminescence assay
is generated by a chemical reaction within the well and not in response to an
excitation light source as is the case for fluorescence-based assays. To
optimize performance in each of these detection modes, ANALYST has two
photo-multiplier tubes, one for luminescence assays and one for
fluorescence-based assays, and automatically directs the emitted light to the
proper unit depending on the assay selected. The light strikes the photocathode
within the photo-multiplier tube, generating the signal that is recorded by the
computer. This data can then be directed to the user's data management system
for further analysis.
Several additional features of ANALYST make it particularly suitable for
integration into the current HTS setting and allow it to operate with minimal
human intervention. ANALYST has a comprehensive self-diagnostic system that
monitors the intensity of the excitation light source and helps prevent the loss
of data and compounds. ANALYST has two serial ports, one to communicate between
ANALYST and the robot controller and the other to upload information to the data
management system. The separation of these two functions may reduce the
incidence of data corruption. An additional communications port allows the user
to employ third party software to either alert the user or shut down the system
in the case of a system failure. The control panel can be attached to either
side of the instrument, providing integration flexibility. ANALYST also accepts
microplates in their short dimension, which accommodates light-duty robot arms
and eliminates the need for a plate turntable. Finally, ANALYST is compatible
with most currently-available microplates, reagents and liquid handling systems.
The Company believes ANALYST will be the only multi-mode analyzer that
enables higher throughput, improved analytical performance and flexibility,
lower compound, assay and reagents costs, allows quick integration into the
existing HTS laboratory and meets evolving HTS needs. Analytical flexibility is
substantially improved based on the four-mode detection capability. The Company
believes that the ability to program precise instrument parameters enables
assays to be performed on ANALYST with improved sensitivity. Throughput is
expected to be increased because the programmable four-mode detection capability
saves the time normally lost in manual reconfiguration when switching between
assay modes in other multi-mode systems. In addition, the ability to run screens
in both the 96- and 384-well format with no loss of sensitivity will enable the
user to increase productivity.
There can be no assurance that the Company will successfully manufacture or
market ANALYST or that ANALYST will achieve market acceptance. The failure to
successfully commercialize ANALYST would have a material, adverse effect on the
Company's business, financial condition or results of operations.
REAGENTS AND ASSAYS
In 1998, the Company intends to offer high value-added, application-specific
reagents and assay kits that are optimized for use in HTS and specifically for
use with ANALYST. The Company intends to initially develop reagents and assay
kits in a single-step format. LJL believes that a single-step assay format is
better suited to the HTS environment because it is faster, less expensive and
easier to automate than multi-
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step assays. The Company believes that its reagents and assay kits will provide
two major benefits to its customers. First, overall assay performance is
expected to be improved because these consumables are being optimized for use
with ANALYST. Second, the Company believes that customers will prefer to
purchase reagents and instruments from one source for convenience, ongoing
support and accountability.
The use of fluorescence-based assays in HTS is increasing due to their
sensitivity, versatility, adaptability, safety and lack of waste-disposal
problems associated with radioisotopic assays. Among fluorescence-based assays,
FP assays are especially well-suited for HTS because they can be used in a
single-step format and are relatively insensitive to concentration and volume
variations. However, the use of FP assays in HTS has previously been limited
because of the relative insensitivity of available analyzers.
The Company believes the increased sensitivity and precision of ANALYST in
the FP format will improve the performance of FP assays. LJL is currently
developing a new, long-lifetime FP reagent based on its proprietary FLARe assay
technology. Currently available FP reagents have short lifetimes and cannot be
used in screening certain targets. The Company believes that its long-lifetime
FP reagent will expand the class of available targets for certain major
diseases, including cardiovascular and immunodeficiency diseases, that can be
screened in a single-step, FP format.
The Company intends to enter into collaborative relationships for the
development of additional reagents, although, to date, no agreements have been
reached. There can be no assurance that LJL will successfully develop its own
reagents and assay kits, that any LJL reagents and assay kits, if developed,
will achieve market acceptance or result in significant Company revenues, or
that the Company will enter into any agreements for rights to additional
reagents or assay technology, the failure of any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
HIGH-DENSITY, ULTRA HIGH THROUGHPUT SCREENING PLATFORM
The Company is developing products designed to operate in a high-density,
ultra high throughput screening system. These products include a 1,536-well
format analyzer, reagents, assay kits and proprietary 1,536-well microplates.
The high-density analyzer will be an evolution of the ANALYST technology
platform, and is being designed to read 1,536 wells arrayed in the same space as
a 96-well microplate. The Company believes this high-density format will
increase throughput significantly over that of currently available systems. In
addition, the high-density analyzer is being designed to perform screens using
significantly reduced assay volumes, thus reducing the costs of reagents, assays
and compounds. LJL is developing 1,536-well microplates to operate with its
high-density analyzer. The Company believes that HTS system performance will be
optimized with the use of these proprietary plates in conjunction with LJL's
high-density analyzer due to the lower error tolerance between system components
in this miniaturized format. In addition, the Company's high-density HTS
analyzer is being designed to operate with third party 1,536-well microplates,
reagents and liquid handling systems. The Company also plans to bring to market
additional reagents and assay kits and intends to miniaturize certain of its
first generation reagents and assays for use in the high-density format.
FLARE TECHNOLOGY
The Company has licensed FLARe, a platform of patented, fluorescence-based
bioassay technologies for use in commercial pharmaceutical and biopharmaceutical
research and development. Fluorescence-based assay technologies are well-suited
to HTS because they are sensitive, versatile, easy to automate and safer than
radioisotopic assays. However, use of fluorescence-based HTS assays has been
limited due to the high level of background noise in the fluorescence signal
within the assay, which obscures the assay-specific signal and results in loss
of sensitivity and reduced accuracy. LJL believes its FLARe technology may
significantly improve the sensitivity, precision and speed of these assays.
The FLARe platform is based on two technologies: a method of assay detection
based on an extension of fluorescence lifetime detection, called
phase/modulation, and long-lifetime fluorescent reagents. Phase/ modulation is a
method of measuring the time required for a molecule to absorb and then emit
light ("fluorescence lifetime"). Fluorescence lifetime assays performed using
phase/modulation detection have a
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higher signal-to-noise ratio than traditional fluorescence assays based on
measurement of intensity. Small changes in phase/modulation can be accurately
measured, resulting in an assay format that is both accurate and sensitive,
including high-density, low volume HTS formats. In addition, fluctuations in
assay volume do not affect the quality of the assay signal, which is also
important in a high-density format, where precision of fluid handling is
extremely difficult.
Many targets, compounds and microplates have transient fluorescent
properties that obscure the assay-specific signal generated by currently
available short lifetime fluorescent reagents. However, using LJL's
phase/modulation assay detection technology, the transient background signal, or
noise, of the well environment can be electronically subtracted from the
assay-specific signal of the long-lifetime fluorescent reagent, resulting in a
high signal-to-noise ratio.
The Company believes FLARe technology can be used in a single-step assay
format against most major classes of human drug targets, including receptors,
ion channels, cell regulatory pathways, gene regulatory elements and enzymes.
Cellular and sub-cellular events such as ligand-receptor binding, ion flux, and
protein-protein interaction all produce changes in the physical
micro-environment that can be measured by changes in the lifetime of the FLARe
fluorescent lifetime reagents.
The following chart summarizes several of the key assay modalities of FLARe,
with examples of classes of targets and therapeutic areas to which the Company
believes they may be applicable:
<TABLE>
<CAPTION>
ASSAY TECHNOLOGY POTENTIAL TARGET CLASSES POTENTIAL THERAPEUTIC AREA
- -------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Long-Lifetime Fluorescence Protein-Protein Interactions Cancer, neurological disorders,
Polarization - cell surface receptors cardiovascular diseases,
(biochemical and cell-based - intracellular signaling inflammatory disorders,
assays) - cell-cycle control gene endocrine diseases
regulation
Phase Resolved Fluorescence Ion Channels Cancer, neurological disorders,
Lifetime Intracellular Ion Flux cardiovascular diseases,
(biochemical and cell-based Cell Surface Receptors inflammatory disorders,
assays) endocrine diseases, and
gastrointestinal diseases
Kinase Reporters Protein Kinases Cancer, autoimmune diseases
(biochemical assays)
Protease Reporters Proteases Cardiovascular disease, AIDS,
(biochemical assays) neurodegenerative diseases
</TABLE>
CLINICAL DIAGNOSTICS PRODUCTS
Since 1988, the Company has successfully designed and manufactured several
products for clinical diagnosis, including Luminometer, Q2000, and Horizon, all
of which were or are marketed and sold through third parties. The Company's
products are used primarily in clinical and research laboratories, which require
highly automated systems to perform large numbers of assays reliably 24 hours a
day with minimal human intervention. The Company has employed a proprietary,
modular, object-oriented design approach in which previously developed and
proven modules are adapted to new systems. LJL believes this design and
manufacturing approach has enabled the Company to rapidly develop and
manufacture new products, and the Company intends to continue to employ this
design and manufacturing method in the development of its HTS instruments.
Luminometer is a highly sensitive blood analyzer used to detect and monitor
the presence of HIV and hepatitis viruses, which the Company developed for
Chiron's DNA-based diagnostics needs. Since 1992, the Company has manufactured
and shipped more than 700 Luminometers to laboratories worldwide. The Company
also developed for Chiron Q2000, which is a second generation, highly automated
analyzer used for HIV and hepatitis detection and monitoring. The Company sold
the manufacturing rights to Q2000 to Chiron, and has phased out production of
both Q2000 and Luminometer.
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In 1996, the Company completed development of Horizon, a clinical specimen
processor used in cancer diagnostics for Ventana. More than 150 units of Horizon
have been manufactured and shipped worldwide. Although the Company intends to
continue to manufacture Horizon under its agreement with Ventana in 1998,
revenues from OEM product sales are expected to substantially decline in future
periods.
SALES AND MARKETING
The Company intends to sell its HTS products worldwide through a direct
sales force in North America and distributors outside North America. LJL
believes that approximately 50 large pharmaceutical companies operate a
substantial portion of pharmaceutical research and development laboratories. As
a result, the Company believes a relatively small direct sales force can
effectively penetrate this market. The Company currently has a direct sales team
of four professionals and plans to hire additional sales personnel. Because the
Company's products are technically-sophisticated and customers are Ph.D.-level
researchers, the sales force consists of scientifically-qualified personnel to
address the technical sophistication of the Company's products and customers.
Sales support is provided by an in-house applications team. The Company is in
the process of identifying European and Pacific Rim distributors that are
currently selling products into the pharmaceutical R&D market.
The Company is marketing ANALYST and intends to market associated reagents
and assay kits under the trademark name of CRITERION. The Company's high-density
HTS products are expected to include an analyzer, reagents, assay kits and
proprietary 1,536-well microplates. The Company intends to sell reagents
primarily to laboratories that perform relatively large numbers of assays, and
intends to sell assay kits, which will include a combination of reagents and
detailed instructions on protocol and use, to laboratories where convenience and
ease of use are expected to be more important than volume purchase of reagents.
The Company will face the risks associated with a highly concentrated
customer base when and if it begins to sell its HTS products. Thus, any
unfavorable development regarding a customer, including but not limited to such
customer negotiating price discounts or unfavorable terms to LJL on its
products, or encountering substantial financial difficulties or decreasing its
capital spending, could have a material adverse effect on the Company's
business, financial condition and results of operations.
MANUFACTURING
The Company has employed a proprietary, modular, object-oriented design
methodology to develop and manufacture a number of successful analytical systems
for clinical diagnosis. LJL's clinical diagnostics and research products are
manufactured at the Company's facilities in Sunnyvale, California. LJL is an
FDA-registered medical device manufacturer operating under GMP regulations and
is certified under ISO 9001. Certain of LJL's clinical diagnostics products have
the CE mark for European distribution. LJL has built its clinical diagnostics
products with an average mean-time-between-failure rate of over 25,000 hours,
demonstrating reliability that the Company believes is significantly higher than
that of similar clinical diagnostics products. LJL has established a track
record of on-time shipment to its customers. The Company has long-standing
relationships with many local suppliers, who both manufacture custom components
and supply off-the-shelf components.
The Company intends to use essentially the same manufacturing process for
ANALYST as it has for its OEM clinical diagnostics products. This manufacturing
process consists of purchasing custom and other components from third parties
and performing sub-assembly, final assembly, and quality assurance functions
in-house. ANALYST will be manufactured in LJL's existing manufacturing facility.
The Company believes that its manufacturing infrastructure for ANALYST is
sufficient for at least the next few years.
The Company's initial strategy with regard to manufacturing reagents is to
outsource the manufacture of assay kits to LJL's specifications. The Company may
begin manufacturing reagents internally if it is determined to be
cost-effective. In addition, the Company intends to expand its relationships
with vendors of plastic disposables and to have them manufacture its 1,536-well
HTS microplates according to LJL specifications.
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The Company's success will depend in part on the expansion of its operations
and the effective management of these expanded operations. Manufacturers often
encounter difficulties in scaling up production of new products, including
problems involving quality control and assurance, component supply and shortages
of qualified personnel. Difficulties encountered by the Company in manufacturing
scale-up could have a material adverse effect on its business, financial
condition and results of operations.
COMPETITION
The market for HTS instrumentation is expected to become highly competitive.
The Company anticipates that competition will increase significantly as more
biotechnology and pharmaceutical companies adopt HTS instruments as a drug
discovery tool and as new companies enter the market with advanced technologies.
The Company will compete in many areas, including high throughput screening
instruments, assay development and reagent sales. The Company competes with
companies which directly market high throughput products. In addition,
pharmaceutical and biotechnology companies, academic institutions, governmental
agencies and other research organizations are conducting research and developing
products in various areas which compete with the Company's technology platform,
either on their own or in collaboration with others. The Company's potential
customers may assemble high throughput screening systems by purchasing
components from competitors. Further, certain companies offer screening services
on a contract or collaborative basis, and these services could eliminate the
need for a potential customer to purchase the Company's products. The Company's
technological approaches may be rendered obsolete or uneconomical by advances in
existing technological approaches or the development of different approaches by
one or more of the Company's current or future competitors. Many of these
competitors have greater financial and personnel resources, and more experience
in research and development, than the Company.
INTELLECTUAL PROPERTY RISKS
The Company's success will depend in part on its ability to obtain patents,
maintain trade secret protection and operate without infringing the proprietary
rights of others. The Company has two U.S. patents. The Company has filed four
U.S. patent applications and four provisional patent applications, all of which
are currently pending. To supplement its proprietary technology, the Company has
licensed ten patents from FluorRx pursuant to a June 1997 agreement. Under this
license, the Company obtained certain worldwide rights relating to FluorRx's
FLARe technology. Certain of these rights have been licensed on an exclusive
basis. Certain other rights have been licensed on a non-exclusive basis, and
therefore could be or are licensed to third parties. In accordance with such
agreement, the Company pays one-time fees as well as royalties based on sales of
its products that incorporate this technology. The license may be terminated in
the event of a material breach by the Company. Furthermore, FluorRx may elect to
convert the exclusive rights into non-exclusive rights in the event the Company
fails to make certain minimum royalty payments. If the license were terminated
by FluorRx due to a material breach of the license by the Company, the Company
would lose the right to incorporate FLARe technology into its HTS products. In
such event, the Company would be required to exclude FLARe technology from the
Company's existing and future products and either license or develop internally
alternative technologies. There can be no assurance that the Company would be
able to license alternative technologies on commercially reasonable terms, or at
all, or that the Company would be capable of developing internally such
technologies. Furthermore, there can be no assurance that other companies may
not independently develop technology with functionality similar or superior to
the FLARe technology that does not or is claimed not to infringe the FLARe
patents, or that otherwise circumvents the technology licensed to the Company.
The Company is aware of third party patents that contain issued claims that
may cover certain aspects of the Company's reagent technologies. There can be no
assurance that the Company would not be required to license any such patents to
produce certain reagents, assay kits and related products or that such licenses
would be available on commercially reasonable terms, if at all. Any action
against the Company claiming damages and seeking to enjoin commercial activities
relating to the affected technologies could subject the Company to potential
liability for damages. The Company could incur substantial
35
<PAGE>
costs in defending patent infringement claims, obtaining patent licenses,
engaging in interference and opposition proceedings or other challenges to its
patent rights or intellectual property rights made by third parties, or in
bringing such proceedings or enforcing any patent rights against third parties.
The Company's inability to obtain necessary licenses or its involvement in
proceedings concerning patent rights could have a material adverse effect on the
business, financial condition and results of operations of the Company.
The patent positions of bioanalytical product companies, including the
Company, are uncertain and involve complex legal and factual questions. In
addition, the coverage claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, there can be no assurance
that the patent applications of the Company or its licensor will result in
patents being issued or that any issued patents will provide protection against
competitive technologies or will be held valid if challenged or circumvented.
Others may independently develop products similar to those of the Company or
design around or otherwise circumvent patents issued to the Company. In the
event that any relevant claims of third-party patents are upheld as valid and
enforceable, the Company could be prevented from practicing the subject matter
claimed in such patents, or would be required to obtain licenses from the patent
owners of each of such patents or to redesign its products or processes to avoid
infringement. There can be no assurance that such licenses would be available
or, if available, would be on terms acceptable to the Company or that the
Company would be successful in any attempt to redesign its products or processes
to avoid infringement. If the Company does not obtain necessary licenses, it
could be subject to litigation and encounter delays in product introductions
while it attempts to design around such patents. Alternatively, the development,
manufacture or sale of such products could be prevented. Litigation would result
in significant cost to the Company as well as diversion of management time.
Adverse determinations in any such proceedings could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company also relies on trade secret and copyright law, and employee and
third-party nondisclosure agreements to protect its intellectual property rights
in its products and technology. There can be no assurance that these agreements
and measures will provide meaningful protection of the Company's trade secrets,
copyrights, know-how, or other proprietary information in the event of any
unauthorized use, misappropriation or disclosure or that others will not
independently develop substantially equivalent proprietary technologies.
Litigation to protect the Company's trade secrets or copyrights would result in
significant cost to the Company as well as diversion of management time. Adverse
determinations in any such proceedings or unauthorized disclosure of the
Company's trade secrets could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the laws
of certain foreign countries do not protect the Company's intellectual property
rights to the same extent as do the laws of the United States. There can be no
assurance that the Company will be able to protect its intellectual property in
these markets. See "Business--Intellectual Property," and "--Products Under
Development--FLARe Technology."
GOVERNMENT REGULATION
The Company's clinical diagnostics products, including Luminometer, Q2000
and Horizon, are subject to FDA regulation as medical devices, as well as
similar foreign regulation. The process of obtaining and maintaining required
regulatory clearances and approvals and otherwise remaining in regulatory
compliance in the United States and certain other countries is lengthy,
expensive and uncertain. Although the Company has phased out production of
Luminometer and Q2000, the Company will continue to manufacture Horizon on an
OEM basis. Horizon is used in research and clinical laboratories to perform IVD
tests, which are exempt from IDE requirements, including the need to obtain the
FDA's prior approval, provided that, among other things, the testing is
noninvasive, the product is not used as a diagnostic procedure without
confirmation by another medically established test or procedure, and
distribution controls are established to assure that IVDs distributed for
research are used only for those purposes. To the Company's knowledge, its OEM
customers have met these conditions. There can be no assurance that the FDA
would agree that the OEM customers' distribution of the Company's clinical
diagnostic products meet and have met the requirements for IDE exemption.
Failure by the Company, its OEM customers or
36
<PAGE>
the recipients of the Company's clinical diagnostic products to comply with the
IDE exemption requirements could result in enforcement action by the FDA, which
could adversely affect the Company's or its OEM customers' ability to gain
marketing clearance or approval of these products or could result in the recall
of previously distributed products.
Applicable law requires that LJL comply with the FDA's current GMP
regulations for the manufacture of its clinical diagnostics products. The FDA
monitors compliance with its GMP regulations by subjecting medical product
manufacturers to periodic FDA inspections of their manufacturing facilities. The
FDA has recently revised the GMP regulations. The new Quality System Regulation
imposes design controls and makes other significant changes in the requirements
applicable to manufacturers. LJL is also subject to other regulatory
requirements, and may need to submit reports to the FDA including adverse event
reporting. Failure to comply with GMP regulations or other applicable legal
requirements can lead to, among other things, warning letters, seizure of
violative products, suspension of manufacturing, government injunctions and
potential civil or criminal liability on the part of the Company and the
responsible officers and employees. In addition, the government may halt or
restrict continued sale of such instruments. Any such actions could have a
material, adverse effect on the business, financial condition and results of
operations of the Company.
In order to export its clinical diagnostics instruments, the Company
maintains ISO 9001 certification and applies the CE mark to certain products
that are exported, which subjects LJL's operations to periodic surveillance
audits. There can be no assurance that the Company's operations will be found to
comply with GMP regulations, ISO standards or other applicable legal
requirements or that the Company will not be required to incur substantial costs
to maintain its compliance with existing or future manufacturing regulations,
standards or other requirements. Any such noncompliance or increased cost of
compliance could have a material adverse effect on the Company's business,
results of operations and financial condition.
LJL also is subject to numerous federal, state and local laws relating to
safe working conditions, manufacturing practices, environmental protection,
storage, use and disposal of hazardous or potentially hazardous substances. Any
material failure to comply with such laws could require the Company to incur
significant costs and would have a material, adverse effect upon the Company's
ability to do business. Changes in existing requirements or adoption of new
requirements or policies relating to government regulations could materially and
adversely affect the ability of LJL to comply with such requirements.
EMPLOYEES
As of November 30, 1997, the Company had 48 employees, of which 11 are
employed in manufacturing, 24 in research and development, and 13 in marketing,
sales and administration. Nine employees hold Ph.D. degrees, and 13 additional
employees hold M.S. degrees. The Company's future success depends upon the
continued service of its key scientific, technical and senior management
personnel and its continuing ability to attract and retain highly qualified
technical and managerial personnel. None of the Company's employees is
represented by a labor union or covered by a collective bargaining agreement.
The Company considers its relations with its employees to be satisfactory.
FACILITIES
The Company's headquarters are located in Sunnyvale, California, and are
comprised of approximately 14,000 square feet of office, research and
development and manufacturing space. The Company's lease of these premises
expires January 31, 2000 and is renewable for an additional term of five years
under certain conditions. As the Company hires additional administrative and
marketing personnel, the Company plans either to lease additional space or to
move its headquarters within the next 24 months in order to support its
projected growth. The Company expects that additional space will be available on
commercially reasonable terms.
37
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
November 30, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
Lev J. Leytes........................................ 42 President, Chief Executive Officer and Chairman of
the Board of Directors
Galina Leytes........................................ 43 Executive Vice President and Director
Anthony H. Bautista.................................. 42 Vice President of Manufacturing Operations
Robert T. Beggs...................................... 49 Vice President of Finance and Administration
William G. Burton, Ph.D.............................. 57 Vice President, Chief Technology Officer
Douglas N. Modlin, Ph.D.............................. 44 Vice President of Instrumentation Systems Research
and Development
DIRECTORS
George W. Dunbar, Jr.(1)............................. 51 Director
Michael F. Bigham(2)................................. 40 Director
John G. Freund, M.D.(2).............................. 44 Director
Daniel S. Janney(1).................................. 32 Director
</TABLE>
- ------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
LEV J. LEYTES is a co-founder of the Company and has been its President,
Chief Executive Officer and Chairman of the Board of Directors since inception.
Prior to founding LJL, Mr. Leytes worked in various technical and management
positions at Beckman Instruments, Inc., a life sciences company, and Molecular
Devices Corporation, a bioanalytical instrumentation company. Mr. Leytes holds
an M.S. in engineering from the Moscow Engineering Institute. Mr. Leytes is the
spouse of Galina Leytes.
GALINA LEYTES is a co-founder of the Company and has been Vice President and
a director since inception, and was promoted to Executive Vice President in
January 1996. Ms. Leytes previously served as the Company's Chief Financial
Officer and Secretary from inception to December 1997. Prior to founding LJL,
Ms. Leytes managed the information systems group at Stanford University, was a
consultant in management information systems, and was a senior programmer at
Charles Schwab & Co., Inc. She holds an M.S. in engineering from the Kiev
Engineering Institute. Ms. Leytes is the spouse of Lev J. Leytes.
ANTHONY H. BAUTISTA joined the Company in November 1991 as Manufacturing
Operations Manager, and was promoted to Director of Manufacturing Operations in
December 1993 and Vice President of Manufacturing Operations in May 1996. Prior
to joining LJL, Mr. Bautista held various management positions in the
manufacturing divisions of Molecular Devices Corporation, a bioanalytical
instrumentation company, and Hewlett-Packard Company, a computer and electronics
company. Mr. Bautista holds an A.A. in electronic technology from the College of
San Mateo and a B.S. in electrical engineering from San Jose State University.
ROBERT T. BEGGS joined the Company in November 1992 as Controller, and was
promoted to Director of Finance and Administration in December 1994 and Vice
President of Finance and Administration in May 1996. Prior to joining LJL, Mr.
Beggs was the Controller of Sequoia-Turner Corporation, a medical instruments
company, acquired in 1991 by Abbott Laboratories, a pharmaceutical and
diagnostics company. Mr. Beggs held several financial management positions at
G.D. Searle & Co., a pharmaceutical company and a wholly-owned subsidiary of
Monsanto Company, and Siemens AG, a diversified electronics
38
<PAGE>
company. Mr. Beggs holds a B.S. in business administration from Nichols College
and an M.B.A. from the University of Massachusetts, Amherst.
WILLIAM G. BURTON, PH.D. joined the Company in March 1996 as Director of
Technology and Business Development, and was promoted to Vice President of
Technology and Business Development in January 1997 and Chief Technology Officer
in August 1997. Dr. Burton was Program Manager, Strategic Market Development for
the BioScience Products Division of Hewlett-Packard Company from September 1994
until March 1996. From January 1993 to September 1994, Dr. Burton was a business
consultant to various biotechnology and pharmaceutical companies. From June 1989
to January 1993, he was a Managing Director of TS/BioDevices, Inc., a
biotechnology systems development company and was responsible for operations and
business development. Previously, Dr. Burton held senior management positions in
biotechnology and health care-related research, product development, marketing
and strategic planning and analysis. He holds a B.S. in biology from California
State University, Long Beach, and an M.S. and Ph.D. in biochemistry from the
University of California at Los Angeles.
DOUGLAS N. MODLIN, PH.D. joined the Company in December 1996 as Senior
Director of Research and Development, and was promoted to Vice President of
Instrumentation Systems Research and Development in October 1997. Prior to
joining the Company, Dr. Modlin was the Manager of Advanced Test Systems
Development at Micro Module Systems, Inc., an electronic integration company,
from November 1995 to December 1996, and was the Associate Technical Director of
Research at Molecular Devices Corporation, a bioanalytical instrumentation
company, from August 1993 to October 1995. From November 1991 to August 1993, he
was the Program Manager of Diagnostic Instrumentation for Affymax NV, a drug
discovery company. Dr. Modlin holds a B.S. in electrical engineering from the
California Polytechnic State University, San Luis Obispo, and an M.S. and Ph.D.
in electrical engineering from Stanford University.
GEORGE W. DUNBAR, JR. has been a director of the Company since February
1995. Mr. Dunbar has been the President, Chief Executive Officer and a director
of Metra Biosystems, Inc., a medical device company specializing in products for
the detection and management of metabolic bone and joint diseases, since July
1991. He is also a member of the Board of Directors of DepoTech Corporation, a
drug delivery company, and Sonus Pharmaceuticals, Inc., a medical diagnostic
ultrasound company. Mr. Dunbar holds a B.S. in electrical engineering and an
M.B.A. from Auburn University.
MICHAEL F. BIGHAM has been a director of the Company since June 1997. Mr.
Bigham has been the President, Chief Executive Officer and a director of Coulter
Pharmaceutical, Inc., a drug development company ("Coulter"), since July 1996.
Prior to joining Coulter, Mr. Bigham served as Executive Vice President of
Operations from April 1994 to June 1996, Chief Financial Officer from April 1989
to June 1996, and Vice President of Corporate Development from July 1988 to
March 1992 at Gilead Sciences, Inc., a biotechnology company. Previously, Mr.
Bigham was Co-head of Healthcare Investment Banking for Hambrecht & Quist LLC,
an investment banking firm. Mr. Bigham is also a member of the Board of
Directors of Datron Systems, Inc., an electronics company, and several
privately-held companies. Mr. Bigham received a B.S. degree in commerce with
distinction from the University of Virginia and an M.B.A. from the Stanford
University Graduate School of Business.
JOHN G. FREUND, M.D. has been a director of the Company since June 1997. Dr.
Freund has been Managing Director of the General Partner of Skyline Venture
Partners, L.P., a venture capital firm, since October 1997. He served as
Managing Director in the Alternative Assets Group of Chancellor Capital
Management, Inc. (now Chancellor LGT Asset Management, Inc.), from August 1995
to September 1997. In 1995, Dr. Freund co-founded Intuitive Surgical Devices,
Inc., a privately-held medical device company. From July 1988 through December
1994, Dr. Freund was employed at Acuson Corporation, a medical equipment
company, where he was Vice President-Corporate Development and later Executive
Vice President. Previously, he was a partner in Morgan Stanley Venture Partners,
a venture capital firm, and also co-founded the healthcare group in the
corporate finance department of Morgan Stanley & Co., Inc. Dr. Freund holds a
B.A. from Harvard College, an M.D. from Harvard Medical School and an M.B.A.
39
<PAGE>
from Harvard Business School, where he was a Baker Scholar and won what is now
called the John L. Loeb Fellowship for excellence in finance.
DANIEL S. JANNEY has been a director of the Company since June 1997. Mr.
Janney is a partner of Alta Partners, a venture capital company, which he joined
in April 1996. Prior to joining Alta Partners, Mr. Janney served as a Vice
President in the health care investment banking group of Montgomery Securities
(now NationsBanc Montgomery Securities LLC) from January 1994 to April 1996 and
as an Associate at Montgomery Securities from March 1993 to December 1993. From
June 1990 to February 1993, Mr. Janney was an Associate at Bankers Trust Company
in the leveraged buyout/private equity group. Mr. Janney holds a B.A. from
Georgetown University and an M.B.A. from the Anderson School at the University
of California, Los Angeles.
BOARD COMPOSITION
The Company currently has authorized seven directors. In accordance with the
terms of the Company's Restated Certificate, effective upon the closing of this
offering, the terms of office of the directors will be divided into two classes:
Class I, whose term will expire at the annual meeting of stockholders to be held
in 1999 and Class II, whose term will expire at the annual meeting of
stockholders to be held in 2000. The Class I directors are Galina Leytes, George
W. Dunbar, Jr. and Daniel S. Janney, and the Class II directors are Lev J.
Leytes, Michael F. Bigham and John G. Freund, M.D. and a vacancy to be filled by
the Board of Directors. At each annual meeting of stockholders after the initial
classification or special meeting in lieu thereof, the successors to directors
whose terms will then expire will be elected to serve from the time of election
and qualification until the second annual meeting following election. In
addition, the Company's Restated Certificate provides that the authorized number
of directors may be changed only by resolution of the Board of Directors. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the two classes so that, as nearly as possible, each
class will consist of one-half of the directors. This classification of the
Board of Directors may have the effect of delaying or preventing changes in
control or management of the Company. Although directors of the Company may be
removed for cause by the affirmative vote of the holders of a majority of the
Common Stock, the Company's Restated Certificate provides that holders of
two-thirds of the Common Stock must vote to approve the removal of a director
without cause.
BOARD COMMITTEES
In December 1997, the Board established the Audit Committee and Compensation
Committee. The Board's Audit Committee currently consists of Messrs. Dunbar and
Janney. The Audit Committee reviews the Company's annual audit and meets with
the Company's independent accountants to review the Company's internal
accounting procedures and financial management practices. The Compensation
Committee currently consists of Mr. Bigham and Dr. Freund. The Compensation
Committee recommends compensation and benefits for the Company's President and
Chief Executive Officer and the Company's other executive officers to the Board
of Directors, reviews general policy relating to compensation and benefits of
employees of the Company, and administers the Company's Stock Plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board of Directors
was, at any time since the formation of the Company, an officer or employee of
the Company. No executive officer of the Company serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving on the Board of Directors or Compensation Committee.
DIRECTOR COMPENSATION
The Company does not currently provide cash compensation to directors for
services in such capacity, but directors may be reimbursed for certain expenses
in connection with attendance at Board of Directors and Committee meetings.
Directors are eligible to participate in the Company's Stock Plans and,
beginning
40
<PAGE>
in 1998, employee directors will also be eligible to participate in the
Company's 1998 Employee Stock Purchase Plan and non-employee directors will also
be eligible to participate in the 1998 Directors' Stock Option Plan. In December
1995, Mr. Bigham was granted an option to purchase 10,000 shares of Common Stock
at an exercise price of $0.10 per share subject to a four year vesting schedule,
in March 1997 he was granted an option to purchase 10,000 shares of Common Stock
at an exercise price of $1.00 per share subject to a four year vesting schedule,
and in December 1997 he purchased 5,000 shares of restricted Common Stock
subject to a four year vesting schedule. In February 1995, Mr. Dunbar was
granted an option to purchase 20,000 shares of Common Stock at an exercise price
of $0.10 per share subject to a four year vesting schedule and in December 1997
he was granted an option to purchase 10,000 shares of Common Stock at an
exercise price of $2.00 per share subject to a four year vesting schedule. In
December 1997, Mr. Janney and Dr. Freund each purchased 20,000 shares of
restricted Common Stock subject to four year vesting schedules. See "Stock
Plans."
EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded by the Company
during the fiscal year ended December 31, 1997 to its President, Chief Executive
Officer and Chairman of the Board of Directors and the Company's other four most
highly compensated executive officers, each of whose aggregate compensation
during the Company's last fiscal year exceeded $100,000 (collectively, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL
COMPENSATION(1) SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#)
- ---------------------------------------------------------------------------- ---------- --------- -------------
<S> <C> <C> <C>
Lev J. Leytes(2) ........................................................... $ 250,000 $ 75,000 12,304
President, Chief Executive Officer and
Chairman of the Board of Directors
Galina Leytes(2) ........................................................... $ 140,000 $ 0 4,823
Executive Vice President and Director
Anthony H. Bautista ........................................................ $ 105,934 $ 50,263 23,760
Vice President of
Manufacturing Operations
Robert T. Beggs ............................................................ $ 108,963 $ 44,411 26,439
Vice President of
Finance and Administration
William G. Burton, Ph.D. ................................................... $ 137,437 $ 36,721 26,891
Vice President,
Chief Technology Officer
</TABLE>
- ------------------------
(1) In accordance with the Securities and Exchange Commission (the "SEC") rules,
other annual compensation in the form of perquisites and other personal
benefits has been omitted where the aggregate amount of such perquisites and
other personal benefits constitutes less than the lesser of $50,000 or 10%
of the total annual salary and bonus for the Named Executive Officer for the
fiscal year.
(2) Prior to June 1997, the Company had been taxed as an S corporation for
federal and state income tax purposes. Under the Internal Revenue Code
regulations regarding S corporations, the Company had not been subject to
federal income taxes but had been subject to state income taxes at a reduced
rate. As an S corporation, the Company's stockholders paid taxes on their
share of the Company's taxable income on their individual tax returns. In
June 1997, in connection with the Company's preferred
41
<PAGE>
stock financing, the Company became subject to the provisions of subchapter
C of the Internal Revenue Code pursuant to which the Company's earnings are
taxed for federal and state income tax purposes at the corporate level.
Amounts exclude S corporation dividends in the aggregate amount of
$1,075,000 distributed to Lev J. Leytes and Galina Leytes for the period
from January 1 through June 5, 1997 during which the Company operated as a
subchapter S corporation for federal and state income tax purposes. See
"Dividend Policy."
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENTAGE OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OR OPTION TERM(5)
OPTIONS EMPLOYEES IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR(%)(3) ($/SH)(4) DATE 5%($) 10%($)
- --------------------------------- ----------- ------------------- ------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lev J. Leytes.................... 12,304(1) 2.6% $ 2.20 12/16/07 $ 213,434 $ 355,892
Galina Leytes.................... 4,823(1) 1.0 2.20 12/16/07 83,663 139,505
Anthony H. Bautista.............. 10,000(2) 2.1 1.00 8/27/07 185,467 301,249
7,500(2) 1.6 2.00 12/16/07 131,601 218,437
6,260(1) 1.3 2.00 12/16/07 109,843 182,322
Robert T. Beggs.................. 15,000(2) 3.1 1.00 8/27/07 278,201 451,874
5,000(2) 1.0 1.00 3/14/07 92,734 150,625
6,439(1) 1.3 2.00 12/16/07 112,983 187,535
William G. Burton, Ph.D.......... 20,000(2) 4.2 1.00 6/17/07 370,935 602,498
6,891(1) 1.4 2.00 12/16/07 120,915 200,700
</TABLE>
- ------------------------
(1) All of such options granted vest in full on the vesting commencement date.
Such options expire 10 years from the date of grant, or earlier upon
termination of employment. See "Stock Plans - 1997 Stock Plan."
(2) Twenty percent (20%) of such options granted vest one year from the vesting
commencement date, and 1/20th of the total shares vest on each quarterly
anniversary of the vesting commencement date thereafter. Such options expire
10 years from the date of grant, or earlier upon termination of employment.
See "Stock Plans--1994 Equity Incentive Plan" and "Stock Plans--1997 Stock
Plan".
(3) Based on an aggregate of 480,000 options granted to employees, consultants
and directors during the fiscal year ended December 31, 1997.
(4) The exercise price per share of each option except the options granted to
Lev J. Leytes and Galina Leytes was equal to the estimated fair value of the
Common Stock on the date of grant as determined by the Board of Directors.
The exercise price per share of the options granted to Lev J. Leytes and
Galina Leytes was equal to 110% of the estimated fair value of the Common
Stock on the date of grant as determined by the Board of Directors.
(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the rules of the SEC. There can be no assurance that the
actual stock price appreciation over the ten-year option term will be at the
assumed 5% and 10% levels or at any other defined level. Unless the market
price of the Common Stock appreciates over the option term, no value will be
realized from the option grants made to the Named Executive Officers. The
potential realizable value is calculated by assuming that the initial public
offering price of $12.00 per share appreciates at the indicated rate for the
entire term of the option and that the option is exercised at the exercise
price and sold on the last day at the appreciated price.
42
<PAGE>
YEAR-END OPTION HOLDINGS AND VALUES
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options held by each of
the Named Executive Officers as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS AT DECEMBER 31, MONEY OPTIONS AT
1997 DECEMBER 31, 1997
-------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- -------------------------------------------------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Lev J. Leytes........................................... 12,304 -- $ 120,579 --
Galina Leytes........................................... 4,823 -- 47,265 --
Anthony H. Bautista..................................... 31,260 32,500 360,100 $ 363,500
Robert T. Beggs......................................... 27,939 38,500 320,240 440,150
William G. Burton, Ph.D................................. 14,891 52,000 164,110 600,800
</TABLE>
- ------------------------
(1) Value of unexercised in-the-money options is based on a value of $12.00 per
share of the Company's Common Stock, the assumed offering price. Amounts
reflected are based on the assumed value minus the exercise price multiplied
by the number of shares acquired on exercise and do not indicate that the
optionee sold such stock.
EMPLOYMENT AGREEMENTS
In December 1995, the Company entered into an agreement with Mr. Leytes
providing that, in the case of involuntary termination other than for cause,
salary and benefits will continue to be paid for a period of one year from the
date of termination, all stock options and restricted stock then held by Mr.
Leytes will immediately vest, and a bonus equal to the greater of the actual
bonus owing to Mr. Leytes in the year of termination or 100% of the base salary
Mr. Leytes received for the preceding twelve calendar months will be paid.
STOCK PLANS
1994 EQUITY INCENTIVE PLAN. The Company's 1994 Equity Incentive Plan (the
"1994 Plan") was adopted by the Board of Directors and approved by the
stockholders in January 1994. A total of 479,250 shares of Common Stock have
been reserved for issuance under the 1994 Plan. As of November 30, 1997, no
options to purchase any shares of Common Stock had been exercised, options to
purchase a total of 479,250 shares at a weighted average exercise price of $0.19
per share were outstanding and no shares remained available for future option
grants under the 1994 Plan.
The purposes of the 1994 Plan are to provide a means by which employees of
and consultants to the Company may be given an opportunity to benefit from
increases in value of the stock of the Company, to retain the services of
persons who are currently employees or directors of or consultants to the
Company, to secure and retain the services of new employees, directors and
consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company. The 1994 Plan provides for the granting to
employees, including officers and employee directors, of incentive stock options
within the meaning of Section 422 of the Code and for the granting to employees
and consultants of nonstatutory stock options. The 1994 Plan also provides for
the granting to employees and consultants of stock bonuses, rights to purchase
restricted stock, and stock appreciation rights (collectively with the incentive
stock options and nonstatutory stock options, the "Stock Awards"). To the extent
an optionee would have the right in any calendar year to exercise for the first
time one or more incentive stock options for shares having an aggregate fair
market value (under all plans of the Company and determined for each share as of
the date the option to purchase the shares was granted) in excess of $100,000,
any such excess options shall be treated as nonstatutory stock options. If not
terminated earlier, the 1994 Plan will terminate in January 2004.
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<PAGE>
The 1994 Plan may be administered by the Board of Directors or a committee
consisting of at least two disinterested directors (the "1994 Administrator").
The 1994 Administrator has the power to determine which of the persons eligible
under the 1994 Plan shall be granted Stock Awards; when and how Stock Awards
shall be granted; whether a Stock Award will be an incentive stock option, a
nonstatutory stock option, a stock bonus, a right to purchase restricted stock,
a stock appreciation right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which Stock Awards shall be
granted to each such person. Options granted under the 1994 Plan are not
generally transferable by the optionee. Options granted under the 1994 Plan may
be exercised within thirty days after termination of employment or consulting
status, provided however that options may be exercised within 18 months after an
optionee's termination by death or 12 months after an optionee's termination due
to optionee's disability, and in any event no later than the expiration of the
option's 10 year term. The exercise price of incentive stock options must be at
least equal to the fair market value of the Common Stock on the date of grant,
and the exercise price of nonstatutory stock options must be at least equal to
50% of the fair market value of the Common Stock on the date of grant. Under the
Company's standard form of option agreement, the options vest over five years,
with 20% vesting on each annual anniversary of the vesting commencement date.
The 1994 Administrator has the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award. In the
event of a dissolution, sale of substantially all of the Company's assets,
merger, reverse merger, or consolidation of the Company with or into another
corporation, the Board may have the surviving corporation assume the Stock
Awards granted under the 1994 Plan, or substitute similar Stock Awards, continue
the Stock Award in full force and effect or accelerate vesting thereof.
1997 STOCK PLAN. The Company's 1997 Stock Plan (the "1997 Plan") was
adopted by the Board of Directors in March 1997 and approved by the stockholders
in May 1997. An increase of 1,250,000 shares in the number of shares reserved
for issuance under the 1997 Plan, to a total of 2,070,750 shares of Common Stock
issuable thereunder, was authorized by the Board of Directors in December 1997
and will be submitted for approval by the stockholders prior to completion of
this offering. As of November 30, 1997, a total of 820,750 shares of Common
Stock were reserved for issuance under the 1997 Plan, no options to purchase any
shares of Common Stock had been exercised, options to purchase a total of
283,750 shares at a weighted average exercise price of $1.00 per share were
outstanding and 537,000 shares remained available for future option grants under
the 1997 Plan.
The purposes of the 1997 Plan are to attract and retain the best available
personnel to the Company, to provide additional incentives to the Company's
employees and consultants and to promote the success of the Company's business.
The 1997 Plan provides for the granting to employees, including officers and
employee directors, of incentive stock options within the meaning of Section 422
of the Code and for the granting to employees and consultants, including
nonemployee directors, of nonstatutory stock options. Stock purchase rights may
also be granted under the 1997 Plan. To the extent an optionee would have the
right in any calendar year to exercise for the first time one or more incentive
stock options for shares having an aggregate fair market value (under all plans
of the Company and determined for each share as of the date the option to
purchase the shares was granted) in excess of $100,000, any such excess options
shall be treated as nonstatutory stock options. If not terminated earlier, the
1997 Plan will terminate in March 2007.
The 1997 Plan may be administered by the Board of Directors or a committee
appointed by the Board which shall be constituted in such a manner as to comply
with applicable law (the "1997 Administrator"). The 1997 Administrator has the
power to select the consultants and employees to whom options and stock purchase
rights may be granted, to determine the terms of the options granted including
the exercise price, the number of shares subject to the option and the
exercisability thereof, and the form of consideration payable upon exercise.
Options granted under the 1997 Plan are not generally transferable by the
optionee. The maximum number of shares which may be subject to options granted
to any employee for any fiscal year or the Company shall be 2,000,000. Such
limitation shall not take effect until the earliest date required
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<PAGE>
under Section 162(m) of the Code. Options granted under the 1997 Plan must be
exercised within 3 months or such other period of time not less than thirty days
as determined by the 1997 Administrator after termination of employment or
consulting status, provided however that options must be exercised within 6
months after an optionee's termination by death and within 12 months after an
optionee's termination by disability, and in any event no later than the
expiration of the option's 10 year term. The exercise price of incentive stock
options must be at least equal to the fair market value of the Common Stock on
the date of grant, and the exercise price of nonstatutory stock options shall be
determined by the 1997 Administrator on the date of grant; provided, however,
that the exercise price of any stock option granted to the Company's Chief
Executive Officer and the four other most highly compensated officers of the
Company must equal at least 110% in the case of an incentive stock option or
100% in the case of a nonstatutory stock option of the fair market value of the
Common Stock on the date of grant. Under the Company's standard form of option
agreement, the options vest over five years, with 20% vesting on the 12 month
anniversary of the vesting commencement date and with 1/20th vesting quarterly
thereafter. In the event of a dissolution or liquidation, to the extent it has
not been previously exercised, the option or stock purchase right will terminate
immediately prior to the consummation of such proposed action. In the event of a
proposed sale of all or substantially all of the Company's assets, merger of the
Company with or into another corporation, each outstanding option or stock
purchase right shall be assumed or an equivalent option or right substituted by
the successor corporation, unless the successor corporation does not agree to
assume the option or stock purchase right or to substitute an equivalent option
or right, in which case such option or stock purchase right shall terminate upon
consummation of such proposed action.
1998 EMPLOYEE STOCK PURCHASE PLAN. The Company's 1998 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors in
December 1997 and will be submitted to the stockholders for approval prior to
the completion of this offering. A total of 300,000 shares of Common Stock has
been reserved for issuance under the Purchase Plan.
The Purchase Plan, which is intended to qualify under Section 423 of the
Code, will be implemented by an offering period commencing on the effective date
of this offering and ending on January 31, 2000. Each subsequent offering period
will have a duration of twenty-four months. Each offering period after the first
offering period will commence on February 1 and August 1 of each year. Each
offering period will consist of four consecutive purchase periods of six months
duration, with the last day of each period being designated a purchase date. The
first purchase date will occur on July 31, 1998, with subsequent purchase dates
to occur every six months thereafter. The Purchase Plan may be administered by
the Board of Directors or a committee thereof. Employees (including officers and
employee directors) of the Company, or of any majority-owned subsidiary
designated by the Board, are eligible to participate in the Purchase Plan if
they are employed by the Company or any such subsidiary for at least 20 hours
per week and more than five months per year. The Purchase Plan permits eligible
employees to purchase Common Stock through payroll deductions, which may not
exceed 20% of an employee's compensation, at a price equal to the lower of 85%
of the fair market value of the Company's Common Stock at the beginning of the
offering period or the purchase date. If the fair market value of the Common
Stock on a purchase date is less than the fair market value at the beginning of
the offering period, a new twenty-four month offering period will automatically
begin on the first business day following the purchase date with a new fair
market value. Employees may end their participation in the offering at any time
during the offering period, and participation ends automatically on termination
of employment with the Company. If not terminated earlier, the Purchase Plan
will have a term of 20 years.
The Purchase Plan provides that in the event of a merger of the Company with
or into another corporation or a sale of all or substantially all of the
Company's assets, each right to purchase stock under the Purchase Plan will be
assumed or an equivalent right substituted by the successor corporation unless
the Board of Directors shortens the offering period so that employees' rights to
purchase stock under the Purchase Plan are exercised prior to the merger or sale
of assets. The Board of Directors has the power to amend or terminate the
Purchase Plan as long as such action does not adversely affect any outstanding
rights to purchase stock thereunder.
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<PAGE>
1998 DIRECTORS' STOCK OPTION PLAN. The 1998 Directors' Stock Option Plan
(the "Directors' Plan") was adopted by the Board of Directors in December 1997
and will be submitted for approval by the stockholders prior to completion of
this offering. A total of 150,000 shares of Common Stock has been reserved for
issuance under the Directors' Plan. The Directors' Plan provides for the
automatic grant of nonstatutory stock options to nonemployee directors of the
Company. The Directors' Plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the Board of Directors.
The Directors' Plan provides that each person who first becomes a
nonemployee director of the Company after the date of this offering shall be
granted a nonstatutory stock option to purchase 20,000 shares of Common Stock
(the "First Option") on the date on which the optionee first becomes a
nonemployee director of the Company. The First Option will not be granted to
individuals serving as nonemployee directors as of the date of this offering.
Thereafter, on the date of each annual meeting of the Company's stockholders,
each nonemployee director (including nonemployee directors who were not granted
a First Option prior to the date of such annual meeting) shall be granted an
option to purchase 5,000 shares of Common Stock (a "Subsequent Option") if, on
such date, he or she has served on the Company's Board of Directors for at least
six months.
The Directors' Plan sets neither a maximum nor a minimum number of shares
for which options may be granted to any one nonemployee director, but does
specify the number of shares that may be included in any one grant and the
method of making a grant. No option granted under the Directors' Plan is
transferable by the optionee other than by will or the laws of descent or
distribution or pursuant to the terms of a qualified domestic relations order,
and each option is exercisable, during the lifetime of the optionee, only by
such optionee. The Directors' Plan provides that the First Option shall become
exercisable in installments as to 25% of the total number of shares subject to
the First Option on each of the first, second, third and fourth anniversaries of
the date of grant of the First Option; each Subsequent Option shall become
exercisable in full on the fourth anniversary of the date of grant of that
Subsequent Option. The exercise price of all stock options granted under the
Directors' Plan shall be equal to the fair market value of a share of the
Company's Common Stock on the date of grant of the option. Options granted under
the Directors' Plan have a term of ten years.
In the event of the dissolution or liquidation of the Company, a sale of all
or substantially all of the assets of the Company, the merger of the Company
with or into another corporation in which the Company is not the surviving
corporation or any other capital reorganization in which more than 50% of the
shares of the Company entitled to vote are exchanged, the Company shall give to
each nonemployee director either (i) a reasonable time within which to exercise
the option, including any part of the option that would not otherwise be
exercisable, prior to the effectiveness of any such transaction at the end of
which time the Option shall terminate, or (ii) the right to exercise the option,
including any part of the option that would not otherwise be exercisable (or
receive a substitute option with comparable terms) as to an equivalent number of
shares of stock of the corporation succeeding the Company or acquiring its
business by reason of any such transaction. The Board of Directors may amend or
terminate the Directors' Plan; provided, however, that no such action may
adversely affect any outstanding option. If not terminated earlier, the
Directors' Plan will have a term of ten years.
401(K) PLAN
Effective January 1, 1992, the Company adopted a tax deferred savings plan
called the LJL
BioSystems, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan"), which covers
all employees who have been employed by the Company for at least one year. An
employee may contribute up to 15% of his or her compensation to the 401(k) Plan
on a pre-tax basis, not to exceed in any given year the maximum amount allowable
under IRS regulations. The Company will contribute the total amount of salary
elected to be deferred by each employee and may contribute a discretionary
matching contribution equal to a specified percentage of the participant's
compensation. The rates of pre-tax contributions may be reduced with respect to
highly compensated employees, as defined in the Internal Revenue Code, so that
the 401(k) Plan will comply with Section 401(k) of the Internal Revenue Code.
Pre-tax contributions are allocated to
46
<PAGE>
each employee's individual account, which is invested in selected investment
alternatives according to the directions of the employee. An employee's pre-tax
contributions vest over five years and are nonforfeitable at all times.
Withdrawals are permitted from an employee's account while the employee is still
employed by the Company in the event of a financial hardship or when the
employee reaches age 59 1/2. Employees may also borrow from the accounts. All
benefits are generally distributed to employees upon termination of employment.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law (the "Delaware Law"),
the Company has included in its Restated Certificate a provision to eliminate
the personal liability of its directors for monetary damages for breach of their
fiduciary duties as directors to the fullest extent permitted by Delaware law.
In addition, the Company's Bylaws provide that the Company is required to
indemnify its officers and directors under certain circumstances to the fullest
extent permitted by Delaware law, and the Company is required to advance
expenses to its officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. The Company has
entered into indemnification agreements with each of its officers and directors
containing provisions that are in some respects broader than the specific
indemnification provisions contained in the Delaware Law. The indemnification
agreements require the Company, among other things, to indemnify such officers
and directors against certain liabilities that may arise by reason of their
status or service as officers and directors and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. The Company intends to obtain directors' and officers' liability
insurance with respect to liabilities arising out of certain matters, including
matters under the Securities Act.
At present, the Company is not aware of any pending or threatened litigation
or proceeding involving a director, officer, employee or agent of the Company in
which indemnification would be required or permitted. The Company is not aware
of any threatened litigation or proceeding that might result in a claim for such
indemnification. The Company believes that its charter provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1997, shares of the Company's Preferred Stock, convertible into an
aggregate of 3,621,503 shares of Common Stock, were sold at an as-converted
price of $2.60 to investors that included, among others: entities affiliated
with Chancellor LGT Asset Management, Inc. (which consists of 878,462 shares
sold to Citiventure 96 Partnership, L.P., 431,923 shares sold to Chancellor LGT
Private Capital Offshore Partners II, L.P. and 228,077 shares sold to Chancellor
Private Capital Partners III, L.P.), entities affiliated with Alta Partners
(which consists of 953,223 shares sold to Alta California Partners, L.P. and
21,778 shares sold to Alta Embarcadero Partners, LLC), entities affiliated with
Hambrecht & Quist Capital Management, Inc. (which consists of 461,539 shares
sold to H&Q Healthcare Investors and 307,693 shares sold to H&Q Life Sciences
Investors) and 40,000 shares sold to a living trust and a charitable remainder
trust formed by Michael F. Bigham. In addition, the Company issued warrants to
purchase 65,653 shares of Preferred Stock to NationsBanc Montgomery Securities
LLC. The Company expects these warrants will be exercised immediately prior to
the completion of this offering.
In December 1995, the Company entered into an employment agreement with Mr.
Leytes providing that, in the case of involuntary termination other than for
cause, salary and benefits will continue to be paid for a period of one year
from the date of termination, all stock options and restricted stock then held
by Mr. Leytes will immediately vest, and a bonus equal to the greater of the
actual bonus owing to Mr. Leytes in the year of termination or 100% of the base
salary Mr. Leytes received for the preceding twelve calendar months will be
paid.
The Company has entered into indemnification agreements with each of its
officers and directors containing provisions which may require the Company,
among other things, to indemnify its officers and directors against certain
liabilities that may arise by reason of their status or service as officers or
directors and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. The Company also intends to
execute such agreements with its future directors and executive officers. See
"Management-- Limitation of Liability and Indemnification Matters."
The Company believes that all of the transactions set forth above were in
its best interests. As a matter of policy, the transactions were, and all future
transactions between the Company and its officers, directors, principal
stockholders and affiliates will be, approved by a majority of the Board of
Directors, including a majority of the independent and disinterested directors
on the Board of Directors, and will be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 30, 1997 and as adjusted
to reflect the sale of the Common Stock offered by the Company pursuant to this
Prospectus and conversion of all outstanding shares of Preferred Stock into
shares of Common Stock by (i) each stockholder who is known by the Company to
own beneficially more than 5% of the Common Stock, (ii) each Named Executive
Officer of the Company, (iii) each director of the Company, and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)(2)
SHARES ------------------------
BENEFICIALLY PRIOR TO AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------------------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Entities affiliated with Chancellor LGT Asset Management, Inc.(3)................. 1,538,462 18.9% 14.5%
1166 Avenue of the Americas
New York, NY 10036
Entities affiliated with Alta Partners(4)......................................... 975,001 12.0% 9.2%
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
Entities affiliated with Hambrecht & Quist Capital Management, Inc.(5)............ 769,232 9.5% 7.2%
50 Rowes Wharf
Boston, MA 02110
Lev J. Leytes(6).................................................................. 4,540,500 55.9% 42.7%
Galina Leytes(7).................................................................. 4,540,500 55.9% 42.7%
Anthony H. Bautista(8)............................................................ 26,500 * *
Robert T. Beggs(9)................................................................ 23,000 * *
William G. Burton, Ph.D.(10)...................................................... 8,000 * *
George W. Dunbar, Jr.(11)......................................................... 10,000 * *
Metra Biosystems, Inc.
265 North Whisman Road
Mountain View, CA 94043
Michael F. Bigham(12)............................................................. 45,000 * *
750 Forest Avenue
Palo Alto, CA 94301
John G. Freund, M.D............................................................... 0 * *
Daniel S. Janney(4)............................................................... 975,001 12.0% 9.2%
Alta Partners
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
All directors and executive officers as a group (10 persons)(13).................. 5,637,251 68.7% 52.7%
</TABLE>
- ------------------------
* Represents beneficial ownership of less than 1% of the Company's Common
Stock.
(1) Assumes no exercise of the Underwriters' over-allotment option and no
exercise of outstanding warrants. Except pursuant to applicable community
property laws or as indicated in the footnotes to this table, to the
Company's knowledge, each stockholder identified in the table possesses
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by such stockholder.
(2) Applicable percentage of ownership for each stockholder is based on
8,122,003 shares of Common Stock outstanding as of November 30, 1997 and
assumes 10,622,003 shares of Common Stock
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<PAGE>
outstanding after completion of this offering, together with applicable
options for such stockholders. Beneficial ownership is determined in
accordance with the rules of the SEC. The number of shares beneficially
owned by a person includes shares of Common Stock subject to options held
by that person that are currently exercisable or exercisable within 60 days
of November 30, 1997. Such shares issuable pursuant to such options are
deemed outstanding for computing the percentage ownership of the person
holding such options but are not deemed outstanding for the purposes of
computing the percentage ownership of each other person. Unless otherwise
indicated, the address of each of the individuals named above is: c/o LJL
BioSystems, Inc., 404 Tasman Drive, Sunnyvale, CA 94089.
(3) Consists of 878,462 shares held by Citiventure 96 Partnership, L.P.,
431,923 shares held by Chancellor LGT Private Capital Offshore Partners II,
L.P. and 228,077 shares held by Chancellor Private Capital Partners III,
L.P.
(4) Consists of 953,223 shares held by Alta California Partners, L.P. and
21,778 shares held by Alta Embarcadero Partners, LLC. Daniel S. Janney, a
director of the Company, is a general partner of the general partner of
Alta California Partners, L.P. and is a general partner of Alta Embarcadero
Partners, LLC, shares voting and dispositive power with respect to the
shares held by each such entity, and disclaims beneficial ownership of such
shares in which he has no pecuniary interest.
(5) Consists of 461,539 shares held by H&Q Healthcare Investors and 307,693
shares held by H&Q Life Sciences Investors.
(6) Consists of 4,500,500 shares jointly held by Lev J. Leytes and Galina
Leytes and 20,000 shares held by the Dina L. Leytes Irrevocable Trust and
20,000 shares held by the Mary E. Leytes Irrevocable Trust. Mr. Leytes
disclaims beneficial ownership of the shares held in each trust.
(7) Consists of 4,500,500 shares jointly held by Lev J. Leytes and Galina
Leytes and 20,000 shares held by the Dina L. Leytes Irrevocable Trust and
20,000 shares held by the Mary E. Leytes Irrevocable Trust. Ms. Leytes
disclaims beneficial ownership of the shares held in each trust.
(8) Consists of 26,500 shares issuable upon exercise of options exercisable
within 60 days of November 30, 1997.
(9) Consists of 23,000 shares issuable upon exercise of options exercisable
within 60 days of November 30, 1997.
(10) Consists of 8,000 shares issuable upon exercise of options exercisable
within 60 days of November 30, 1997.
(11) Consists of 10,000 shares issuable upon exercise of options exercisable
within 60 days of November 30, 1997.
(12) Consists of 25,000 shares held by a charitable trust formed by Michael F.
Bigham, 15,000 shares held by a living trust formed by Mr. Bigham, and
5,000 shares issuable upon exercise of options exercisable within 60 days
of November 30, 1997. Mr. Bigham disclaims beneficial ownership of the
shares held in each trust except to the extent of his pecuniary interest
therein.
(13) Includes 975,001 shares held by entities affiliated with certain directors
of the Company as described in Note 4 and 81,750 shares subject to options
exercisable within 60 days of November 30, 1997.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, the authorized capital stock of the
Company will consist of 50,000,000 shares of Common Stock, $0.001 par value, and
2,000,000 shares of undesignated Preferred Stock, $0.001 par value.
COMMON STOCK
As of November 30, 1997, there were 8,122,003 shares of Common Stock
outstanding (pro forma reflecting the conversion of all outstanding shares of
Preferred Stock into Common Stock upon the completion of this offering), held of
record by 19 stockholders, and options to purchase an aggregate of 763,000
shares of Common Stock were also outstanding. There will be 10,622,003 shares of
Common Stock outstanding (assuming no exercise of the Underwriters'
overallotment option, no exercise of outstanding warrants, and no exercise of
outstanding options under the Stock Plans after November 30, 1997) after giving
effect to the sale of the shares of Common Stock to the public offered hereby.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding Preferred Stock, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of liquidation, dissolution or winding up of the Company,
the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and satisfaction of preferential rights
of any outstanding Preferred Stock. The Common Stock has no preemptive or
conversion rights or other subscription rights. The outstanding shares of Common
Stock are, and the shares of Common Stock to be issued upon completion of this
offering will be, fully paid and non-assessable.
PREFERRED STOCK
In June 1997, the Company completed a private placement of 3,621,503 shares
of its Preferred Stock for $2.60 per share. Upon the closing of this offering,
each outstanding share of Preferred Stock will be converted into one share of
Common Stock and automatically retired. Thereafter, the Board of Directors is
authorized to issue up to 2,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the stockholders.
The issuance of Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company without further action by the
stockholders. The issuance of Preferred Stock with voting and conversion rights
may adversely affect the voting power of the holders of Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock. As of the closing of the offering, no shares of
Preferred Stock will be outstanding and the Company currently has no plans to
issue any shares of Preferred Stock.
WARRANTS
As of November 30, 1997, the Company had outstanding exercisable warrants to
purchase 65,653 shares of Preferred Stock at $5.20 per share. The warrants
expire upon the closing of this offering. Each warrant contains provisions for
the adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant under certain circumstances, including stock
dividends, stock splits, certain reorganizations and reclassifications. Each
warrant may be exercised, without the payment of cash, for the number of shares
of Common Stock purchasable by the difference between the aggregate exercise
price of the warrant and the value at the current market price per share of
Common Stock of the aggregate number of shares purchasable under the warrant.
The Company anticipates that the warrants will be exercised immediately prior to
the closing of this offering.
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<PAGE>
REGISTRATION RIGHTS
Following this offering the holders of 8,122,003 shares of Common Stock (the
"Registrable Securities") or their transferees will be entitled to certain
rights with respect to the registration of such shares under the Securities Act.
These rights are provided under the terms of an agreement between the Company
and the holders of the Registrable Securities. Subject to certain limitations in
the agreement, the holders of at least 50% of the Registrable Securities may
require, on two occasions beginning after the earlier of June 6, 1999 or 12
months after the effective date of this offering, that the Company use its best
efforts to register the Registrable Securities for public resale. If the Company
registers any of its Common Stock either for its own account or for the account
of other security holders, the holders of Registrable Securities are entitled to
include their shares of Common Stock in such registration, subject to the
ability of the underwriters to limit the number of shares included in the
offering. The holders of Registrable Securities may also require the Company
(not more than two times in any twelve-month period or three times in the
aggregate) to register all or a portion of their Registrable Securities on Form
S-3 when use of such form becomes available to the Company, provided, among
other limitations, that the proposed aggregate selling price (net of any
underwriters' discounts or commissions) is at least $1,000,000. All registration
expenses must be borne by the Company and certain selling expenses relating to
the Registrable Securities must be borne by the Company.
DELAWARE LAW AND CERTAIN CHARTER PROVISIONS
The Company's Restated Certificate and Amended and Restated Bylaws provide,
among other things, that after the closing of this offering, any action required
or permitted to be taken by the stockholders of the Company may be taken only at
a duly called annual or special meeting of the stockholders and may not be
effected by a consent in writing. In addition, special meetings of the
stockholders of the Company may be called only by the Board of Directors, the
Chairman of the Board, the President of the Company or by any person or persons
holding shares representing at least 10% of the outstanding capital stock. The
Restated Certificate also provides for a classified Board and specifies that the
authorized number of directors may be changed only by resolution of the Board of
Directors. See "Management--Board Composition." These provisions may have the
effect of deterring hostile takeovers or delaying changes in control or
management of the Company. The Bylaws also establish procedures, including
advance notice procedures with regard to the nomination, other than by or at the
direction of the Board of Directors, of candidates for election as directors.
The Company is subject to the provisions of Section 203 of the Delaware Law,
an anti-takeover law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. For purposes of Section 203, a
"business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years prior, did own) 15% or more of the
corporation's voting stock.
The foregoing provisions could have the effect of making it more difficult
for a third party to effect a change in the control of the Board of Directors.
In addition, these provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, a majority of the outstanding voting stock of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is U.S. Stock Transfer
Corporation, 1745 Gardena Avenue, Glendale, California 91204, (818) 502-1404.
52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market may adversely affect the market price of the Common Stock offered
hereby. Furthermore, as described below, because only a limited number of shares
will be available for sale shortly after this offering because of certain
contractual and legal restrictions on resale, sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of this offering, based on the number of shares outstanding
as of November 30, 1997, the Company will have outstanding an aggregate of
10,622,003 shares of Common Stock assuming (i) the issuance by the Company of
2,500,000 shares of Common Stock offered hereby, (ii) no exercise of outstanding
warrants to purchase 65,653 shares of Preferred Stock, that expire upon the
effective date of this offering, (iii) no exercise of vested options to purchase
277,599 shares of Common Stock, and (iv) no exercise of the Underwriters'
overallotment option to purchase 375,000 shares of Common Stock. Of these
shares, 2,500,000 shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except for shares
held by "affiliates" of the Company as that term is defined in Rule 144 under
the Securities Act and the regulations promulgated thereunder (whose sales would
be subject to certain limitations and restrictions described below).
The remaining 8,122,003 shares of Common Stock held by officers, directors,
employees and other stockholders of the Company are "restricted securities"
within the meaning of Rule 144 under the Securities Act ("Restricted Shares").
These restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rule 144 under the
Securities Act, which are summarized below. Sales of these restricted securities
in the public market, or the availability of such shares for sale, could
adversely affect the market price of the Common Stock.
All of the stockholders of the Company have entered into agreements ("Lock
Up Agreements") generally providing that they will not offer, sell, contract to
sell or grant any option to purchase or otherwise dispose of the shares of
Common Stock of the Company or any securities exercisable for or convertible
into the Company's Common Stock owned by them for a period of 180 days after the
effective date of the registration statement filed pursuant to this offering
(the "Effective Date") without the prior written consent of NationsBanc
Montgomery Securities LLC. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rule 144, shares subject to Lock-Up Agreements will not be salable until such
agreements expire or are waived by NationsBanc Montgomery Securities LLC. Taking
into account the Lock-Up Agreements, and assuming NationsBanc Montgomery
Securities LLC does not release stockholders from these agreements, the
following shares will be eligible for sale in the public market at the following
times: beginning on the Effective Date, only the shares sold in the Offering
will be immediately available for sale in the public market; beginning 180 days
after the Effective Date, approximately 8,122,003 additional shares will be
eligible for sale pursuant to Rule 144, of which all but 258,808 shares are held
by affiliates of the Company. Shares eligible to be sold pursuant to Rule 144
are subject to volume restrictions as described below.
In general, under Rule 144 as currently in effect, and beginning after the
expiration of the Lock-Up Agreements (180 days after the Effective Date of the
offering), a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately 106,220 shares immediately after the
offering); or (ii) the average weekly trading volume of the Common Stock during
the four calendar weeks preceding the date of sale. Sales under Rule 144 are
also subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be
53
<PAGE>
sold for at least two years, is entitled to sell such shares without complying
with the manner of sale, public information, volume limitation or notice
provisions of Rule 144.
Pursuant to the Lock-Up Agreements, all Company employees and consultants
holding Common Stock or stock options may not sell shares acquired upon exercise
until 180 days after the Effective Date. Beginning 180 days after the Effective
Date, any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the holding period, public information, volume limitation or notice
provisions of Rule 144. In addition, the Company intends to file registration
statements under the Securities Act as promptly as possible after the Effective
Date to register shares to be issued pursuant to the Company's 1994 Plan, 1997
Plan, Purchase Plan and Directors' Plan. As a result, any options exercised
under such plans after the effectiveness of such registration statements will
also be freely tradable in the public market, except that shares held by
affiliates will still be subject to the volume limitation, manner of sale,
notice and public information requirements of Rule 144. As of November 30, 1997,
there were outstanding options for the purchase of 763,000 shares, of which
options for 364,962 shares will be eligible for sale 180 days after the date of
this Prospectus upon expiration of the Lock-Up Agreements and in compliance with
certain limitations set forth in the Securities Act. See "Risk Factors--Shares
Eligible for Future Sale" and "Management--Stock Plans."
In addition, after this offering, the holders of approximately 8,122,003
shares will be entitled to certain rights with respect to registration of such
shares under the Securities Act. Registration of such shares under the
Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by affiliates
of the Company) immediately upon the effectiveness of such registration. See
"Description of Capital Stock--Registration Rights."
54
<PAGE>
UNDERWRITING
The Underwriters named below, represented by NationsBanc Montgomery
Securities LLC, Hambrecht & Quist LLC and Volpe Brown Whelan & Company, LLC (the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement (the "Underwriting Agreement") by and
between the Company and the Underwriters, to purchase from the Company the
aggregate number of shares of Common Stock indicated below opposite their
respective names at the offering price less the underwriting discount set forth
on the cover page of this Prospectus. The Underwriting Agreement provides that
the obligations of the Underwriters to pay for and accept delivery of the shares
of Common Stock are subject to certain conditions precedent, and that the
Underwriters are committed to purchase all of such shares if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
NationsBanc Montgomery Securities LLC............................................
Hambrecht & Quist LLC............................................................
Volpe Brown Whelan & Company, LLC................................................
----------
Total........................................................................ 2,500,000
----------
----------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow selected dealers a
concession of not more than $ per share, and the Underwriters may allow,
and such dealers may reallow, a concession of not more than $ per share
to certain other dealers. After the offering, the price and other selling terms
may be changed by the Representatives. The Common Stock is offered subject to
receipt and acceptance by the Underwriters, and to certain other conditions,
including the right to reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a maximum
of 375,000 additional shares of Common Stock to cover over-allotments, if any,
at the same price per share as the initial 2,500,000 shares to be purchased by
the Underwriters. To the extent that the Underwriters exercise such option, each
of the Underwriters will be committed, subject to certain conditions, to
purchase such additional shares in approximately the same proportion as set
forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with the offering.
In June 1997, H&Q Healthcare Investors and H&Q Life Sciences Investors,
entities affiliated with Hambrecht & Quist LLC, purchased 769,232 shares of the
Company's Preferred Stock at a purchase price of $2.60 per share, for an
aggregate of $2,000,000. Such shares will convert into 769,232 shares of Common
Stock upon the closing of this offering. In June 1997, the Company granted
NationsBanc Montgomery Securities LLC warrants to purchase 65,653 shares of the
Company's Preferred Stock at an exercise price of $5.20 per share. See
"Description of Capital Stock."
The Representatives have advised the Company that the Underwriters do not
expect to confirm sales to any accounts over which they exercise discretionary
authority in excess of 5% of the number of the shares of Common Stock offered
hereby.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
55
<PAGE>
For a period of 180 days after the effectiveness of the Registration
Statement, without the prior written consent of NationsBanc Montgomery
Securities LLC, the Company and holders of 8,122,003 shares of Common Stock
including the Company's directors and executive officers have agreed not to
offer, sell or contract to sell, sell or grant any option to purchase, make any
short sale, pledge or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or securities exchangeable or exercisable for or
convertible into shares of, or any other rights to purchase or acquire Common
Stock of the Company other than transfers to the holders' immediate family or
into trusts for the benefit of the holder or members of the holder's immediate
family.
Prior to the offering, there has been no public market for the Common Stock
of the Company. Consequently, the offering price for the Common Stock will be
negotiated between the Company and the Representatives. Among the factors to be
considered in determining the offering price of the Common Stock will be
prevailing market and economic conditions, market valuations of other companies
engaged in activities similar to the Company, estimates of the business
potential and prospects of the Company, the present state of the Company's
business operations, the Company's management and other factors deemed relevant.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. 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. Penalty bids permit the
Representatives to reclaim a selling concession from a syndicate member when the
Common Stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of the Common Stock to be higher than it would otherwise be in
the absence of such transactions. These transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discontinued at
any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Venture Law Group, A Professional Corporation ("Venture Law Group"),
Menlo Park, California. Certain legal matters in connection with this offering
will be passed upon for the Underwriters by Cooley Godward LLP ("Cooley
Godward"), Palo Alto, California. Certain legal matters with respect to
information contained in this Prospectus under the captions "Risk
Factors--Intellectual Property Risks" and "Business--Intellectual Property" will
be passed upon by Kolish, Hartwell, Dickinson, McCormick & Heuser, patent
counsel to the Company. As of the date of this Prospectus, certain directors of
Venture Law Group and an investment partnership affiliated with Venture Law
Group own (i) options under the 1997 Stock Plan to purchase an aggregate of
20,000 shares of the Company's Common Stock, and (ii) 9,500 shares of the
Company's Preferred Stock, which shares will convert into 9,500 shares of the
Company's Common Stock upon the completion of this offering. As of the date of
this Prospectus, GC&H Investments, an investment partnership affiliated with
Cooley Godward, owns 9,500 shares of the Company's Preferred Stock, which shares
will convert into 9,500 shares of the Company's Common Stock upon the completion
of this offering.
EXPERTS
The financial statements as of December 31, 1995 and 1996 and for each of
the three years in the period ended December 31, 1996 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
56
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement (which term
shall include any amendments thereto) on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain items of which are contained in
exhibits to the Registration Statement as permitted by the rules and regulations
of the SEC. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto, and the financial statements and notes filed as a part
thereof. Statements made in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With respect to each
such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved. The Registration Statement, including exhibits thereto and
the financial statements and notes filed as a part thereof, as well as such
reports and other information filed with the Commission, may be inspected
without charge at the public reference facilities maintained by the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Seven World Trade Center, 13th Floor, New York, NY
10048, and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of all or any part thereof may be obtained from
the Commission upon payment of certain fees prescribed by the Commission. Such
reports and other information may also be inspected without charge at a World
Wide Web site on the Internet maintained by the Commission (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC through the
Electronic Data Gathering, Analysis, and Retrieval System.
57
<PAGE>
LJL BIOSYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Balance Sheet.............................................................................................. F-3
Statement of Operations and Retained Earnings (Accumulated Deficit)........................................ F-4
Statement of Cash Flows.................................................................................... F-5
Notes to Financial Statements.............................................................................. F-6
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
LJL BioSystems, Inc.
The reverse stock split described in Note 6 to the financial statements has not
been consummated at December 31, 1997. When it has been consummated, we will be
in a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related statements
of operations and retained earnings (accumulated deficit) and of cash flows
present fairly, in all material respects, the financial position of LJL
BioSystems, Inc. at December 31, 1995 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
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
generally accepted auditing standards 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."
PRICE WATERHOUSE LLP
San Jose, California
February 21, 1997, except as to Note 6
which is as of January , 1998
F-2
<PAGE>
LJL BIOSYSTEMS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
SEPTEMBER
DECEMBER 31, SEPTEMBER 30,
-------------------- 30, 1997
1995 1996 1997 (NOTE 6)
--------- --------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $1,773,000 $1,166,000 $7,122,000
Accounts receivable....................... 349,000 397,000 169,000
Inventories............................... 237,000 673,000 137,000
Other current assets...................... 3,000 71,000 49,000
--------- --------- -----------
Total current assets.................... 2,362,000 2,307,000 7,477,000
Property and equipment, net................. 121,000 151,000 373,000
--------- --------- -----------
$2,483,000 $2,458,000 $7,850,000
--------- --------- -----------
--------- --------- -----------
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................... $ 127,000 $ 233,000 $ 215,000
Accrued expenses.......................... 286,000 396,000 755,000
Customer deposits......................... 1,938,000 1,943,000 364,000
Current portion of long-term debt......... 15,000 30,000 48,000
--------- --------- -----------
Total current liabilities............... 2,366,000 2,602,000 1,382,000
--------- --------- -----------
Long-term debt, net of current portion...... 32,000 43,000 50,000
--------- --------- -----------
Commitments and contingencies (Note 5)
Mandatorily redeemable convertible preferred
stock; $0.001 par value; 7,400,000 shares
authorized; 3,621,503 issued and
outstanding at September 30, 1997;
$21,543,000 redemption value (no shares
outstanding pro forma).................... -- -- 8,989,000 $ --
--------- --------- ----------- -----------
Stockholders' equity (deficit):
Common stock; $0.001 par value; 12,000,000
shares authorized at December 31, 1995
and 1996; 19,000,000 shares authorized
at September 30, 1997; 4,500,500 shares
issued and outstanding at December 31,
1995 and 1996 and at September 30, 1997
(8,122,003 shares outstanding pro
forma).................................. 5,000 5,000 5,000 8,000
Additional paid-in capital................ 34,000 34,000 -- 8,334,000
Deferred compensation..................... -- -- (55,000) (55,000)
S corporation accumulated deficit......... -- -- (652,000) --
Retained earnings (accumulated deficit)... 46,000 (226,000) (1,869,000) (1,869,000)
--------- --------- ----------- -----------
Total stockholders' equity (deficit).... 85,000 (187,000) (2,571,000) $6,418,000
--------- --------- ----------- -----------
-----------
$2,483,000 $2,458,000 $7,850,000
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
LJL BIOSYSTEMS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales................... $3,551,000 $2,236,000 $5,622,000 $3,180,000 $4,233,000
Development agreements.......... 2,659,000 2,915,000 3,663,000 3,538,000 642,000
--------- --------- --------- --------- ----------
Total revenues................ 6,210,000 5,151,000 9,285,000 6,718,000 4,875,000
--------- --------- --------- --------- ----------
Costs and operating expenses:
Product sales................... 1,581,000 1,174,000 2,755,000 1,595,000 2,035,000
Research and development........ 1,810,000 1,740,000 2,384,000 1,816,000 2,426,000
Selling, general and
administrative................ 2,822,000 1,963,000 4,062,000 3,110,000 1,541,000
--------- --------- --------- --------- ----------
Total costs and operating
expenses.................... 6,213,000 4,877,000 9,201,000 6,521,000 6,002,000
--------- --------- --------- --------- ----------
Income (loss) from operations..... (3,000) 274,000 84,000 197,000 (1,127,000)
Interest and other income......... 59,000 87,000 181,000 150,000 153,000
Interest expense.................. (5,000) (5,000) (5,000) (3,000) (7,000)
--------- --------- --------- --------- ----------
Income (loss) before provision for
income taxes.................... 51,000 356,000 260,000 344,000 (981,000)
Provision for income taxes........ 7,000 4,000 2,000 2,000 12,000
--------- --------- --------- --------- ----------
Net income (loss)................. 44,000 352,000 258,000 342,000 (993,000)
Retained earnings (accumulated
deficit) at beginning of
period.......................... 211,000 9,000 46,000 46,000 (226,000)
S corporation dividends paid...... (246,000) (315,000) (530,000) (364,000) (1,075,000)
Transfer of S corporation
accumulated deficit............. -- -- -- -- 742,000
Accretion of mandatorily
redeemable preferred stock
redemption value................ -- -- -- -- 317,000
--------- --------- --------- --------- ----------
Retained earnings (accumulated
deficit) at end of period....... $ 9,000 $ 46,000 $(226,000) $ 24,000 $(1,869,000)
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Pro forma data (unaudited) (Note
1):
Income (loss) before provision
(benefit) for income taxes.... $ 51,000 $ 356,000 $ 260,000 $ 344,000 $ (981,000)
Pro forma provision (benefit)
for income taxes.............. 20,000 142,000 104,000 138,000 (200,000)
--------- --------- --------- --------- ----------
Pro forma net income (loss)..... $ 31,000 $ 214,000 156,000 $ 206,000 (781,000)
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Pro forma net income (loss) per
share......................... $ 0.02 $ (0.09)
--------- ----------
--------- ----------
Shares used in computation of
pro forma net income (loss)
per share..................... 8,631,000 8,631,000
--------- ----------
--------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
LJL BIOSYSTEMS, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ---------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................ $ 44,000 $ 352,000 $ 258,000 $ 342,000 $ (993,000)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization................. 65,000 57,000 63,000 42,000 87,000
Amortization of deferred
compensation................. -- -- -- -- 1,000
Changes in assets and
liabilities:
Accounts receivable.......... (809,000) 553,000 (48,000) (118,000) 228,000
Inventories.................. 396,000 30,000 (436,000) (600,000) 536,000
Other current assets......... (107,000) 108,000 (68,000) -- 22,000
Accounts payable............. 82,000 2,000 106,000 91,000 (18,000)
Accrued expenses............. 96,000 (84,000) 110,000 2,358,000 359,000
Customer deposits............ 537,000 1,145,000 5,000 778,000 (1,579,000)
--------- --------- --------- --------- ----------
Net cash provided by (used
in) operating
activities............... 304,000 2,163,000 (10,000) 2,893,000 (1,357,000)
--------- --------- --------- --------- ----------
Cash flows used in investing
activities for the purchase of
property and equipment........... (43,000) (103,000) (93,000) (45,000) (309,000)
--------- --------- --------- --------- ----------
Cash flows from financing
activities:
Repayment of note payable to
shareholder.................... (500,000) -- -- -- --
Repayment of long-term debt...... (22,000) (22,000) (19,000) -- (25,000)
Proceeds from long-term debt..... -- 47,000 45,000 34,000 50,000
Proceeds from issuance of
mandatorily redeemable
convertible preferred stock,
net............................ -- -- -- -- 8,672,000
Payment of S corporation
dividends...................... (246,000) (315,000) (530,000) (364,000) (1,075,000)
--------- --------- --------- --------- ----------
Net cash provided by (used
in) financing
activities............... (768,000) (290,000) (504,000) (330,000) 7,622,000
--------- --------- --------- --------- ----------
Net increase (decrease) in cash and
cash equivalents................. (507,000) 1,770,000 (607,000) 2,518,000 5,956,000
Cash and cash equivalents at
beginning of period.............. 510,000 3,000 1,773,000 1,773,000 1,166,000
--------- --------- --------- --------- ----------
Cash and cash equivalents at end of
period........................... $ 3,000 $1,773,000 $1,166,000 $4,291,000 $7,122,000
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the period for
interest....................... $ 14,000 $ 5,000 $ 6,000 $ 3,000 $ 6,000
Cash paid during the period for
income taxes................... $ 9,000 $ 5,000 $ 2,000 $ 2,000 $ 1,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY AND BASIS OF PRESENTATION
LJL BioSystems, Inc. (the "Company") was incorporated in Delaware on January
14, 1993 and is the surviving corporation of two commonly controlled companies
that were merged into the Company on January 1, 1994. The Company is developing
and intends to commercialize proprietary technologies, products and services to
provide a flexible solution to the current and evolving high throughput
screening requirements of drug discovery laboratories. The Company currently
operates in one business segment.
In the second half of 1996, the Company implemented a new strategic business
model aimed at developing instruments for the emerging high throughput screening
market of the accelerated drug discovery market. In connection with the change
in strategy, the Company shifted its focus from developing and manufacturing
original equipment manufacturing ("OEM") clinical diagnostics and research
products to developing, manufacturing and marketing its own products for high
throughput screening. As part of its shift in focus, the Company has
discontinued its OEM development activities and has phased out production of all
but one of its OEM instruments. However, the Company intends to continue to
manufacture products under its agreement with Ventana Medical Systems, Inc.
through 1998. As a result, revenues from development agreements declined
significantly during the nine months ended September 30, 1997, and revenues from
OEM product sales are expected to materially decline in future periods.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The financial information at September 30, 1997 and for the nine month
periods ended September 30, 1996 and 1997 is unaudited. In the opinion of
management, this information has been prepared on the same basis as the audited
financial statements and includes all adjustments, consisting solely of normal
recurring adjustments, necessary for the fair statement of results for the
interim periods. The results of operations and cash flows for the nine month
period ended September 30, 1997 are not necessarily indicative of the results
for the full year or any future period.
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,
disclosure 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.
REVENUE RECOGNITION
Revenues from product sales are generally recognized upon shipment.
Development agreements are performed on a best efforts basis and revenues are
recognized based on work performed using the percentage of completion method,
completion measured using cost incurred to total estimated cost at completion.
Amounts received in advance of services rendered are recorded as customer
deposits. Research and development expenses under development agreements were
$1,602,000, $1,537,000 and $1,663,000 in 1994, 1995 and 1996, respectively.
F-6
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
RESEARCH AND DEVELOPMENT EXPENSE
Research and development costs are expensed as incurred and consist of costs
incurred for internally funded research and development activities and
development agreements. These amounts include direct costs and research-related
overhead expenses.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with maturities from
date of purchase of three months or less.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including
accounts receivable, accounts payable and accrued liabilities, approximate fair
value due to their short maturities. The carrying value of the Company's
long-term debt approximates fair value as its interest rates approximate market
rates for borrowings with similar terms and maturities.
CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of accounts receivable. At December 31, 1995, amounts due
from two customers represented 54% and 36% of gross accounts receivable. At
December 31, 1996, amounts due from three customers represented 72%, 15% and 10%
of gross accounts receivable. The Company performs ongoing credit evaluations of
its customers' financial condition and provides for expected losses; however,
such amounts have not been material. As a percentage of total revenues, product
sales and revenues recognized under development agreements from individual
customers in excess of 10% of total revenues were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Chiron Corporation......................................... 95% 47% 58%
CombiChem, Inc............................................. -- 31% 18%
Ventana Medical Systems, Inc............................... -- 11% 13%
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost, determined using the first-in,
first-out method, or market.
CAPITALIZED SOFTWARE COSTS
Software development costs incurred subsequent to the establishment of
technological feasibility are capitalized in accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed." Amortization of capitalized
software development costs is the greater of the amount computed using (a) the
ratio of current revenues to the total of current and anticipated future
revenues or (b) the straight-line method over the estimated economic life of the
product. No amounts have been capitalized to date.
F-7
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation and amortization
are computed using the straight-line method over estimated useful lives ranging
from three to five years. Maintenance and repairs are expensed as incurred.
LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121"), and identifies and records impairment losses on
long-lived assets when events and circumstances indicate that the assets might
be impaired. No such events have occurred with respect to the Company's
long-lived assets, which consist primarily of property and equipment and
leasehold improvements.
INCOME TAXES
Through June 5, 1997, the Company had elected to be taxed under the S
corporation provisions of the Internal Revenue Code. Under those provisions, the
Company was not subject to federal corporate income taxation. Rather, the
Company's shareholders included their respective portions of the Company's
taxable income in their individual income tax returns.
California generally conforms to the federal provisions recognizing S
corporations as pass-through entities. However, California imposes a 1.5% tax at
the legal entity level. The provision for income taxes for the years ended
December 31, 1994, 1995 and 1996 has been computed at this rate, adjusted for
potentially nondeductible items and nonrecoverable deferred tax assets. At
December 31, 1995 and 1996, the tax effect of the differences between the
financial reporting and income tax bases of assets and liabilities were not
material.
On June 6, 1997, in connection with the Preferred Stock financing, the
Company became subject to the C corporation provisions of the Internal Revenue
Code. Accordingly, its earnings since that time are taxed at federal and state
corporate income tax rates. Further, the Company adopted an asset and liability
approach for accounting for income taxes which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
events recognized in the Company's financial statements or income tax returns.
Deferred tax assets are recognized, net of any valuation allowance, for
deductible temporary differences, net operating losses and tax credit
carryforwards when their realization is considered more likely than not.
Deferred tax expense represents the change in the deferred tax asset and
liability balances.
Upon termination of S corporation status on June 6, 1997, the S corporation
accumulated deficit of $742,000 was transferred to additional paid in capital,
to the extent available, with the remainder presented as a separate component of
stockholders' deficit at September 30, 1997.
STOCK-BASED COMPENSATION
The Company has adopted the pro forma disclosure requirements of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").
F-8
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 1--THE COMPANY AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
PRO FORMA PROVISION (BENEFIT) FOR INCOME TAXES, PRO FORMA NET INCOME (LOSS)
AND PRO FORMA NET INCOME (LOSS) PER SHARE
Unaudited pro forma provision (benefit) for income taxes presented in the
Statement of Operations and Retained Earnings (Accumulated Deficit) reflects
income taxes computed at rates that would have been in effect had the Company
been subject to federal and state income taxes at the corporate level during
these periods.
Historical net income (loss) per share has not been presented since such
amounts are not considered meaningful due to the significant change in the
Company's capital structure that will occur in connection with the Offering.
Unaudited pro forma net income (loss) per share is computed using the
weighted average number of common and common equivalent shares outstanding.
Common equivalent shares are excluded from the computation if their effect is
antidilutive, except that, pursuant to the Securities and Exchange Commission
("SEC") Staff Accounting Bulletin No. 83, common and common equivalent shares
(stock options, warrants and mandatorily redeemable convertible preferred stock)
issued during the period commencing twelve months prior to the initial filing of
the proposed public offering, and through the effective of the offering, at
prices below the assumed initial public offering price have been included in the
calculation as if they were outstanding for all periods presented (using the
treasury stock method for stock options and warrants and the if-converted method
for mandatorily redeemable convertible preferred stock).
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 is effective for the Company's fiscal year ending December 31, 1997.
Under SFAS 128, primary earnings per share is replaced by basic earnings per
share and fully diluted earnings per share is replaced by diluted earnings per
share. The Company does not believe the adoption of SFAS 128, which will require
retroactive restatement of all prior periods presented, will have a material
impact on its computation of net income (loss) per share.
F-9
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 2--COMPOSITION OF BALANCE SHEET AMOUNTS:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
-------------------- 30,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accounts receivable comprise:
Trade receivables....................... $ 375,000 $ 448,000
Less allowance for doubtful accounts.... (26,000) (51,000)
--------- ---------
$ 349,000 $ 397,000
--------- ---------
--------- ---------
Inventories comprise:
Raw materials........................... $ 54,000 $ 355,000 $ 108,000
Work-in-process......................... 52,000 313,000 25,000
Finished goods.......................... 131,000 5,000 4,000
--------- --------- -----------
$ 237,000 $ 673,000 $ 137,000
--------- --------- -----------
--------- --------- -----------
Property and equipment comprise:
Computer equipment...................... $ 465,000 $ 508,000
Furniture and equipment................. 63,000 110,000
Leasehold improvements.................. 25,000 25,000
--------- ---------
553,000 643,000
Less accumulated depreciation and
amortization............................ (432,000) (492,000)
--------- ---------
$ 121,000 $ 151,000
--------- ---------
--------- ---------
</TABLE>
NOTE 3--LONG-TERM DEBT:
In September 1995 and 1996, the Company entered into two equipment loan
agreements with a bank related to the purchase of equipment and software. At
December 31, 1996, the Company had outstanding borrowings on these loans of
$42,000 and $31,000, respectively. Both loans are secured by the related
equipment and software and by personal guarantees by the Company's shareholders
and are due and payable in monthly installments over three years and bear
interest at 10.95% and 10.20% per annum, respectively. The equipment loan
agreements require that the Company complies with certain covenants, including
certain restrictions regarding distributions to shareholders. Future principal
payments under the loan agreements are $30,000, $31,000 and $12,000 in 1997,
1998 and 1999, respectively.
NOTE 4--EQUITY INCENTIVE PLANS:
On January 10, 1994, the Company adopted the 1994 Equity Incentive Plan (the
"1994 Plan") under which 499,500 shares of the Company's Common Stock were
reserved for issuance to employees, directors and consultants of the Company, as
approved by the Board of Directors. On March 14, 1997, the Company reduced the
number of shares reserved for issuance under the 1994 Plan to 479,250. The 1994
Plan, which expires in 2004, provides for the grant of incentive as well as
nonstatutory stock options, stock bonuses, stock appreciation rights and
restricted stock purchase rights.
In March 1997, the Company adopted the 1997 Stock Plan (the "1997 Plan")
under which 820,750 shares of the Company's Common Stock (including 20,250
shares originally reserved under the 1994 Plan) have been reserved for issuance
to employees, directors and consultants of the Company, as approved by
F-10
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 4--EQUITY INCENTIVE PLANS: (CONTINUED)
the Board of Directors. The 1997 Plan, which expires in 2007, provides for the
grant of incentive as well as nonstatutory stock options and restricted stock
purchase rights.
Options granted under the plans are for terms not to exceed ten years. If
the option is granted to a shareholder who owns more than 10% of all outstanding
stock of the Company, the term may not exceed five years and the exercise price
of the stock option must be at least 110% of the estimated fair value of the
stock at the date of grant. Exercise prices of incentive stock options granted
to all other persons are generally equal to at least 100% of the estimated fair
value of the stock at the date of grant, as determined by the Board of
Directors. For nonstatutory stock options granted to all other persons, the
exercise price under the 1994 Plan and the 1997 Plan is generally equal to at
least 50% or 85%, respectively, of the estimated fair value of the stock at the
date of grant. Options under the plans generally vest over a five year period.
The term of restricted stock purchase rights granted under the 1997 Plan is
thirty days, after which unaccepted stock purchase rights expire. If the stock
purchase right is granted to a shareholder who owns stock representing more than
10% of the total combined voting power of all classes of stock of the Company,
the exercise price is generally at least equal to 100% of the estimated fair
value of the stock on the date of grant. The exercise price of stock purchase
rights granted to all other persons is generally equal to at least 85% of the
estimated fair value of the stock on the date of grant.
The following table summarizes activity under the plans:
<TABLE>
<CAPTION>
WEIGHTED
SHARES STOCK AVERAGE
AVAILABLE OPTIONS EXERCISE
FOR GRANT OUTSTANDING PRICE
---------- ----------- -----------
<S> <C> <C> <C>
Authorized................................................ 499,500 --
Granted................................................... (255,500) 255,500 $ 0.10
Canceled.................................................. 12,500 (12,500) $ 0.10
---------- -----------
Balance at December 31, 1994.............................. 256,500 243,000 $ 0.10
Granted................................................... (209,000) 209,000 $ 0.10
Canceled.................................................. 105,750 (105,750) $ 0.10
---------- -----------
Balance at December 31, 1995.............................. 153,250 346,250 $ 0.10
Granted................................................... (102,000) 102,000 $ 0.10
Canceled.................................................. 60,000 (60,000) $ 0.10
---------- -----------
Balance at December 31, 1996.............................. 111,250 388,250 $ 0.10
Authorized (unaudited).................................... 800,500 --
Granted (unaudited)....................................... (342,750) 342,750 $ 0.89
---------- -----------
Balance at September 30, 1997 (unaudited)................. 569,000 731,000 $ 0.47
---------- -----------
---------- -----------
</TABLE>
F-11
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 4--EQUITY INCENTIVE PLANS: (CONTINUED)
The following table summarizes information about stock options outstanding
and vested under the plans at December 31, 1996 and September 30, 1997
(unaudited):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
-------------------------------------- --------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
STOCK STOCK REMAINING STOCK STOCK REMAINING
EXERCISE PRICE PER OPTIONS OPTIONS CONTRACTUAL OPTIONS OPTIONS CONTRACTUAL
SHARE OUTSTANDING EXERCISABLE LIFE OUTSTANDING EXERCISABLE LIFE
- --------------------- ----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
$0.10................ 388,250 215,850 7.1 years 388,250 243,700 6.4 years
$0.60................ -- -- -- 91,000 2,500 9.3 years
$1.00................ -- -- -- 251,750 10,000 9.5 years
----------- ----------- ----------- -----------
388,250 215,850 731,000 256,200
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Deferred compensation is recorded when the exercise price of an option is
less than the deemed fair value of the underlying stock on the date of grant.
From inception through June 1997, all stock options were granted at exercise
prices which equaled the estimated fair value of the underlying stock on the
respective grant dates. In August 1997, the Company granted options to purchase
a total of 75,000 shares of Common Stock at an exercise price of $1.00 per
share. Deferred compensation of approximately $56,000 was recorded on these
options, based on the deemed fair value of the Common Stock on the date of grant
of $1.75 per share. In October 1997, the Company granted options to purchase
24,500 shares of Common Stock at an exercise price of $1.00 per share.
Additional deferred compensation of approximately $123,000 is expected to be
recorded based on a deemed fair value of the Common Stock of $6.00 per share on
the date of grant. Additionally, in October 1997 the Company granted to a
consultant options to purchase 7,500 shares of the Company's Common Stock at an
exercise price of $1.00 per share resulting in additional deferred compensation
of $40,000 is expected to be recorded based on the estimated fair value of the
options granted. In December 1997, the Company granted 45,000 shares of
restricted Common Stock at an exercise price of $2.00 per share and options to
purchase 30,250 shares of Common Stock at an exercise price of $2.00 per share.
Additional deferred compensation of approximately $553,000 related to these
grants is expected to be recorded based on a deemed fair value of the Common
Stock of $9.35 per share on the date of grant. Deferred compensation is
amortized over the vesting period of the options or restricted stock, generally
four to five years.
In December 1997, the Company also granted fully vested options to purchase
75,000 shares of Common Stock at an exercise price of $2.00 per share in lieu of
employee cash bonuses. Additional compensation expense of $552,000 related to
these options based on a deemed fair value of the Common Stock of $9.35 per
share is being recognized as earned throughout 1997.
At September 30, 1997, the Company had 4,987,154 shares of Common Stock
reserved for future issuance upon conversion of mandatorily redeemable
convertible preferred stock, exercise of stock options and exercise of
mandatorily redeemable convertible preferred stock purchase warrants.
The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board Opinion No. 25. Had compensation cost
for the Company's option plans been determined based on the fair value of the
options at the dates of grant, as prescribed in SFAS 123, the Company's pro
forma net income for 1995 and 1996 would have included additional stock
compensation expense of $1,000 and $2,000, respectively. The fair value of each
option grant has been estimated on the date of grant using the minimum value
method with the following assumptions used for grants during the
F-12
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 4--EQUITY INCENTIVE PLANS: (CONTINUED)
applicable period: dividend yield of 0.0% for 1995 and 1996; risk-free interest
rates of 5.6% to 7.8% for options granted during the year ended December 31,
1995 and 5.5% to 6.8% for options granted during the year ended December 31,
1996; and a weighted average expected option term of six years for 1995 and
1996.
For pro forma purposes, option grants made prior to January 1, 1995 are not
considered; further, additional option grants are expected to be made during
1997 and beyond. Accordingly, pro forma disclosures may differ materially from
the reported results of operations in the future.
NOTE 5--COMMITMENTS AND CONTINGENCIES:
In September 1996, the Company amended the operating lease agreement for its
facility to extend the lease term to January 2000 and provide the Company an
option to extend the lease term for an additional five years. The lease
agreement requires the Company to pay minimum rent as well as certain facility
operating expenses incurred by the lessor. Rent expense in 1994, 1995 and 1996
was $99,000, $128,000 and $149,000, respectively.
Future minimum payments under non-cancelable operating leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 144,000
1998.............................................................................. 144,000
1999.............................................................................. 153,000
2000.............................................................................. 13,000
----------
$ 454,000
----------
----------
</TABLE>
In June 1997, the Company entered into a development, license and sales
agreement (the "Agreement") under which it obtained worldwide rights to certain
patented assay technologies. Future minimum royalties due through 2002 under the
Agreement aggregate approximately $950,000.
Under an employment agreement with an officer entered into in December 1995,
the Company is required in the event of involuntary termination to continue to
pay all salary, bonus and benefits for a period of up to one year.
In the normal course of business, the Company is subject to various claims
and assessments which, in the opinion of management, will not have a material
adverse effect on its results of operations or financial condition.
NOTE 6--SUBSEQUENT EVENTS:
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
In May and June 1997, the Company amended its Certificate of Incorporation
to authorize a total of 7,400,000 shares of Preferred Stock for future issuance.
In June 1997, the Company completed a private placement of 3,621,503 shares
of Series A Mandatorily Redeemable Convertible Preferred Stock (the "Series A")
for $2.60 per share, resulting in proceeds of $8,672,000, net of issuance costs
of $744,000.
F-13
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 6--SUBSEQUENT EVENTS: (CONTINUED)
The Series A stockholders may be entitled to annual dividends at a rate of
$0.312 per share (subject to adjustment for dilution or stock splits). Such
dividends are noncumulative and are payable when and if declared by the Board of
Directors provided, however, that such dividends shall be deemed to be accrued
and cumulatively payable upon the redemption of the Series A or a liquidation or
dissolution of the Company. Accordingly, such amounts are accreted to the
carrying value of the Series A with a corresponding charge to accumulated
deficit. The Series A shares carry a liquidation preference of $2.60 per share
(subject to adjustment for dilution and stock splits) plus cumulative but unpaid
dividends, and are convertible at any time at the option of the holder on a
one-for-one basis (subject to adjustment for antidilution) into shares of the
Company's Common Stock. The Series A shareholders have one vote for each share
of Common Stock into which such shares may be converted. The Series A shares
automatically convert into shares of the Company's Common Stock in the event of
an initial public offering of the Company's Common Stock resulting in gross cash
proceeds of at least $15.0 million. The Series A shares are redeemable on June
6, 2004, or any annual anniversary date thereafter, upon written notice by
holders of at least 75% of the Series A stock, in the amount of $2.60 per share
(subject to adjustment for antidilution) plus cumulative but unpaid dividends.
WARRANTS
In connection with the Series A private placement in June 1997, the Company
issued to the placement agent two warrants to purchase a total of 65,653 shares
of Series A preferred stock at an exercise price of $5.20 per share. The
warrants expire on the earlier of June 6, 2002, the closing of an initial public
offering of the Company's Common Stock pursuant to a registration statement
under the Securities Act of 1993 or a merger or sale of substantially all of the
Company's assets. The warrants are exercisable immediately.
INCREASE IN AUTHORIZED SHARES, INITIAL PUBLIC OFFERING AND REVERSE STOCK
SPLIT
In June 1997, the Board of Directors increased the authorized number of
shares of the Company's Common Stock to 19,000,000.
In December 1997, the Board of Directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell up to 2,875,000 shares of Common Stock
to the public (the "Offering"). In connection with the Offering, the Board of
Directors approved, subject to stockholder approval, a one-for-two reverse stock
split of the Company's Common and Series A Stock. All share and per share
amounts in the accompanying financial statements have been retroactively
adjusted to reflect the reverse stock split. If the Offering is completed under
the terms currently contemplated, 3,621,503 shares of outstanding mandatorily
redeemable convertible preferred stock will convert into an equal number of
shares of Common Stock.
Unaudited pro forma shareholders' equity at September 30, 1997, as adjusted
for the assumed conversion of the mandatorily redeemable convertible preferred
stock and the concurrent transfer of remaining S corporation accumulated deficit
to additional paid-in capital, is set forth in the accompanying balance sheet.
CHANGES TO STOCK OPTION PLANS
On December 16, 1997, the Board of Directors adopted the 1998 Employee Stock
Purchase Plan (the "1998 Purchase Plan") and the 1998 Directors' Plan and
reserved 300,000 and 150,000 shares of Common Stock, respectively, for issuance
under these plans. The 1998 Purchase Plan, which is intended to qualify
F-14
<PAGE>
LJL BIOSYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997 IS UNAUDITED)
NOTE 6--SUBSEQUENT EVENTS: (CONTINUED)
under Section 423 of the Internal Revenue Code, permits eligible employees to
purchase Common Stock through payroll deductions at a purchase price equal to
85% of the estimated fair value of the Company's Common Stock at the beginning
or end of the offering period, whichever is less. The 1998 Directors' Plan
provides for certain automatic grants of nonstatutory stock options to
nonemployee directors of the Company. Options granted under the 1998 Directors'
Plan vest over four years, have a term of ten years and are granted at exercise
prices equal to the estimated fair value of the Company's Common Stock on the
date of grant. Additionally, on December 16, 1997, the Board of Directors
approved an amendment to the 1997 Plan to increase the number of shares reserved
for issuance by 1,250,000 shares. The 1998 Directors' Plan, the 1998 Purchase
Plan and the increase in shares available under the 1997 Plan will be submitted
for stockholder approval prior to completion of the Offering.
F-15
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH IT RELATES, OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
---------------------
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
PROSPECTUS SUMMARY.............................. 3
RISK FACTORS.................................... 6
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS.................................... 16
USE OF PROCEEDS................................. 17
DIVIDEND POLICY................................. 17
CAPITALIZATION.................................. 18
DILUTION........................................ 19
SELECTED FINANCIAL DATA......................... 20
MANAGEMENT'S DISCUSS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........... 22
BUSINESS........................................ 27
MANAGEMENT...................................... 38
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.................................. 48
PRINCIPAL STOCKHOLDERS.......................... 49
DESCRIPTION OF CAPITAL STOCK.................... 51
SHARES ELIGIBLE FOR FUTURE SALE................. 53
UNDERWRITING.................................... 55
LEGAL MATTERS................................... 56
EXPERTS......................................... 56
ADDITIONAL INFORMATION.......................... 57
INDEX TO FINANCIAL STATEMENTS................... F-1
</TABLE>
---------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
[LOGO]
COMMON STOCK
-------------
PROSPECTUS
-------------
NATIONSBANC MONTGOMERY
SECURITIES LLC
HAMBRECHT & QUIST
VOLPE BROWN WHELAN &
COMPANY
, 1998
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee and the Nasdaq National Market
listing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC registration fee.............................................................. $ 11,026
NASD filing fee................................................................... 4,238
Nasdaq National Market listing fee................................................ 44,055
Printing and engraving expenses................................................... 120,000
Legal fees and expenses........................................................... 250,000
Accounting fees and expenses...................................................... 150,000
Blue Sky qualification fees and expenses.......................................... 5,000
Transfer Agent and Registrar fees................................................. 15,000
Miscellaneous fees and expenses................................................... 100,681
----------
Total......................................................................... $ 700,000
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----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article XIV of the Company's Restated
Certificate (Exhibit 3.3 hereto) and Article VI of the Company's Amended and
Restated Bylaws (Exhibit 3.5 hereto) provide for indemnification of the
Company's directors, officers, employees and other agents to the maximum extent
permitted by Delaware Law. In addition, the Company has entered into
Indemnification Agreements (Exhibit 10.2 hereto) with its officers and
directors. The Underwriting Agreement (Exhibit 1.1) also provides for
cross-indemnification among the Company and the Underwriters with respect to
certain matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since December 31, 1994, the Company has sold and issued the following
securities:
1. In June 1997, the Company issued and sold, pursuant to Series A
Preferred Stock Purchase Agreements, an aggregate of 3,621,503 shares of its
Preferred Stock convertible into 3,621,503 shares of Common Stock at a
purchase price of $2.60 per share for an aggregate offering price of
$9,415,907.80.
2. In June 1997, the Company issued and sold warrants to purchase an
aggregate of 65,653 shares of its Preferred Stock convertible into 65,653
shares of Common Stock with an exercise price of $5.20 per share to
NationsBanc Montgomery Securities LLC.
3. From December 31, 1994 through December 31, 1997, the Company
granted options under the 1994 Equity Incentive Plan to purchase an
aggregate of 402,000 shares of Common Stock at exercise prices ranging from
$0.10 to $0.60 per share to 28 employees, directors and consultants.
4. From March 14, 1997 through December 31, 1997, the Company granted
(i) options under the 1997 Stock Plan to purchase an aggregate of 389,000
shares of Common Stock at exercise prices
II-1
<PAGE>
ranging from $1.00 to $2.20 per share to 55 employees, directors and
consultants and (ii) stock purchase rights under the 1997 Stock Plan to
purchase an aggregate of 45,000 shares of Common Stock at a purchase price
of $2.00 per share to 3 directors. Each stock purchase right has been
exercised in full.
5. On December 15, 1997, one employee exercised a stock option for
1,000 shares of Common Stock at an exercise price of $0.10 per share.
The issuances of the securities in Items 1 and 2 above were deemed to be
exempt from registration under the Securities Act in reliance on Regulation D
Rule 506 of the Securities Act. The issuances of the options and purchases of
Common Stock in Items 3, 4 and 5 above were deemed exempt from registration
under the Securities Act in reliance upon Rule 701 promulgated under the
Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates, options and warrants
issued in such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Amended and Restated Certificate of Incorporation of the Company, as currently in effect.
3.2 Form of Amended and Restated Certificate of Incorporation of the Company, to be filed and become
effective prior to the effective date of the offering.
3.3 Form of Amended and Restated Certificate of Incorporation of the Company, to be filed and become
effective upon completion of the offering.
3.4 Bylaws of the Company.
3.5 Form of Amended and Restated Bylaws of the Company, to be effective upon completion of the offering.
4.1 See Exhibits 3.1, 3.2, 3.3 and 3.4.
4.2 Specimen Stock Certificate.*
4.3 Amended and Restated Investors' Rights Agreement dated June 17, 1997 between the Company and the
individuals and entities listed in the signature pages thereto.
5.1 Opinion of Venture Law Group regarding the legality of the Common Stock being registered.*
10.1 Agreement dated June 5, 1997 between the Company and FluorRx, Inc.**
10.2 Form of Indemnification Agreement between the Company and each of its officers and directors.
10.3 Severance Agreement dated December 6, 1995 between the Company and Lev J. Leytes.
10.4 Lease between Company and Yageo USA Inc., as amended.
10.5 1994 Equity Incentive Plan and Forms of Agreements.
10.6 1997 Stock Plan and Forms of Agreements.
10.7 1998 Directors' Stock Option Plan and Forms of Agreements.
10.8 1998 Employee Stock Purchase Plan and Subscription Agreement.
11.1 Computation of pro forma net income (loss) per share.
23.1 Consent of Independent Accountants.
23.2 Consent of Venture Law Group (included in Exhibit 5.1).*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
23.3 Consent of Kolish, Hartwell, Dickinson, McCormick & Heuser.
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
** Confidential treatment requested as to certain portions of this Exhibit.
Omitted portions will be filed separately with the Securities and Exchange
Commission.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities 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 Securities Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities 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 Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-3
<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 Sunnyvale, State of
California on December 31, 1997.
<TABLE>
<S> <C> <C>
LJL BIOSYSTEMS, INC.
By: /s/ LEV J. LEYTES
-----------------------------------------
Lev J. Leytes
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD OF DIRECTORS
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Lev J. Leytes and
Robert T. Beggs, and each of them, his attorneys-in-fact, with full power of
substitution, for him or her in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective amendments),
and any and all Registration Statements filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, in connection with or related to the
offering contemplated by this Registration Statement and its amendments, if any,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorney to any and
all amendments to said Registration Statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
- -------------------------- ------------------------------ -------------------
President, Chief Executive
/s/ LEV J. LEYTES Officer and Chairman of the
- -------------------------- Board of Directors December 31, 1997
Lev J. Leytes (Principal Executive
Officer)
/s/ GALINA LEYTES
- -------------------------- Executive Vice President and December 31, 1997
Galina Leytes Director
Vice President of Finance and
/s/ ROBERT T. BEGGS Administration (Principal
- -------------------------- Financial and Accounting December 31, 1997
Robert T. Beggs Officer)
/s/ GEORGE W. DUNBAR,
JR.
- -------------------------- Director December 31, 1997
George W. Dunbar, Jr.
/s/ MICHAEL F. BIGHAM
- -------------------------- Director December 31, 1997
Michael F. Bigham
/s/ JOHN G. FREUND, M.D.
- -------------------------- Director December 31, 1997
John G. Freund, M.D.
/s/ DANIEL S. JANNEY
- -------------------------- Director December 31, 1997
Daniel S. Janney
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS PAGE
- ----------- ---------
<C> <S> <C>
1.1 Form of Underwriting Agreement.*................................................................
3.1 Amended and Restated Certificate of Incorporation of the Company, as currently in effect........
3.2 Form of Amended and Restated Certificate of Incorporation of the Company, to be filed and become
effective prior to the effective date of the offering.........................................
3.3 Form of Amended and Restated Certificate of Incorporation of the Company, to be filed and become
effective upon completion of the offering.....................................................
3.4 Bylaws of the Company...........................................................................
3.5 Form of Amended and Restated Bylaws of the Company, to be effective upon completion of the
offering......................................................................................
4.1 See Exhibits 3.1, 3.2, 3.3 and 3.4..............................................................
4.2 Specimen Stock Certificate.*....................................................................
4.3 Amended and Restated Investors' Rights Agreement dated June 17, 1997 between the Company and the
individuals and entities listed in the signature pages thereto................................
5.1 Opinion of Venture Law Group regarding the legality of the Common Stock being registered.*......
10.1 Agreement dated June 5, 1997 between the Company and FluorRx, Inc.**............................
10.2 Form of Indemnification Agreement between the Company and each of its officers and directors....
10.3 Severance Agreement dated December 6, 1995 between the Company and Lev J. Leytes................
10.4 Lease between Company and Yageo USA Inc., as amended............................................
10.5 1994 Equity Incentive Plan and Forms of Agreements..............................................
10.6 1997 Stock Plan and Forms of Agreements.........................................................
10.7 1998 Directors' Stock Option Plan and Forms of Agreements.......................................
10.8 1998 Employee Stock Purchase Plan and Subscription Agreement....................................
11.1 Computation of pro forma net income (loss) per share............................................
23.1 Consent of Independent Accountants..............................................................
23.2 Consent of Venture Law Group (included in Exhibit 5.1).*........................................
23.3 Consent of Kolish, Hartwell, Dickinson, McCormick & Heuser......................................
24.1 Power of Attorney (see page II-4)...............................................................
27.1 Financial Data Schedule.........................................................................
</TABLE>
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* To be supplied by amendment.
** Confidential treatment requested as to certain portions of this Exhibit.
Omitted portions will be filed separately with the Securities and Exchange
Commission.
<PAGE>
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LJL BIOSYSTEMS, INC.
The undersigned, Lev Leytes and Galina Leytes, hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of LJL BioSystems, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 19, 1993 under the
name CARDIODIAGNOSTICS, INC.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
"The name of this corporation is LJL BioSystems, Inc. (the "CORPORATION").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 15 East North Street, Dover, County of Kent. The name of its registered
agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) CLASSES OF STOCK. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK."
The total number of shares which the Corporation is authorized to issue is
Twenty Six Million Four Hundred Thousand (26,400,000) shares, each with a par
value of $0.001 per share. Nineteen Million (19,000,000) shares shall be Common
Stock and Seven Million Four Hundred Thousand (7,400,000) shares shall be
Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The first series of Preferred
Stock shall be designated "SERIES A PREFERRED STOCK" and shall consist of Seven
Million Four Hundred Thousand (7,400,000) shares. The rights,
<PAGE>
preferences, privileges, and restrictions granted to and imposed on the Series A
Preferred Stock are as set forth below in this Article IV(B).
1. DIVIDEND PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, the holders of
shares of Series A Preferred Stock shall be entitled to receive, beginning on
the date such shares of Series A Preferred Stock are issued by the Company and
fully paid for by such holder, cumulative 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, additional shares of Common Stock of the Corporation) on the Common
Stock of the Corporation, at the rate of $0.156 per share per annum on each
outstanding share of Series A Preferred Stock (as adjusted for any stock splits,
stock dividends, combinations, recapitalizations and the like), compounded
quarterly, and payable when, as and if declared by the Board of Directors,
PROVIDED HOWEVER that such dividends shall be deemed to have accrued and shall
be cumulatively payable: (i) upon the redemption, if any, of the shares of
Series A Preferred Stock pursuant to Section 3 hereof, and (ii) upon any
liquidation, dissolution or winding up of the Corporation pursuant to
Section 2(a) or any acquisition, or sale of all or substantially all of the
assets, of the Corporation pursuant to Section 2(c).
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of the Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $1.30 per share for each share of Series A Preferred Stock then
held by them, plus accrued but unpaid dividends. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then, subject to the rights
of series of Preferred Stock that may from time to time come into existence, the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A Preferred Stock
in proportion to the preferential amount each such holder is otherwise entitled
to receive.
(b) Upon the completion of the distribution required by Section
2(a) above and any other distribution that may be required with respect to
series of Preferred Stock that may from time to time come into existence, if
assets remain in the Corporation, the holders of the Common Stock of the
Corporation shall receive all of the remaining assets of the Corporation.
(c) For purposes of this Section 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include, (i) the acquisition of the Corporation by another entity by means of
any transaction or series of related
<PAGE>
transactions (including, without limitation, any reorganization, merger or
consolidation, but excluding any merger effected exclusively for the purpose of
changing the domicile of the Corporation); or (ii) a sale of all or
substantially all of the assets of the Corporation, UNLESS in the event of
either (i) or (ii) of this subsection (c) the Corporation's stockholders of
record as constituted immediately prior to such acquisition or sale will,
immediately after such acquisition or sale (by virtue of securities issued as
consideration for the Corporation's acquisition or sale or otherwise) hold more
than 50% of the voting power of the surviving or acquiring entity.
(d) In any of the events specified in (c) above, if the
consideration received by the Corporation is other than cash, its value will be
deemed its fair market value. Any securities 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 the
Nasdaq National Market System, the value shall be deemed to be the average of
the closing sale prices of the securities on such exchange over the thirty-day
period ending three (3) 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
(whichever is applicable) over the thirty-day period ending three (3) 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 by the
Corporation and the holders of at least a majority of the voting power of all
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 by 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 Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.
(iii) In the event the requirements of Section 2(d) are
not complied with, the Corporation shall forthwith either:
(A) cause such closing to be postponed until such
time as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A 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
Section 2(d)(iv) hereof.
<PAGE>
(iv) The Corporation shall give each holder of record of
Series A Preferred Stock written notice of such impending transaction not later
than twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (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 2, and the Corporation shall thereafter give such holders prompt
notice of any material changes. The transaction shall in no event take place
sooner than twenty (20) days after the Corporation has given the first notice
provided for herein or sooner than ten (10) days after the 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 Preferred
Stock that are entitled to such notice rights or similar notice rights and that
represent at least a majority of the voting power of all then outstanding shares
of such Preferred Stock.
3. REDEMPTION.
(a) Subject to the provisions of Section 3(b) below, on the 6th
day of June, 2004 or on any annual anniversary date thereof thereafter (the
"REDEMPTION DATE") the holders of not less than seventy-five percent (75%) of
the shares of Series A Preferred Stock (collectively, the "REQUESTING HOLDERS,"
and each individually, a "REQUESTING HOLDER") shall have the right to require
the Corporation to redeem 100% of the outstanding shares of Series A Preferred
Stock on the Redemption Date. The Requesting Holders shall provide written
notice to the Corporation not less than 60 days before the Redemption Date
setting forth the number of shares owned by such Requesting Holders. On the
Redemption Date and upon a holder's surrender of all of such holder's
certificates representing shares owned, the redemption price shall be paid by
the Corporation in cash in an amount equal to $1.30 per share of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations affecting such
shares) plus an amount equal to all accrued but unpaid dividends payable in
accordance with Section 1 hereof on each share of Series A Preferred Stock to be
redeemed (the "REDEMPTION PRICE").
(b) Within five days following its receipt from the Requesting
Holders of a notice of intent to exercise redemption rights pursuant to
subsection (a) hereof, the Corporation shall provide each holder of Series A
Preferred Stock with a written notice (addressed to the holder at its address as
it appears on the stock transfer books of the Corporation) setting forth (i) the
Redemption Price for the shares to be redeemed and (ii) the place at which such
holders may obtain payment of the Redemption Price upon surrender of their share
certificates. All notices or offers hereunder shall be sent by first class or
registered mail, postage prepaid, and shall be deemed to have been provided when
mailed.
(c) On or prior to the Redemption Date, each holder of Series A
Preferred Stock shall surrender his, her or its certificate or certificates
representing the shares owned and to be redeemed, in the manner and at the place
designated in the Corporation's redemption offer. From and after the Redemption
Date, unless there shall be a default in payment of the Redemption Price, all
rights of each holder with respect to shares of Series A
<PAGE>
Preferred Stock redeemed on the Redemption Date shall cease (except the right to
receive the Redemption Price without interest upon surrender of the certificate
or certificates therefor), and such shares shall not be deemed to be outstanding
for any purpose whatsoever. Such shares of Series A Preferred Stock shall not
be reissued, and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Series A Preferred Stock
accordingly.
(d) On or prior to the Redemption Date, the Corporation shall
deposit the Redemption Price of all shares of Series A Preferred Stock to be
redeemed and for which the holders of such shares have surrendered their
certificates representing such shares to be redeemed in accordance with Section
3(c) with a bank or trust company having aggregate capital and surplus in excess
of $100,000,000, as a trust fund, with irrevocable instructions and authority to
the bank or trust company to pay, on the Redemption Date, the Redemption Price
of such shares to the respective holders of Series A Preferred Stock.
(e) For the purpose of determining whether funds are legally
available for redemption of shares of Series A Preferred Stock as provided
herein, the Corporation shall value its assets at the highest amount permissible
under applicable law. Notwithstanding any other provision of this Section 3,
if, on the Redemption Date, funds of the Corporation legally available therefor
shall be insufficient to redeem all the shares of Series A Preferred Stock
required to be redeemed as provided herein, funds to the extent legally
available shall be used for such purpose and the Corporation shall effect such
redemption pro rata according to the number of shares of Series A Preferred
Stock held by each holder as a proportion of the total shares of Series A
Preferred Stock. The redemption requirements provided hereby shall be
continuous, so that if on the Redemption Date such requirements shall not be
fully discharged, without further action by any holder of Series A Preferred
Stock, funds legally available shall be applied therefor until such requirements
are fully discharged.
4. CONVERSION. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. Subject to Section 4(c), each share of
Series A 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
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing $1.30
by the Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion.
The initial Conversion Price per share of Series A Preferred Stock shall be
$1.30. Such initial Conversion Price shall be subject to adjustment as set
forth in Section 4(d).
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such share immediately upon the
earlier of (i) except as provided below in Section 4(c), the Corporation's sale
of its Common Stock in a firm commitment underwritten public offering pursuant
to a registration statement under the Securities Act of 1933, as amended,
<PAGE>
the public offering price of which is not less than $3.00 per share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization) and which
results in gross cash proceeds to the Corporation of at least $15 million or
(ii) the date specified by written consent or agreement of the holders of
seventy-five percent (75%) of the then outstanding shares of Series A Preferred
Stock.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he or she shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the 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. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the 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 and shall promptly pay in cash or, to
the extent sufficient funds are not then legally available, in Common Stock (at
the Common Stock's fair market value determined by the Board of Directors as of
the date of such conversion), any declared but unpaid dividends on such shares
of Series A Preferred Stock, except for the cumulative dividends described in
Section 1 hereof, which shall be payable only on the conditions described in
Section 1. 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 Series A
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, the conversion
may, at the option of any holder tendering Series A Preferred Stock for
conversion, be conditioned upon the closing with the underwriters of the sale of
securities pursuant to such offering, in which event the person(s) entitled to
receive Common Stock upon conversion of such Preferred Stock shall not be deemed
to have converted such Preferred Stock until immediately prior to the closing of
such sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN
DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the
Series A Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) (A) If the Corporation shall issue, after the
date upon which any shares of Series A Preferred Stock were first issued (the
"PURCHASE DATE"), any Additional Stock (as defined below) without consideration
or for a consideration per share less than the Conversion Price for the Series A
Preferred Stock in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for the Series A Preferred Stock in effect
immediately prior to each such issuance shall automatically (except as otherwise
provided in this clause (i)) be adjusted to a price determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issuance plus
the number of shares of Common Stock that
<PAGE>
the aggregate consideration received by the Corporation for such issuance would
purchase at such Conversion Price; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to three years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in Sections
4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of such Conversion Price pursuant
to this Section 4(d)(i) shall have the effect of increasing the Conversion Price
above the Conversion Price 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 the Corporation for any underwriting or
otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the 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 by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before,
on or after the applicable 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, the following provisions shall
apply for all purposes of this Section 4(d)(i) and Section 4(d)(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 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
Sections 4(d)(i)(C) and 4(d)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum exercise 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 convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible
<PAGE>
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 the Corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the 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
Sections 4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the number
of shares of Common Stock deliverable or in the consideration payable to the
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 the Series A Preferred Stock, to the extent in any way
affected by or computed using 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 the Series A Preferred Stock, to the extent
in any way affected by or computed using 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 which 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 of the options or rights related to such
securities.
(5) The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to Sections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 4(d)(i)(E)(3)
or (4).
(ii) "ADDITIONAL STOCK" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 4(d)(i)(E)) by
the Corporation after the Purchase Date) other than
(A) Common Stock issued pursuant to a transaction
described in Section 4(d)(iii) hereof,
(B) Shares of capital stock issuable or issued to
employees, consultants or directors of the Corporation directly or pursuant to a
stock option plan or restricted stock plan approved by the Board of Directors of
the Corporation,
<PAGE>
(C) Capital stock, or options or warrants to
purchase capital stock, issued to financial institutions or other lenders or
lessors in connection with leases, equipment financings, revolving lines of
credit or borrowings to support working capital, or similar borrowing in the
ordinary course of business,
(D) Warrants to purchase shares of Series A
Preferred Stock issued in connection with one or more closings of a Series A
Preferred Stock financing on or before June 30, 1997, and shares of Common Stock
or Preferred Stock issuable upon exercise of, or conversion of the shares issued
or issuable on exercise of such warrants,
(E) Capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions, mergers
or similar transactions, the terms of which are approved by the Board of
Directors of the Corporation,
(F) Shares of Common Stock issued or issuable
upon conversion of the Series A Preferred Stock, and
(G) Shares of Common Stock issued or issuable in
a public offering prior to or in connection with which all outstanding shares of
Series A Preferred Stock will be converted to Common Stock.
(iii) In the event the Corporation should at any time or
from time to time after the 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 shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase in
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents with the number of shares issuable with
respect to Common Stock Equivalents determined from time to time in the manner
provided for deemed issuances in Section 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding
at any time after the 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 shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of such series shall be decreased in proportion to such
decrease in outstanding shares.
<PAGE>
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(iii), then, in
each such case for the purpose of this Section 4(e), the holders of Series A
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 the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. 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 2), provision shall be made so that the holders of the
Series A Preferred Stock shall thereafter be entitled to receive upon conversion
of the Series A Preferred Stock the number of shares of stock or other
securities or property of the Company 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 the Series A 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 the Series A Preferred Stock) shall be applicable after that event
and be as nearly equivalent as practicable.
(g) NO IMPAIRMENT. The 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 the 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 Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 4,
the 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 a certificate setting
<PAGE>
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series A 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 the Series A
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 the Series A Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
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, the Corporation
shall mail to each holder of Series A 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.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
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 the Series A 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; 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, in addition to such other remedies as shall be available to the
holder of such Preferred Stock, the 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, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary amendment
to this Certificate of Incorporation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A 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 the
Corporation.
5. VOTING RIGHTS. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Preferred Stock could then be converted, and 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 the 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. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an
as-converted basis (after aggregating all shares into which shares of
<PAGE>
Series A Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as any
shares of Preferred Stock are outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of at least a majority of the then outstanding shares of Preferred
Stock, voting together as a class:
(a) sell, convey, or otherwise dispose of (by license or
otherwise) 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 other transaction or series of related
transactions in which the stockholders of the Corporation immediately prior
thereto own less than fifty percent (50%) of the voting power of the acquiring
or surviving corporation thereafter, PROVIDED that this Section 6(a) shall not
apply to a merger effected exclusively for the purpose of changing the domicile
of the Corporation;
(b) alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares of such
series;
(c) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock;
(d) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series A Preferred Stock with respect to voting, dividends or upon
liquidation; or
(e) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock in excess of an aggregate of $100,000 per annum;
PROVIDED, HOWEVER, that this restriction shall not apply to the repurchase of
shares of Common Stock from employees, directors or consultants pursuant to
agreements or plans approved by the Board of Directors;
(f) declare any dividend or make any other distribution on any
shares of Common Stock;
(g) reclassify any shares of Common Stock into shares having a
preference or priority superior to or on a parity with the Series A Preferred
Stock; or
(h) amend Section 4.4 of the Bylaws of the Corporation.
7. BOARD OF DIRECTORS.
(a) The Board of Directors of the Corporation shall consist of
seven members. Two members shall be elected by (and may only be removed by) the
holders of the
<PAGE>
Series A Preferred Stock, voting as a single class on an as-converted to Common
Stock basis. Two members shall be elected by (and may only be removed by) the
holders of Common Stock, voting as a single class. Three members shall be
elected by (and may only be removed by) the holders of Common Stock and
Preferred Stock, voting as a single class on an as-converted to Common Stock
basis.
(b) If the office of any director becomes vacant, such
director's replacement shall be elected by the class (or classes, as applicable)
of shares of which such director is the representative.
(c) This Section 7 shall terminate and be of no further force or
effect immediately upon the consummation of the Corporation's sale of its Common
Stock in a firm commitment underwriting registered under the Securities Act of
1933, as amended, which results in aggregate gross proceeds to the Corporation
of at least $15,000,000 and the public offering price of which is at least $3.00
per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations).
8. STATUS OF CONVERTED STOCK. In the event any shares of Preferred
Stock shall be converted pursuant to Section 4 hereof, the shares so converted
shall be canceled and shall not be issuable by the Corporation. The Certificate
of Incorporation of the Corporation shall be appropriately amended to effect the
corresponding reduction in the Corporation's authorized capital stock.
(C) COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or winding
up of the Corporation, the assets of the Corporation shall be distributed as
provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any stockholders'
meeting in accordance with the Bylaws of the Corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
Subject to Article IV, Section 6(h), the Board of Directors of the
Corporation is expressly authorized to make, alter or repeal Bylaws of the
Corporation.
<PAGE>
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, 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.
(B) The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision."
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Sunnyvale, California, on June 16, 1997.
/s/ Lev Leytes
------------------------------
Lev Leytes, President
/s/ Galina Leytes
------------------------------
Galina Leytes, Secretary
<PAGE>
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LJL BIOSYSTEMS, INC.
The undersigned, Lev Leytes and Mark B. Weeks, hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of LJL BioSystems, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 19, 1993.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
"The name of this corporation is LJL BioSystems, Inc. (the "CORPORATION").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, Dover, County of Kent. The name of its
registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
Upon the effective date of the filing of the Third Amended and Restated
Certificate of Incorporation, every two (2) shares of this corporation's
outstanding Common Stock and Preferred stock shall be converted and
reconstituted into one (1) share of the like class and series of the
corporation's capital stock from which such shares were converted (the "STOCK
SPLIT"). The number of shares to be issued shall be rounded to the nearest
whole share. No fractional shares shall be issued. All share amounts and
amounts per share set forth in the Third Amended and Restated Certificate of
Incorporation have been appropriately adjusted to reflect the Stock Split.
(A) CLASSES OF STOCK. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK."
The total number of shares which the Corporation is authorized to issue is
Thirteen Million Two Hundred Thousand
<PAGE>
(13,200,000) shares, each with a par value of $0.001 per share. Nine
Million Five Hundred Thousand (9,500,000) shares shall be Common
Stock and Three Million Seven Hundred Thousand (3,700,000) shares
shall be Preferred Stock.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Third Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The
first series of Preferred Stock shall be designated "SERIES A PREFERRED
STOCK" and shall consist of Three Million Seven Hundred Thousand (3,700,000)
shares. The rights, preferences, privileges, and restrictions granted to and
imposed on the Series A Preferred Stock are as set forth below in this
Article IV(B).
1. DIVIDEND PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, the holders of
shares of Series A Preferred Stock shall be entitled to receive, beginning on
the date such shares of Series A Preferred Stock are issued by the Company and
fully paid for by such holder, cumulative 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, additional shares of Common Stock of the Corporation) on the Common
Stock of the Corporation, at the rate of $0.312 per share per annum on each
outstanding share of Series A Preferred Stock (as adjusted for any stock
splits, stock dividends, combinations, recapitalizations and the like),
compounded quarterly, and payable when, as and if declared by the Board of
Directors, PROVIDED HOWEVER that such dividends shall be deemed to have accrued
and shall be cumulatively payable: (i) upon the redemption, if any, of the
shares of Series A Preferred Stock pursuant to Section 3 hereof, and (ii) upon
any liquidation, dissolution or winding up of the Corporation pursuant to
Section 2(a) or any acquisition, or sale of all or substantially all of the
assets, of the Corporation pursuant to Section 2(c).
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, subject to the rights of
series of Preferred Stock that may from time to time come into existence, the
holders of the Series A Preferred Stock shall be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to
the holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $2.60 per share for each share of Series A Preferred Stock then
held by them, plus accrued but unpaid dividends. If, upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then, subject to the rights
of series of Preferred Stock that may from time to time come into existence,
the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
<PAGE>
(b) Upon the completion of the distribution required by Section
2(a) above and any other distribution that may be required with respect to
series of Preferred Stock that may from time to time come into existence, if
assets remain in the Corporation, the holders of the Common Stock of the
Corporation shall receive all of the remaining assets of the Corporation.
(c) For purposes of this Section 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include, (i) the acquisition of the Corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation, but excluding any
merger effected exclusively for the purpose of changing the domicile of the
Corporation); or (ii) a sale of all or substantially all of the assets of the
Corporation, UNLESS in the event of either (i) or (ii) of this subsection (c)
the Corporation's stockholders of record as constituted immediately prior to
such acquisition or sale will, immediately after such acquisition or sale (by
virtue of securities issued as consideration for the Corporation's acquisition
or sale or otherwise) hold more than 50% of the voting power of the surviving
or acquiring entity.
(d) In any of the events specified in (c) above, if the
consideration received by the Corporation is other than cash, its value will be
deemed its fair market value. Any securities 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 the Nasdaq
National Market System, the value shall be deemed to be the average of the
closing sale prices of the securities on such exchange over the thirty-day
period ending three (3) 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 (whichever
is applicable) over the thirty-day period ending three (3) 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 by the
Corporation and the holders of at least a majority of the voting power of all
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 by 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 Corporation and the
holders of at least a majority of the voting power of all then outstanding
shares of Preferred Stock.
(iii) In the event the requirements of Section 2(d) are
not complied with, the Corporation shall forthwith either:
<PAGE>
(A) cause such closing to be postponed until such
time as the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Series A 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 Section 2(d)(iv) hereof.
(iv) The Corporation shall give each holder of record of
Series A Preferred Stock written notice of such impending transaction not later
than twenty (20) days prior to the stockholders' meeting called to approve such
transaction, or twenty (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 2, and the Corporation shall thereafter give such
holders prompt notice of any material changes. The transaction shall in no
event take place sooner than twenty (20) days after the Corporation has given
the first notice provided for herein or sooner than ten (10) days after the
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 Preferred Stock that are entitled to such notice rights or
similar notice rights and that represent at least a majority of the voting
power of all then outstanding shares of such Preferred Stock.
3. REDEMPTION.
(a) Subject to the provisions of Section 3(b) below, on the 6th
day of June, 2004 or on any annual anniversary date thereof thereafter (the
"REDEMPTION DATE") the holders of not less than seventy-five percent (75%) of
the shares of Series A Preferred Stock (collectively, the "REQUESTING HOLDERS,"
and each individually, a "REQUESTING HOLDER") shall have the right to require
the Corporation to redeem 100% of the outstanding shares of Series A Preferred
Stock on the Redemption Date. The Requesting Holders shall provide written
notice to the Corporation not less than 60 days before the Redemption Date
setting forth the number of shares owned by such Requesting Holders. On the
Redemption Date and upon a holder's surrender of all of such holder's
certificates representing shares owned, the redemption price shall be paid by
the Corporation in cash in an amount equal to $2.60 per share of Series A
Preferred Stock (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other similar recapitalizations affecting such
shares) plus an amount equal to all accrued but unpaid dividends payable in
accordance with Section 1 hereof on each share of Series A Preferred Stock to
be redeemed (the "REDEMPTION PRICE").
(b) Within five days following its receipt from the Requesting
Holders of a notice of intent to exercise redemption rights pursuant to
subsection (a) hereof, the Corporation shall provide each holder of Series A
Preferred Stock with a written notice (addressed to the holder at its address
as it appears on the stock transfer books of the Corporation) setting forth
(i) the Redemption Price for the shares to be redeemed and (ii) the place at
which such holders may obtain payment of the Redemption Price upon surrender of
their
<PAGE>
share certificates. All notices or offers hereunder shall be sent by
first class or registered mail, postage prepaid, and shall be deemed
to have been provided when mailed.
(c) On or prior to the Redemption Date, each holder of Series A
Preferred Stock shall surrender his, her or its certificate or certificates
representing the shares owned and to be redeemed, in the manner and at the
place designated in the Corporation's redemption offer. From and after the
Redemption Date, unless there shall be a default in payment of the Redemption
Price, all rights of each holder with respect to shares of Series A Preferred
Stock redeemed on the Redemption Date shall cease (except the right to receive
the Redemption Price without interest upon surrender of the certificate or
certificates therefor), and such shares shall not be deemed to be outstanding
for any purpose whatsoever. Such shares of Series A Preferred Stock shall not
be reissued, and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Series A Preferred Stock
accordingly.
(d) On or prior to the Redemption Date, the Corporation shall
deposit the Redemption Price of all shares of Series A Preferred Stock to be
redeemed and for which the holders of such shares have surrendered their
certificates representing such shares to be redeemed in accordance with Section
3(c) with a bank or trust company having aggregate capital and surplus in
excess of $100,000,000, as a trust fund, with irrevocable instructions and
authority to the bank or trust company to pay, on the Redemption Date, the
Redemption Price of such shares to the respective holders of Series A Preferred
Stock.
(e) For the purpose of determining whether funds are legally
available for redemption of shares of Series A Preferred Stock as provided
herein, the Corporation shall value its assets at the highest amount
permissible under applicable law. Notwithstanding any other provision of this
Section 3, if, on the Redemption Date, funds of the Corporation legally
available therefor shall be insufficient to redeem all the shares of Series A
Preferred Stock required to be redeemed as provided herein, funds to the extent
legally available shall be used for such purpose and the Corporation shall
effect such redemption pro rata according to the number of shares of Series A
Preferred Stock held by each holder as a proportion of the total shares of
Series A Preferred Stock. The redemption requirements provided hereby shall be
continuous, so that if on the Redemption Date such requirements shall not be
fully discharged, without further action by any holder of Series A Preferred
Stock, funds legally available shall be applied therefor until such
requirements are fully discharged.
4. CONVERSION. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. Subject to Section 4(c), each share of
Series A 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
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing
$2.60 by the Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion.
The initial
<PAGE>
Conversion Price per share of Series A Preferred Stock shall be
$2.60. Such initial Conversion Price shall be subject to adjustment
as set forth in Section 4(d).
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such share immediately upon the
earlier of (i) except as provided below in Section 4(c), the Corporation's sale
of its Common Stock in a firm commitment underwritten public offering pursuant
to a registration statement under the Securities Act of 1933, as amended, the
public offering price of which is not less than $3.00 per share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization) and which
results in gross cash proceeds to the Corporation of at least $15 million or
(ii) the date specified by written consent or agreement of the holders of
seventy-five percent (75%) of the then outstanding shares of Series A
Preferred Stock.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he or she shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the 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. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the 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 and shall promptly pay in cash or,
to the extent sufficient funds are not then legally available, in Common Stock
(at the Common Stock's fair market value determined by the Board of Directors
as of the date of such conversion), any declared but unpaid dividends on such
shares of Series A Preferred Stock, except for the cumulative dividends
described in Section 1 hereof, which shall be payable only on the conditions
described in Section 1. 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 Series A 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, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive Common Stock upon
conversion of such Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN
DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the
Series A Preferred Stock shall be subject to adjustment from time to time as
follows:
<PAGE>
(i) (A) If the Corporation shall issue, after
the date upon which any shares of Series A Preferred Stock were first issued
(the "PURCHASE DATE"), any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for the Series A Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series A Preferred Stock in
effect immediately prior to each such issuance shall automatically (except as
otherwise provided in this clause (i)) be adjusted to a price determined by
multiplying such Conversion Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock that the aggregate
consideration received by the Corporation for such issuance would purchase at
such Conversion Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by
reason of this sentence shall be carried forward and shall be either taken into
account in any subsequent adjustment made prior to three years from the date of
the event giving rise to the adjustment being carried forward, or shall be made
at the end of three years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
Sections 4(d)(i)(E)(3) and 4(d)(i)(E)(4), no adjustment of such Conversion
Price pursuant to this Section 4(d)(i) shall have the effect of increasing the
Conversion Price above the Conversion Price 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 the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the 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 by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on
or after the applicable 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, the following provisions shall
apply for all purposes of this Section 4(d)(i) and Section 4(d)(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 into account potential antidilution adjustments) of
such options to purchase or rights to subscribe for Common
<PAGE>
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 Sections 4(d)(i)(C) and 4(d)(i)(D)), if any, received
by the Corporation upon the issuance of such options or rights plus the
minimum exercise 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 convertibility or exchangeability, 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 the Corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the 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
Sections 4(d)(i)(C) and 4(d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
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 the Series A Preferred Stock, to the extent in any way
affected by or computed using 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 the Series A Preferred Stock, to the extent
in any way affected by or computed using 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 which 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 of the options or rights related to such
securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to Sections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 4(d)(i)(E)(3)
or (4).
<PAGE>
(ii) "ADDITIONAL STOCK" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to Section 4(d)(i)(E)) by
the Corporation after the Purchase Date) other than
(A) Common Stock issued pursuant to a transaction
described in Section 4(d)(iii) hereof,
(B) Shares of capital stock issuable or issued to
employees, consultants or directors of the Corporation directly or pursuant to
a stock option plan or restricted stock plan approved by the Board of Directors
of the Corporation,
(C) Capital stock, or options or warrants to purchase
capital stock, issued to financial institutions or other lenders or lessors in
connection with leases, equipment financings, revolving lines of credit or
borrowings to support working capital, or similar borrowing in the ordinary
course of business,
(D) Warrants to purchase shares of Series A Preferred
Stock issued in connection with one or more closings of a Series A Preferred
Stock financing on or before June 30, 1997, and shares of Common Stock or
Preferred Stock issuable upon exercise of, or conversion of the shares issued
or issuable on exercise of such warrants,
(E) Capital stock or warrants or options to purchase
capital stock issued in connection with bona fide acquisitions, mergers or
similar transactions, the terms of which are approved by the Board of Directors
of the Corporation,
(F) Shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock, and
(G) Shares of Common Stock issued or issuable in a
public offering prior to or in connection with which all outstanding shares of
Series A Preferred Stock will be converted to Common Stock.
(iii) In the event the Corporation should at any time
or from time to time after the 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 shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion
of each share of Series A Preferred Stock shall be increased in proportion to
such increase in the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents with the number of
shares
<PAGE>
issuable with respect to Common Stock Equivalents determined from time
to time in the manner provided for deemed issuances in Section 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the 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 shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be decreased in proportion to
such decrease in outstanding shares.
(e) OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d)(iii), then, in
each such case for the purpose of this Section 4(e), the holders of Series A
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 the Corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS. 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 2), provision shall be made so that the
holders of the Series A Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Preferred Stock the number of shares of stock
or other securities or property of the Company 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 the Series A 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 the Series A Preferred Stock) shall be applicable after that
event and be as nearly equivalent as practicable.
(g) NO IMPAIRMENT. The 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 the 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 Preferred Stock against impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be
<PAGE>
issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on
the basis of the total number of shares of Series A Preferred Stock the
holder is at the time converting into Common Stock and the number of shares
of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 4, the 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 a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A 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 the Series A
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 the Series A Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
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, the
Corporation shall mail to each holder of Series A 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.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
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 the Series A 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; 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, in addition to such other remedies as shall be available to
the holder of such Preferred Stock, the 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, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to this Certificate of Incorporation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A 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
the Corporation.
<PAGE>
5. VOTING RIGHTS. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into
which such Preferred Stock could then be converted, and 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 the 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. Fractional votes shall not,
however, be permitted and any fractional voting rights available on an as-
converted basis (after aggregating all shares into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
6. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as any
shares of Preferred Stock are outstanding, the Corporation shall not without
first obtaining the approval (by vote or written consent, as provided by law)
of the holders of at least a majority of the then outstanding shares of
Preferred Stock, voting together as a class:
(a) sell, convey, or otherwise dispose of (by license or
otherwise) 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 other transaction or series of related
transactions in which the stockholders of the Corporation immediately prior
thereto own less than fifty percent (50%) of the voting power of the acquiring
or surviving corporation thereafter, PROVIDED that this Section 6(a) shall not
apply to a merger effected exclusively for the purpose of changing the domicile
of the Corporation;
(b) alter or change the rights, preferences or privileges of
the shares of Series A Preferred Stock so as to affect adversely the shares of
such series;
(c) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock;
(d) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity with,
the Series A Preferred Stock with respect to voting, dividends or upon
liquidation; or
(e) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock in excess of an aggregate of $100,000 per
annum; PROVIDED, HOWEVER, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, directors or consultants
pursuant to agreements or plans approved by the Board of Directors;
(f) declare any dividend or make any other distribution on any
shares of Common Stock;
<PAGE>
(g) reclassify any shares of Common Stock into shares having a
preference or priority superior to or on a parity with the Series A Preferred
Stock; or
(h) amend Section 4.4 of the Bylaws of the Corporation.
7. BOARD OF DIRECTORS.
(a) The Board of Directors of the Corporation shall consist of
seven members. Two members shall be elected by (and may only be removed by)
the holders of the Series A Preferred Stock, voting as a single class on an as-
converted to Common Stock basis. Two members shall be elected by (and may only
be removed by) the holders of Common Stock, voting as a single class. Three
members shall be elected by (and may only be removed by) the holders of Common
Stock and Preferred Stock, voting as a single class on an as-converted to
Common Stock basis.
(b) If the office of any director becomes vacant, such
director's replacement shall be elected by the class (or classes, as
applicable) of shares of which such director is the representative.
(c) This Section 7 shall terminate and be of no further force
or effect immediately upon the consummation of the Corporation's sale of its
Common Stock in a firm commitment underwriting registered under the Securities
Act of 1933, as amended, which results in aggregate gross proceeds to the
Corporation of at least $15,000,000 and the public offering price of which is
at least $3.00 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalizations).
8. STATUS OF CONVERTED STOCK. In the event any shares of
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation. The
Certificate of Incorporation of the Corporation shall be appropriately amended
to effect the corresponding reduction in the Corporation's authorized capital
stock.
(C) COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV.
3. REDEMPTION. The Common Stock is not redeemable.
<PAGE>
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
Subject to Article IV, Section 6(h), the Board of Directors of the
Corporation is expressly authorized to make, alter or repeal Bylaws of the
Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, 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.
(B) The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by reason
of the fact that he, his testator or intestate is or was a director or officer
of the Corporation or any predecessor of the Corporation, or serves or served
at any other enterprise as a director or officer at the request of the
Corporation or any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of
this Article VII in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision."
<PAGE>
The foregoing Third Amended and Restated Certificate of Incorporation
has been duly adopted by this corporation's Board of Directors and
stockholders in accordance with the applicable provisions of Section 228, 242
and 245 of the General Corporation Law of the State of Delaware.
Executed at Sunnyvale, California, on ______ ___, 1998.
-----------------------------------------
Lev Leytes, President
-----------------------------------------
Mark B. Weeks, Secretary
<PAGE>
FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LJL BIOSYSTEMS, INC.
The undersigned, Lev J. Leytes and Mark B. Weeks, hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively, of LJL Biosystems, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on January 19, 1993.
3. The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:
ARTICLE I
"The name of this corporation is LJL BioSystems, Inc. (the "CORPORATION").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, Dover, County of Kent. The name of its
registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) CLASSES OF STOCK. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK."
The total number of shares which the Corporation is authorized to issue is
Fifty Two Million (52,000,000) shares, each with a par value of $0.001 per
share. Fifty Million (50,000,000) shares shall be Common Stock and Two Million
(2,000,000) shares shall be Preferred Stock.
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations
and restrictions stated in this Fourth Amended and Restated Certificate of
Incorporation, to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of
Preferred Stock and the number of shares constituting any such series and the
designation thereof, or any of them; and to increase or decrease the number
of shares of any series subsequent to the issuance of shares of that series,
but not below the number of shares of such series then outstanding. In case
the number of shares of any series shall be so decreased, the shares
constituting such decrease shall
<PAGE>
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
(A) The Board of Directors of the Corporation shall divide the
directors into two classes, as nearly equal in number as reasonably possible,
with the term of office of the first class to expire at the first annual
meeting of stockholders following the date this Article VI becomes effective
(the "EFFECTIVE DATE") or any special meeting in lieu thereof and the term of
office of the second class to expire at the second annual meeting of
stockholders after the Effective Date or any special meeting in lieu thereof.
At each annual meeting of stockholders or special meeting in lieu thereof
following such initial classification, directors elected to succeed those
directors whose terms expire shall be elected for a term of office to expire
at the second succeeding annual meeting of stockholders or special meeting in
lieu thereof after their election and until their successors are duly elected
and qualified.
(B) Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any
increase in the authorized number of directors or any vacancies in the Board
of Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of
the directors then in office even though less than a quorum, or by a sole
remaining director. In the event of any increase or decrease in the
authorized number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he or she is a
member until the expiration of his or her current term or his or her prior
death, retirement, removal or resignation, and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall, if
reasonably possible, be apportioned by the Board of Directors between the two
classes of directors so as to ensure that no class has more than one director
more than the other class. To the extent reasonably possible, consistent
with the foregoing rule, any newly created directorships shall be added to
those classes whose terms of office are to expire at the latest dates
following such allocation and newly eliminated directorships shall be
subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the Board
of Directors, the remaining directors, except as otherwise provided by law,
may exercise the powers of the full Board of Directors until the vacancy is
filled. Vacancies in the Board of Directors and newly created directorships
resulting from any increase in the authorized number of directors shall be
filled by a vote of the majority of the directors then in office, though less
than a quorum, or by a sole remaining director. Any director or the entire
Board of Directors may be removed, (i) with cause, by the holders of a
majority of the shares then entitled to vote at
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<PAGE>
an election of directors or (ii) without cause, by the holders of two-thirds
of the shares then entitled to vote at an election of directors.
ARTICLE VII
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each
share held. No stockholder will be permitted to cumulate votes at any election
of directors.
ARTICLE VIII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE X
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE XI
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XII
The Corporation shall have perpetual existence.
ARTICLE XIII
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, 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.
If the General Corporation Law of Delaware is hereafter amended to authorize,
with the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not
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<PAGE>
be liable for any such breach to the fullest extent permitted by the General
Corporation Law of Delaware, as so amended.
(B) Any repeal or modification of the foregoing provisions of this
Article XIII shall not adversely affect any right or protection of a director
of the Corporation with respect to any acts or omissions of such director
occurring prior to such repeal or modification.
ARTICLE XIV
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the
Corporation to provide indemnification) though 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 a corporation, its
stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XIV 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 the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification."
* * *
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<PAGE>
The foregoing Fourth Amended and Restated Certificate of Incorporation
has been duly adopted by this Corporation's Board of Directors and
stockholders in accordance with the applicable provisions of Section 228, 242
and 245 of the General Corporation Law of the State of Delaware.
Executed at _________________, California, on ____________________.
-------------------------------------
Lev J. Leytes, President
-------------------------------------
Mark B. Weeks, Secretary
<PAGE>
BYLAWS
OF
LJL BIOSYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - CORPORATE OFFICES. . . . . . . . . . . . . . . . . . . . . .1
1.1 Registered Office. . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II - MEETINGS OF STOCKHOLDERS. . . . . . . . . . . . . . . . . .1
2.1 Place Of Meetings. . . . . . . . . . . . . . . . . . . . . . . .1
2.2 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . .1
2.3 Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . .1
2.4 Notice Of Stockholders' Meetings . . . . . . . . . . . . . . . .2
2.5 Manner Of Giving Notice; Affidavit Of Notice . . . . . . . . . .2
2.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.7 Adjourned Meeting; Notice. . . . . . . . . . . . . . . . . . . .2
2.8 Conduct Of Business. . . . . . . . . . . . . . . . . . . . . . .3
2.9 Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.10 Waiver Of Notice. . . . . . . . . . . . . . . . . . . . . . . .3
2.11 Stockholder Action By Written Consent Without A Meeting . . . .3
2.12 Record Date For Stockholder Notice; Voting; Giving Consents . .4
2.13 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE III - DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . .5
3.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
3.2 Number Of Directors. . . . . . . . . . . . . . . . . . . . . . .5
3.3 Election, Qualification And Term Of Office Of Directors. . . . .5
3.4 Resignation And Vacancies. . . . . . . . . . . . . . . . . . . .5
3.5 Place Of Meetings; Meetings By Telephone . . . . . . . . . . . .6
3.6 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . .6
3.7 Special Meetings; Notice . . . . . . . . . . . . . . . . . . . .6
3.8 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.9 Waiver Of Notice . . . . . . . . . . . . . . . . . . . . . . . .7
3.10 Board Action By Written Consent Without A Meeting . . . . . . .7
3.11 Fees And Compensation Of Directors. . . . . . . . . . . . . . .8
3.12 Approval Of Loans To Officers . . . . . . . . . . . . . . . . .8
3.13 Removal Of Directors. . . . . . . . . . . . . . . . . . . . . .8
3.14 Chairman Of The Board Of Directors. . . . . . . . . . . . . . .8
ARTICLE IV - COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . .9
4.1 Committees Of Directors. . . . . . . . . . . . . . . . . . . . .9
4.2 Committee Minutes. . . . . . . . . . . . . . . . . . . . . . . .9
4.3 Meetings And Action Of Committees. . . . . . . . . . . . . . . .9
4.4 Outside Directors Committee. . . . . . . . . . . . . . . . . . .9
ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Appointment Of Officers. . . . . . . . . . . . . . . . . . . . 10
5.3 Subordinate Officers . . . . . . . . . . . . . . . . . . . . . 11
5.4 Removal And Resignation Of Officers. . . . . . . . . . . . . . 11
<PAGE>
5.5 Vacancies In Offices . . . . . . . . . . . . . . . . . . . . . 11
5.6 Chief Executive Officer. . . . . . . . . . . . . . . . . . . . 11
5.7 President. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . 12
5.9 Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Chief Financial Officer . . . . . . . . . . . . . . . . . . . 12
5.11 Representation Of Shares Of Other Corporations. . . . . . . . 13
5.12 Authority And Duties Of Officers. . . . . . . . . . . . . . . 13
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.1 Indemnification Of Directors And Officers. . . . . . . . . . . 13
6.2 Indemnification Of Others. . . . . . . . . . . . . . . . . . . 13
6.3 Payment Of Expenses In Advance . . . . . . . . . . . . . . . . 14
6.4 Indemnity Not Exclusive. . . . . . . . . . . . . . . . . . . . 14
6.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.6 Conflicts. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VII - RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . 15
7.1 Maintenance And Inspection Of Records. . . . . . . . . . . . . 15
7.2 Inspection By Directors. . . . . . . . . . . . . . . . . . . . 15
7.3 Annual Statement To Stockholders . . . . . . . . . . . . . . . 15
ARTICLE VIII - GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . 16
8.1 Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Execution Of Corporate Contracts And Instruments . . . . . . . 16
8.3 Stock Certificates; Partly Paid Shares . . . . . . . . . . . . 16
8.4 Special Designation On Certificates. . . . . . . . . . . . . . 17
8.5 Lost Certificates. . . . . . . . . . . . . . . . . . . . . . . 17
8.6 Construction; Definitions. . . . . . . . . . . . . . . . . . . 17
8.7 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.9 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.10 Transfer Of Stock . . . . . . . . . . . . . . . . . . . . . . 18
8.11 Stock Transfer Agreements . . . . . . . . . . . . . . . . . . 18
8.12 Registered Stockholders . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
BYLAWS
OF
LJL BIOSYSTEMS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The registered office of the corporation shall be in the City of
Dover, County of Kent, State of Delaware. The name of the registered agent of
the corporation at such location is Incorporating Services, Ltd.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices at
any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 ANNUAL MEETING.
The annual meeting of stockholders shall be held on such date, time
and place, either within or without the State of Delaware, as may be designated
by resolution of the Board of Directors each year. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING.
A special meeting of the stockholders may be called at any time by
the Board of Directors, the chairman of the board, the president or by one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other than
the Board of Directors, the president or the chairman of the board, the request
shall be in writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and
<PAGE>
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, any
vice president, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II, that a meeting will be held at the time requested by
the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after the receipt of the request, the person
or persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS.
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 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 or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or
(b) the stockholders entitled to vote thereat, present in person or represented
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the
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<PAGE>
corporation may transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including the manner of
voting and the conduct of business.
2.9 VOTING.
The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.12 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise provided in the certificate of incorporation, any
action required to be taken at any annual or special meeting of stockholders of
the corporation, or any action that 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, is 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
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<PAGE>
writing. If the action which is consented to is such as would have required the
filing of a certificate under any section of the General Corporation Law of
Delaware if such action had been voted on by stockholders at a meeting thereof,
then the certificate filed under such section shall state, in lieu of any
statement required by such section concerning any vote of stockholders, that
written notice and written consent have been given as provided in Section 228 of
the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to 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 (60) nor less than ten (10)
days before the date of such meeting, nor more than sixty (60) days prior to any
other action.
If the Board of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(b) The record date for determining stockholders entitled to
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 delivered to the corporation.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
2.13 PROXIES.
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 such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's
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<PAGE>
attorney-in-fact. The revocability of a proxy that states on its face that it
is irrevocable shall be governed by the provisions of Section 212(e) of the
General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.2 NUMBER OF DIRECTORS.*
Upon the adoption of these bylaws, the number of directors
constituting the entire Board of Directors shall be seven. Thereafter, this
number may be changed by a resolution of the Board of Directors or of the
stockholders, subject to Section 3.4 of these Bylaws. No reduction of the
authorized number of directors shall have the effect of removing any director
before such director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4 of these Bylaws, directors shall
be elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or
these Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a
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* SEE CERTIFICATE OF AMENDMENT OF BYLAWS
<PAGE>
single class may be filled by a majority of the directors then in office,
although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause,
the corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
3.7 SPECIAL MEETINGS; NOTICE.
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Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM.
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
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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. Written consents representing actions taken by the
board or committee may be executed by telex, telecopy or other facsimile
transmission, and such facsimile shall be valid and binding to the same extent
as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
3.12 APPROVAL OF LOANS TO OFFICERS.
The corporation may lend money to, or guarantee any obligation of,
or otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, 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; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of
the whole board, designate one or more committees, with 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. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors or in the Bylaws of the
corporation, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (a) approve or adopt, or recommend to the stockholders, any action
or matter expressly required under the Delaware General Corporation Law to be
submitted to stockholders for approval, or (b) adopt, amend or repeal any Bylaw
of the corporation.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held
and taken in accordance with, the provisions of Section 3.5 (place of meetings
and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.
4.4 OUTSIDE DIRECTORS COMMITTEE.
The Restated Certificate of Incorporation of the Company (the
"RESTATED CERTIFICATE") currently provides that the Board of Directors shall
consist of seven members, of
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which two members shall be elected by (and may only be removed by) the holders
of the Series A Preferred Stock, voting as a single class on an as-converted to
Common Stock basis (the "SERIES A DIRECTORS"); two members shall be elected by
(and may only be removed by) the holders of Common Stock, voting as a single
class (the "COMMON DIRECTORS"); and three members shall be elected by (and may
only be removed by) the holders of Common Stock and Preferred Stock, voting as a
single class on an as-converted to Common Stock basis (the "INDEPENDENT
DIRECTORS"). The Series A Directors and Independent Directors are referred to
herein as the "OUTSIDE DIRECTORS." For so long as: (i) Chancellor LGT Asset
Management and its affiliates continue to hold at least 80% of the shares of
Series A Preferred Stock held by them immediately after the closing of a Series
A Preferred Stock financing on or about June 6, 1997 (the "SERIES A FINANCING"),
as adjusted for stock splits, combinations and the like, and (ii) Alta Partners
and its affiliates continue to hold at least 80% of the shares of Series A
Preferred Stock held by them immediately after the closing of the Series A
Financing, as adjusted for stock splits, combinations and the like, there shall
be a committee of the Board of Directors, comprised of the Outside Directors
(the "OUTSIDE DIRECTORS COMMITTEE"), and
(a) the corporation shall not, without the unanimous approval of
the Outside Directors Committee, undertake any (i) acquisition (by purchase,
lease or other disposition) of all or substantially all the assets of any other
entity, or (ii) transaction or series of transactions whereby the corporation or
its stockholders immediately prior thereto acquire fifty percent (50%) or more
of any other entity's voting power (each of (i) and (ii) is an "ACQUISITION") in
which the fair market value (as determined in good faith by the corporation's
Board of Directors) of the consideration paid by the corporation with respect to
such Acquisition is in excess of $2 million, and
(b) the Outside Directors shall have the right to elect and
remove the Chief Executive Officer of the corporation.
ARTICLE V
OFFICERS
5.1 OFFICERS.*
The officers of the corporation shall be a chief executive
officer, a president, a secretary, and a chief financial officer. The
corporation may also have, at the discretion of the Board of Directors, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these Bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS.
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
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5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the corporation under any
contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the Board of Directors and shall have the general powers and
duties of management usually vested in the office of chief executive officer of
a corporation and shall have such other powers and duties as may be prescribed
by the Board of Directors or these bylaws.
5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in
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the office of president of a corporation and such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
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5.10 CHIEF FINANCIAL OFFICER.*
The chief financial officer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts
of the properties and business transactions of the corporation, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital retained earnings, and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the same and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or shall
shall disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or
the directors, upon request, an account of all his or her transactions as
chief financial officer and of the financial condition of the corporation,
and shall have other powers and perform such other duties as may be
prescribed by the Board of Directors or the bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by the person
having such authority.
5.12 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER
AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or was
a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS.
The corporation shall have the power, to the maximum extent and in
the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and
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agents (other than directors and officers) against expenses (including
attorneys' fees), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding, arising by reason of the
fact that such person is or was an agent of the corporation. For purposes of
this Section 6.2, an "employee" or "agent" of the corporation (other than a
director or officer) includes any person (a) who is or was an employee or agent
of the corporation, (b) who is or was serving at the request of the corporation
as an employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (c) who was an employee or agent of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately be
determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 INSURANCE.
The corporation may 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 or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the
certificate of incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time
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of the accrual of the alleged cause of the action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The corporation shall, either at its principal executive offices or
at such place or places as designated by the Board of Directors, keep a record
of its stockholders listing their names and addresses and the number and class
of shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and records,
the stock ledger, and the stock list and to make copies or extracts therefrom.
The Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
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ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these
Bylaws, may authorize any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the chief executive officer or the president or
vice-president, and by the chief financial officer or an assistant treasurer, or
the secretary or an assistant secretary of such corporation representing the
number of shares registered in certificate form. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon
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partly paid shares of the same class, but only upon the basis of the percentage
of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
8.5 LOST CERTIFICATES.
Except as provided in this Section 8.5, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and cancelled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS.
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
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The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include but
not be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors and may be changed by the Board of Directors.
8.9 SEAL.
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact
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that such power has been so conferred upon the directors shall not divest the
stockholders of the power, nor limit their power to adopt, amend or repeal
Bylaws.
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CERTIFICATE OF AMENDMENT
TO THE BYLAWS OF
LJL BIOSYSTEMS, INC.
The undersigned, being the Secretary of LJL BioSystems, Inc., a Delaware
corporation, hereby certifies that the Board of Directors of the corporation
approved the amendment of Article III, Section 3.2 of the Bylaws of the
corporation to read in its entirety as follows, effective as of the date
indicated below:
"3.2 NUMBER OF DIRECTORS
Upon the adoption of these bylaws, the number of directors
constituting the entire Board of Directors shall be seven.
Thereafter, this number may be changed by a resolution of the Board
of Directors or of the stockholders, subject to Section 3.4 of these
Bylaws. No reduction of the authorized number of directors shall
have the effect of removing any director before such director's term
of office expires."
Date: May 29, 1997
/s/ Galina Leytes
-----------------------------------
Galina Leytes, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE BYLAWS OF
LJL BIOSYSTEMS, INC.
The undersigned, being the Secretary of LJL BioSystems, Inc., a Delaware
corporation, hereby certifies that the Board of Directors of the corporation
approved the amendment of Article V, Sections 5.1 and 5.10 of the Bylaws of the
corporation to read in their entirety as follows, effective as of the date
indicated below:
"5.1 OFFICERS.
The officers of the corporation shall be a chief executive
officer, a president and a secretary. The corporation may also
have, at the discretion of the Board of Directors, a chief financial
officer, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and any such other
officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by
the same person."
"5.10 CHIEF FINANCIAL OFFICER.
If appointed pursuant to Article V, Section 5.1, the chief
financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of
the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital retained earnings, and shares.
The books of account shall at all reasonable times be open to
inspection by any director.
The chief financial officer shall deposit all moneys and
other valuables in the name and to the credit of the corporation
with such depositories as may be designated by the Board of
Directors. He or she shall disburse the funds of the corporation as
may be ordered by the Board of Directors, shall render to the
president, the chief executive officer, or the directors, upon
request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation,
and shall have other powers and perform such other duties as may be
prescribed by the Board of Directors of the bylaws."
Date: December 16, 1997
/s/ Mark Weeks
-------------------------------
Mark Weeks, Secretary
<PAGE>
FORM OF AMENDED AND RESTATED
BYLAWS
OF
LJL BIOSYSTEMS, INC.
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I - CORPORATE OFFICES . . . . . . . . . . . . . . 3
1.1 Registered Office. . . . . . . . . . . . . . . . 3
1.2 Other Offices. . . . . . . . . . . . . . . . . . 3
ARTICLE II - MEETINGS OF STOCKHOLDERS . . . . . . . . . . 3
2.1 Place Of Meetings. . . . . . . . . . . . . . . . 3
2.2 Annual Meeting . . . . . . . . . . . . . . . . . 3
2.3 Special Meeting. . . . . . . . . . . . . . . . . 3
2.4 Manner Of Giving Notice; Affidavit Of Notice . . 4
2.5 Advance Notice of Stockholder Nominees . . . . . 4
2.6 Quorum . . . . . . . . . . . . . . . . . . . . . 5
2.7 Adjourned Meeting; Notice. . . . . . . . . . . . 5
2.8 Conduct Of Business. . . . . . . . . . . . . . . 6
2.9 Voting . . . . . . . . . . . . . . . . . . . . . 6
2.10 Waiver Of Notice. . . . . . . . . . . . . . . . 6
2.11 Record Date For Stockholder Notice; Voting. . . 6
2.12 Proxies . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - DIRECTORS . . . . . . . . . . . . . . . . . 7
3.1 Powers . . . . . . . . . . . . . . . . . . . . . 7
3.2 Number Of Directors. . . . . . . . . . . . . . . 7
3.3 Election, Qualification And Term Of Office
Of Directors. . . . . . . . . . . . . . . . . . 8
3.4 Resignation And Vacancies. . . . . . . . . . . . 8
3.5 Place Of Meetings; Meetings By Telephone . . . . 9
3.6 Regular Meetings . . . . . . . . . . . . . . . . 9
3.7 Special Meetings; Notice . . . . . . . . . . . . 9
3.8 Quorum . . . . . . . . . . . . . . . . . . . . . 10
3.9 Waiver Of Notice . . . . . . . . . . . . . . . . 10
3.10 Board Action By Written Consent
Without A Meeting. . . . . . . . . . . . . . . 10
3.11 Fees And Compensation Of Directors. . . . . . . 10
3.12 Approval Of Loans To Officers . . . . . . . . . 11
3.13 Removal Of Directors. . . . . . . . . . . . . . 11
3.14 Chairman Of The Board Of Directors. . . . . . . 11
ARTICLE IV - COMMITTEES . . . . . . . . . . . . . . . . . 11
4.1 Committees Of Directors. . . . . . . . . . . . . 11
4.2 Committee Minutes. . . . . . . . . . . . . . . . 12
4.3 Meetings And Action Of Committees. . . . . . . . 12
ARTICLE V - OFFICERS. . . . . . . . . . . . . . . . . . . 13
5.1 Officers . . . . . . . . . . . . . . . . . . . . 13
5.2 Appointment Of Officers. . . . . . . . . . . . . 13
5.3 Subordinate Officers . . . . . . . . . . . . . . 13
5.4 Removal And Resignation Of Officers. . . . . . . 13
5.5 Vacancies In Offices . . . . . . . . . . . . . . 13
5.6 Chief Executive Officer. . . . . . . . . . . . . 14
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<PAGE>
TABLE OF CONTENTS
(continued)
PAGE
----
5.7 President. . . . . . . . . . . . . . . . . . . . 14
5.8 Vice Presidents. . . . . . . . . . . . . . . . . 14
5.9 Secretary. . . . . . . . . . . . . . . . . . . . 14
5.10 Chief Financial Officer . . . . . . . . . . . . 15
5.11 Representation Of Shares Of Other Corporations. 15
5.12 Authority And Duties Of Officers. . . . . . . . 16
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS. . . . . . . . . . 16
6.1 Indemnification Of Directors And Officers. . . . 16
6.2 Indemnification Of Others. . . . . . . . . . . . 16
6.3 Payment Of Expenses In Advance . . . . . . . . . 16
6.4 Indemnity Not Exclusive. . . . . . . . . . . . . 17
6.5 Insurance. . . . . . . . . . . . . . . . . . . . 17
6.6 Conflicts. . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII - RECORDS AND REPORTS . . . . . . . . . . . . 17
7.1 Maintenance And Inspection Of Records. . . . . . 17
7.2 Inspection By Directors. . . . . . . . . . . . . 18
7.3 Annual Statement To Stockholders . . . . . . . . 18
ARTICLE VIII - GENERAL MATTERS. . . . . . . . . . . . . . 18
8.1 Checks . . . . . . . . . . . . . . . . . . . . . 18
8.2 Execution Of Corporate Contracts And
Instruments . . . . . . . . . . . . . . . . . . 18
8.3 Stock Certificates; Partly Paid Shares . . . . . 19
8.4 Special Designation On Certificates. . . . . . . 19
8.5 Lost Certificates. . . . . . . . . . . . . . . . 20
8.6 Construction; Definitions. . . . . . . . . . . . 20
8.7 Dividends. . . . . . . . . . . . . . . . . . . . 20
8.8 Fiscal Year. . . . . . . . . . . . . . . . . . . 20
8.9 Seal . . . . . . . . . . . . . . . . . . . . . . 20
8.10 Transfer Of Stock . . . . . . . . . . . . . . . 20
8.11 Stock Transfer Agreements . . . . . . . . . . . 21
8.12 Registered Stockholders . . . . . . . . . . . . 21
ARTICLE IX - AMENDMENTS . . . . . . . . . . . . . . . . . 21
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<PAGE>
FORM OF AMENDED AND RESTATED
BYLAWS
OF
LJL BIOSYSTEMS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE.
The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, Dover, Delaware, County of Kent. The name of
its registered agent at such address is Incorporating Services, Ltd.
1.2 OTHER OFFICES.
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 ANNUAL MEETING.
The annual meeting of stockholders shall be held on such date, time
and place, either within or without the State of Delaware, as may be designated
by resolution of the Board of Directors from time to time. At the meeting,
directors shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING.
(a) A special meeting of the stockholders may be called at any time
by the Board of Directors, the chairman of the board or the president or by one
or more stockholders holding shares in the aggregate entitled to cast not less
than ten percent of the votes at that meeting.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the chairman of the board or the president, the
request shall be in writing,
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specifying the time of such meeting and the general nature of the business
proposed to be transacted, and shall be delivered personally or sent by
registered mail or by telegraphic or other facsimile transmission to the
chairman of the board, the president, any vice president, or the secretary of
the corporation. No business may be transacted at such special meeting
otherwise than as specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled
to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this
Article II, that a meeting will be held at the time requested by the person
or persons calling the meeting, not less than thirty-five (35) nor more than
sixty (60) days after the receipt of the request. If the notice is not given
within twenty (20) days after the receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 2.3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the
Board of Directors may be held.
(c) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
notice of meeting given in accordance with Section 2.3(b). Nominations of
persons for election to the board of directors may be made at a special meeting
of stockholders at which directors are to be selected pursuant to such notice
of meeting (i) by or at the direction of the board of directors or (ii) by any
stockholder of the corporation who is a stockholder of record at the time of
giving of notice provided for in this paragraph, who shall be entitled to vote
at the meeting and who complies with the notice procedures set forth in Section
2.5.
2.4 NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE.
All notices of meetings of stockholders shall be in writing and shall
be sent or otherwise given in accordance with this Section 2.4 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting (or such longer or
shorter time as is required by Section 2.5 of these Bylaws, if applicable).
The notice shall specify the place, date, and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
Written notice of any meeting of stockholders, if mailed, is given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES.
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 2.5. 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.
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<PAGE>
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation not less than
sixty (60) days nor more than ninety (90) days prior to the meeting;
provided, however, that in the event that less than sixty (60) days' notice
or prior public disclosure of the date of the 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 10th day following the day on which
such notice of the date of the meeting was mailed or such public disclosure
was made. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
Director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the corporation which are beneficially owned by
such person and (iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of
Directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including, without
limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (b) as
to the stockholder giving the notice (i) the name and address, as they appear
on the corporation's books, of such stockholder and (ii) the class and number
of shares of the corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors any person nominated
by the Board of Directors for election as a director shall furnish to the
secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this Section 2.5.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine, he
or she shall so declare to the meeting and the defective nomination shall be
disregarded.
2.6 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 or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (a) the chairman of the meeting or (b) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE.
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the
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<PAGE>
corporation may transact any business that might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or
if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder
of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting
and the conduct of business.
2.9 VOTING.
(a) The stockholders entitled to vote at any meeting of stockholders
shall be determined in accordance with the provisions of Section 2.11 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
(b) Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.10 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action. If the Board
of Directors does not so fix a record date:
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(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
2.12 PROXIES.
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
ARTICLE III
DIRECTORS
3.1 POWERS.
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction
of the Board of Directors.
3.2 NUMBER OF DIRECTORS.
Upon the adoption of these Bylaws, the number of directors
constituting the entire Board of Directors shall be seven (7). Thereafter,
this number may be changed by a resolution of the Board of Directors or of the
stockholders, subject to Section 3.4 of these Bylaws. No reduction of the
authorized number of directors shall have the effect of removing any director
before such director's term of office expires.
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3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.
Except as provided in Section 3.4 of these Bylaws or the Company's
Certificate of Incorporation, directors shall be elected at each annual
meeting of stockholders to hold office until the next annual meeting.
Directors need not be stockholders unless so required by the certificate of
incorporation or these Bylaws, wherein other qualifications for directors may
be prescribed. Each director, including a director elected to fill a
vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES.
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in this section in the filling of other
vacancies. A vacancy created by the removal of a director by the vote of the
stockholders or by court order may be filled only by the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively also constitute a majority
of the quorum). Each director so elected shall hold office until the next
annual meeting of the stockholders at which the term of office of the class to
which they have been elected expires and until a successor has been elected and
qualified.
Unless otherwise provided in the certificate of incorporation or
these Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the certificate of incorporation or these
Bylaws, or may apply to the Court of Chancery for a decree summarily ordering
an election as provided in Section 211 of the General Corporation Law of
Delaware.
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If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE.
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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3.8 QUORUM.
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the board 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. Written consents representing actions
taken by the board or committee may be executed by telex, telecopy or other
facsimile transmission, and such facsimile shall be valid and binding to the
same extent as if it were an original.
3.11 FEES AND COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
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3.12 APPROVAL OF LOANS TO OFFICERS.
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
3.13 REMOVAL OF DIRECTORS.
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, 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; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 CHAIRMAN OF THE BOARD OF DIRECTORS.
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with 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. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in
the resolution of the Board of Directors or in the Bylaws of the corporation,
shall have and may exercise all the powers and authority of the Board
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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 that may require it; but no such committee shall have the power or
authority to (a) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board of
Directors as provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation or fix the
number of shares of any series of stock or authorize the increase or decrease
of the shares of any series), (b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (d)
recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (e) amend the Bylaws of the corporation; and,
unless the board resolution establishing the committee, the Bylaws or the
certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance
of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES.
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES.
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of
the committee. The Board of Directors may adopt rules for the government of
any committee not inconsistent with the provisions of these Bylaws.
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ARTICLE V
OFFICERS
5.1 OFFICERS.
The officers of the corporation shall be a chief executive officer,
a president and a secretary. The corporation may also have, at the
discretion of the Board of Directors, a chief financial officer, one or more
vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and any such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these Bylaws. Any number of offices
may be held by the same person.
5.2 APPOINTMENT OF OFFICERS.
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS.
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these Bylaws or as the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any
resignation is without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES.
Any vacancy occurring in any office of the corporation shall be
filled by the Board of Directors.
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5.6 CHIEF EXECUTIVE OFFICER.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation shall, subject to the control of the Board of
Directors, have general supervision, direction, and control of the business and
the officers of the corporation. He or she shall preside at all meetings of
the stockholders and, in the absence or nonexistence of a chairman of the
board, at all meetings of the Board of Directors and shall have the general
powers and duties of management usually vested in the office of chief executive
officer of a corporation and shall have such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.
5.7 PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control
of the business and other officers of the corporation. He or she shall have
the general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be
prescribed by the Board of Directors or these Bylaws.
5.8 VICE PRESIDENTS.
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors, these Bylaws, the president or the chairman of the
board.
5.9 SECRETARY.
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show
the time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names
of all stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
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The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the corporation,
if one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.
5.10 CHIEF FINANCIAL OFFICER.
If appointed pursuant to Article V, Section 5.1, the chief
financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.
5.11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority
granted herein may be exercised either by such person directly or by any other
person authorized to do so by proxy or power of attorney duly executed by the
person having such authority.
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5.12 AUTHORITY AND DUTIES OF OFFICERS.
In addition to the foregoing authority and duties, all officers of
the corporation shall respectively have such authority and perform such duties
in the management of the business of the corporation as may be designated from
time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or
was a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS.
The corporation shall have the power, to the maximum extent and in
the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (a) who is
or was an employee or agent of the corporation, (b) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE.
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance
of the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately
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be determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation.
6.5 INSURANCE.
The corporation may 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 or her and incurred
by him or her in any such capacity, or arising out of his or her status as
such, whether or not the corporation would have the power to indemnify him or
her against such liability under the provisions of the General Corporation Law
of Delaware.
6.6 CONFLICTS.
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the
certificate of incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS.
The corporation shall, either at its principal executive offices or
at such place or places as designated by the Board of Directors, keep a record
of its stockholders listing their names and addresses and the number and class
of shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
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Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean
a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
7.2 INSPECTION BY DIRECTORS.
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether
a director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS.
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
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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.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the
Board of Directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the corporation by the chairman or
vice-chairman of the Board of Directors, or the chief executive officer or the
president or vice-president, and by the chief financial officer or an assistant
treasurer, or the secretary or an assistant secretary of such corporation
representing the number of shares registered in certificate form. Any or all
of the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total
amount of the consideration to be paid therefor and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully paid shares,
the corporation shall declare a dividend upon partly paid shares of the same
class, but only upon the basis of the percentage of the consideration
actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES.
If the corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock; provided,
however, that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements there may be
set forth on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
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8.5 LOST CERTIFICATES.
Except as provided in this Section 8.5, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the corporation and canceled at the same time. The
corporation may issue a new certificate of stock or uncertificated shares in
the place of any certificate previously issued by it, alleged to have been
lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or the owner's legal representative, to
give the corporation a bond sufficient to indemnify it against any claim that
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate or uncertificated
shares.
8.6 CONSTRUCTION; DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS.
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the
funds of the corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include
but not be limited to equalizing dividends, repairing or maintaining any
property of the corporation, and meeting contingencies.
8.8 FISCAL YEAR.
The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors and may be changed by the Board of Directors.
8.9 SEAL.
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK.
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession,
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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 in its books.
8.11 STOCK TRANSFER AGREEMENTS.
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock
of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS.
The corporation shall be entitled to recognize the exclusive right of
a person registered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
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LJL BIOSYSTEMS, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
JUNE 17, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
1. Restatement of Existing Rights Agreement. . . . . . . . . . . . . . . . . 1
2. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Request for Registration . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Obligations of the Company . . . . . . . . . . . . . . . . . . . . . 5
2.6 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . . 8
2.9 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Reports Under Securities Exchange Act of 1934 . . . . . . . . . . .11
2.12 Assignment of Registration Rights . . . . . . . . . . . . . . . . .11
2.13 "Market Stand-Off" Agreement. . . . . . . . . . . . . . . . . . . .12
2.14 Termination of Registration Rights. . . . . . . . . . . . . . . . .13
3. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . .13
3.1 Delivery of Financial Statements . . . . . . . . . . . . . . . . . .13
3.2 Board Observer Rights. . . . . . . . . . . . . . . . . . . . . . . .14
3.3 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . .14
3.4 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . .16
4. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .16
4.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . .16
4.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . .17
4.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.9 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . .17
<PAGE>
LJL BIOSYSTEMS, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the "AGREEMENT") is
made as of the 17th day of June, 1997, by and among LJL BioSystems, Inc., a
Delaware corporation (the "COMPANY"), the investors listed on EXHIBIT A hereto,
each of which is herein referred to as an "INVESTOR," and Lev Leytes and Galina
Leytes, each of whom is herein referred to as a "FOUNDER."
RECITALS
1. The Company and certain of the Investors (the "EXISTING INVESTORS")
entered into a Series A Preferred Stock Purchase Agreement on June 6, 1997 (the
"PURCHASE AGREEMENT"), pursuant to which the Company sold the Existing Investors
shares of the Company's Series A Preferred Stock. Concurrently with the
execution of the Purchase Agreement, the Company, the Founders and the Existing
Investors entered into an existing Investors' Rights Agreement (the "EXISTING
RIGHTS AGREEMENT") in order to provide (i) the Existing Investors with certain
rights to register shares of the Company's Common Stock issuable upon conversion
of the Series A Preferred Stock held by the Investors, (ii) certain of the
Existing Investors with certain rights to receive information pertaining to the
Company, and (iii) certain of the Existing Investors with a right of first offer
with respect to certain issuances by the Company of its securities.
2. Concurrently herewith the Company and the Investors are entering into
an Amended and Restated Series A Preferred Stock Purchase Agreement (the
"AMENDED PURCHASE AGREEMENT"), pursuant to which the Company shall sell, and
certain of the Investors (the "ADDITIONAL INVESTORS") shall acquire, shares of
the Company's Series A Preferred Stock. A condition to the Additional
Investors' obligations under the Amended Purchase Agreement is that the Company,
the Founders and the Investors amend and restate the Existing Rights Agreement
in order to include the Additional Investors as parties, and the Company, the
Founders and the Investors desire to do so.
AGREEMENT
1. RESTATEMENT OF EXISTING RIGHTS AGREEMENT.
Pursuant to Section 3.7 of the Existing Rights Agreement, the
Company, the Founders and the undersigned Existing Investors, being the holders
of the requisite majority of the outstanding Registrable Securities other than
the Founders' Stock (as defined in the Existing Rights Agreement), hereby:
(i) waive the right of first offer contained in Section 2.3 of the Existing
Rights Agreement (including notice requirements) with respect to the issuance of
the shares of Series A Preferred Stock to the Additional Investors and the
issuance of an additional warrant to purchase shares of Series A Preferred Stock
to Montgomery Securities in connection with the closing of the Amended Purchase
Agreement, and (ii) amend and restate the Existing Rights Agreement to read in
its entirety as set forth in this Agreement.
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2. REGISTRATION RIGHTS. The Company and the Investors covenant and
agree as follows:
2.1 DEFINITIONS. For purposes of this Section 2:
(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 of 1933, as
amended (the "ACT"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "REGISTRABLE SECURITIES" means (i) the shares
of Common Stock issuable or issued upon conversion of the Series A Preferred
Stock (the "STOCK"), (ii) any other shares of 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, the Stock, and (iii) the shares of
Common Stock issued to the Founders (the "FOUNDERS' STOCK"), PROVIDED, HOWEVER,
that for the purposes of Section 2.2 or 2.4, the Founders' Stock shall not be
deemed Registrable Securities and the Founders shall not be deemed Holders and
PROVIDED, FURTHER, that the foregoing definition shall exclude in all cases any
Registrable Securities sold by a person in a transaction in which his or her
rights under this Agreement are not assigned. Notwithstanding the foregoing,
Common Stock or other securities shall only be treated as Registrable Securities
if and so long as they have not been (A) sold to or through a broker or dealer
or underwriter in a public distribution or a public securities transaction, or
(B) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Act under Section 4(1) thereof so that all transfer
restrictions, and restrictive legends with respect thereto, if any, are removed
upon the consummation of such sale;
(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, Registrable
Securities;
(d) The term "HOLDER" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 2.12 hereof;
(e) The term "FORM S-3" means such form under the Act as in
effect on the date hereof or any successor form under the Act; and
(f) The term "SEC" means the Securities and Exchange
Commission.
2.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after the
earlier of (i) June 6, 1999, or (ii) one (1) year after the effective date of
the first registration statement filed
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with the SEC pursuant to the Act for a firmly underwritten initial 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 an SEC Rule 145
transaction), a written request from the Holders of a majority of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least fifty percent
(50%) of the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $5,000,000), then the Company shall, within ten
(10) days after the receipt thereof, give written notice of such request to all
Holders and shall, subject to the limitations of subsection 2.2(b), use its best
efforts to effect as soon as practicable, and in any event within 60 days after
the receipt of such request, the registration under the Act of all Registrable
Securities that the Holders request to be registered within twenty (20) days
after the mailing of such notice by the Company in accordance with Section 4.5.
(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 2.2 and the
Company shall include such information in the written notice referred to in
subsection 2.2(a). The underwriter will be selected by mutual agreement of a
majority in interest of the Initiating Holders and the Company. 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 2.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 2.2, 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 that 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) Notwithstanding the foregoing, if the Company shall
furnish to Holders requesting a registration statement pursuant to this
Section 2.2, a certificate signed by the President of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its 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 90 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-month period.
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(d) In addition, the Company shall not be obligated to
effect, or to take any action to effect, any registration pursuant to this
Section 2.2:
(i) After the Company has effected two (2)
registrations pursuant to this Section 1.2 and such registrations have been
declared or ordered effective;
(ii) During the period starting with the date sixty
(60) days prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective date of,
a registration subject to Section 2.3 hereof; PROVIDED that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 2.4 below.
2.3 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 under the Act in connection with the firmly underwritten 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 transaction
covered by Rule 145 under the Act, a registration in which the only stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered, or any registration on any form that 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 4.5,
the Company shall, subject to the provisions of Section 2.8, cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive
from any Holder or Holders of a majority of the Registrable Securities then
outstanding 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
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<PAGE>
15 days after receipt of such written notice from the Company; PROVIDED,
HOWEVER, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 2.4: (1) if
Form S-3 is not available for such offering by the Holders; (2) 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 $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
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 90 days after receipt of
the request of the Holder or Holders under this Section 2.4; PROVIDED, HOWEVER,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 2.4; (5) if the Company has already effected
three registrations on Form S-3 for the Holders pursuant to this Section 2.4; or
(6) 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. Registrations effected pursuant to this
Section 2.4 shall not be counted as demands for registration or registrations
effected pursuant to Sections 2.2 or 2.3, respectively.
2.5 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 2 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.
The Company shall not be required to file, cause to become effective or maintain
the effectiveness of any registration statement that contemplates a distribution
of securities on a delayed or continuous basis pursuant to Rule 415 under the
Act.
(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 Act with respect to the disposition of all securities covered
by such registration statement for up to one hundred twenty (120) days.
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<PAGE>
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 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 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 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, such
obligation to continue for one hundred twenty (120) days.
(g) 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.
(h) 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.
(i) Use its best efforts to 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 2, 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.
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2.6 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities. The Company shall have no obligation with respect to
any registration requested pursuant to Section 2.2 or Section 2.4 of this
Agreement if, as a result of the application of the preceding sentence, the
number of shares or the anticipated aggregate offering price of the Registrable
Securities to be included in the registration does not equal or exceed the
number of shares or the anticipated aggregate offering price required to
originally trigger the Company's obligation to initiate such registration as
specified in subsection 2.2(a) or subsection 2.4(b)(2), whichever is applicable.
2.7 EXPENSES OF REGISTRATION.
(a) DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 2.2, 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 independent 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 2.2 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 2.2 or such
withdrawal is based upon a material adverse change in the condition, business or
prospects of the Company of which the Initiating Holders were not aware at the
time of such request and the Initiating Holders have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change.
(b) 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 2.3 for each Holder (which right may be assigned as provided
in Section 2.12), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees relating or apportionable
thereto and the reasonable fees and disbursements of one counsel for the selling
Holders selected by them with the approval of the Company, which approval shall
not be unreasonably withheld, but excluding underwriting discounts and
commissions relating to Registrable Securities.
(c) REGISTRATION ON FORM S-3. All expenses incurred in
connection with a registration requested pursuant to Section 2.4, including
(without limitation) all registration, filing, qualification, printers' and
accounting fees and the reasonable fees and disbursements of one independent
counsel for the selling Holder or Holders and counsel for the
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Company, but excluding any underwriters' discounts or commissions associated
with Registrable Securities, shall be borne by the Company.
2.8 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 2.3 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 (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
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 determine in their sole discretion is
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, that the underwriters determine in their sole discretion
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 the amount of securities of the
selling Holders included in the offering be reduced below fifteen percent (15%)
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 entirely if the underwriters make
the determination described above; and PROVIDED FURTHER that the Founders shall
be excluded entirely from selling shares in a public offering before selling
holders of Registrable Securities other than the Founders are excluded
therefrom. 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 shares carrying registration rights owned by all
entities and individuals included in such "selling stockholder," as defined in
this sentence.
2.9 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 2.
2.10 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), against any
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<PAGE>
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "VIOLATION"): (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 Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Act, the Exchange
Act or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, 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 2.10(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, 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 Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 2.10(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 2.10(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 2.10(b)
exceed the net proceeds from the offering received by such Holder, except in the
case of willful fraud by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 2.10 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 2.10, deliver to
the indemnifying party a written notice of the
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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 which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable 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 2.10, 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 2.10.
(d) If the indemnification provided for in this
Section 2.10 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; provided, that, in no event shall any contribution by
a Holder under this Subsection 2.10(d) exceed the net proceeds from the offering
received by such Holder, except in the case of willful fraud by such Holder.
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 2.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
2.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the
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<PAGE>
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 SEC 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 so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;
(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;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the 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 SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the 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.
2.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register Registrable Securities pursuant to this Section 2 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of at least 1,000,000 shares of such securities, provided 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; and PROVIDED,
FURTHER, that 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 Act, and PROVIDED, FURTHER, that, except for
transfers of such shares as a result of distributions to its partners or for
estate planning purposes, without the consent of the Board of Directors, the
Holder may only assign such rights to a person or entity that is primarily in a
financial or investment business until the closing of the Company's initial
public offering, PROVIDED FURTHER that after the closing of such initial public
offering Holder shall not sell such shares in a private transaction (ie not an
open market sale or pursuant to a registration statement) to an entity that,
itself or through a subsidiary, is primarily engaged in the business of
developing and manufacturing automated instrumentation systems for clinical,
research and drug development applications (a
-11-
<PAGE>
"COMPETITOR") unless the Holder holds less than 5% of the outstanding capital
stock. 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 Section 2.
2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that, during the period of duration (up to, but not exceeding, 180 days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Act, it shall not, to the extent requested by the
Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company that covers Common Stock (or other
securities) to be sold on its behalf to the public in a firm commitment
underwritten public offering yielding gross proceeds of at least $15,000,000 and
with a per share offering price of at least $3.00 per share (a "QUALIFIED
INITIAL PUBLIC OFFERING"); and
(b) all officers and directors of the Company and all
Founders (including affiliates) enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 2.13.
Notwithstanding the foregoing, the obligations described in this
Section 2.13 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.
2.14 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in this Section 2 after the earlier
of (i) four (4) years following the consummation of the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the initial firm commitment underwritten offering of
-12-
<PAGE>
its securities to the general public, or (ii) such time as Rule 144 or another
similar exemption under the Act is available for the sale of all of such
Holder's shares during a three (3)-month period without registration and the
Company's Common Stock is traded on a national exchange or the Nasdaq National
Market.
3. COVENANTS OF THE COMPANY.
3.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall
deliver to each Investor holding, and to transferees of, at least 1,500,000
shares of Series A Preferred Stock:
(a) as soon as practicable after the end of each fiscal
year of the Company, an income statement for such fiscal year, a balance sheet
of the Company and statement of stockholder's equity 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 an independent
public accounting firm of nationally recognized standing selected by the
Company;
(b) as soon as practicable after the end of each of the
first three (3) quarters of each fiscal year of the Company, an unaudited profit
or loss statement, a statement of cash flows for such fiscal quarter and an
unaudited balance sheet as of the end of such fiscal quarter;
(c) as soon as practicable prior to the end of each
fiscal year, a budget for the next fiscal year, prepared on a monthly basis,
including balance sheets and sources and applications of funds statements for
such months;
(d) with respect to the financial statements called for
in subsection (b) of this Section 3.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared substantially in accordance with GAAP consistently
applied with prior practice for earlier periods (with the exception of footnotes
that may be required by GAAP) and fairly present the financial condition of the
Company and its results of operation for the period specified, subject to
year-end audit adjustment, PROVIDED that the foregoing shall not restrict the
right of the Company to change its accounting principles consistent with GAAP,
if the Board of Directors determines that it is in the best interest of the
Company to do so; and
PROVIDED, HOWEVER, that the Company shall not be obligated under any subsection
of Section 3.1 to provide information that it deems in good faith to be a trade
secret or similar confidential information.
3.2 BOARD OBSERVER RIGHTS. If an Investor is not directly
represented on the Company's Board of Directors and such Investor holds at least
1,500,000 shares of Series A Preferred Stock,
(a) the Company shall invite one representative of
Investor to attend all regular meetings of its Board of Directors in a nonvoting
observer capacity, and, in this
-13-
<PAGE>
respect, shall give such representative copies of all notices and information
that the Company provides to its directors for Board of Directors meetings;
PROVIDED, HOWEVER, that the Company reserves the right to exclude such
representative from any meeting or portion thereof, and deny such representative
access to any material, if the Company believes that such exclusion or denial of
access is reasonably necessary to preserve the attorney-client privilege, to
protect confidential proprietary information, material non-public information or
for other similar reasons. The Company shall promptly notify Investor of any
actions taken by the Board of Directors in lieu of a meeting.
(b) Investor agrees, and will require any representative
of Investor to agree in writing, to hold in confidence and trust and not use or
disclose any confidential information provided to Investor or learned in
connection with Investor's rights under this Agreement, PROVIDED HOWEVER, that
parties may disclose such information to partners, parents, subsidiaries or
affiliates (provided that none of such third persons is a competitor of the
Company) solely for the purpose of evaluating the investment in the Company and
PROVIDED that such person is subject to an agreement with such party that
requires such person to keep such information confidential. Confidential
information does not include information, technical data or know-how that (i) is
in the possession of Investor at the time of disclosure as shown by Investor's
files and records immediately prior to the time of disclosure; (ii) prior or
after the time of disclosure becomes public knowledge, not as a result of any
action or inaction of the receiving party; (iii) is approved for release by
Company; or (iv) is required to be produced by Investor pursuant to statute,
regulation, subpoena, criminal or civil investigative demand or similar process,
PROVIDED that Investor provides the Company with prompt written notice of such
requirement so that the Company may seek (with the cooperation and reasonable
efforts of Investor) a protective order, confidential treatment or other
appropriate remedy.
(c) The confidentiality provisions hereof with respect to
any confidential information shall survive for a period of five years after the
disclosure of such confidential information.
3.3 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 3.3, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this
Section 3.3, a "MAJOR INVESTOR" shall mean any person who holds at least
1,000,000 shares of Series A Preferred Stock (or the Common Stock issued upon
conversion thereof) issued pursuant to the Purchase Agreement. For purposes of
this Section 3.3, Major Investor includes any general partners and affiliates of
a Major Investor. A Major Investor who chooses to exercise the right of first
offer may designate as purchasers under such right itself or its partners or
affiliates 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 shares of, any class of its
capital stock ("SHARES"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
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<PAGE>
(a) The Company shall deliver a notice by certified mail
("NOTICE") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 15 calendar days after delivery of the Notice,
the Major 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 and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).
(c) The Company may, during the 45-day period following
the expiration of the period provided in subsection 3.3(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, 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 60 days after the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 3.3 shall
not be applicable (i) to the issuance or sale of capital stock (or options
therefor) to employees, consultants or directors, pursuant to plans or
agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, or (ii) to the consummation of the
Company's Qualified Initial Public Offering, or (iii) to the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, or (iv) to the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise, or (v) to the issuance
of securities to financial institutions or other lenders or lessors in
connection with loans, commercial credit arrangements, equipment financings, or
similar transactions, or (vi) to the issuance or sale of the Series A Preferred
Stock and warrants to purchase shares of Series A Preferred Stock to be issued
to Montgomery Securities on or before the date hereof, or (vii) to the issuance
of securities that, with unanimous approval of the Board of Directors of the
Company, are not offered to any existing stockholder of the Company.
3.4 TERMINATION OF COVENANTS. The covenants set forth in
Section 3 shall terminate as to Investors and be of no further force or effect
upon the earliest of: (i) the closing of the Company's Qualified Initial Public
Offering, (ii) the consummation of a merger, acquisition or other change of
control of the Company pursuant to which a Public Market exists for the
Company's capital stock (or other stock issued in exchange therefor) immediately
thereafter. For the purpose of this Agreement, a "PUBLIC MARKET" shall be
deemed to exist if (a) such stock is listed on a national securities exchange
(as that term is used in the Securities Exchange Act of 1934, as amended) or
(b) such stock is traded on the over-the-counter market
-15-
<PAGE>
and prices are published daily on business days in a recognized financial
journal; or (iii) when the Company first becomes subject to the periodic
reporting requirements of Sections 13 or 15(d) of the Exchange Act.
4. MISCELLANEOUS.
4.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, 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
(including transferees of any of the Series A Preferred Stock or any Common
Stock issued upon conversion thereof). 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.
4.2 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto shall be governed, construed and interpreted in
accordance with the laws of the State of California, without giving effect to
principles of conflicts of laws.
4.3 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.
4.4 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.
4.5 NOTICES. Unless otherwise provided, any notice required
or permitted by this Agreement shall be in writing and shall be deemed
sufficient upon delivery, when delivered personally or by overnight courier or
sent by fax, or forty-eight (48) hours after being deposited in the U.S. mail,
as certified or registered mail, with postage prepaid, and addressed to the
party to be notified at such party's address as set forth below or on EXHIBIT A
hereto or as subsequently modified by written notice.
4.6 EXPENSES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
4.7 AMENDMENTS AND WAIVERS. 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
a majority of the Registrable Securities then outstanding, other than the
Founders' Stock; PROVIDED that if such amendment has the effect of affecting the
Founders' Stock (i) in a manner different than securities issued to the
Investors and (ii) in a manner adverse to the interests of the holders of the
Founders' Stock, then such amendment shall require the consent of the holder or
holders of a majority of the Founders' Stock. Any
-16-
<PAGE>
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company.
4.8 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(x) such provision shall be excluded from this Agreement, (y) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (z) the
balance of the Agreement shall be enforceable in accordance with its terms.
4.9 AGGREGATION OF STOCK. All shares of the 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. For the purpose of this Agreement, Chancellor LGT Private Capital
Partners III, L.P., Chancellor LGT Private Capital Offshore Partners II, L.P.
and Citiventure 96 Partnership, L.P. shall be deemed to be affiliates; Alta
California Partners, L.P. and Alta Embarcadero Partners, LLC shall be deemed to
be affiliates; H&Q Healthcare Investors and H&Q Life Sciences Investors shall be
deemed to be affiliates; and MK GVD Fund and Michael D. Kaufman shall be deemed
to be affiliates.
[Signature Page Follows]
-17-
<PAGE>
The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.
COMPANY: INVESTORS:
LJL BioSystems, Inc. CHANCELLOR LGT PRIVATE CAPITAL
PARTNERS III, L.P.
By: CPCP Associates, L.P., its General
Partner
By: /s/ Lev Leytes By: Chancellor LGT Venture Partners, Inc.,
----------------------------- its General Partner
Lev Leytes, President
Address: 404 Tasman By: /s/ Johnston L. Evans
Sunnyvale, CA 94089 ---------------------------------------
Name: Johnston L. Evans
--------------------------------
Title: Managing Director
--------------------------------
FOUNDERS: CHANCELLOR LGT PRIVATE CAPITAL
OFFSHORE PARTNERS II, L.P.
/s/ Lev Leytes By: CPCO Associates, L.P., its General
- ------------------------------- Partner
Lev Leytes By: Chancellor LGT Venture Partners, Inc.,
its General Partner
/s/ Galina Leytes By: /s/ Johnston L. Evans
- ------------------------------- ----------------------------------------
Galina Leytes Name: Johnston L. Evans
---------------------------------
Title: Managing Director
---------------------------------
CITIVENTURE 96 PARTNERSHIP, L.P.
By: Chancellor LGT Asset Management, Inc.,
its Investment Adviser
By: /s/ Johnston L. Evans
----------------------------------------
Name: Johnston L. Evans
---------------------------------
Title: Managing Director
---------------------------------
ALTA CALIFORNIA PARTNERS, L.P.
By: Alta California Management Partners,
L.P.
By: /s/ Jean Deleage
----------------------------------------
General Partner
ALTA EMBARCADERO PARTNERS, LLC
By: /s/ Jean Deleage
----------------------------------------
Member
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
THE MICHAEL F. BIGHAM LIVING
TRUST U/A DD 1/21/93
By: /s/ Michael F. Bigham
----------------------------------------
Name: Michael F. Bigham
Title: Trustee
THE MICHAEL F. BIGHAM
CHARITABLE REMAINDER UNITRUST
DATED 11/23/94
By: /s/ James D. Hake
----------------------------------------
James D. Hake, Trustee
/s/ Michael Kaufman
-------------------------------------------
Michael Kaufman
VLG INVESTMENTS 1997
By: /s/ Josh Pickus
----------------------------------------
Name: Josh Pickus
---------------------------------
Title: Partner
---------------------------------
PMSV L.P.
By: /s/ Paul Brooke
----------------------------------------
Name: Paul Brooke
---------------------------------
Title: G.P.
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
/s/ Craig W. Johnson
-------------------------------------------
Craig W. Johnson
/s/ Mark B. Weeks
-------------------------------------------
Mark B. Weeks
GC&H INVESTMENTS
By: /s/ John L. Cardoza
----------------------------------------
Name: John L. Cardoza
---------------------------------
Title: Executive Partner
---------------------------------
JOSEPH LEYTES, AS TRUSTEE OF
DINA L. LEYTES IRREVOCABLE
TRUST U/A DD 6/21/96
By: /s/ Joseph Leytes
----------------------------------------
Name: Joseph Leytes
---------------------------------
Title: Trustee
---------------------------------
JOSEPH LEYTES, AS TRUSTEE OF
MARY E. LEYTES IRREVOCABLE
TRUST U/A DD 6/21/96
By: /s/ Joseph Leytes
----------------------------------------
Name: Joseph Leytes
---------------------------------
Title: Trustee
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
H&Q HEALTHCARE INVESTORS
By: /s/ Alan G. Carr
----------------------------------------
Its: President
---------------------------------------
H&Q LIFE SCIENCES INVESTORS
By: /s/ Alan G. Carr
----------------------------------------
Its: President
---------------------------------------
MK GVD FUND, a California limited
partnership
By: MK GVD Management, a California
limited partnership
By: /s/ Michael D. Kaufman
----------------------------------------
Michael D. Kaufman
General Partner
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE>
EXHIBIT A
INVESTORS
NAME/ADDRESS NO. OF SHARES
------------ -------------
Chancellor Private Capital III, L.P. 456,154
c/o Chancellor LGT Asset Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Citiventure 96 Partnership, L.P. 1,756,924
c/o Chancellor LGT Asset Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Chancellor LGT Private Capital Offshore Partners II, 863,846
L.P.
c/o Chancellor LGT Asset Management, Inc.
1166 Avenue of the Americas
New York, NY 10036
Alta California Partners, L.P. 1,906,445
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
Alta Embarcadero Partners, LLC 43,555
One Embarcadero Center
Suite 4050
San Francisco, CA 94111
The Michael F. Bigham Living Trust 30,000
c/o Michael F. Bigham
750 Forest Avenue
Palo Alto, CA 94301
The Michael F. Bigham Charitable Remainder 50,000
Unitrust Dated 11/23/94
Tax ID#77-6110990
James D. Hake, Trustee
c/o M. Bigham
750 Forest Avenue
Palo Alto, CA 94301
<PAGE>
NAME/ADDRESS NO. OF SHARES
------------ -------------
Joseph Leytes, as Trustee of 40,000
Dina L. Leytes Irrevocable Trust
u/a dd 6/21/96
443 Tennyson
Palo Alto, CA 94308
Joseph Leytes, as Trustee of 40,000
Mary E. Leytes Irrevocable Trust
u/a dd 6/21/96
443 Tennyson
Palo Alto, CA 94308
Michael Kaufman 76,000
c/o MK Global Ventures
2471 East Bayshore Rd., Suite 520
Palo Alto, CA 94303
PMSV L.P. 19,000
c/o Paul Brooke
Tower Hill Road
Tuxedo Park, NY 10987
VLG Investments 1997 15,200
2800 Sand Hill Road
Menlo Park, CA 94025
Craig Johnson 1,900
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Mark B. Weeks 1,900
c/o Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
GC&H Investments 19,000
1 Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attn: John Cardoza
<PAGE>
NAME/ADDRESS NO. OF SHARES
------------ -------------
H&Q Healthcare Investors 923,077
c/o Hambrecht & Quist Capital Management, Inc.
50 Rowes Wharf, 4th Floor
Boston, MA 02110-3328
H&Q Life Sciences Investors 615,385
c/o Hambrecht & Quist Capital Management, Inc.
50 Rowes Wharf, 4th Floor
Boston, MA 02110-3328
MK GVD Fund 384,615
c/o MK Global Ventures
2471 East Bayshore Road, Suite 520
Palo Alto, CA 94303
TOTAL 7,243,001
<PAGE>
DEVELOPMENT, LICENSE AND SALES AGREEMENT
This DEVELOPMENT, LICENSE, AND SALES AGREEMENT is effective, as of the
5th day of June, 1997, (the "EFFECTIVE DATE") by and between LJL BIOSYSTEMS,
INC, a California corporation having a principal place of business at 404
Tasman Drive, Sunnyvale, California 94089 ("LJL") and FLUORRX, Inc., a Delaware
corporation having a principal place of business at 979 Keystone Way, Carmel,
Indiana 46032 ("FLUORRX").
WITNESSETH:
WHEREAS, LJL possesses certain proprietary information, know-how, patents,
trade secrets, and other intellectual property rights with respect to the
development, use and manufacture of absorbance, fluorescence,
chemiluminescence, and other detection systems;
WHEREAS, FluorRx posses certain proprietary information, know-how, patents
and other intellectual property rights with respect to its Fluorescence Life
Time ("FLT") technology platform developed by [*] and owned or licensed to
FluorRx; and
WHEREAS, LJL desires to develop, manufacture, market, and otherwise
commercialize such FLT technology platform, including incorporating such FLT
technology platform into LJL systems in accordance with the terms and
conditions set forth below.
NOW, in consideration of the mutual promises contained in this Agreement,
the parties hereto agree as follows:
ARTICLE I - DEFINITIONS AND CONSTRUCTION
1.1 The following terms as used hereinafter in this Agreement shall have the
meaning set forth in this Article:
"AFFILIATE" shall mean any person, firm or corporation which controls, is
controlled by or is under common control with FluorRx or LJL as the case may
be, with "control" to mean ownership directly or indirectly of fifty percent
(50%) or more of voting stock or equity interest of the subject entity.
"CONFIDENTIAL INFORMATION" shall mean any information disclosed by one
party (the "DISCLOSING PARTY") to the other party (the "RECEIVING PARTY"),
which if in written, graphic, machine-readable, or other tangible form is
marked as "confidential" or "proprietary", or which, if disclosed orally or by
demonstration, is identified at the time of initial disclosure as confidential
and reduced to writing in which it is identified as "confidential" within
thirty (30) days of such disclosure. Confidential Information includes,
without limitation, source code, source listings, program listings, flow
charts, databases, schematics, computer programs, drawings, specifications,
data, design documents, methods, processes, formulae, inventions, discoveries,
know-how, trade secrets, technical information or material, marketing plans,
financial information, business plans, business strategies, customer lists,
supplier lists, and other
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
information relating to the Disclosing Party's business, products and
research, development, marketing, and manufacturing activities.
"FIELD" shall mean the field of [*].
"INSTRUMENTS" shall mean the [*] developed by LJL pursuant to this
Agreement, for [*] and [*]. Such Instruments may include [*] which [*], and
[*], which are [*].
"INTELLECTUAL PROPERTY" shall mean all current and future worldwide rights
in patents, copyrights, trade secrets, trademarks, know-how, utility models,
and other intellectual property and proprietary rights including, without
limitation, all applications and registrations with respect thereto.
"LJL INTELLECTUAL PROPERTY" shall mean the Intellectual Property and
Confidential Information owned or licensed by LJL [*].
"LICENSED INFORMATION" shall mean know-how, trade secrets, and other
information [*], related to [*], and [*].
"LICENSED PATENTS" shall mean all foreign and domestic patents and patent
applications, including provisional applications, [*], containing claims
covering or relating to [*], and including without limitation [*].
"LICENSED PRODUCTS" shall mean [*].
"LICENSED TECHNOLOGY" shall mean, collectively, the [*], and all related
materials thereto [*].
"NEW PATENT" shall mean any domestic or foreign issued patent or filed
patent application that is not listed in EXHIBIT A or EXHIBIT B, and that
includes claims covering or relating to the FLT technology platform.
1.2 CONSTRUCTION. As used in this Agreement, neutral pronouns and
any variations thereof shall be deemed to include the feminine and
masculine and all terms used in the singular shall be deemed to
include the plural, and vice versa, as the context may require. The
words "hereof, herein", and "hereunder", and other words of similar
import refer to this Agreement as a whole, including the Exhibits
hereto, as the same may from time to time be amended or supplemented
and not to any subdivision contained in this Agreement. The word
"including", when used hereof is not intended to be exclusive and
means "including, without limitation". References hereof to Section,
subsection, paragraph or Exhibit shall refer to the appropriate
Section, subsection, paragraph or Exhibit in or to this Agreement.
Headings contained in this Agreement are for ease of reference only
and shall have no legal effect. The term "party" or "parties" shall
mean, as the case may be, LJL or FluorRx individually or
collectively, to the exclusion of other parties. In constructing the
terms of this Agreement, no presumption shall
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
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operate in favor of or against any party as a result of its counsel's
role in drafting the terms and provisions hereof.
ARTICLE 2 - LICENSE GRANT
2.1 LICENSE TO LICENSED PATENTS.
(a) FluorRx hereby grants to LJL and its Affiliates [*].
(b) FluorRx hereby grants to LJL and its Affiliates [*].
2.2 LICENSE TO LICENSED INFORMATION. FluorRx hereby grants to LJL and its
Affiliates [*].
2.3 COVENANT. FluorRx agrees that LJL shall not be liable or considered
to be in breach of this Agreement in the event that [*]; PROVIDED HOWEVER,
[*] To the extent reasonably possible, if LJL, its Affiliates, or
licensees receives an inquiry relating to the purchase of any product [*],
then LJL [*], its Affiliates, or licensees. Similarly, LJL agrees that
FluorRx shall not be liable or considered to be in breach of this Agreement
in the event [*]; provided, however, [*]. To the extent reasonably
possible, if FluorRx, its Affiliates, or licensees receives an inquiry
relating to the purchase of any product [*], then FluorRx [*].
2.4 RIGHTS TO FUTURE PATENTS AND TECHNOLOGY. Promptly upon receipt by FluorRx
of each New Patent, FluorRx shall fully disclose to LJL each New Patent
owned or controlled (in whole or in part), or licensed by FluorRx, for
purposes of [*]. In addition to the licenses granted under Sections 2.1
and 2.2, [*].
2.5 NO OTHER RIGHTS. Except as expressly granted herein, no rights to any
FluorRx trademarks, copyrights, or tradenames are granted hereunder.
ARTICLE 3 - ROYALTIES, FEES, AND EXCLUSIVITY
3.1 ONE-TIME FEE. In consideration of the licenses granted under Article 2
hereto, LJL shall pay to FluorRx [*] LJL shall pay: (i) [*] within [*] after
the Effective Date of this Agreement: and (ii) [*] the earlier of: (a) [*]
after [*]; or (b) [*].
3.2 ROYALTY. In consideration of the licenses granted under Section 2.1
hereto, LJL shall pay to FluorRx the royalties set forth in EXHIBIT C attached
hereto. Royalty payments shall be due and payable [*].
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
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<PAGE>
3.3 MINIMUM ROYALTY.
(a) MINIMUM ROYALTY PAYMENTS. LJL agrees to pay the minimum royalty
amounts set forth in EXHIBIT C attached hereto. Each minimum royalty payment
is due and payable [*] after the anniversary of the Effective Date, and all
royalties paid under Section 3.2 and 3.3 shall be fully creditable toward the
minimum royalty amounts, on a rolling credit basis. [*].
(b) EFFECT OF NON-PAYMENT. In the event that LJL fails to make any
minimum royalty payment due under Section 3.3(a) hereto, and LJL does not
cure such failure to pay [*] after receipt by LJL of notice thereof then,
after reasonably considering LJL's reasons for nonpayment hereunder, and at
FluorRx's sole discretion:
(i) [*]or [*].
(ii) [*] and [*] or
(iii) [*], then the parties shall submit to binding arbitration the
issue whether: (a) [*]; in which event the agreement shall be terminated; or
(b) [*] in which event the agreement shall not be terminated [*].
For purposes of Section 3(b)(iii), binding arbitration shall take place
in San Jose, California, under the Commercial Arbitration Rules of the
American Arbitration Association by one (1) arbitrator mutually agreed to by
the parties or, in the event that the parties fail to appoint an arbitrator
within ten (10) days after the initiation of the arbitration proceeding,
appointed in accordance with such Rules. Judgment on the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration proceedings shall be governed by federal arbitration law and by
the Rules, without reference to state arbitration law. Judgment on the award
rendered by the arbitrator may be entered in any court of competent
jurisdiction, and shall be the sole remedy available under this Section
3.3(b). The parties agree that, any provision of applicable law
notwithstanding, they will not request, and the arbitrator shall have no
authority to award, punitive or exemplary damages against any party, but
shall strictly conform to the provisions set forth in this Section 3.3(b).
3.4 NEW PATENT FEES. In the event that LJL elects to exercise its rights
under Section 2.4 with respect to a New Patent, [*]. In addition, [*];
PROVIDED, HOWEVER, that in no event [*]. In addition, within [*], the amount
of [*].
3.5 AUDIT RIGHTS. LJL will permit an independent accounting firm retained
by FluorRx and acceptable to LJL, to access LJL's records solely for purposes
of auditing LJL's payment of the fees pursuant to Sections 3.2 and 3.3
hereto; PROVIDED, HOWEVER, that such audit: (i) shall be upon at least thirty
(30) days prior notice to LJL; (ii) is conducted during LJL's normal business
hours, and without disruption to LJL's business; (iii) is conducted at
FluorRx's sole expense; and (iv)
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
4
<PAGE>
any information obtained or accessed as a result of such audit shall be
considered LJL's Confidential Information, subject to the confidentiality
provisions of Article 7 hereto, and the accounting firm shall be bound by
obligations of confidentiality with respect to LJL's Confidential Information.
In the event that the audit reveals an underpayment of [*] or more, then LJL
shall [*].
ARTICLE 4 - OBLIGATIONS OF THE PARTIES
4.1 DELIVERABLES. Within [*] after the payment of the [*], as set forth in
Section 3.1, FluorRx shall arrange for [*], to meet with LJL at a mutually
agreed site [*], to deliver the Licensed Information at a mutually agreed time.
Prior to such meeting, LJL will provide to FluorRx a proposed agenda for such
meeting. [*].
4.2 UPDATES. During the term of this Agreement each party shall generally
keep the other party fully and promptly apprised of all technical and other
developments and information relating to the Licensed Technology, as such
developments and information becomes available to the apprising party. In
addition, each party hereto will provide to the other party hereto[*] relating
to the Licensed Technology, in a form mutually agreed by the parties.
4.3 COOPERATION AND SUPPORT. During the term of this Agreement, LJL and
FluorRx agree to cooperate fully and in good faith to enhance the development
of the Licensed Products. In general, the duty to cooperate means that LJL's
and FluorRx's scientific and management personnel involved in the development
of the Licensed Products shall communicate as frequently as reasonably
necessary to facilitate the transfer of information and Confidential
Information, including specifications, contemplated by this Agreement,
discuss and review the same and coordinate the fulfillment of LJL's
obligations under this Agreement. If LJL participates in the sponsored
research program, as set forth in Article 5 hereto, then [*]; and, if LJL
does not participate, [*], and as reasonably necessary for LJL to fully
exercise its rights under this Agreement, [*] For purposes of this
Agreement, the term "CONSULTING DAYS" shall mean eight (8) man-hours. In the
event that, at any time, LJL requests additional Consulting Days, then [*].
Nothing in this Agreement shall be interpreted as any guaranty on the part of
LJL that the development contemplated by this Agreement win result in any
commercially successful Licensed Products, or any obligation of LJL to
develop any specific Licensed Products.
4.4 CONSULTANT. If at any time LJL requests the services and support
of [*] then FluorRx will use its best efforts to make [*] available,
subject to [*]personal schedule, and LJL agrees [*], including [*],
associated with receiving such Consulting.
ARTICLE 5 - SPONSORED RESEARCH PROGRAM; INTELLECTUAL PROPERTY
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
5
<PAGE>
5.1 SPONSORED RESEARCH PROGRAM. At LJL's sole discretion, LJL may elect to
participate in the [*]. LJL's involvement, if LJL so elects, shall be in
accordance with the terms and conditions set forth in EXHIBIT D attached
hereto. LJL shall notify FluorRx in writing in the event that LJL elects to
participate in such sponsored research program.
5.2 LJL INTELLECTUAL PROPERTY. FluorRx acknowledges and agrees that LJL or
its licensors, as the case may be, are the sole and exclusive owners of all
right, title and interest in and to the [*]. No provision contained in this
Agreement shall be construed to transfer to FluorRx, any FluorRx Affiliate,
or any FluorRx customer any right, title or ownership interest in [*].
5.3 FLUORRX INTELLECTUAL PROPERTY. LJL acknowledges and agrees that FluorRx
or its licensors, as the case may be, are the sole and exclusive owners of
all right, title and interest in and to [*]. Except as expressly stated
herein, no provision contained in this Agreement shall be construed to
transfer to LJL, and LJL Affiliate or any LJL customer any right, title or
ownership interest in [*].
5.4 LICENSED PRODUCTS INTELLECTUAL PROPERTY. The parties hereto shall use
their commercially reasonable efforts to maintain the strict allocation of
Intellectual Property rights contemplated in Sections 5.2 and 5.3 hereto,
during the development of the Licensed Products. Nonetheless, should any
patentable invention, trade secret or know-how or other Intellectual Property
be developed by LJL in connection with the development of any Licensed
Products hereunder in performance of this Agreement, then [*]. LJL agrees to
enter into good faith negotiations with FluorRx [*], including without
limitation, [*].
5.5 SPONSORED RESEARCH PROGRAM INTELLECTUAL PROPERTY. In the event that any
Intellectual Property rights are conceived, developed, or reduced to practice
during the development of applications under the sponsored research program,
as set forth in EXHIBIT D attached hereto, then [*]. In the event that any
Intellectual Property rights are conceived, developed, or reduced to practice
during the basic research and development under the sponsored research
program, as set forth in EXHIBIT D attached hereto, then [*].
5.6 NO RIGHTS GRANTED. The parties hereto acknowledge and agree that,
except as expressly granted herein, nothing in this Agreement is to be
construed as a grant of or as an intention or commitment to grant to FluorRx
any right, title or interest, of any nature whatsoever, to LJL Intellectual
Property or to any products or processes encompassed thereby or any
improvements or developments thereon.
ARTICLE 6 - GOVERNMENT APPROVALS: PATENT PROTECTION
6.1 APPROVALS. LJL shall solely be responsible for obtaining all required
governmental approvals, including FDA approvals, for the development,
testing, production, distribution, sale
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
6
<PAGE>
and use of Licensed Products in the Field and for applications developed for
LJL under the sponsored research program. FluorRx agrees to provide LJL, at
LJL's expense, with any assistance reasonably requested by LJL, in obtaining
such governmental approvals, including, without limitation, the furnishing of
all relevant technical information and know-how presently or hereafter
available to FluorRx, but excluding any documentation or data which FluorRx is
bound by obligations to third parties to keep confidential.
6.2 PATENT PROTECTION. Each party hereto shall promptly disclose to the
other party hereto the making, conception or reduction to practice of any
joint invention developed under the sponsored research program. Each party
shall apply for any patent(s) covering its own invention, and shall be
responsible for any and all costs associated with prosecuting and maintaining
such patents; PROVIDED, however, that if a party fails to prosecute or
maintain any such patent (the "FIRST PARTY") within sixty (60) days of
request in writing by the other party hereto (the "SECOND PARTY"), such
Second Party shall have the right to prosecute and maintain such patent at
its own expense and shall be solely entitled to ownership of the issuing or
issued patent, and such First Party shall have, during the Term of this
Agreement, a non-exclusive, royalty-free license to make, have made, use,
sell, and import under such patent, and after the termination or expiration
of this Agreement, such First Party shall then have a non-exclusive license
to make, have made, use, sell, and import under such patent, under
commercially reasonable royalty terms.
6.3 ACTION AGAINST INFRINGERS. If during the term of this Agreement, LJL
becomes aware of a third party infringement or threatened infringement of any
Licensed Patent, or any misappropriation of Licensed Technology that is
incorporated in or related to Licensed Products, the following provisions
shall apply:
6.3.1 LJL shall promptly give notice to FluorRx, with all available
details.
6.3.2 FluorRx shall use its best efforts to pursue in its name at
its own expense to restrain such infringement and to recover profits and
damages if such infringement relates to Licensed Technology or Licensed
Patents in the Field. LJL agrees at FluorRx's request to cooperate in the
pursuit thereof, as is reasonably necessary, at FluorRx's expense. FluorRx
shall have the sole right to control prosecution but FluorRx shall keep LJL
informed on a regular basis as to the status of such action.
6.3.3 If FluorRx fails to take action under Section 6.3.2 within [*]
after becoming aware of such infringement, in the first instance or by notice
from LJL, then LJL, at any time prior to FluorRx thereafter taking action,
shall have the right, but not the obligation to take such action in its own
name; PROVIDED, HOWEVER, that: (i) such infringement relates to Licensed
Technology or Licensed Patents in or covering Licensed Products in the Field;
(ii) [*] any such action [*]. In the event that LJL exercises its rights
under this Section 6.3.3, FluorRx shall have the right to observe in any such
action hereunder, at its sole expense. FluorRx shall cooperate with LJL, at
LJL's expense, as is reasonably necessary in any such action brought by LJL.
If LJL brings legal action, [*], including all of LJL's lost profits and
damages.
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
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ARTICLE 7 - CONFIDENTIALITY
7.1 DUTY OF NON-DISCLOSURE. In the course of doing business in accordance
with this Agreement, FluorRx will receive Confidential Information from LJL
("LJL CONFIDENTIAL INFORMATION") and LJL will receive Confidential Information
from FluorRx ("FLUORRX CONFIDENTIAL INFORMATION'). The parties shall: (i)
maintain in strict confidence, and not disclose or reveal to third parties,
any information of the other party hereto communicated under this Agreement;
(ii) use such information only for the purposes specifically provided under
this Agreement; and (iii) obligate all their personnel having access to such
information to treat it in the same manner as their own proprietary
information, except and to the extent as required by governmental authorities.
If either party becomes required by governmental authorities to disclose any
such information to a third party, it shall provide prompt written notice
thereof to the other party, and use its best efforts to secure confidential
treatment thereof. Notwithstanding the preceding, either party may disclose
all or portions of the information to responsible persons or organizations who
will be entrusted by a party hereto with the evaluation, development or
packaging of the Licensed Products or as may otherwise be reasonably necessary
to exercise such party's rights under this Agreement; PROVIDED, HOWEVER such
party shall impose upon said persons or organizations substantially the same
or stricter obligations than those imposed under this Section 7.1.
7.2 EXCLUSIONS. Notwithstanding the foregoing, information shall not be
treated as "Confidential Information" under this Agreement which:
(i) at the time of disclosure is in the public domain;
(ii) after disclosure has become part of the public domain by publication
or otherwise, except by act or omission of the Receiving Party or its
employees, agents or contractors; or
(iii) the Receiving Party can establish by competent proof was in its
possession at the time of disclosure hereunder; or
(iv) the Receiving Party receives, without restriction, from a third
party, provided that such information was not obtained by said third party
directly or indirectly from the Disclosing Party under an obligation of
confidence.
7.3 PUBLICATIONS. The contents of all proposed technical publications or
oral presentations concerning the Licensed Products by one party (the
"DISCLOSING PARTY") shall be submitted to the other party (the "NON-DISCLOSING
PARTY") for approval prior to any such publication or oral presentations, which
approval shall not be unreasonably withheld. The parties expressly agree that
all drafts of any publications or oral presentations by a Disclosing Party,
including without
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limitation manuscripts, abstracts, posters, and visual works based on the
Sponsored Research Program or the Licensed Products shall be submitted to the
Non-Disclosing Party at least [*] prior to the proposed submission of such
drafts for publication or presentation. Such publications and presentations
shall not divulge any of the Non-Disclosing Party's Confidential Information
without prior written approval of the Non-Disclosing Party, and the
Disclosing Party shall promptly remove any Confidential Information
identified and requested by the Non-Disclosing Party. If requested by the
Non-Disclosing Party, the Disclosing Party shall delay the submission of any
publication or presentation up to [*] from the date of the Non-Disclosing
Party's request for such a delay to permit the preparation and filing of
related patent applications.
7.4 CONFIDENTIALITY OF AGREEMENT. Each party hereto agrees that the terms
and conditions of this Agreement shall be treated as Confidential Information
and shall not be disclosed to any third party; PROVIDED, HOWEVER, that each
party hereto may disclose the terms and conditions of this Agreement:
(i) as required by any court or other governmental body;
(ii) as otherwise required by law;
(iii) to each parties' own legal counsel;
(iv) in confidence, to that party's accountants, banks, and
financing sources and their advisors;
(v) in connection with the enforcement of this Agreement or rights
under this Agreement; or
(vi) in confidence, in connection with a merger or acquisition or
proposed merger or acquisition, or the like.
ARTICLE 8 - REPRESENTATION AND WARRANTIES
8.1 LJL REPRESENTATIONS. LJL represents, warrants and agrees as follows:
(a) POWER AND AUTHORITY. LJL has the corporate power and authority to
execute and deliver this Agreement, and perform its obligations hereunder.
The execution, delivery and performance of this Agreement by LJL have been
duly and validly authorized by LJL, and upon execution and delivery by
FluorRx, this Agreement will constitute the valid and binding agreement of LJL
enforceable against it in accordance with its terms.
(b) NO CONFLICT. Neither LJL's execution and delivery of this Agreement
nor its performance hereunder will result in a breach of any agreement or
contract to which LJL may
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
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<PAGE>
be a party, or violate any applicable law or regulation, LJL's Articles of
Incorporation or By-Laws, or any judgment or order of any court or
governmental agency with competent jurisdiction and authority over LJL.
8.2 FLUORRX REPRESENTATIONS. FluorRx represents, warrants and agrees
as follows:
(a) POWER AND AUTHORITY. FluorRx has the corporate power and authority
to execute and deliver this Agreement, and perform its obligations
hereunder. The execution, delivery and performance of this Agreement by
FluorRx have been duly and validly authorized by FluorRx, and upon execution
and delivery by LJL, this Agreement will constitute the valid and binding
agreement of FluorRx enforceable against it in accordance with its terms.
(b) NO CONFLICT. Neither FluorRx's execution and delivery of this
Agreement nor its performance hereunder will result in a breach of any
agreement or contract to which FluorRx or any of its Affiliates may be a
party, or violate any applicable law or regulation, FluorRx's Articles of
Incorporation or By-Laws, or any judgment or order of any court or
governmental agency with competent jurisdiction and authority over FluorRx.
(c) GRANTED RIGHTS. FluorRx owns, or has the right to license, the
FluorRx Intellectual Property related to the Licensed Technology that is the
subject matter of this Agreement.
8.3 DISCLAIMER OF WARRANTIES. EXCEPT AS SPECIFICALLY SET FORTH HEREIN,
NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE AND ANY OTHER STATUTORY WARRANTIES.
ARTICLE 9 - INDEMNIFICATION
9.1 FLUORRX INDEMNIFICATION. FluorRx assumes responsibility and shall
indemnify LJL from all liability to third parties or expenses of litigation
(including reasonable attorney's fees) for: (i) the breach or
misrepresentation by FluorRx of its warranties or obligations hereunder; (ii)
the negligent or intentionally wrongful acts or omissions of FluorRx; and
(iii) any breach or alleged breach of any third party Intellectual Property
rights by Licensed Technology and Licensed Products; EXCEPT to the extent
such personal injury or property damages results from or arises out of: (a)
the breach or misrepresentation by LJL of its warranties or obligations
hereunder; or (b) the negligent or intentionally wrongful acts or omissions
of LJL.
9.2 LJL INDEMNIFICATION. LJL assumes responsibility and shall indemnify
FluorRx from all liability to third parties or expenses of litigation
(including reasonable attorney's fees) for personal injuries or property
damages resulting from or arising out of: (i) the breach or
misrepresentation by LJL of its warranties or obligations hereunder; or (ii)
product liability
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with respect to the Licensed Product; or (iii) the negligent or intentionally
wrongful acts or omissions of LJL, EXCEPT to the extent such personal injury
or property damages results from or arises out of: (a) the breach or
misrepresentation by FluorRx of its warranties or obligations hereunder; or
(b) negligent acts or omissions of FluorRx.
9.3 PROCEDURES. Each party's obligation to indemnify the other party under
this Article 9 shall be subject to its: (i) being notified promptly of such
claim; (ii) being given sole control of the defense and/or settlement
thereof, and, (iii) receiving the cooperation of the indemnified party.
9.4 LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY HERETO BE LIABLE
FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR INDIRECT DAMAGES
SUFFERED BY THE OTHER PARTY ARISING IN ANY WAY OUT OF THIS AGREEMENT, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY; PROVIDED, HOWEVER, THAT THE FOREGOING
LIMITATION SHALL NOT APPLY TO A BREACH BY EITHER PARTY OF ARTICLE 7. THIS
LIMITATION WILL APPLY EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGE.
ARTICLE 10 TERMINATION
10.1 TERM The term of this Agreement shall commence as of the Effective
Date hereof, and shall continue until: (i) the last to expire Licensed
Patent; (ii) all Licensed Patents are held invalid or unenforceable by a
court of competent jurisdiction; or (iii) terminated under the provisions of
this Article 10.
10.2 TERMINATION. Without prejudice to any other rights it may have
hereunder or at law or in equity, either may terminate this Agreement
immediately by written notice to the other party in the event the other party
materially breaches any provision of this Agreement and fails to cure such
breach within [*] after receiving written notice of the breach from the non-
breaching party.
10.3 RIGHTS AND DUTIES UPON TERMINATION. Termination of this Agreement,
for whatever reason, shall not affect any rights or obligations accrued by
either party prior to the effective date of termination and specifically
stated herein to survive such termination. Upon any termination of this
Agreement, each party shall, and shall cause its Affiliates and sublicensees
to, return to the other party within thirty (30) days all copies of
Confidential Information of any kind communicated or delivered by the
Disclosing Party still within the custody or control of the Receiving Party,
including all copies thereof, in whatever form.
10.4 SURVIVABILITY. The representations, warranties, covenants and
obligations of the parties contained in Sections 10.3, 10.4, and Articles 1,
5, 6, 7, 8, 9, and 11 hereof, shall survive the termination of this Agreement
unless otherwise indicated therein.
[*]=Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
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<PAGE>
ARTICLE 11 - GENERAL PROVISIONS
11.1 INDEPENDENT STATUS OF PARTIES. The parties hereto acknowledge and agree
that in connection with this Agreement, each party is an independent contractor
with respect to the other, and nothing in this Agreement shall be considered to
create an employment, agency, joint venture, partnership, fiduciary or other
relationship between LJL and FluorRx. Except as expressly provided herein:
neither party shall have the right to bind the other to any agreement with a
third party nor to represent itself as an agent, partner or joint venturer of
the other or to incur any obligation or liability on behalf of the other party;
(ii) the parties are not sharing in any profits of the other and are not
otherwise jointly responsible for any of the other party's expenses, losses, or
liabilities; and (iii) nothing herein shall be construed as providing for the
sharing of profits or losses arising out of the efforts of either or both the
parties.
11.2 FORCE MAJEURE. Except as otherwise specifically provided herein, neither
party shall be liable for loss, damage, detention, or delay, nor be deemed to
be in default from causes beyond its reasonable control or from fire, strike,
labor difficulties, act or omission of any governmental authority or of the
other party, INSURRECTION or riot, embargo, delays or shortages in
transportation or inability to obtain necessary labor, materials, or
manufacturing facilities from usual sources or from defects or delays in the
performance of its suppliers or subcontractors due to any of the foregoing
enumerated causes. In the event of delay due to any such cause, each party
hereto undertakes to immediately notify the other party hereto and the date of
delivery will be adjusted as maybe reasonably necessary.
11.3 NOTICES. All notices hereunder shall be in writing and shall be
personally delivered or duly dispatched in the United States by registered
mail, or by overnight air courier, duly addressed, if to LJL, to:
LJL BIOSYSTEMS, INC.
404 Tasman Drive
Sunnyvale, California 94089
ATTN: Lev J. Leytes, P.E.
President and CEO
or, if to FluorRx to:
FLUORRX
979 Keystone Way
Carmel, Indiana 46032
ATTN: John Hurrell, Ph.D.
President and CEO
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<PAGE>
or in either case to such address as the recipient party shall previously have
designated for the purpose by written communication to and actually received
by the giving party. Notices shall be effective upon receipt.
11.4 AMENDMENTS. This Agreement embodies all of the understandings and
obligations between the parties concerning the Licensed Products and the
Licensed Technology, and any amendments and supplements shall not be valid
unless executed in writing by duly authorized officers of both parties.
11.5 ASSIGNABILITY. This Agreement may not be assigned by either party
hereto without the prior written consent of the other party, EXCEPT either
party may assign this Agreement in connection with the sale or assignment of
substantially its business to which this Agreement relates. Any assignment of
this Agreement shall be conditioned upon the assignee agreeing to be bound by
all the terms of this Agreement.
11.6 GOVERNING LAW: VENUE. This Agreement shall be governed and construed
in accordance with the laws of the State of California, without regard to
conflicts of laws principles, regardless of the place of its execution or
performance. Any dispute, controversy, difference, or claim arising between
the parties, out of, in relation to, or in connection with this Agreement, or
any breach thereof, shall brought in the venue of the party against which the
action initially is brought.
11.7 SERVERABILITY. In the event that any term, clause or provision of
this Agreement is construed to be or adjudged invalid, void, contrary, to law
or public policy, or otherwise unenforceable: (i) the remaining provisions of
this Agreement as well as any portions thereof shall remain in full force and
effect; (ii) the affected provision shall remain unenforceable to the fullest
extent of the parties' stated intentions consistent with applicable law and
public policy; and (iii) the parties shall negotiate, in good faith, a
substitute, valid and enforceable provision which most nearly reflects the
parties' stated intention as set forth in such affected provision.
11.8 ENTIRE AGREEMENT. This Agreement, including the Exhibits hereto,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior representations, assurances, courses of
dealing, agreements and undertaking, whether written or oral, between them
concerning such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement by their
qualified representatives effective as of the date first above written.
LJL BIOSYSTEMS FLUORRX
By: /s/ Lev Leytes By: /s/ John Hurell, Ph.D.
--------------------------- ---------------------------
Title: President & CEO Title: President & CEO
----------------------- -----------------------
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Date: June 5, 1997 Date: June 5, 1997
-------------------------- ----------------------
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EXHIBIT A
FLUORRX PATENTS LICENSED TO LJL ON AN EXCLUSIVE BASIS
ISSUED PATENTS
[*]
PATENT APPLICATIONS
[*]
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT B
FLUORRX PATENTS LICENSED TO LJL ON A NON-EXCLUSIVE BASIS
PATENT NO. TITLE
[*] [*]
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT C
ROYALTIES
I. INSTRUMENTATION
A. [*]
B. [*]
II. REAGENTS
[*]
III. MINIMUM ROYALTIES
[*]
Wherein the first year is the period extending from the Effective Date
through twelve (12) months thereafter, and each subsequent year is measured at
the anniversary of the Effective Date.
"NET SALES" shall mean the gross invoiced price received by LJL for: [*]
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT D
SPONSORED RESEARCH PROGRAM
STATEMENT OF PURPOSE: LJL and FluorRx will work together to identify each
specific project under the program, including without limitation, the research
goals, milestones, management, and staffing requirements, of each such
project.
I. DIRECT COSTS (PER YEAR):
[*]
II. APPLICATION DEVELOPMENT:
[*]
III. BASIC R&D:
[*]
IV. COMMITMENT:
[*]
[*] = Material has been omitted pursuant to a request for confidential
treatment. Such material has been filed separately with the Securities and
Exchange Commission.
<PAGE>
LJL BIOSYSTEMS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "AGREEMENT") is made as of
_____________, 19___, by and between LJL BioSystems, Inc., a Delaware
corporation (the "COMPANY"), and < < IndemniteeName > > (the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in obtaining
directors' and officers' liability insurance, the significant increases in the
cost of such insurance and the general reductions in the coverage of such
insurance. The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited. Indemnitee does not regard
the current protection available as adequate under the present circumstances,
and Indemnitee and other officers and directors of the Company may not be
willing to continue to serve as officers and directors without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors of
the Company and to indemnify its officers and directors so as to provide them
with the maximum protection permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
if Indemnitee is or was 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 Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company 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 (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
<PAGE>
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 Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, or, with respect to any
criminal action or proceeding, that Indemnitee had reasonable cause to believe
that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section l(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as
<PAGE>
authorized hereby. Any advances to be made under this Agreement shall be paid
by the Company to Indemnitee within twenty (20) days following delivery of a
written request therefor by Indemnitee to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received on the third business day after
the date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 11 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Section 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the
<PAGE>
insurers in accordance with the procedures set forth in the respective policies.
The Company shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts payable as a
result of such proceeding in accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he may have ceased to serve
in an such capacity at the time of any action, suit or other covered
proceeding.
<PAGE>
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
<PAGE>
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "COMPANY" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "OTHER ENTERPRISES"
shall include employee benefit plans; references to "FINES" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "SERVING AT THE REQUEST OF THE COMPANY" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in
<PAGE>
good faith and in a manner Indemnitee reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan, Indemnitee
shall be deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTERESTS OF
THE COMPANY" as referred to in this Agreement.
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) NOTICES. Any notice, demand or request required or permitted to
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
<PAGE>
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
to effectively bring suit to enforce such rights.
[Signature Page Follows]
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
LJL BIOSYSTEMS, INC.
By:
------------------------------
Title:
------------------------------
Address: 404 Tasman Drive
Sunnyvale, CA 94089
AGREED TO AND ACCEPTED:
< < INDEMNITEENAME > >
- -------------------------------------
(Signature)
Address: < < IndemniteeAddress1 > >
< < IndemniteeAddress2 > >
< < IndemniteeAddress3 > >
[SIGNATURE PAGE TO LJL BIOSYSTEMS, INC.
INDEMNIFICATION AGREEMENT]
<PAGE>
November 6, 1995
Mr. Lev Leytes
LJL BioSystems, Inc.
404 Tasman Dr.
Sunnyvale, CA 94089
Dear Lev:
In order to ensure that LJL Biosystems, Inc. (the "Company") will have your
continued dedication to the Company in the future and in order to provide you
with some financial security in the event your employment with the Company is
terminated or materially changed without your consent for any reason other than
Cause, the Board of Directors has determined that it is in the interests of both
parties to agree to provide you the following benefits.
In the event your employment with the Company is terminated as a result of
Involuntary Termination other than for Cause, you will receive the following
severance benefits:
(1) Salary payments for a period of one year from the date of your
termination. The payments will be equal to the average of the prior three
years' base salary you received from the Company and will be paid in accordance
with the Company's standard payroll practices;
(2) Continuation of benefits substantially identical to those you were
provided immediately prior to your termination at Company expense for a period
of one year from the date of your termination;
(3) Immediate vesting of all Company stock options and restricted stock
held on the date of termination; and
(4) Payment of a bonus in an amount equal to the greater of the actual
bonus owing to you for the year of termination under the Company's bonus plan in
effect for that year and 100% of the base salary you received from the Company
for the 12 calendar months preceding the termination date.
For purposes of this letter agreement, the following definitions will
apply. "Involuntary Termination" means (a) termination of your employment by
the Company for any reason other than Cause, and (b) your voluntary termination,
upon 30 days prior written notice to the Company, following (i) a material
reduction in job responsibilities inconsistent with your position with the
Company and your prior responsibilities, without your express written consent;
(ii) a reduction by the Company in your annual base compensation as in effect
immediately prior to such reduction, without your express written consent;
(iii) your refusal to relocate to a facility or location more than 50 miles from
the Company's current location; or (iv) any purported termination by the Company
which is not effected for Cause, or for which the grounds relied
<PAGE>
upon are not valid. "Cause" means (i) a material and willful violation of any
federal or state law, (ii) fraud, (iii) repeated unexplained or unjustified
absence, (iv) willful breach of fiduciary duty under applicable laws or Company
policies, or (v) gross negligence or willful misconduct where such gross
negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries.
If you voluntarily resign from the Company (other than as an Involuntary
Termination as described above) or if the Company terminates your employment for
Cause, you will not be entitled to receive any severance benefits. Your salary
and benefits will terminate under the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination.
The benefits provided herein are in lieu of any other severance benefits to
which you may be entitled.
The Company's Board of Directors looks forward to a long, prosperous
relationship with you and is pleased to offer you this severance protection.
Please indicate your agreement to the terms set forth above by signing below.
Sincerely,
/s/ George W. Dunbar, Jr.
George W. Dunbar, Jr., on behalf of
the Board of Directors of LJL BioSystems Inc.
Accepted and Agreed:
/s/ Lev Leytes
- -------------------------
Lev Leytes
<PAGE>
STANDARD INDUSTRIAL LEASE --- MULTI-TENANT
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. PARTIES. This Lease, dated, for reference purposes only, OCTOBER 14,
1992, is made by and between YAGEO USA (herein called "Lessor") and LJL
BIOSYSTEMS, INC. (herein called "Lessee").
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES. Lessor hereby leases to Lessee and Lessee leases from
Lessor for the term, at the rental, and upon all of the conditions set forth
herein, real property situated in the County of Santa Clara, State of
California commonly known as 404 TASMAN DRIVE, SUNNYVALE and described as
APPROXIMATELY 14,130 SQUARE FEET, THE MOST WESTERLY PORTION OF A SINGLE STORY
25,000 SF BUILDING, herein referred to as the "Premises", as may be outlined
on an Exhibit attached hereto, including rights to the Common Areas as
hereinafter specified but not including any rights to the roof on the
Premises or to any building in the Industrial Center. The Premises are a
portion of a building, herein referred to as the "Building". The Premises,
the Building, the Common Areas, the land upon which the same are located,
along with all other buildings and improvements thereon, are herein
collectively referred to as the "Industrial Center".
2.2 VEHICLE PARKING. Lessee shall be entitled to 56 vehicle parking
spaces, unreserved and unassigned, on those portions of the Common Areas
designated by Lessor for parking. Lessee shall not use more parking spaces
than said number. Said parking spaces shall be used only for parking by
vehicles no larger than full size passenger automobiles or pick-up trucks,
herein called "Permitted Size Vehicles". Vehicles other than Permitted Size
Vehicles are herein referred to as "Oversized Vehicles."
2.2.1 Lessee shall not permit or allow any vehicles that belong
to or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
2.2.2 If Lessee permits or allows any of the prohibited
activities described in paragraph 2.2 of this Lease, than Lessor shall have
the right, without notice, in addition to such other rights and remedies that
it may have, to remove or tow away the vehicle involved and charge the cost
to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.3 COMMON AREAS -- DEFINITION. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center that are provided and designated by
the Lessor from time to time for the general and non-exclusive use of Lessor,
Lessee and of other lessees of the Industrial Center and their respective
employees, suppliers, shippers, customers and invitees, including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways and landscaped areas.
2.4 COMMON AREAS -- LESSEE'S RIGHTS. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers, customers
and invitees during the term of this Lease, the non-exclusive right to use,
in common with others entitled to such use, the Common Areas as they exist
from time to time, subject to any rights, powers, and privileges reserved by
Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be
deemed to include the right to store any property, temporarily or
permanently, in the Common Areas. Any such storage shall be permitted only by
the prior written consent of Lessor's or Lessor's designated agent, which
consent may be revoked at any time. In the event that any unauthorized
storage shall occur then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove the
property and charge the cost to Lessee, which cost shall be immediately
payable upon demand by Lessor.
2.5 COMMON AREAS -- RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time,
to establish, modify, amend and enforce reasonable rules and regulations with
respect thereto. Lessee agrees to abide by and conform to all such rules and
regulations, and to cause its employees, suppliers, shippers, customers and
invitees to so abide and conform. Lessor shall not be responsible to Lessee
for the non-compliance with said rules and regulations by other lessees of
the Industrial Center.
2.6 COMMON AREAS -- CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time
(a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas,
ingress, egress, direction of traffic, landscaped areas and walkways, (b) To
close temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available, (c) To designate other
land outside the boundaries of the Industrial Center to be a part of the
Common Areas, (d) To add additional buildings and improvements to the Common
Areas, (e) To use the Common Areas while engaged in making additional
improvements, repairs, or alterations to the Industrial Center, or any
portion thereof, (f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Industrial Center, as
Lessor may, in the exercise of sound business judgment, deem to be
appropriate.
2.6.1 Lessor shall at all times provide the parking facilities
required by applicable law and in no event shall the number of parking spaces
that Lessee is entitled to under paragraph 2.2 be reduced.
3. TERM.
3.1 TERM. The term of this Lease shall be for (2) TWO YEARS commencing
on JANUARY 1, 1993 and ending on DECEMBER 31, 1994 unless sooner terminated
pursuant to any provision hereof.
3.2 DELAY IN POSSESSION. Notwithstanding said commencement date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee, on
said date, Lessor shall not be subject to any liability therefor nor shall
such failure affect the validity of this Lease or the obligations of Lessee
hereunder or extend the term hereof, but in such case, Lessee shall not be
obligated to pay rent or perform any other obligation of Lessee under the
terms of this Lease, except as may be otherwise provided in this Lease, until
possession of the Premises is tendered to Lessee, provided however, that if
Lessor shall not have delivered possession of the Premises within sixty (60)
days from said commencement date, Lessee may, at Lessee's 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 further, however, that if such written notice of Lessee is not
received by Lessor within said ten (10) day period, Lessee's right to cancel
this Lease hereunder shall terminate and be of no further force or effect.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
commencement date, such occupancy shall be subject to all provisions of this
Lease except for the payment of base rent, such occupancy shall not advance
the termination date.
4. RENT.
4.1 BASE RENT. Lessee shall pay to Lessor, as Base Rent for the
Premises, without any offset or deduction, except as may be otherwise
expressly provided in this Lease, on the 1ST day of each month of the term
hereof, monthly payments in advance of $7,065.00 SEVEN THOUSAND SIXTY-FIVE
AND NO/100 DOLLARS.
Lessee shall pay Lessor upon execution hereof $7,065.00 as Base Rent for
JANUARY 1993. Rent for any period during the term hereof which is for less
than one month shall be a pro rata portion of the Base Rent. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may
designate in writing.
4.2 OPERATING EXPENSES. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined,
of all Operating Expenses, as hereinafter defined, during each calendar year
of the term of this Lease, in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease, as 56%
percent.
(b) "Operating Expenses" is defined, for purposes of this Lease, as all
costs incurred by Lessor, if any, for:
<PAGE>
(i) The operation, repair and maintenance, in neat, clean, good
order and condition of the following:
(aa) The Common Areas, including parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area
lighting facilities and fences and gates.
(bb) Trash disposal services.
(cc) Tenant directories.
(dd) Fire detection systems including sprinkler system
maintenance and repair.
(ee) Security services.
(ff) Any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense."
(ii) Any deductible portion of an insured loss concerning any of the
items or matters described in this paragraph 4.2:
(iii) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof:
(iv) The amount of the real property tax to be paid by Lessor under
paragraph 10.1 hereof:
(v) The cost of water, gas and electricity to service the Common
Areas.
(c) The inclusion of the improvements, facilities and services set
forth in paragraph 4.2(b)(i) of the definition of Operating Expenses shall
not be deemed to impose an obligation upon Lessor to either have said
improvements or facilities or to provide those services unless the Industrial
Center already has the same, Lessor already provides the services, or Lessor
has agreed elsewhere in this Lease to provide the same or some of them.
(d) Lessee's Share of Operating Expenses shall be payable by Lessee
within ten (10) days after a reasonably detailed statement of actual expenses
is presented to Lessee by Lessor. At Lessor's option, however, an amount may
be estimated by Lessor from time to time of Lessee's Share of annual
Operating Expenses and the same shall be payable monthly or quarterly, as
Lessor shall designate, during each twelve-month period of the Lease term, on
the same day as the Base Rent is due hereunder. In the event that Lessee
pays Lessor's estimate of Lessee's Share of Operating Expenses as aforesaid,
Lessor shall deliver to Lessee within sixty (60) days after the expiration of
each calendar year a reasonably detailed statement showing Lessee's Share of
the actual Operating Expenses incurred during the preceding year. If
Lessee's payments under this paragraph 4.2(d) during said preceding year
exceed Lessee's Share as indicated on said statement, Lessee shall be
entitled to credit the amount of such overpayment against Lessee's Share of
Operating Expenses next falling due. If Lessee's payments under this
paragraph during said preceding year were less than Lessee's Share as
indicated on said statement, Lessee shall pay to Lessor the amount of the
deficiency within ten (10) days after delivery by Lessor to Lessee of said
statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof $7,065.00 as security for Lessee's faithful performance of Lessee's
obligation hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any
other sum to which Lessor may become obligated by reason of Lessee's default,
or to compensate Lessor for any loss or damages which Lessor may suffer
thereby. If Lessor so uses or applies all or any portion of said deposit,
Lessee shall within ten (10) days after written demand therefor deposit cash
with Lessor in an amount sufficient to restore said deposit to the full
amount then required of Lessee. If the monthly rent shall, from time to
time, increase during the term of this Lease, Lessee shall, at time of such
increase, deposit with Lessor additional money as a security deposit so that
the total amount of the security deposit held by Lessor shall at all times
bear the same proportion to the then current Base Rent as the initial
security deposit bears to the initial Base Rent set forth in paragraph 4.
Lessor shall not be required to keep said security deposit separate from its
general accounts. If Lessee performs all of Lessee's obligations hereunder,
said deposit, or so much thereof as has not theretofore been applied by
Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) at the expiration of the term hereof, and after
Lessee has vacated the Premises. No trust relationship is created herein
between Lessor and Lessee with respect to said Security Deposit.
6. USE.
6.1 USE. The Premises shall be used and occupied only for general
office, R&D/light manufacturing, and storage and distribution of diagnostic
instruments, or any other use which is reasonably comparable and for no other
purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to the
use for which Lessee will occupy the Premises, does not violate any covenants
or restrictions of record, or any applicable building code, regulation or
ordinance in effect on such Lease term commencement date. In the event it is
determined that this warranty has been violated, then it shall be the
obligation of the Lessor, after written notice from Lessee, to promptly, at
Lessor's sole cost and expense, rectify any such violation. In the event
Lessee does not give to Lessor written notice of the violation of this
warranty within six months from the date that the Lease term commences, the
correction of same shall be the obligation of the Lessee at Lessee's sole
cost. The warranty contained in this paragraph 6.2(a) shall be of no force or
effect if, prior to the date of this Lease, Lessee was an owner or occupant
of the Premises and, in such event, Lessee shall correct any such violation
at Lessee's sole cost.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in
effect or which may hereafter come into effect, whether or not they reflect a
change in policy from that now existing, during the term or any part of the
term hereof, relating in any manner to the Premises and the occupation and
use by Lessee of the Premises and of the Common Areas. Lessee shall not use
nor permit the use of the Premises of the Common Areas in any manner that
will tend to create waste or a nuisance or shall tend to disturb other
occupants of the Industrial Center.
6.3 CONDITION OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee clean and free of
debris on the Lease commencement date (unless Lessee is already in
possession) and Lessor warrants to Lessee that the plumbing, lighting, air
conditioning, heating, and loading doors in the Premises shall be in good
operating condition on the Lease commencement date. In the event that it is
determined that this warranty has been violated, then it shall be the
obligation of Lessor, after receipt of written notice from Lessee setting
forth with specificity the nature of the violation, to promptly, at Lessor's
sole cost, rectify such violation. Lessee's failure to give such written
notice to Lessor within thirty (30) days after the Lease commencement date
shall cause the conclusive presumption that Lessor has complied with all of
Lessor's obligations hereunder. The warranty contained in this paragraph
6.3(a) shall be of no force or effect if prior to the date of this Lease,
Lessee was an owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Lease commencement
date or the date that Lessee takes possession of the Premises, whichever is
earlier, subject to all applicable zoning, municipal, county and state laws,
ordinances and regulations governing and regulating the use of the Premises,
and any covenants or restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
hereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made
any representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of paragraphs 4.2
(Operating Expenses), 6 (Use), 7.2 (Lessee's Obligations) and 9 (Damage or
Destruction) and except for damage caused by any negligent or intentional act
or omission of Lessee, Lessee's employees, suppliers, shippers, customers, or
invitees, in which event Lessee shall repair the damage. Lessor, at Lessor's
expense, subject to reimbursement pursuant to paragraph 4.2, shall keep in
good condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, and roof of the Premises, as well as the
parking lots, walkways, driveways, landscaping, fences, signs, and utility
installations of the Common Areas and all parts thereof, as well as providing
the services for which there is an Operating Expense pursuant to paragraph
4.2. Lessor shall not, however, be obligated to paint the exterior or
interior surface of exterior walls, nor shall Lessor be required to maintain,
repair or replace windows, doors, or plate glass of the Premises. Lessor
shall have no obligation to make repairs under this paragraph 7.1 until a
reasonable time after receipt of written notice from Lessee of the need of
such repairs. Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition and repair. Lessor
shall not be liable for damages or loss of any kind or nature by reason of
Lessor's failure to furnish any Common Area Services when such failure is
caused by accident, breakage, repairs, strikes, lockout, or other labor
disturbances or disputes of any character, or by any other cause beyond the
reasonable control of Lessor.
7.2 LESSEE'S OBLIGATIONS.
<PAGE>
(a) Subject to the provisions of paragraphs 6 (Use), 7.1 (Lessor's
Obligations), and 9 (Damage or Destruction), Lessee, at Lessee's expense,
shall keep in good order, condition and repair the Premises and every part
thereof (whether or not the damaged portion of the Premises or the means of
repairing the same are reasonably or readily accessible to Lessee) including,
without limiting the generality of the foregoing, all plumbing, *(Lessee
shall procure and maintain, at Lessee's expense, a ventilating and air
conditioning system maintenance contract), electrical and lighting facilities
and equipment within the Premises, fixtures, interior walls and interior
surfaces of exterior walls, ceilings, windows, doors, plate glass, and
skylights located within the Premises. Lessor reserves the right to procure
and maintain the ventilating and air conditioning system maintenance contract
and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the
cost thereof. *SEE ADDENDUM
(b) If Lessee fails to perform Lessee's obligations under this
paragraph 7.2 or under any other paragraph of this Lease, Lessor may enter
upon the Premises after ten (10) days prior written notice to Lessee (except
in the case of emergency, in which no notice shall be required), perform such
obligations on Lessee's behalf and put the Premises in good order, condition
and repair, and the cost thereof together with interest thereon at the
maximum rate then allowable by law shall be due and payable as additional
rent to Lessor together with Lessee's next Base Rent installment.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear if the same could have been prevented by good
maintenance practices. Lessee shall repair any damage to the Premises
occasioned by the installation or removal of Lessee's trade fixtures,
alterations, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing on the Premises in good
operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make
any alterations, improvements, additions, or Utility Installations in, on or
about the Premises, or the Industrial Center, except for nonstructural
alterations to the Premises not exceeding $2,500 in cumulative costs during
the term of this Lease. In any event, whether or not in excess of $2,500 in
cumulative costs, Lessee shall make no change or alterations to the exterior
of the Premises nor the exterior of the Building nor the Industrial Center
without Lessor's prior written consent. As used in this paragraph 7.3 the
term "Utility Installation" shall mean carpeting, window coverings, air
lines, power panels, electrical distribution systems, lighting fixtures,
space heaters, air conditioning, plumbing, and fencing. Lessor may require
that Lessee remove any or all of said alterations, improvements, additions or
Utility Installations at the expiration of the term, and restore the Premises
and the Industrial Center to their prior condition. Lessor may require
Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated
cost of such improvements, to insure Lessor against any liability for
mechanic's and materialmen's liens and to insure completion of the work.
Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may, at any time
during the term of this Lease, require that Lessee remove any or all of the
same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Industrial Center that Lessee
shall desire to make and which requires the consent of the Lessor shall be
presented to Lessor in written form, with proposed detailed plans. If Lessor
shall give its consent, the consent shall be deemed conditioned upon Lessee
acquiring a permit to do so from appropriate governmental agencies, the
furnishing of a copy thereof to Lessor prior to the commencement of the work
and the compliance by Lessee of all conditions of said permit in a prompt and
expeditious manner.
(c) 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 in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, or the Industrial Center, or any
interest therein. Lessee shall give Lessor not less than ten (10) days
notice prior to the commencement of any work in the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises or the Building 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 itself and Lessor 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 or the Industrial
Center, upon the condition that if Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to
such contested lien claim or demand indemnifying Lessor against liability for
the same and holding the Premises and the Industrial Center free from the
effect of such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's attorneys fees and costs in participating in such action if Lessor
shall decide it is to Lessor's best interest to do so.
(d) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall be the property
of Lessor and shall remain upon and be surrendered with the Premises at the
expiration of the Lease term, unless Lessor requires their removal pursuant
to paragraph 7.3(a). Notwithstanding the provisions of this paragraph
7.3(d), Lessee's machinery and equipment, other than that which is affixed to
the Premises so that it cannot be removed without material damage to the
Premises and other than Utility Installations, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of paragraph
7.2.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Building and the Common Areas
for the benefit of Lessor or Lessee, or any other lessee of the Industrial
Center, including but not by way of limitation, such utilities as plumbing,
electrical systems, security systems, communication systems, and fire
protection and detection systems, so long as such installations do not
unreasonably interfere with Lessee's use of the Premises.
8. INSURANCE INDEMNITY.
8.1 LIABILITY INSURANCE -- LESSEE. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of Combined
Single Limit Bodily Injury and Property Damage insurance insuring Lessee and
Lessor against any liability arising out of the use, occupancy or maintenance
of the Premises and the Industrial Center. Such insurance shall be in an
amount not less that $500,000.00 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this paragraph 8. The
limit of said insurance shall not, however, limit the liability of Lessee
hereunder.
8.2 LIABILITY INSURANCE -- LESSOR. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Property Damage Insurance, insuring Lessor, but not Lessee, against
any liability arising out of the ownership, use, occupancy or maintenance of
the Industrial Center in an amount not less than $500,000.00 per occurrence.
8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during
the term of this Lease a policy or policies of insurance covering loss or
damage to the Industrial Center improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in an amount not to
exceed the full replacement value thereof, as the same may exist from time to
time, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
flood (in the event same is required by a lender having a lien on the
Premises) special extended perils ("all risk", as such term is used in the
insurance industry), plate glass insurance and such other insurance as Lessor
deems advisable. In addition, Lessor shall obtain and keep in force, during
the term of this Lease, a policy of rental value insurance covering a period
of one year, with loss payable to Lessor, which insurance shall also cover
all Operating Expenses for said period. In the event that the Premises shall
suffer an insured loss as defined in paragraph 9.1(g) hereof, the deductible
amounts under the casualty insurance policies relating to the Premises shall
be paid by Lessee.
8.4 PAYMENT OF PREMIUM INCREASE.
(a) After the term of this Lease has commenced, Lessee shall not
be responsible for paying Lessee's Share of any increase in the property
insurance premium for the Industrial Center specified by Lessor's insurance
carrier as being caused by the use, acts or omissions of any other lessee of
the Industrial Center, or by the nature of such other lessee's occupancy
which create an extraordinary or unusual risk.
(b) Lessee, however, shall pay the entirety of any increase in the
property insurance premium for the Industrial Center over what it was
immediately prior to the commencement of the term of this Lease if the
increase is specified by Lessor's insurance carrier as being caused by the
nature of Lessee's occupancy or any act or omission of Lessee.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at least B plus, or such
other rating as may be required by a lender having a lien on the Premises, as
set forth in the most current issue of "Best's Insurance Guide." Lessee
<PAGE>
shall not do or permit to be done anything which shall invalidate the
insurance policies carried by Lessor. Lessee shall deliver to Lessor copies
of liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the commencement date of this Lease. No such policy shall be
cancellable or subject to reduction of coverage or other 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 renewals or "binders" thereof.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other. and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
which perils occur in on or about the Premises, whether due to the negligence
of Lessor or Lessee or their agents, employees, contractors and/or invitees.
Lessee and Lessor shall, upon obtaining the policies of insurance required
give notice to the insurance carrier or carriers that the foregoing mutual
waiver of subrogation is contained in this Lease.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from
and against any and all claims arising from Lessee's use of the Industrial
Center or from the conduct of Lessee's business or from any activity, work or
things done, permitted or suffered by Lessee in or about the Premises or
elsewhere and shall further indemnify and hold harmless Lessor from and
against any and all claims arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any act or omission of Lessee or any of
Lessee's agents, contractors, or employees, and from and against all costs,
attorney's fees, expenses and liabilities incurred in the defense of any such
claim or any action or proceeding brought thereon, and in case any action or
proceeding be brought against Lessor by reason of any such claim. 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. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property of Lessee or injury to persons,
in, upon or about the Industrial Center arising from any cause and Lessee
hereby waives all claims in respect thereof against Lessor.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises or the Industrial Center, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, 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, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether said damage or injury results from conditions arising upon the
Premises or upon portions of the Industrial Center, 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 inaccessible to Lessee. Lessor shall not be
liable for any damages arising from any act or neglect of any other lessee,
occupant or user of the Industrial Center, nor from the failure of Lessor to
enforce the provisions of any other lease of the Industrial Center.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean if the Premises are
damaged or destroyed to the extent that the cost of repair is less than fifty
percent of the then replacement cost of the Premises.
(b) "Premises Total Destruction" shall mean if the Premises are
damaged or destroyed to the extent that the cost of repair is fifty percent
or more of the then replacement cost of the Premises.
(c) "Premises Building Partial Damage" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that
the cost to repair is less than fifty percent of the then replacement cost of
the Building.
(d) "Premises Building Total Destruction" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is fifty percent or more of the then
replacement cost of the Building.
(e) "Industrial Center Buildings" shall mean all of the buildings
on the Industrial Center site.
(f) "Industrial Center Buildings Total Destruction" shall mean if
the Industrial Center Buildings are damaged or destroyed to the extent that
the cost of repair is fifty percent or more of the then replacement cost of
the Industrial Center Buildings.
(g) "Insured Loss" shall mean damage or destruction which was
covered by an event required to be covered by the insurance described in
paragraph 8. The fact that an Insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(h) "Replacement Cost" shall mean the amount of money necessary to
be spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring excluding all improvements
made by lessees.
9.2 PREMISES PARTIAL DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss. Subject to the provisions of paragraph 9.4 and
9.5 if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises
Partial Damage or Premises Building Partial Damage, then Lessor shall, at
Lessor's expense, repair such damage to the Premises, but not Lessee's
fixtures, equipment, or tenant improvements, as soon as reasonably possible
and this Lease shall continue in full force and effect.
(b) Uninsured Loss. Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage which
is not an Insured Loss and which falls within the classification of Premises
Partial Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), which damage prevents Lessee from using the
Premises, 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 the date of the occurrence of such damage of
Lessor's intention to cancel and terminate this Lease as of the date of the
occurrence of such damage. In the event Lessor elects to give such notice of
Lessor's intention to cancel and 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 intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, in which event this Lease shall
continue in full force and effect, and Lessee shall proceed to make such
repairs as soon as reasonably possible. If Lessee does not give such notice
within such 10-day period this Lease shall be cancelled and terminated as of
the date of the occurrence of such damage.
9.3 PREMISES TOTAL DESTRUCTION; PREMISES BUILDING TOTAL DESTRUCTION;
INDUSTRIAL CENTER BUILDINGS TOTAL DESTRUCTION.
(a) Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, and which falls into the classifications of either (i) Premises
Total Destruction, or (ii) Premises Building Total Destruction, or (iii)
Industrial Center Buildings Total Destruction, then Lessor may at Lessor's
option either (i) repair such damage or destruction, but not Lessee's
fixtures, equipment or tenant improvements as soon as reasonably possible at
Lessor's expense and this Lease shall continue in full force and effect or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall be cancelled and terminated as of the
date of the occurrence of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the last
six months of the term of this Lease there is substantial damage, whether or
not an Insured Loss, which falls within the classification of Premises
Partial Damage, Lessor may at Lessor's option cancel and terminate this Lease
as of the date of occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has
an option to extend or renew this Lease and the time within which said option
may be exercised has not yet expired, Lessee shall exercise such option, if
it is to be exercised at all, no later than twenty (20) days after the
occurrence of an Insured Loss falling within the classification of Premises
Partial Damage during the last six months of the term of this Lease if Lessee
duly exercises such option during said twenty (20) day period. Lessor shall,
at Lessor's expense, repair such damage, but not Lessee's fixtures,
equipment, or tenant improvements, as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise
such option during said twenty (20) day period, then Lessor may at Lessor's
option terminate and cancel this Lease as of the expiration of said twenty
(20) day period by giving written notice to Lessee of Lessor's election to do
so within ten (10) days after the expiration of said twenty (20) day period,
notwithstanding any term or provision in the grant of option to the contrary.
<PAGE>
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event Lessor repairs or restores the Premises pursuant
to the provisions of this paragraph 9, the rent payable hereunder for the
period during which such damage, repair, or restoration continues shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of rent, if any, Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, 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 such repair
or restoration within ninety (90) days after such obligation shall accrue,
Lessee may at Lessee's option cancel and terminate this Lease by giving
Lessor written notice of Lessee's election to do so at any time prior to the
commencement of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.
9.6 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee wave the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree
that such event shall be governed by the terms of this Lease.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax. as
defined in paragraph 10 3. applicable to the Industrial Center subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with
the provisions of paragraph 4 2. except as otherwise provided in paragraph
10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for
paying Lessee's Share of any increase in real property tax specified in the
tax assessor's records and work sheets as being caused by additional
improvements placed upon the Industrial Center by other lessees or by Lessor
for the exclusive enjoyment of such other lessees. Lessee shall, however,
pay to Lessor at the time that Operating Expenses are payable under paragraph
4.2(c) the entirety of any increase in real property tax if assessed solely
by reason of additional improvements placed upon the Premises by Lessee or at
Lessee's request.
10.3 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" 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 on the Industrial Center or any
portion thereof by any authority having the direct or indirect power to tax,
including any city, county, state or federal government, or any school,
agricultural , sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Lessor in the
Industrial Center or in any portion thereof, as against Lessor's right to
rent or other income therefrom, and as against Lessor's business of leasing
the Industrial Center. The term "real property tax" shall also include any
tax, fee, levy, assessment, or charge (i) in substitution of, partially or
totally, any tax, fee, levy, assessment or charge hereinabove included within
the definition of "real property tax", or (ii) the nature of which was
hereinbefore included within the definition of "real property tax", or (iii)
which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1, 1978, or (iv)
which is imposed as a result of a transfer, either partial or total, of
Lessor's interest in the Industrial Center or which is added to a tax or
charge hereinbefore included within the definition of real property tax by
reason of such transfer, or (v) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof.
10.4 JOINT ASSESSMENT. If the Industrial Center is not separately
assessed, Lessee's Share of the real property tax 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.
10.5 PERSONAL PROPERTY TAX.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the
real property of Lessor.
(b) If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay to 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.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light,
power, telephone and other utilities and services supplied to the Premises,
together with any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's
Share or a reasonable proportion to be determined by Lessor of all charges
jointly metered with other premises in the Building.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer
or encumber all or any part of Lessee's interest in the Lease or in the
Premises without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a breach of this Lease without the need for notice to Lessee
under paragraph 13.1.
12.2 LESSEE AFFILIATE. Notwithstanding the provisions of
paragraph 12.1 hereof, Lessee may assign or sublet the Premises, or any
portion thereof, without Lessor's consent, to any corporation which controls,
is controlled by or is under common control with Lessee, or to any
corporation resulting from the merger or consolidation with Lessee, or to any
person or entity which acquires all the assets of Lessee as a going concern
of the business that is being conducted on the Premises, all of which are
referred to as "Lessee Affiliate", provided that before such assignment
shall be effective said assignee shall assume, in full, the obligations of
Lessee under this Lease. Any such assignment shall not, in any way, affect or
limit the liability of Lessee under the terms of this Lease even if after
such assignment or subletting the terms of this Lease are materially changed
or altered without the consent of Lessee, the consent of whom shall not be
necessary.
12.3 TERMS AND CONDITIONS OF ASSIGNMENT. Regardless of Lessor's
consent, no assignment shall release Lessee of Lessee's obligations hereunder
or after the primary liability of Lessee to pay the Base Rent and Lessee's
Share of Operating Expenses, and to perform all other obligations to be
performed by Lessee hereunder. Lessor may accept rent from any person other
than Lessee pending approval or disapproval of such assignment. Neither a
delay in the approval or disapproval of such assignment nor the acceptance of
rent shall constitute a waiver or estoppel of Lessor's right to exercise its
remedies for the breach of any of the terms or conditions of this paragraph
12 of this Lease Consent to one assignment shall not be deemed consent to any
subsequent assignment. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof,
Lessor may proceed directly against Lessee without the necessity of
exhausting remedies against said assignee. Lessor may consent to subsequent
assignments of this Lease or amendments or modifications to this Lease with
assignees of Lessee, without notifying Lessee or any successor of Lessee, and
without obtaining its or their consent thereto and such action shall not
relieve Lessee of liability under this Lease.
12.4 TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be included
in subleases:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and
apply same toward Lessee's obligations under this Lease, provided, however,
that until a default shall occur in the performance of Lessee's obligations
under this Lease, Lessee may receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of
<PAGE>
the rents from a sublessee, be deemed liable to the sublessee for any failure
of Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a default exists in the performance of Lessee's obligations
under this Lease, to pay Lessor the rents due and to become due under the
sublease. Lessee agrees that such sublessee shall have the right to rely
upon any such statement and request from Lessor, and that such sublessee
shall pay such rent to Lessor without any obligation or right to inquire as
to whether such default exists and notwithstanding any notice from or claim
from Lessee to the contrary. Lessee shall have no right or claim against
such sublessee or Lessor for any such rents so paid by said sublessee to
Lessor.
(b) No sublease entered into by Lessee shall be effective unless
and until it has been approved in writing by Lessor. In entering into any
sublease, Lessee shall use only such form of sublease as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublessee shall, by
reason of entering into a sublease under this Lease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions contained in a
sublease to which Lessor has expressly consented in writing.
(c) If Lessee's obligations under this Lease have been
guaranteed by third parties, then a sublease, and Lessor's consent
thereto, shall not be effective unless said guarantors give their
written consent to such sublease and the terms thereof.
(d) The consent by Lessor to any subletting shall not
release Lessee from its obligations or alter the primary liability of
Lessee to pay the rent and perform and comply with all of the
obligations of Lessee to be performed under this Lease.
(e) The consent by Lessor to any subletting shall not
constitute a consent to any subsequent subletting by Lessee or to any
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.
(f) In the event of any default under this Lease, Lessor
may proceed directly against Lessee, and guarantors or any one else
responsible for the performance of 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.
(g) In the event Lessee shall default 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
Lessee under such sublease from the time of the exercise of said
option to the termination of such sublease, provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by
such sublessee to Lessee or for any other prior defaults of Lessee
under such sublease.
(h) Each and every consent required of Lessee under a
sublease shall also require the consent of Lessor.
(i) No sublessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(j) Lessor's written consent to any subletting of the Premises by
Lessee shall not constitute an acknowledgement that no default then exists
under this Lease of the obligations to be performed by Lessee nor shall such
consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(k) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within ten (10) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 ATTORNEY'S FEES. In the event Lessee shall assign or
sublet the Premises or request the consent of Lessor to any
assignment or subletting or if Lessee shall request the consent of
Lessor for any act Lessee proposes to do then Lessee shall pay
Lessor's reasonable attorneys fees incurred in connection therewith,
such attorneys fees not to exceed $350.00 for each such request.
Initials
13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the
following events shall constitute a material default of this Lease by
Lessee:
(a) The vacating or abandonment of the Premises by Lessee.
(b) The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder, as and
when due, where such failure shall continue for a period of three (3)
days after written notice thereof from Lessor to Lessee. In the
event that Lessor serves Lessee with a Notice to Pay Rent or Quit
pursuant to applicable Unlawful Detainer statutes such Notice to Pay
Rent or Quit shall also constitute the notice required by this
subparagraph.
(c) Except as otherwise provided in this Lease, the
failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by
Lessee, other than described in paragraph (b) above, where such
failure shall continue for a period of thirty (30) days after written
notice thereof from Lessor to Lessee, provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30)
days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commenced such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure
to completion. To the extent permitted by law, such thirty (30) day
notice shall constitute the sole and exclusive notice required to be
given to Lessee under applicable Unlawful Detainer statutes.
(d) (i) The making by Lessee of any general arrangement
or general assignment for the benefit of creditors, (ii) Lessee
becomes 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 possession is not restored to
Lessee within thirty (30) days, or (iv) the attachment, execution, or
other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where
such seizure is not discharged within thirty (30) days. In the event
that any provision of this paragraph 13.1(d) is contrary to any
applicable law, such provision shall be of no force or effect.
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, was materially false.
13.2 REMEDIES. In the event of any such material default by
Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof
shall terminate and Lessee shall immediately surrender possession of
the Premises to Lessor. In such event Lessor shall be entitled to
recover from Lessee all damages incurred by Lessor by reason of
Lessee's default 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 attorney's fees, and any real estate commission actually
paid, the worth at the time of award by the court having jurisdiction
thereof of the amount by which the unpaid rent for the balance of the
term after the time of such award exceeds the amount of such rental
loss for the same period that Lessee proves could be reasonably
avoided, that portion of the leasing commission paid by Lessor
pursuant to paragraph 15 applicable to the unexpired term of this
Lease.
(b) Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have
vacated or abandoned the Premises. In such event Lessor shall be
entitled to enforce all of Lessor's rights and remedies under this
Lease, including the right to recover the rent as it becomes due
hereunder.
<PAGE>
(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. Unpaid installments of rent and other unpaid
monetary obligations of Lessee under the terms of this Lease shall
bear interest from the date due at the maximum rate then allowable by
law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to
Lessee in writing, specifying wherein Lessor has failed to perform such
obligation, provided, however, that if the nature of Lessor's obligation is
such that more than thirty (30) days are required for performance then Lessor
shall not be in default if Lessor commences performance within such thirty
(30) day period and thereafter diligently prosecutes the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expenses or 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 on Lessor by the terms of any
mortgage or trust deed covering the Property. Accordingly, if any
installment of Base Rent Operating Expenses or any other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) 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 6% 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. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's default 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 any of
the aforesaid monetary obligations of Lessee, then Base Rent shall
automatically become due and payable quarterly in advance, rather than
monthly, notwithstanding paragraph 4.1 or any other provision of this Lease
to the contrary.
14. CONDEMNATION. If the Premises or any portion thereof or the Industrial
Center 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 the
date the condemning authority takes title or possession, whichever first
occurs. If more than ten percent of the floor area of the Premises, or more
than twenty-five percent of that portion of the Common Areas designated as
parking for the Industrial Center is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only 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
rent shall be reduced in the proportion that the floor area of the Premises
taken bears to the total floor area of the Premises. No reduction of rent
shall occur if the only area taken is that which does not have the Premises
located thereon. 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 award for loss of or damage to Lessee's trade
fixtures and removable personal property. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of
severance damages received by Lessor in connection with such condemnation,
repair any damage to the Premises caused by such condemnation except to the
extent that Lessee has been reimbursed therefor by the condemning authority.
Lessee shall pay any amount in excess of such severance damages required to
complete such repair.
15. BROKER'S FEE.
(a) Upon execution of this Lease by both parties, Lessor shall pay to
CUSHMAN & WAKEFIELD AND CORNISH & CAREY split 50/50 Licensed real estate
broker(s) a fee as set forth in a separate agreement between Lessor and said
broker(s).
(b) Lessor further agrees that if Lessee exercises any Option,
as defined in paragraph 39.1 of this Lease, which is granted to
Lessee under this Lease, or any subsequently granted option which is
substantially similar to an Option granted to Lessee under this
Lease, or if Lessee acquires any rights to the Premises or other
premises described in this Lease which are substantially similar to
what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or if Lessee remains in possession of the
Premises after the expiration of the term of this Lease after having
failed to exercise an Option, or if said broker(s) are the procuring
cause of any other lease or sale entered into between the parties
pertaining to the Premises and/or any adjacent property in which
Lessor has an interest then as to any of said transactions, Lessor
shall pay said broker(s) a fee in accordance with the schedule of
said broker(s) in effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor
but also on behalf of any person, corporation, association, or other
entity having an ownership interest in said real property or any part
thereof, when such fee is due hereunder. Any transferee of Lessor's
interests in this Lease, whether such transfer is by agreement or by
operation of law, shall be deemed to have assumed Lessor's obligation
under this paragraph 15. Said broker shall be a third party
beneficiary of the provisions of this paragraph 15.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon
not less than ten (10) days prior written notice from the other party
("requesting party") execute, acknowledge and deliver to the
requesting party a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and
(ii) acknowledging that there are not, to the responding party's
knowledge, any uncured defaults on the part of the requesting party,
or specifying such defaults if any are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or of the business of the requesting
party.
(b) At the requesting party's option, the failure to deliver
such statement within such time shall be a material default of this
Lease by the party who is to respond, without any further notice to
such party, or it shall be conclusive upon such party that (i) this
Lease is in full force and effect, without modification except as may
be represented by the requesting party, (ii) there are no uncured
defaults in the requesting party's performance, and (iii) if Lessor
is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the
Property, or any party thereof, Lessee hereby agrees to deliver to
any lender or purchaser designated by Lessor such financial
statements of Lessee as may be reasonably required by such lender or
purchaser. Such statements shall include the past three (3) years'
financial statements of Lessee. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and
shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean
only the owner or owners, at the time in question, of the fee title
or a lessee's interest in a ground lease of the Industrial Center,
and except as expressly provided in paragraph 15, in the event of any
transfer of such title or interest. Lessor herein named (and in case
of any subsequent transfers then the grantor) shall be relieved from
and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any
funds in the hands of Lessor of the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by
Lessor shall, subject as aforesaid, be binding on Lessor's successors
and assigns, only during their respective periods of ownership.
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. Except as expressly herein
provided any amount due to Lessor not paid when due shall bear
interest at the maximum rate then allowable by law from the date due.
Payment of such interest shall not excuse or cure any default by
Lessee under this Lease, provided, however, that interest shall not
be payable on late charges incurred by Lessee nor on any amounts upon
which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the
obligations to be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor
under the terms of this Lease, including but not limited to Lessee's
Share of Operating Expenses and insurance and tax expenses payable
shall be deemed to be rent.
<PAGE>
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker
on this transaction nor the Lessor or any employee or agents of any of said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by the Lessee of the Premises or the
Property and Lessee acknowledges that Lessee assumes all responsibility
regarding the Occupational Safety Health Act, the legal use and adaptability
of the Premises and the compliance thereof with all applicable laws and
regulations in effect during the term of this Lease except as otherwise
specifically stated in this Lease.
23. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal delivery or by
certified mail, and if given personally or by mail, shall be deemed
sufficiently given if addressed to Lessee or to Lessor at the address
noted below the signature of the respective parties, as the case may
be. Either party may by 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 notice purposes. 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 notice to Lessee.
24. WAIVERS. No waiver by Lessor or any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent
breach by Lessee of the same or any other provision. 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 act by Lessee. The acceptance of rent hereunder by Lessor
shall not be a waiver of any preceding breach by Lessee of any
provision hereof other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the
other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in
possession of the Premises or any part thereof after the expiration
of the term hereof, such occupancy shall be tenancy from month to
month upon all the provisions of this Lease pertaining to the
obligations of Lessee, but all Options, if any, granted under the
terms of this Lease shall be deemed terminated and be of no further
effect during said month to month tenancy.
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. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the
provisions of paragraph 17, this Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall
be governed by the laws of the State where the Industrial Center is
located and any litigation concerning this Lease between the parties
hereto shall be initialed in the county in which the Industrial
Center is located.
30. SUBORDINATION.
(a) This Lease, and any Option granted hereby, at Lessor's
option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed
upon the Industrial Center and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such
subordination, Lessee's right to quiet possession of the Premises
shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated
pursuant to its terms. If any mortgagee, trustee or ground lessor
shall elect to have this Lease and such Options granted hereby prior
to the lien of its mortgage, deed of trust or ground lease, and shall
give written notice thereof to Lessee, this Lease and such Options
shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or
subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to
effectuate an attornment, a subordination or to make this Lease or
any Option granted herein prior to the lien of any mortgage, deed of
trust or ground lease, as the case may be. Lessee's failure to
execute such documents within ten (10) days after written demand
shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option. Lessor shall
execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and
irrevocably appoint Lessor as Lessee's attorney-in-fact and in
Lessee's name, place and stead, to execute such documents in
accordance with this paragraph 30(b).
31. ATTORNEY'S FEES. If either party or the broker(s) named herein
bring an action to enforce the terms hereof or declare rights
hereunder, the prevailing party in any such action, on trial or
appeal, shall be entitled to his reasonable attorney's fees to be
paid by the losing party as fixed by the court. The provisions of
this paragraph shall inure to the benefit of the broker named herein
who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the
same, 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 part as Lessor may deem necessary or
desirable. Lessor may at any time place on or about the Premises or the
Building any ordinary "For Sale" signs and Lessor may at any time during the
last 120 days of the term hereof place on or about the Premises any ordinary
"For Lease" signs. All activities of Lessor pursuant to this paragraph shall
be without abatement of rent, nor shall Lessor have any liability to Lessee
for the same.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common
Areas 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 or the
Industrial Center without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Industrial
Center.
35. MERGER. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, or a termination by Lessor,
shall not work a merger, and shall, at the option of Lessor,
terminate all or any existing subtenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such
subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this
Lease the consent of one party is required to an act of the other
party such consent shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this
Lease, said guarantor shall have the same obligations as Lessee under
this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises
and observing and performing all of the covenants, conditions and
provisions on Lessee's part to be observed and performed hereunder,
Lessee shall have quiet possession of the Premises for the entire
term hereof subject to all of the provisions of this Lease. The
individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable
of executing this Lease on behalf of Lessor and that such execution
is binding upon all parties holding an ownership interest in the
Property.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Option"
has the following meaning (1) the right or option 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; (2) the option or 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 space
within the Industrial Center or other property of Lessor or the right
of first offer to lease other space within the Industrial Center or
other property of Lessor; (3) the right or option to purchase the
Premises or the Industrial Center, or the right of first refusal to
purchase the Premises or the
<PAGE>
Industrial Center, or the right of first offer to purchase the
Premises of the Industrial Center, or the right or option 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. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises who does so without the intent thereafter
assigning this Lease or subletting the Premises or any portion thereof, and
may not be exercised or be assigned, voluntarily or involuntarily, by or to
any person or entity other than Lessee, provided, however, that an Option may
be exercised by or assigned to any Lessee Affiliate as defined in paragraph
12.2 of this Lease. The Options, if any, herein granted to Lessee are not
assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. [DELETED]
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 time commencing from the date Lessor gives to Lessee a
notice of default pursuant to paragraph 13.1(b) or 13.1(c) and
continuing until the noncompliance alleged in said notice of default
is cured, or (ii) during the period of time commencing on the date
after a monetary obligation to Lessor is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee) and continuing
until the obligation is paid, or (iii) at any time after an event of
default described in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee),
nor (iv) in the event that Lessor has given to Lessee three or more
notices of default under paragraph 13.1(b), or paragraph 13.1(c),
whether or not the defaults are cured, during the 12 month period of
time immediately prior to the time that Lessee attempts to exercise
the subject Option.
(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 give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(c) within
thirty (30) days after the date that Lessor gives notice to Lessee of
such default and/or Lessee fails thereafter to diligently prosecute
said cure to completion, or (iii) Lessee commits a default described
in paragraph 13.1(a), 13.1(d) or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) Lessor
gives to Lessee three or more notices of default under paragraph
13.1(b), or paragraph 13.1(c), whether or not the defaults are cured.
40. SECURITY MEASURES. Lessee hereby acknowledges that Lessor shall
have no obligation whatsoever to provide guard service or other
security measures for the benefit of the Premises or the Industrial
Center. Lessee assumes all responsibility for the protection of
Lessee, its agents, and invitees and the property of Lessee and of
Lessee's agents and invitees from acts of third parties. Nothing
herein contained shall prevent Lessor, at Lessor's sole option, from
providing security protection for the Industrial Center or any part
thereof, in which event the cost thereof shall be included within the
definition of Operating Expenses, as set forth in paragraph 4.2(b).
41. EASEMENTS. Lessor reserves to itself the right, from time to
time, to grant such easements, rights and dedications that Lessor
deems necessary or desirable, and to cause the recordation of Parcel
Maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not unreasonably interfere
with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so
shall constitute a material default of this Lease by Lessee without
the need of further notice to Lessee.
42. 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 sums 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.
43. AUTHORITY. If Lessee 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 behalf of said
entity. It Lessee is a corporation, trust or partnership, Lessee
shall, within thirty (30) days after execution of this Lease, deliver
to Lessor evidence of such authority satisfactory to Lessor.
44. CONFLICT. Any Conflict between the printed provisions of this
Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.
45. 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. This Lease shall become binding upon Lessor and Lessee only
when fully executed by Lessor and Lessee.
46. ADDENDUM. Attached hereto is an addendum or addenda containing
paragraphs _________ through _________ which constitute a part of
this Lease.
47. IMPROVEMENTS TO BE COMPLETED AT SOLE COST OF LESSOR BY
DECEMBER 4, 1992.
(a) Paint throughout or touch-up paint as indicated on Exhibit C.
(b) Replace lenses in overhead lighting and replace broken
ceiling and floor tiles where necessary.
(c) Lessor shall reduct the HVAC systems serving the warehouse
and tiled areas to divide the space. Upon execution of a lease for
the remaining portion of the building, Lessor will separate the
electrical supply for each unit and separately meter the 10-ton HVAC
unit which serves the front areas. Lessee will pay the entire cost
of operating this unit in lieu of payment of rent for the conference
room until such time as a tenant is found. Then Lessee will vacate
the conference room, the 10-ton unit will be metered, and Lessee and
the new tenant will divide the cost of operating this unit 50/50.
48. LESSEE OPTION. Lessee shall have an option (subject to
paragraph 39) to extend this lease for one additional one year
period. The base rent for this period shall be $.60 per square foot
or $8,478.00 per month.
49. RIGHT OF FIRST REFUSAL. Lessee shall have a right of first
refusal on the adjacent space at the same terms and conditions of any
bona fide written offer. After receipt of the written offer, Lessee
shall have three (3) working days to notify Lessor in writing of its
intention to lease the space. If Lessee elects not to lease such
space, Lessor may offer such space to third parties upon the same
terms and conditions as contained in Lessor's prior written
notification to Lessee. Prior to offering such space to third
parties upon terms and conditions which differ by greater than 5%,
Lessor will first offer the space to Lessee upon such newly proposed
terms and conditions and the same 3 day notification period shall
apply. If within the initial 24 month lease term no offer exists,
Lessee may expand to occupy the entire building under the same terms
and conditions as the current lease. The rent would increase to
$12,600 per month and the security deposit would be increased to
equal $12,600.
49.1 DIVISION OF UTILITIES COST. If Lessor occupies any portion
of the building with 3 or fewer employees, Lessor shall pay $200.00
per month to be applied to the cost of electricity, gas and water
which are supplied to the building. If Lessor should change the
nature of his use of the building so that the demand for electricity,
gas and water increases, then the $200.00 amount shall be
re-negotiated to reflect the change, or Lessor shall separately meter
the two sides as if a new tenant had been found.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND
EACH TERM AND PROVISION CONTAINED HEREIN AND, BY 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.
<PAGE>
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING
THERETO. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN
LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
Yageo USA Inc. LJL BioSystems, Inc.
- ------------------------- -----------------------------
By /s/ By /s/ Galina Leytes 11/5/92
--------------------------- ---------------------------------
By By
--------------------------- ---------------------------------
Executed on Executed on
------------------ ------------------------
ADDRESS FOR NOTICES AND RENT ADDRESS
Yageo USA, Inc. LJL BioSystems, Inc.
- ----------------------------- -------------------------------
404 Tasman Drive 404 Tasman Drive
- ----------------------------- -------------------------------
Sunnyvale, CA 94089 Sunnyvale, CA 94089
- ----------------------------- --------------------------------
<PAGE>
ADDENDUM TO LEASE AGREEMENT
50. Lessor agrees that Lessee will make improvements to the Premises
indicated on Exhibit C. At termination of the Lease, Lessee will
remove the wall and the carpeting as specified on Exhibit C and
restore the vinyl tile to good usable condition. Lessee, at Lessee's
option may install a shower as shown on Exhibit C. All work to be
done shall meet all applicable building codes per city of Sunnyvale.
51. Lessee, at Lessee's expense, shall procure and maintain a
heating, ventilation and air conditioning system maintenance contract
for the part of the building that is occupied by Lessee. Lessor
shall be responsible for all the repairs and replacement costs
associated with HVAC system, when needed.
52. Lessor shall clean and buff all tile areas indicated on Exhibit C.
53. Lessor shall secure all loose or hanging ceiling insulation.
54. LJL BioSystems, Inc. shall have exclusive rights to the lobby.
However any future occupant of the unused portion of the Premises
shall have access to their portion of the building through the lobby.
55. Lessee's portion of operating expenses shall not exceed $.12 per
sq. foot for the first year of the lease. Subsequent years shall not
exceed 10% increase per year.
56. TOXIC MATERIALS: Lessor shall have the express responsibility to
advise Lessee of any toxic materials which are located in, or about
the Premises, parking areas, storage area or other parts of the
Project. It shall be the responsibility of Lessor at its sole cost
and expense to remove any building toxic materials prior to the
commencement of Lessee improvement construction, and to indemnify and
hold Lessee harmless from any prior condition. Further, Lessor's
costs for the removal of toxic material(s) in Lessee's Premises or in
any other location in the Project shall be the Lessor's sole
responsibility.
57. NOTICE TO OWNER'S, BUYERS AND TENANTS REGARDING ENVIRONMENTAL
MATTERS: It is essential that all parties to real estate
transactions be aware of the health, liability and economic impact of
environmental factors on real estate. Cushman & Wakefield and Cornish
& Carey Commercial does not conduct investigations or analyses of
environmental matters and, accordingly, urges its clients to retain
qualified environmental professionals to determine whether hazardous
or toxic wastes or substances are present at the property and, if so,
whether any health danger or other liability exists.
<PAGE>
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
Sobrato Development Companies
10600 North De Anza Blvd.
Suite 200
Cupertino, CA 95014-2031
Attn: Mr. John M. Sobrato
- ------------------------------------------------------------------------------
AGREEMENT
This Agreement is made and entered into as of the 3rd day of December,
1993, by and between LJL BIOSYSTEMS, INC., a California corporation ("LJL"),
YAGEO USA, INC., a California corporation ("Yageo"), and JOHN MICHAEL SOBRATO,
or his successor(s) Trustee(s) under Revocable Trust Agreement dated April 28,
1989, FBO ANN S. SOBRATO ("Sobrato").
THE UNDERSIGNED EACH ACKNOWLEDGE:
A. LJL, as Tenant, and Yageo, as Landlord, entered into that written
Lease Agreement ("the Lease") dated October 14, 1992 for certain approximately
14,130 square feet of premises (the "Premises") located in that certain
building commonly known as 404 Tasman Drive, Sunnyvale, California, more
particularly described on EXHIBIT A attached hereto (the "Property").
B. The Property is encumbered by a deed of trust ("Deed of Trust")
securing an assumption agreement executed by Yageo for the benefit of Sobrato.
C. Sobrato has commenced foreclosure proceedings under the deed of trust
and a foreclosure sale is currently scheduled for December 7, 1993.
D. It is in the best interests of Yageo, LJL and Sobrato for Yageo, LJL
and Sobrato to be mutually assured that LJL will continue to be a tenant of the
Premises after the foreclosure.
Accordingly, Yageo, LJL and Sobrato hereby agree as follows:
1. The effectiveness of this Agreement is conditioned on the following:
(a) Receipt by LJL from Yageo of the sum of Seven Thousand Sixty
Five Dollars ($7,065), which sum represents the deposit previously delivered by
LJL to Yageo as the security deposit under the Lease.
<PAGE>
(b) Receipt by Sobrato from Yageo of the sum of Seventeen Thousand
Nine Hundred Thirty-five Dollars ($17,935), for application toward amounts due
and owing from Yageo to Sobrato in connection with the Property and the Deed of
Trust.
2. In the event of any foreclosure of the Deed of Trust, provided that
LJL shall not then be in default beyond any grace period under the Lease, LJL
shall not be made a party in any action or proceeding to remove or evict LJL or
to disturb its possession, nor shall the leasehold estate of LJL created by the
Lease be affected in any way, and the Lease shall continue in full force and
effect as a direct lease between LJL and Sobrato (or any third-party purchaser
at the foreclosure sale).
3. Sobrato hereby agrees to proceed with the pending foreclosure sale,
unless prevented by a third party. Yageo and LJL hereby agree not to interfere
with the foreclosure sale or attempt to enjoin the same.
4. Sobrato shall request that the trustee holding the foreclosure sale
read a statement notifying any potential bidders that the Property is being
sold subject to the Lease (as amended below) and another lease.
5. Effective as of the consummation of the foreclosure sale, the Lease
shall be amended as follows:
(a) Paragraph 5 ("Security Deposit") of the Lease shall be deleted;
(b) The following is added to the Lease: Lessor shall have no
obligation to provide separate utility meters for the Premises. Lessor shall
equitably prorate utility charges that are used in common by Lessee and the
other occupants of the Property, such that Lessee shall pay only that portion
of such charges attributable to Lessee's consumption utilities.
(c) Except as set forth above, all terms and conditions of the Lease
(including, without limitation, paragraph 54 of the Addendum which grants LJL
the exclusive right to use the building lobby), are unmodified and in full
force and effect.
6. Effective as of the consummation of the foreclosure sale, the parties
do hereby release, discharge and waive claims against each other as follows:
(a) RELEASE BY LJL. LJL, on behalf of itself and its agents,
employees, heirs, representatives, successors and assigns, hereby releases and
discharges Yageo, and its agents, employees, heirs, representatives, successors
and assigns, of and from any and all claims, demands, obligations, liabilities,
indebtedness, breaches of contract, breaches of duty or any relationship, acts,
omissions, misfeasance, malfeasance, causes of action, controversies, promises,
losses, damages, costs and expenses of
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<PAGE>
every type, kind, nature, description or character, and irrespective of how,
why, or by reason of what facts, whether now existing or hereafter arising, or
which could, might or may be claimed to exist, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, each as though fully set
forth herein at length, including without limitation those liabilities which
in any way arise out of, are connected with or relate to the Lease, as well as
any action or inaction of any person or entity released hereunder with respect
to the Lease.
(b) RELEASE BY SOBRATO. Sobrato on behalf of itself and its agents,
employees, heirs, representatives, successors and assigns, hereby releases and
discharges Yageo, and its agents, employees, heirs, representatives,
successors and assigns, of and from any and all claims, demands, obligations,
liabilities, indebtedness, breaches of contract, breaches of duty or any
relationship, acts, omissions, misfeasance, malfeasance, causes of action,
controversies, promises, losses, damages, costs and expenses of every type,
kind, nature, description or character, and irrespective of how, why, or by
reason of what facts, whether now existing or hereafter arising, or which
could, might or may be claimed to exist, whether known or unknown, suspected
or unsuspected, liquidated or unliquidated, each as though fully set forth
herein at length, including without limitation those liabilities which in any
way arise out of, are connected with or relate to the above-referenced
assumption agreement and/or Deed of Trust, as well as any action or inaction
of any person or entity released hereunder with respect to said assumption
agreement and/or Deed of Trust.
(c) RELEASES BY YAGEO. Yageo, on behalf of itself and its agents,
employees, heirs, representatives, successors and assigns, hereby releases and
discharges Sobrato, and his agents, employees, heirs, representatives,
successors and assigns, of and from any and all claims, demands, obligations,
liabilities, indebtedness, breaches of contract, breaches of duty or any
relationship, acts, omissions, misfeasance, malfeasance, causes of action,
controversies, promises, losses, damages, costs and expenses of every type,
kind, nature, description or character, and irrespective of how, why, or by
reason of what facts, whether now existing or hereafter arising, or which
could, might or may be claimed to exist, whether known or unknown, suspected
or unsuspected, liquidated or unliquidated, each as though fully set forth
herein at length, including without limitation those liabilities which in any
way arise out of, are connected with or relate to the above-referenced
assumption agreement and/or Deed of Trust, as well as any action or inaction
of any person or entity released hereunder with respect to said assumption
agreement and/or Deed of Trust.
Yageo, on behalf of itself and its agents, employees, heirs,
representatives, successors and assigns, hereby releases and discharges LJL,
and its agents, employees, heirs, representatives, successors and assigns, of
and from any and all claims, demands,
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<PAGE>
obligations, liabilities, indebtedness, breaches of contract, breaches of duty
or any relationship, acts, omissions, misfeasance, malfeasance, causes of
action, controversies, promises, losses, damages, costs and expenses of every
type, kind, nature, description or character, and irrespective of how, why,
or by reason of what facts, whether now existing or hereafter arising, or
which could, might or may be claimed to exist, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, each as though fully set
forth herein at length, including without limitation those liabilities which
in any way arise out of, are connected with or relate to the Lease, as well as
any action or inaction of any person or entity released hereunder with respect
to the Lease.
(d) WAIVER OF UNKNOWN CLAIMS. As to all matters being released by
each releasing party pursuant to the foregoing provisions, such releasing party
waives any and all rights which it may have under the provisions of California
Civil Code section 1542 or under any comparable federal and/or state statute or
rule of law. California Civil Code section 1542 provides:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release which if known by him must have materially affected his
settlement with the debtor.
In the event, for any reason, the foreclosure sale is not consummated or, if
consummated, is successfully challenged or set aside, then the foregoing
releases and waivers of claims shall be of no force and effect, all currently
existing obligations of the parties shall be reinstated, and the parties shall
be obligated to perform under the Lease, as to LJL and Yageo, and under said
assumption agreement and Deed of Trust, as to Sobrato and Yageo, of the sale,
as the same exist as of the date of this Agreement. Yageo and LJL hereby agree
not to challenge the foreclosure sale or seek to set the same aside.
7. LJL will not make any claim of default under the Lease against any
purchaser of the Premises at a foreclosure sale of the Deed of Trust (including
Sobrato) with respect to any matter under the Lease of which LJL is aware as of
the date of this Agreement.
8. The parties hereto may execute this Agreement simultaneously, in any
number of counterparts, or by annexing signature pages hereto, or on facsimile
copies, each of which shall be deemed an original, but all of which together
shall constitute one and the same document.
9. This Agreement constitutes the entire agreement between the parties
hereto and supersedes and cancels any and all previous negotiations,
arrangements, agreements and understandings, whether written or oral, between
the parties with respect to the subject
-4-
<PAGE>
matter hereof. No addition to, or modification of, any term or provision of
this Agreement shall be effective until and unless set forth in a written
instrument signed by all parties.
10. In the event any party hereto shall bring any action or legal
proceeding for damages for an alleged breach of any provision of this
Agreement, or to enforce protect, interpret, or establish any term, condition,
or covenant of this Agreement or right or remedy of any party, the prevailing
party shall be entitled to recover, as a part of such action or proceeding,
reasonable attorneys' fees and court costs, including attorneys' fees and costs
for appeal, as may be fixed by the court or jury.
11. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without regard to the provisions thereof
relating to conflict of laws and shall be binding upon the successors and
assigns of the parties.
IN WITNESS WHEREOF, this Agreement has been executed as of the dates set
forth below.
YAGEO USA, INC.,
a California corporation
By: THOMAS M. BOEHM /s/
---------------------------
Its: Attorney in fact
--------------------------
Date:December 3, 1993
-------------------------
LJL BIOSYSTEMS, INC.,
a California corporation
By: /s/ ROBERT BEGGS
---------------------------
Its: Director, Finance &
Administration
--------------------------
Date: December 3, 1993
-------------------------
JOHN MICHAEL SOBRATO, or his
successor(s) Trustee(s) under
Revocable Trust Agreement dated
April 28, 1989, FBO ANN S. SOBRATO
By: /s/ JMS
---------------------------
John M. Sobrato, Trustee
Date: December 3, 1993
-------------------------
-5-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
On December ___, 1993, before me, _____________________.
personally appeared JOHN M. SOBRATO,
/ / personally known to me -OR- proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
----------------------------------------
(SIGNATURE OF NOTARY)
CAPACITY CLAIMED BY SIGNER
- --------------------------
Though statute does not require the Notary to fill in the data below, doing
so may prove invaluable to persons relying on the document.
/ / INDIVIDUAL
/ / CORPORATE OFFICER(S)
-------------------------
Title(s)
/ / PARTNER(s) / / LIMITED
/ / GENERAL
/ / ATTORNEY-IN-FACT
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER:
--------------------
--------------------
SIGNER IS REPRESENTING:
- -----------------------
Name of Person(s) or Entity(ies)
- --------------------------------
- --------------------------------
STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
On December 3 , 1993, before me, Pat Meyer ,
--- --------------------
personally appeared THOMAS M. BOEHM ,
-------------------------
/x/ personally known to me -OR- proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf
of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Patricia J. Meyer
--------------------------------------
(SIGNATURE OF NOTARY)
CAPACITY CLAIMED BY SIGNER
- --------------------------
Though statute does not require the Notary to fill in the data below, doing
so may prove invaluable to persons relying on the document.
/ / INDIVIDUAL
/ / CORPORATE OFFICER(S)
-------------------------
Title(s)
/ / PARTNER(s) / / LIMITED
/ / GENERAL
/X/ ATTORNEY-IN-FACT
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER:
--------------------
--------------------
SIGNER IS REPRESENTING:
- -----------------------
Name of Person(s) or Entity(ies)
- --------------------------------
- --------------------------------
-6-
<PAGE>
STATE OF CALIFORNIA
COUNTY OF SANTA CLARA
On December ______, 1993, before me,__________________________,
personally appeared _____________________________________,
/ / personally known to me -OR- proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument
and acknowledged to me that he executed the same in his authorized capacity,
and that by his signature on the instrument the person, or the entity upon
behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------------
(SIGNATURE OF NOTARY)
CAPACITY CLAIMED BY SIGNER
- --------------------------
Though statute does not require the Notary to fill in the data below, doing
so may prove invaluable to persons relying on the document.
/ / INDIVIDUAL
/ / CORPORATE OFFICER(S)
-------------------------
Title(s)
/ / PARTNER(s) / / LIMITED
/ / GENERAL
/ / ATTORNEY-IN-FACT
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER:
--------------------
--------------------
SIGNER IS REPRESENTING:
- -----------------------
Name of Person(s) or Entity(ies)
- --------------------------------
- --------------------------------
-7-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All that certain real property situate in the City of Sunnyvale, County of
Santa Clara, State of California, described as follows:
PARCEL B, as shown on that certain Map recorded February 13, 1976 in Book 367,
Page 54 of Maps, Records of Santa Clara County, California
Common Address: 404 Tasman Drive, Sunnyvale, CA
APN: 110-14-167
<PAGE>
SECOND AMENDMENT TO LEASE
This second amendment to lease ("Second Amendment") is made this 20TH day of
October, 1995 by and between The Ann Sobrato 1989 Revocable Trust, having an
address at 10600 N. De Anza Blvd., Suite 200, Cupertino, California 95014, as
successor Landlord to Yageo USA Inc., ("Landlord") and LJL Biosystems, a
Delaware corporation having its principal place of business at 404 Tasman
Drive, Sunnyvale, California, 94089 ("Tenant").
WITNESSETH
WHEREAS Landlord and Tenant entered into a lease dated October 14, 1992 and an
amendment to the lease dated December 3, 1993 (collectively the "Lease") for
the premises ("Premises") located at 404 Tasman Drive, Sunnyvale, California;
and
WHEREAS effective October 15,1995, Landlord and Tenant wish to modify the Lease
to revise the Lease Expiration Date, Base Rent, and certain other provisions of
the Lease;
NOW, THEREFORE, in order to effect the intent of the parties as set forth above
and for good and valuable consideration exchanged between the parties, the
Lease is amended effective October 15, 1995 as follows:
1. The expiration date of the Lease is changed to December 31, 1996.
2. The Base Rent is changed from $8,478.00 per month to $9,891.00 per month.
3. Lease paragraphs 47, 48, 49.1, 51, 52, 53 and 55 are deleted.
4. Tenant, at Tenant's expense, agrees to procure and maintain a heating,
ventilation and air conditioning system maintenance contract for the equipment
that serves the Premises. Tenant shall be responsible for all repair costs
associated with the HVAC system.
5. Tenant shall have no responsibility to pay the cost of equipment
replacement or any other replacement associated with the Premises if such cost
would normally be capitalized under generally
<PAGE>
accepted accounting principles. Tenant shall have no responsibility to pay
replacement costs for the roof membrane.
6. Tenant shall have the right to terminate the Lease by providing Landlord
with no less than 180 days' advance written notice of its intent to terminate.
Such termination shall occur on the last day of the month that is at least 6
months from the date of Tenant's termination notice.
7. All defined terms shall have the same meanings as in the Lease, except as
otherwise stated in this Second Amendment.
8. Except as hereby amended, the Lease and all of the terms, covenants and
conditions thereof shall remain unmodified and in full force and effect. In
the event of any conflict or inconsistency between the terms and provisions of
this Second Amendment and the terms and provisions of the Lease, the terms and
provisions of this Second Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have set their hands to this Amendment
as of the day and date first above written.
LANDLORD TENANT
The Ann Sobrato 1989 Revocable Trust LJL Biosystems,
a Delaware corporation
By: /s/ JMS By: /s/ Robert Beggs
--------------------------- -----------------------
Director, Finance &
Its: Trustee Its: Administration
--------------------------- -----------------------
Page 2
<PAGE>
THIRD AMENDMENT TO LEASE
This third amendment to lease ("Third Amendment") is made this 16 day of
September, 1996 by and between The Ann Sobrato 1989 Revocable Trust, having an
address at 10600 N. De Anza Blvd., Suite 200, Cupertino, California 95014, as
successor Landlord to Yageo USA Inc., ("Landlord") and LJL Biosystems, a
Delaware corporation having its principal place of business at 404 Tasman
Drive, Sunnyvale, California, 94089 ("Tenant").
WITNESSETH
WHEREAS Landlord and Tenant entered into a lease dated October 14, 1992, an
amendment to the lease dated December 3, 1993, and a second amendment to the
lease dated October 20, 1995 (collectively the "Lease") for the premises
located at 404 Tasman Drive, Sunnyvale, California ("Premises"); and
WHEREAS effective September 1, 1996, Landlord and Tenant wish to modify the
Lease to revise the Lease Expiration Date, Base Rent, and certain other
provisions of the Lease;
NOW, THEREFORE, in order to effect the intent of the parties as set forth above
and for good and valuable consideration exchanged between the parties, the
Lease is amended effective September 1, 1996 as follows:
1. The expiration date of the Lease is changed to January 31, 2000.
2. Paragraph 6 of the Second Amendment to Lease is deleted.
3. Base Rent is due according to the following schedule:
September 1, 1996 through December 31, 1996: $9,891.00 per month
January 1, 1997 through December 31, 1998: $12,010.50 per month
January 1, 1999 through February 14, 2000: $12,717.00 per month
<PAGE>
4. Lease paragraph 49 is deleted. In its place, Landlord hereby grants
Tenant a right of first offering to lease the adjacent space within the
building of approximately 11,000 square feet ("Expansion Space"), currently
leased by Cermetek Microelectronics. Prior to Landlord offering to lease the
Expansion Space to a third party (other than any third parties with existing
rights as of the date of this Third Amendment), Landlord shall give Tenant
written notice of such desire and the terms and other information under which
Landlord intends to lease the Expansion Space. Provided at the time of
exercise Tenant is not in default under this Lease, Tenant shall have the
option, which must be exercised, if at all, by written notice to Landlord
within ten (10) days after Tenant's receipt of Landlord's notice, to lease
the Expansion Space at the rent and terms of lease specified in the notice.
In the event Tenant timely exercises such option to lease the Expansion
Space, Landlord shall lease the Expansion Space to Tenant in accordance with
the rent and terms specified in Landlord's notice and on the terms and
conditions of this Lease which are not inconsistent with the terms and
conditions set forth in Landlord's notice. The parties shall execute an
amendment to this Lease memorializing the addition of the Expansion Space to
this Lease on such terms and conditions. In the event Tenant does not
execute said amendment within 30 days of receipt from Landlord, or in the
event Tenant fails to exercise Tenant's option within said 10-day period,
Landlord shall have one hundred eighty (180) days thereafter to lease the
Expansion Space at no less than ninety percent (90%) of the rental rate and
upon the same or substantially the same other terms of lease as specified in
the notice to Tenant. In the event Landlord fails to lease the Expansion
Space within said 180-day period or in the event Landlord proposes to lease
the Expansion Space at less than 90% of the rental rate or on other material
terms which are more favorable to the prospective tenant than that proposed
to Tenant, Landlord shall be required to resubmit such offer to Tenant in
accordance with this Right of First Offering. Notwithstanding the foregoing,
this Right of First Offering shall automatically terminate upon the
expiration or sooner termination of the Lease.
5. Landlord grants to Tenant, subject to the terms and conditions set forth
in this paragraph, an option ("Option") to extend the Lease Term for an
additional term ("Option Term"). The Option Term shall be for a period of
sixty (60) months and shall be exercised, if at all, by written notice to
Landlord no earlier than eighteen (18) months prior to the Lease expiration
date but no later than nine (9) months prior to the expiration date. If
Tenant exercises the Option, all of the terms,
Page 2
<PAGE>
covenants and conditions of this Lease except this Section shall apply during
the Option Term as though the expiration date of the Option Term was the date
originally set forth herein as the Lease expiration date, provided that Base
Rent for the Premises payable by Tenant during the Option Term shall be
derived by increasing the Base Rent applicable to the period immediately
prior to the commencement of the Option Term by a percentage equal to the
percentage increase, if any, in the Consumer Price Index for the year 1999.
Notwithstanding anything herein to the contrary, if Tenant is in monetary or
material non-monetary default under any of the terms, covenants or conditions
of this Lease either at the time Tenant exercises the Option or at any time
thereafter prior to the commencement date of the Option Term, Landlord shall
have, in addition to all of Landlord's other rights and remedies provided in
this Lease, the right to terminate the Option upon notice to Tenant, in which
event the expiration date of this Lease shall be and remain unmodified. It
is understood and agreed by the parties that Tenant's right to extend the
Lease Term as provided in this paragraph is contingent upon Cermetek
Microelectronics exercising its right to extend its lease for the adjacent
space within the Building. In the event Cermetek does not elect to extend
its lease, this paragraph shall be null and void, unless Tenant is willing to
lease the Expansion Space as provided in Paragraph 4 above.
6. Paragraph 8.6 of the Lease is deleted and replaced with the following:
Landlord and Tenant hereby waive any rights each may have against the other on
account of any loss or damage that is caused or results from a risk which is
actually insured against, which is required to be insured against under this
Lease, or which would normally be covered by a standard form of full
replacement value "all risk extended coverage" policy of casualty insurance,
regardless of whether such loss or damage is due to the negligence of Landlord
or Tenant or if their respective agents, employees, subtenants, contractors,
assignees, invitees or any other cause.
7. In Paragraph 12.2 of the Lease, the words "or Paragraph 12.4" are added to
the first sentence after the words - "the provisions of paragraph 12.1".
8. All defined terms shall have the same meanings as in the Lease, except as
otherwise stated in this Third Amendment.
Page 3
<PAGE>
9. Except as hereby amended, the Lease and all of the terms, covenants and
conditions thereof shall remain unmodified and in full force and effect. In
the event of any conflict or inconsistency between the terms and provisions of
this Third Amendment and the terms and provisions of the Lease, the terms and
provisions of this Third Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have set their hands to this Amendment
as of the day and date first above written.
LANDLORD TENANT
The Ann Sobrato 1989 Revocable Trust LJL Biosystems, Inc.
a Delaware corporation
By: /s/ JMS By: /s/ Robert Beggs
--------------------------------- ------------------------------
Its: Trustee Its: Vice President, Finance
-------------------------------- -----------------------------
Page 4
<PAGE>
LJL BIOSYSTEMS, INC.
1994 EQUITY INCENTIVE PLAN
ADOPTED JANUARY 10, 1994
1. PURPOSES.
(a) The purpose of the 1994 Equity Incentive Plan (the "Plan") is to
provide a means by which employees of and consultants to the Company, and its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Incentive Stock Options,
(ii) Nonstatutory Stock Options, (iii) stock bonuses, (iv) rights to purchase
restricted stock, and (v) stock appreciation rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services
of persons who are now Employees or Directors of or Consultants to the Company,
to secure and retain the services of new Employees, Directors and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to paragraph 6 hereof, including
Incentive Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or
rights to purchase restricted stock granted pursuant to paragraph 7 hereof, or
(iii) stock appreciation rights granted pursuant to paragraph 8 hereof. All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant, and in such form as issued pursuant to
Section 6, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "COMPANY" means LJL BioSystems, Inc., a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means
a right granted pursuant to subsection 8(b)(ii) of the Plan.
<PAGE>
(g) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated by the Company or any Affiliate. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; provided, however, that for purposes of Incentive Stock Options
and Stock Appreciation Rights appurtenant thereto, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company policies) or statute; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
its successor.
(i) "DIRECTOR" means a member of the Board.
(j) "DISINTERESTED PERSON" means a Director: (i) who was not during
the one year prior to service as an administrator of the Plan granted or awarded
equity securities pursuant to the Plan or any other plan of the Company or any
of its affiliates entitling the participants therein to acquire equity
securities of the Company or any of its affiliates except as permitted by Rule
16b-3(c)(2)(i); or (ii) who is otherwise considered to be a "disinterested
person" in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of determination, as reporting in the Wall Street Journal or such
other source as the Board deems reliable;
<PAGE>
(ii) If the common stock is quoted on the NASDAQ System (but
not on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of common stock shall be the mean between the bid and
asked prices for the common stock on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
(iii) In the absence of an established market for the common
stock, the Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted under subsection 8(b)(iii) of the Plan.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.
(u) "PLAN" means this 1994 Equity Incentive Plan.
(v) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(w) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.
(x) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.
(y) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual
<PAGE>
Stock Award grant. The Stock Award Agreement is subject to the terms and
conditions of the Plan.
(z) "TANDEM STOCK APPRECIATION RIGHT" or "Tandem Right" means a right
granted under subsection 8(b)(i) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how Stock Awards
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
a stock appreciation right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which Stock Awards shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan as provided in Section 14.
(4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons, if required by the provisions
of subsection 3(d). If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board (and references in this Plan to the
Board shall thereafter be to the Committee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. Additionally, prior to
the date of the first registration of an equity security of the Company under
Section 12 of the Exchange Act, and notwithstanding anything to the contrary
contained herein, the Board may delegate administration of the Plan to any
person or persons and
<PAGE>
the term "Committee" shall apply to any person or persons to whom such authority
has been delegated. Notwithstanding anything in this Section 3 to the contrary,
the Board or the Committee may delegate to a committee of one or more members of
the Board the authority to grant options to eligible persons who are not then
subject to Section 16 of the Exchange Act.
(d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply (i) prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, or (ii) if the Board or the Committee expressly declares that such
requirement shall not apply. Any Disinterested Person shall otherwise comply
with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate Nine Hundred Fifty Eight Thousand Five Hundred
(958,500) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate without having been exercised in full,
the stock not purchased under such Stock Award shall again become available for
the Plan. Shares subject to Stock Appreciation Rights exercised in accordance
with Section 8 of the Plan shall not be available for subsequent issuance under
the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Stock Awards may be granted, or in the determination (of the
number of shares which may be covered by Stock Awards granted to the Director:
(i) the Board has delegated its discretionary authority over the Plan to a
Committee which consists solely of Disinterested Persons; or (ii) the Plan
otherwise complies with the requirements of Rule 16b-3. The Board shall
otherwise comply with the requirements of Rule 16b-3. This subsection 5(b)
shall not apply (i) prior to the date of the first registration of an equity
security of the Company under Section 12 of the Exchange Act, or (ii) if the
Board or Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such
<PAGE>
Incentive Stock Option is at least one hundred ten percent (110%) of the Fair
Market Value of such stock at the date of grant and the Incentive Stock Option
is not exercisable after the expiration of five (5) years from the date of
grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the fair market value of the
stock subject to the Option on the date the Option is granted. The exercise
price of each Nonstatutory Stock Option shall be not less than fifty percent
(50%) of the fair market value of the stock subject to the Option on the date
the Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (a) by delivery to the Company of other common stock of
the Company, (b) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (c) in any other
form of legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or Title
I of the Employee Retirement Income Security Act, or the rules thereunder (a
"QDRO"), and shall be exercisable during the lifetime of the person to whom the
Nonstatutory Stock Option is granted only by such person or any transferee
pursuant to a QDRO. The person to whom the Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
<PAGE>
(e) VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which to Option became vested but was not
fully exercised. The Option may be subject to such other terms and conditions
on the time or times when it may be exercised (which may be based on performance
criteria) as the Board may deem appropriate. The provisions of this subsection
6(e) are subject to an Option provisions governing the minimum number of shares
as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee,
or any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Board, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified in the
Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option, but, unless
otherwise provided in the Option Agreement, only within twelve (12) months from
the date of such termination (or such shorter period specified in the Option
Agreement), and only to the extent that the Optionee was entitled to exercise it
at the date of such termination (but in no event later than the term of such
Option as
<PAGE>
set forth in the Option Agreement). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within eighteen (18) months following the
date of death (or such other period, specified in the Option Agreement) (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. If, at
the time of death, the Optionee was not entitled to exercise his or her entire
Option, the shares covered by the unexercisable portion of the Option shall
revert to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee, Director
or Consultant to exercise the Option as to any part or all of the shares subject
to the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the participant as a result of the exercise of the Option;
or (3) delivering to the Company owned and unencumbered shares of the common
stock of the Company.
The Board or Committee shall have the authority (but not an
obligation) to include as part of any Option Agreement a provision entitling the
Optionee to a further Option (a "Re-Load Option") in the event the Optionee
exercises the Option evidenced by the Option agreement, in whole or in part, by
surrendering other shares of Common Stock in accordance with this Plan and the
terms and conditions of the Option Agreement. Any such Re-Load Option (i) shall
be for a number of shares equal to the number of shares surrendered as part or
all of the exercise price of such Option; (ii) shall have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (iii) shall have an exercise price which
is equal to one hundred percent (100%) of the Fair Market Value of the Common
Stock subject to the Re-Load Option on the date of exercise of the original
Option or, in the case of a Re-Load Option which is an Incentive Stock Option
and which is granted to a 10% stockholder (as described in subparagraph 5(c)),
shall have an exercise price
<PAGE>
which is equal to one hundred ten percent (110%) of the Fair Market Value of the
stock subject to the Re-Load Option on the date of exercise of the original
Option.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonqualified Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option, provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subparagraph 12(d) of the Plan and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subparagraph 4(a) and shall be subject to such other
terms and conditions as the Board or Committee may determine.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such agreement. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted
stock purchase agreement shall be assignable by any participant under the Plan,
either voluntarily or by operation of law, except where such assignment is
required by law or expressly authorized by the terms of the applicable stock
bonus or restricted stock purchase agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
a stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in their discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
<PAGE>
(d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights to
Employees or Directors of or Consultants to, the Company or its Affiliates under
the Plan. Each such right shall entitle the holder to a distribution based on
the appreciation in the fair market value per share of a designated amount of
stock.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) TANDEM STOCK APPRECIATION RIGHTS. Tandem Rights will be
granted appurtenant to an Option and will require the holder to elect between
the exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution equal to the
excess of (a) the Fair Market Value (on the date of Option surrender) of vested
shares of stock purchasable under the surrendered Option over (b) the aggregate
exercise price payable for such shares.
(ii) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and will be exercised
automatically at the same time the Option is exercised for those shares. The
appreciation distribution to which the holder of such concurrent right shall be
entitled upon exercise of the underlying Option shall be in an amount equal to
the excess of (a) the aggregate fair market value (at date of exercise) of the
vested shares purchased under the underlying Option with such concurrent rights
over (b) the aggregate exercise price paid for those shares.
(iii) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
may be granted independently of any Option and will entitle the holder upon
exercise to an appreciation distribution equal in amount to the excess of (a)
the aggregate fair market value (at the date of exercise) of a number of shares
of stock equal to the number of vested share equivalents exercised at such time
(as described in subsection 7(c)(iii)(b)) over (b) the aggregate fair market
value of such number of shares of stock at the date of grant.
<PAGE>
(c) The terms and conditions applicable to each Tandem Right,
Concurrent Right and Independent Right shall be as follows:
(i) TANDEM RIGHTS.
(A) Tandem Rights may be tied to either Incentive
Stock Options or Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option to which it pertains. If Tandem Rights are
granted appurtenant to an Incentive Stock Option, they shall satisfy any
applicable Treasury Regulations so as not to disqualify such Option as an
Incentive Stock Option under the Code.
(B) The appreciation distribution payable on the
exercised Tandem Right shall be in cash in an amount equal to the excess of (I)
the fair market value (on the date of the Option surrender) of the number of
shares of stock covered by that portion of the surrendered Option in which the
optionee is vested over (II) the aggregate exercise price payable for such
vested shares.
(ii) CONCURRENT RIGHTS.
(A) Concurrent Rights may be tied to any or all of the
shares of stock subject to any Incentive Stock Option or Nonstatutory Stock
Option grant made under the Plan. A Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains.
(B) A Concurrent Right shall be automatically
exercised at the same time the underlying Option is exercised with respect to
the particular shares of stock to which the Concurrent Right pertains.
(C) The appreciation distribution payable on an
exercised Concurrent Right shall be in cash in an amount equal to such portion
as shall be determined by the Board or the Committee at the time of the grant of
the excess of (I) the aggregate fair market value (on the Exercise Date) of the
vested shares of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (II) the aggregate exercise price
paid for such shares.
(iii) INDEPENDENT RIGHTS.
(A) Independent Rights shall, except as specifically
set forth below, be subject to the same terms and conditions applicable to
Nonstatutory Stock Options as set forth in Section 6. They shall be denominated
in share equivalents.
(B) The appreciation distribution payable on the
exercised Independent Right shall be in an amount equal to the excess of (I) the
aggregate fair market value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent
<PAGE>
right, and with respect to which the holder is exercising the Independent Right
on such date, over (II) the aggregate fair market value (on the date of the
grant of the Independent Right) of such number of shares of Company stock.
(C) The appreciation distribution payable on the
exercised Independent Right may be paid, in the discretion of the Board or the
Committee, in cash, in shares of stock or in a combination of cash and stock.
Any shares of stock so distributed shall be valued at fair market value on the
date the Independent Right is exercised.
(iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS AND
INDEPENDENT RIGHTS.
(A) To exercise any outstanding Tandem, Concurrent or
Independent Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the instrument evidencing such
right.
(B) If a Tandem, Concurrent, or Independent Right is
granted to an individual who is at the time subject to Section 16(b) of the
Exchange Act (a "Section 16(b) Insider"), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure that
the subsequent exercise of such right shall qualify for the safe-harbor
exemption from short-swing profit liability provided by Rule 16b-3 promulgated
under the Exchange Act (or any successor rule or regulation).
(C) No limitation shall exist on the aggregate amount
of cash payments the Company may make under the Plan in connection with the
exercise of Tandem, Concurrent or Independent Rights.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than fifty percent (50%) of the
Fair Market Value (one hundred percent (100%) of the Fair Market Value in the
case of an Incentive Stock Option or, in the case of a 10% stockholder (as
described in subparagraph 5(c)), not less than one hundred ten percent (110%) of
the Fair Market Value) per share of stock on the new grant date.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards up to the number of shares of stock authorized under the Plan.
<PAGE>
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under the Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan, any Stock Award or any stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock under such Stock Awards unless and until such authority is
obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant,
Optionee, or other holder of Stock Awards any right to continue in the employ of
the Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(e) Stock issued pursuant to the Plan may, but need not, be subject
to a repurchase option or a right of first refusal in favor of the Company or
such other conditions as may be determined by the Board. The provisions of such
repurchase option, right of first refusal, or other condition, if any, shall be
set forth in a stock purchase agreement, or other similar agreement, executed in
connection with the exercise of the Stock Award.
<PAGE>
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan and outstanding Stock Awards will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Stock Awards.
(b) In the event of: (1) a dissolution or liquidation or sale of all
or substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; or (3) a reverse merger
in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then, at the sole discretion of the Board and to
the extent permitted by applicable law: (i) any surviving corporation shall
assume any Stock Awards outstanding under the Plan or shall substitute similar
Stock Awards for those outstanding under the Plan, (ii) such Stock Awards shall
continue in full force and effect, or (iii) the time during which such Stock
Awards become vested or may be exercised shall be accelerated and any
outstanding unexercised rights under any Stock Awards terminated if not
exercised prior to such event.
14. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code; or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code, comply with the stockholder approval requirements of
Section 162(m), if applicable, of the Code or to comply with the requirements of
Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated
<PAGE>
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(c) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on January 9, 2004. No Stock Awards
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be altered or impaired by suspension or termination
of the Plan, except with the consent of the person to whom the Stock Award was
granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercisable unless and until the
Plan has been approved by the stockholders of the Company.
<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFORE, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONER'S RULES.
NONSTATUTUORY STOCK OPTION
__________________, Optionee:
LJL BIOSYSTEMS, INC. (the "Company"), pursuant to its 1994 Equity
Incentive Plan (the "Plan") has this day granted to you, the optionee named
above, an option to purchase shares of the common stock of the Company ("Common
Stock"). This option is intended not to qualify and will not be treated as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the Company's
compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
_____________ (________). The Vesting Commencement Date is
___________________________ Subject to the limitation contained
herein, this option shall be exercisable, in whole or in part, in
accordance with the following schedule:
Twenty percent (20%) of the shares subject to this option shall
vest (i.e., become purchasable) on the date that occurs twelve
(12) months after the Vesting Commencement Date, and an
additional twenty percent (20%) of the shares subject to this
option shall vest on the anniversary of each twelve (12) month
period thereafter.
2. (a) The exercise price of this option is _____________ (_______) per
share, being not less than fifty percent (50%) of the fair market
value of the Common Stock on the date of grant of this option.
(b) Payment of the exercise price per share is due in full in cash
(including check) upon exercise of all or any part of each
installment which has become exercisable by you; provided,
however, that if at the time of exercise, the Company's
<PAGE>
Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment of the exercise price, to the extent
permitted by applicable statutes and regulations, may be made by
delivery of already owned shares of Common Stock, or a
combination of cash and already-owned Common Stock. Such Common
Stock (i) shall be valued at its fair market value on the date of
exercise, (ii) if originally acquired from the Company, must have
been held for the period required to avoid a charge to the
Company's reported earnings, and (iii) must be owned free and
clear of any liens, claims, encumbrances or security interests.
(c) Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company prior to the issuance of Common Stock.
3. Subject to the provisions of this option, you may elect to exercise
all or any part of each installment that has become purchasable by
you, provided, however, that you enter into a Stock Purchase Agreement
in the form attached hereto in the event that the shares issuable upon
such exercise are not then registered under the Act. Any shares so
issued shall remain subject to the right of repurchase and right of
first refusal, as described therein, until the earlier of: (i)
effective date ("Effective Date") of the registration statement of the
Company filed under the Act in connection with the first underwritten
registration of the offering of any securities of the Company under
the Act, or (ii) the sale by the Company of all or substantially all
of its assets or a merger or consolidation involving the Company in
which there is a change in the ownership of the Company's stock
representing more than 50% of its total combined voting power.
4. This option may not be exercised for any number of shares which would
require the issuance of anything other than whole shares.
5. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this
option are then registered under the Act or, if such shares are not
then so registered, the Company has determined that such exercise and
issuance would be exempt from the registration requirements of the
Act.
6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on
JANUARY 9, 2004 (which date shall be no more than ten (10) years from
the date this option is granted. In no event may this option be
exercised on or after the date on which it terminates.
However, this option may be exercised following termination of
employment only as to that number of shares as to which it was
exercisable on the date of termination of employment under the
provisions of paragraph 1 of this option.
-2-
<PAGE>
7. (a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the
Company, or to such other person as the Company may designate,
during regular business hours, together with such additional
documents as the Company may then require pursuant to
subparagraph 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an arrangement
providing for the cash payment by you to the Company of any
tax withholding obligation of the Company arising by reason
of: (1) the exercise of this option; (2) the lapse of any
substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of
shares acquired upon such exercise; and
(ii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of
the offering, of any securities of the Company under the
Act, require that you not sell or otherwise transfer or
dispose of any shares of Common Stock or other securities of
the Company during such period (not to exceed one hundred
eighty (180) days) following the Effective Date of the
registration statement of the Company filed under the Act as
may be requested by the Company or the representative of the
underwriters. For purposes of this restriction you will be
deemed to own securities which (i) are owned directly or
indirectly by you, including securities held for your
benefit by nominees, custodians, brokers, or plegees; (ii)
may be acquired by you within sixty (60) days of the
Effective Date; (iii) are owned directly or indirectly, by
or for you brothers or sisters (whether by whole or half
blood), spouse, ancestors and lineal descendants; or (iv)
are owned, directly or indirectly, by or for a corporation,
partnership, estate or trust of which you are a shareholder,
partner or beneficiary, but only to the extent of your
proportionate interest therein as a shareholder, partner or
beneficiary thereof. You further agree that the Company may
impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such
period.
8. This option is not transferable, except by will or by the laws of
decent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder (a "QDRO"), and shall be
exercisable during the lifetime of the person to whom this option is
granted only by such person or any transferee pursuant to a QDRO.
9. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ
-3-
<PAGE>
of the Company, or of the Company to continue your employment with the
Company. In the event that this option is granted to you in
connection with the performance of services as a consultant or
director, references to employment, employee and similar terms shall
be deemed to include the performance of services as a consultant or a
director, as the case may be, provided, however, that no rights as an
employee shall arise by reason of the use of such terms.
10. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you
at the address specified below or at such other address as you
hereafter designate by written notice to the Company.
11. This option is subject to all the provisions of the Plan, a copy of
which is available upon request and its provisions are hereby made a
part of this option, including without limitation the provisions of
paragraph 6 of the Plan relating to option provisions, and is further
subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the
Plan. In the event of any conflict between the provisions of this
option and those of the Plan, the provision or the Plan shall control.
Dated the ___ day of _________________, 1994.
Very truly yours.
LJL BIOSYSTEMS, INC.
By
---------------------------------------------------
Duly authorized on behalf of the Board of Directors
-4-
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and
liabilities with respect to this option are set forth in the
option and the Plan;
(b) Acknowledges that as of the date of grant of this option, this
agreement, including exhibits and attachments, (i) sets forth the
entire understanding between the undersigned optionee and the
Company and its affiliates regarding the acquisition of stock in
the Company; (ii) constitutes the full satisfaction of all
Company obligations to the undersigned relating to the Company
stock or stock rights, including any rights in the Company's
equity participation plan that have been provided for in any
offer of employment letter; and (iii) supersedes all prior oral
and written agreements on the subject of the undersigned
optionee's acquisition of Company stock; and
(c) accepts and agrees to the terms hereof.
----------------------------
Optionee
----------------------------
Address
----------------------------
City, State, Zip
ATTACHMENTS:
Notice of Exercise
Stock Purchase Agreement
-5-
<PAGE>
NOTICE OF EXERCISE
LJL BioSystems, Inc.
404 Tasman Drive
Sunnyvale, CA 94089 Date of Exercise: ______________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive Nonstatutory X
----- -----
Stock option dated: < < OptionDated > >
-------------------
Number of shares as to which
option is exercised: < < NumberShares > >
--------------------
Certificates to be issued
in the name of: < < Optionee > >
----------------
Total exercise price: $ < < TotalExercisePrice > >
---------------------------
Cash payment delivered herewith: $ < < TotalExercisePrice > >
---------------------------
Value of shares of common stock delivered herewith(1): N/A
_________________
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
<PAGE>
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1994 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with respect
to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and are deemed to constitute "restricted
securities" under Rule 701 and "control securities" under Rule 144 promulgated
under the Act. I warrant and represent to the Company that I have no present
intention of distributing or selling said Shares, except as permitted under the
Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. For purposes of this restriction I will be
deemed to own securities that (i) are owned directly or indirectly by me,
including securities held for my benefit by nominees, custodians, brokers, or
pledgees; (ii) may be acquired by me within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for my brothers or sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust
-7-
<PAGE>
of which I am a shareholder, partner or beneficiary, but only to the extent of
my proportionate interest therein as a shareholder, partner or beneficiary
thereof. I further agree that the Company may impose stop-transfer instructions
with respect to securities to the foregoing restrictions until the end of such
period.
Very truly yours,
---------------------------
< < Optionee > >
-8-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made by and between LJL BIOSYSTEMS, INC., a Delaware
corporation (the "Corporation"), and < < Optionee > > ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds an ISO stock option to purchase shares of common
stock of the Corporation pursuant to the Corporation's 1994 Equity Incentive
Plan (the "Plan") which Purchaser desires to exercise;
WHEREAS, the shares of common stock purchasable under this option are
subject to certain repurchase rights and rights of first refusal in favor of the
Corporation; and
WHEREAS, Purchaser desires to exercise such option which requires that
Purchaser enter into this Agreement;
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to Purchaser, an aggregate of
< < NumberShares > > shares of the common stock (the "Stock") of the
Corporation, for an exercise price of $ < < ExercisePricePerShare > > per share
(total exercise price: $ < < TotalExercisePrice > > ), payable in cash at
closing.
The closing hereunder shall occur at the offices of the Corporation on the
date of this Agreement or at such other time and place as the parties may
mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in the
form of Exhibit A, duly endorsed (with date and number of shares left blank),
joint escrow instructions (the "Joint Escrow Instructions") in the form of
Exhibit B, duly executed by Purchaser, and the total exercise price.
At the closing or as soon thereafter as practicable, the Corporation shall
deliver to the Escrow Agent (as defined in paragraph 8 below) share certificates
for all of the Stock.
2. Until the earlier of: (i) the effective date of the registration
statement filed by the Corporation under the Securities Act of 1933, as amended
(the "Act"), in connection with the
-9-
<PAGE>
first underwritten registration of the public offering of any securities of the
Corporation, or (ii) the sale by the Company of all or substantially all of its
assets or a merger or consolidation involving the Company in which there is a
change in the ownership of the Company's stock representing more than 50% of its
total combined voting power, the Stock to be purchased by Purchaser pursuant to
this Agreement shall be subject to the right of repurchase and the right of
first refusal in favor of the Corporation under the following circumstances:
(a) At any time, the Corporation shall have the right (the "Purchase
Option") to purchase all or any portion of the Stock from Purchase or
Purchaser's personal representative, as the case may be, at the price per share
equal to its then fair market value, as determined by the Company's Board of
Directors ("Option Price").
The Corporation shall be entitled to pay for any shares purchased pursuant
to its Purchase Option at the Corporation's option in cash, by offset against
any indebtedness owing to the Corporation by Purchaser including without
limitation any note given in payment for the Stock, or a combination of both.
This Agreement is not an employer contract and nothing in this Agreement
shall be deemed to create in any way whatsoever any obligation on the part of
Purchaser to continue in the employ of the Corporation, or of the Corporation to
continue Purchaser in the employ of the Corporation.
(b) In addition, that Purchaser desires to sell or otherwise transfer
all or any portion of the Stock, Purchaser shall be required to first give
written notice of the intent to transfer to the Secretary of the Corporation.
The notice shall name the proposed transferee and state the number of shares to
be transferred, the proposed consideration, and all other terms and conditions
of the proposed transfer. In addition to its right to exercise its Purchase
Option in accordance with subparagraph 2(a), the Corporation shall have the
right at any time within sixty (60) days after receipt of such notice to
purchase all or any portion of the Stock specified in the notice at the price
and upon the terms set forth in such notice ("Notice Price") In the event the
Corporation elects to purchase all or any portion of the Stock, it shall provide
Purchaser with written notice of its election and payment at the Notice Price.
If, however, the terms and payment set forth in the transfer notice were other
than cash against delivery, the Corporation and/or its assignee(s) shall pay for
the Stock on the same terms and conditions as set forth in the transfer notice.
In the event the Corporation and/or its assignee(s) do not elect to acquire all
of the shares specified in the transfer notice, Purchaser may, within the sixty
(60)-day period following the expiration of the Corporation's purchase right,
transfer any portion of the Stock specified in the notice which was not acquired
by the Corporation and/or its assignee(s) on the terms specified in the original
notice. All shares so sold by Purchaser shall continue to be subject to the
same restrictions as before the transfer.
3. The Purchase Option and the Company's right of first refusal described
in subparagraph 2(b) are hereinafter collectively referred to as the Options.
The Options may be exercised by giving written notice of exercise delivered or
mailed as provided in paragraph 12. Upon providing of such notice and payment
or tender of the purchase price, the Corporation shall
-10-
<PAGE>
become the legal and beneficial owner of the Stock being purchased and all
rights and interests therein or related thereto.
4. If from time to time during the term of the Options there is any stock
dividend or liquidating dividend or distribution of cash and/or property, stock
split or other change in the character or amount of any of the outstanding
securities of the Corporation, then, in such event, any and all new, substituted
or additional securities or other property to which Purchaser is entitled by
reason of the ownership of Stock will be immediately subject to the Options and
be included in the word "Stock" for all purposes of the Options with the same
force and effect as the shares of Stock then subject to the Options.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
(i) "The shares represented by this certificate are subject to an
option and restrictions on transfer set forth in an agreement between the
Corporation and the registered holder, or such registered holder's
predecessor in interest, a copy of which is on file at the principal office
of this corporation. Any transfer or attempted transfer of any shares
subject to such option is void without the prior express written consent of
the issuer of these shares."
(ii) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to
the securities under said Act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
(iii) Any legend required to be placed thereon by the California
Commissioner of Corporations.
6. Purchase acknowledges that Purchaser is aware that the Stock to be
issued to Purchaser by the Corporation pursuant to this Agreement has not been
registered under the Act, on the basis that no distribution or public offering
of the Stock is to be affected, and in this connection acknowledges that the
Corporation is relying on the following representations. In this connection,
Purchaser warrants and represents to the Corporation that Purchaser is acquiring
the Stock for investment and not with a view to or for sale in connection with
any distribution of the Stock or with any present intention of distributing or
selling the Stock and Purchaser does not presently have reason to anticipate any
change in circumstances or any particular occasion or event which would cause
Purchaser to sell the stock. Purchaser recognizes that the Stock must be held
indefinitely unless it is subsequently registered under the Act or an exemption
from such registration is available and, further, recognizes that the
Corporation is under no obligation to register the Stock or to comply with any
exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule 144
adopted under
<PAGE>
the Act unless certain conditions are met and until Purchaser has held the Stock
for at least two (2) years. Among the conditions for use of Rule 144 is the
availability of specified current public information about the Corporation.
Purchaser recognizes that the Corporation presently has no plans to make such
information available to the public.
Whether or not either of the Options is exercised or has lapsed, Purchaser
further agrees not to make any disposition of any of the Stock an any event
unless and until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) Purchaser shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
Purchaser shall have given the Corporation an opinion of counsel, which opinion
and counsel shall be satisfactory to the Corporation, to the effect that such
disposition will not require registration of the Stock under the Act.
8. To insure the availability for delivery of Purchaser's Stock upon
exercise of the Options herein provided for, Purchaser agrees, at the closing
hereunder (or as soon thereafter as practicable), to deliver (or have the
Corporation deliver on the Purchaser's behalf) to and deposit with the Secretary
of the Corporation ("Escrow Agent"), as Escrow Agent in this transaction, three
(3) stock assignments duly endorsed (with date and number of shares left blank)
in the form attached hereto as Exhibit A, together with a certificate or
certificates evidencing all of the Stock subject to the Options; said documents
are to be held by the Escrow Agent and delivered by said Escrow Agent pursuant
to the Joint Escrow Instructions of the Corporation and Purchaser set forth in
Exhibit B attached hereto and incorporated herein by this reference, which
instructions shall also be delivered to the Escrow Agent at the closing
hereunder (or as soon thereafter as practicable).
9. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (ii) to treat
as owner of such shares or to accord the right to vote as such owner to pay
dividends to any transferee to whom such shares shall have been so transferred.
10. Subject to the Provisions of paragraph 9 above, Purchaser (but not any
unapproved transferee) shall, during the term of this Agreement, exercise all
rights and privileges of a stockholder of the Corporation with respect to the
Stock.
11. The parties agree to execute such further instruments and to take such
further action as reasonably may be necessary to carry out the intent of this
Agreement.
12. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post
<PAGE>
Office Box, by registered or certified mail with postage and fees prepaid,
addressed to the other party hereto at the address hereinafter shown below such
party's signature or at such other address as such party may designate ten (10)
days' advance written notice to the other party hereto.
13. This Agreement shall bind and inure to the benefit of the successors
and assigns of the Corporation and, subject to the restrictions on transfer
herein set forth, inure to the benefit of and be binding upon Purchaser and
Purchaser's heirs, executors, administrators, successors, and assigns. Without
limiting the generality of the foregoing, the Options of the Corporation
hereunder shall be assignable by the Corporation at any time or from time to
time, in whole or in part.
(signature page follows)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
____________ day of _________________, 19___.
CORPORATION:
< < COMPANYNAME > >
By:
-----------------------------
Title:
--------------------------
Address: 404 Tasman Drive
--------------------------------
Sunnyvale, CA 94089
--------------------------------
PURCHASER:
< < OPTIONEE > >
--------------------------------
Address:
--------------------------------
--------------------------------
ATTACHMENTS - AVAILABLE UPON REQUEST
Exhibit A Assignment Separate from Certificate
Exhibit B Joint Escrow Instructions
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase Agreement
between the undersigned ("Purchaser") and LJL BioSystems, Inc. (the "Company")
dated _______________ (the "Agreement"), Purchaser hereby sells, assigns and
transfers unto the Company _________________________________ (________) shares
of the Common Stock of the Company standing in Purchaser's name on the Company's
books and represented by Certificate No. _____, and does hereby irrevocably
constitute and appoint ______________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated: ______________________
Signature:
-----------------------------------------
< < Optionee > >
-----------------------------------------
Spouse of < < Optionee > > (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
Venture Law Group
Legal Counsel to
LJL BioSystems, Inc.
404 Tasman Drive
Sunnyvale, CA 94089
As Escrow Agent for both LJL BioSystems, Inc., a Delaware corporation (the
"Corporation") and < < Optionee > > (the "Purchaser"), you are hereby authorized
and directed to hold the documents delivered to you pursuant to the terms of
that certain Stock Purchase Agreement (the "Agreement") dated as of
______________, to which a copy of these Joint Escrow Instructions is attached
as Exhibit B, in accordance with the following instructions:
1. In the event the Corporation or an assignee shall elect to exercise
the Purchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of shares
of stock to be purchased, the purchase price, and the time for a closing
thereunder at the principal office of the Corporation. Purchaser and the
Corporation hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver the same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) for the number of shares of
stock being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and complete any transaction herein contemplated,
including but not limited to any appropriate filing with state or government
officials or bank officials. Subject to the provisions of this paragraph 3,
Purchaser shall exercise all rights and privileges of a shareholders of the
Corporation while the stock is held by you.
4. This escrow shall terminate upon the exercise in full or expiration of
the Purchase Option, whichever occurs first.
<PAGE>
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Corporation that any property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or the person designated
by the Corporation.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporations by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Escrow Agent of the Corporation or if you shall resign by
written notice to each party. In the event of any such termination, the
Corporation shall appoint any officer or assistant officer of the Corporation as
successor Escrow Agent and Purchaser hereby confirms the appointment of such
successor as his attorney-in-fact and agent to the full extent of your
appointment.
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
<PAGE>
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery, including delivery
by express courier, of four (4) days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to each of the other parties entitled to such notice at the following addresses,
or at such other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto.
CORPORATION: LJL BioSystems, Inc.
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER: < < Optionee > >
-----------------------------
-----------------------------
ESCROW AGENT: Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
15. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
16. You shall be entitled to employ such legal counsel and other experts
(including, without limitation, the firm of Venture Law Group) as you may deem
necessary properly to advise you in connection with your obligations hereunder.
You may rely upon the advice of such counsel, and you may pay such counsel
reasonable compensation therefor. The Corporation shall be responsible for all
fees generated by such legal counsel in connection with your obligations
hereunder.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
<PAGE>
18. This Agreement shall be governed by and interpreted and determined in
accordance with the laws of the State of California, as such laws are applied by
California courts to contracts made and to be performed entirely in California
by residents of that state.
Very truly yours,
"CORPORATION"
LJL BioSystems, Inc.
By:
-----------------------------------
Its:
----------------------------------
"PURCHASER"
--------------------------------------
< < Optionee > >
"ESCROW AGENT"
Venture Law Group
By:
----------------------------
<PAGE>
IT IS UNLAWFUL TO CONSUMMATE A SALE OR
TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFORE, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE
COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONER'S RULES.
INCENTIVE STOCK OPTION
________________, Optionee:
LJL BIOSYSTEMS, INC. (the "Company"), pursuant to its 1994 Equity
Incentive Plan (the "Plan") has this day granted to you, the optionee named
above, an option to purchase shares of the common stock of the Company ("Common
Stock"). This option is intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
The grant hereunder is in connection with and in furtherance of the Company's
compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
__________________ (__________). The Vesting Commencement Date is
__________. Subject to the limitation contained herein, this option
shall be exercisable, in whole or in part, in accordance with the
following schedule:
Twenty percent (20%) of the shares subject to this option shall
vest (i.e., become purchasable) on the date that occurs twelve
(12) months after the Vesting Commencement Date, and an
additional twenty percent (20%) of the shares subject to this
option shall vest on the anniversary of each twelve (12) month
period thereafter.
2. (a) The exercise price of this option is _________ ( _____) per
share, being not less than the fair market value of the Common
Stock on the date of grant of this option.
(b) Payment of the exercise price per share is due in full in cash
(including check) upon exercise of all or any part of each
installment which has become exercisable by you; provided,
however, that if at the time of exercise the Company's
<PAGE>
Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment of the exercise price, to the extent
permitted by applicable statutes and regulations, may be made by
delivery of already-owned shares of Common Stock, or a
combination of cash and already-owned Common Stock. Such Common
Stock (i) shall be valued at its fair market value on the date of
exercise, (ii) if originally acquired from the Company, must have
been held for at least the period required to avoid a charge to
the Company's reported earnings, and (iii) must be owned free and
clear of any liens, claims, encumbrances or security interests.
(c) Notwithstanding the foregoing, this option may be exercised
pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board which results in the receipt of cash
(or check) by the Company prior to the issuance of Common Stock.
3. Subject to the provisions of this option, you may elect to exercise
all or any part of each installment that has become purchasable by
you, provided, however, that you enter into a Stock Purchase Agreement
in the form attached hereto in the event that the shares issuable upon
such exercise are not then registered under the Act. Any shares so
issued shall remain subject to the right of repurchase and right of
first refusal, as described therein, until the earlier of: (i) the
effective date ("Effective Date") of the registration statement of the
Company filed under the Act, or (ii) the sale by the Company of all or
substantially all of its assets or a merger or consolidation involving
the Company in which there is a change in the ownership of the
Company's stock representing more that 50% of its total combined
voting power.
4. This option may not be exercised for any number of shares which would
require the issuance of anything other than whole shares.
5. Notwithstanding anything to the contrary contained herein, this option
may not be exercised unless the shares issuable upon exercise of this
option are then registered under the Act or, if such shares are not
then so registered, the Company has determined that such exercise and
issuance would be exempt from the registration requirements of the
Act.
6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on
JANUARY 9, 2004 (which date shall be no more than ten (10) years from
the date this option is granted). In no event may this option be
exercised on or after the date on which it terminates. This option
shall terminate prior to the expiration of its term as follows: thirty
(30) days after the termination of your employment with the Company or
an affiliate of the Company (as defined in the Plan) for any reason or
for no reason unless:
(a) such termination of employment is due to your disability, in
which event the option shall terminate on the earlier of the
termination date set forth above or twelve (12) months following
such termination of employment; or
<PAGE>
(b) such termination of employment is due to your death, in which
event the option shall terminate on the earlier of the
termination date set forth above or twelve (12) months after your
death; or
(c) during any part of such thirty (30) day period the option is not
exercisable solely because of the condition set forth in
paragraph 5 above, in which event the option shall not terminate
until the earlier of the termination date set forth above or
until it shall have been exercisable for an aggregate period of
thirty (30) days after the termination of employment; or
(d) exercise of the option within thirty (30) days after termination
of your employment with the Company or with an affiliate would
result in liability under section 16 (b) of the Securities
Exchange Act of 1934, in which case the option will terminate on
the earlier of (i) the termination date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10)
days after the termination of your employment with the Company or
an affiliate.
However, this option may be exercised following termination of
employment only as to that number of shares as to which it was
exercisable on the date of termination of employment under the
provisions of paragraph 1 of this option.
7. (a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the
Company, or to such other person as the Company may designate,
during regular business hours, together with such additional
documents as the Company may then require pursuant to
subparagraph 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of
(1.) the exercise of this option; (2.) the lapse of any
substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3.) the disposition
of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the
shares of the Common Stock issued upon exercise of this
option that occurs within two (2) years after the date of
this option grant or within one (1) year after such shares
of Common Stock are transferred upon exercise of this
option; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of
the offering of any securities of
<PAGE>
the Company under the Act, require that you not sell or
otherwise transfer or dispose of any shares of Common
Stock or other securities of the Company during such
period (not to exceed one hundred eighty (180) days)
following the Effective Date of the registration statement
of the Company filed under the Act as may be requested by
the Company or the representative of the underwriters.
For purposes of this restriction you will be deemed to own
securities which (i) are owned directly or indirectly by
you, including securities held for your benefit by
nominees, custodians, brokers, or pledgees; (ii) may be
acquired by you within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for
you brothers or sisters (whether by whole or half blood),
spouse, ancestors and lineal descendants; or (iv) are
owned, directly or indirectly, by or for a corporation,
partnership, estate or trust of which you are a
shareholder, partner or beneficiary, but only to the
extent of your proportionate interest therein as a
shareholder, partner or beneficiary thereof. You further
agree that the Company may impose stop-transfer
instructions with the respect of securities subject to the
foregoing restrictions until the end of such period.
8. This option is not transferable, except by will or by the laws of
decent and distribution, and is exercisable during your life only by
you.
9. This option is not an employment contract and nothing in this option
shall be deemed to create in any way whatsoever any obligation on your
part to continue in the employ of the Company, or of the Company to
continue your employment with the Company.
10. Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you
at the address specified below or at such other address as you
hereafter designate by written notice to the Company.
<PAGE>
11. This option is subject to all the provisions of the Plan, a copy of
which is available upon request and its provisions are hereby made a
part of this option, including without limitation the provisions of
paragraph 6 of the Plan relating to option provisions, and is further
subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the
Plan. In the event of any conflict between the provisions of this
option and those of the Plan, the provision of the Plan shall control.
Dated the day of 19 .
----- ------------
Very truly yours,
LJL BIOSYSTEMS, INC.
By
-------------------------------------------------------
Duly authorized on behalf of the Board of Directors
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan;
(b) Acknowledges that as of the date of grant of this option, this
agreement, including exhibits and attachments, (i) sets forth the
entire understanding between the undersigned optionee and the Company
and its affiliates regarding the acquisition of stock in the Company;
(ii) constitutes the full satisfaction of all Company obligations to
the undersigned relating to the Company stock or stock rights,
including any rights in the Company's equity participation plan that
have been provided for in any offer of employment letter; and (iii)
supersedes all prior oral and written agreements on the subject of the
undersigned optionee's acquisition of Company stock; and
(c) accepts and agrees to the terms hereof.
--------------------------------------------
Optionee
--------------------------------------------
Address
--------------------------------------------
City, State, Zip
ATTACHMENTS:
Notice of Exercise
Stock Purchase Agreement
<PAGE>
NOTICE OF EXERCISE
LJL BioSystems, Inc.
404 Tasman Drive
Sunnyvale, CA 94089 Date of Exercise: ____________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive X Nonstatutory
----- -----
Stock option dated: < < OptionDated > >
-------------------
Number of shares as to which
option is exercised: < < NumberShares > >
--------------------
Certificates to be issued in
the name of: < < Optionee > >
----------------
Total exercise price: $ < < TotalExercisePrice > >
---------------------------
Cash payment delivered herewith: $ < < TotalExercisePrice > >
---------------------------
Value of shares of common stock
delivered herewith(1): N/A
__________________
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the
option, and must be owned free and clear of any liens, claims, encumbrances
or security interests. Certificates must be endorsed or accompanied by an
executed assignment separate from certificate.
<PAGE>
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1994 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with respect
to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), and are deemed to constitute "restricted
securities" under Rule 701 and "control securities" under Rule 144 promulgated
under the Act. I warrant and represent to the Company that I have no present
intention of distributing or selling said Shares, except as permitted under the
Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at
least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934) under Rule 701 and that more restrictive
conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares
subject to the provisions of the Option shall have endorsed thereon appropriate
legends reflecting the foregoing limitations, as well as any legends reflecting
restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or
applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. For purposes of this restriction I will be
deemed to own securities that (i) are owned directly or indirectly by me,
including securities held for my benefit by nominees, custodians, brokers, or
pledgees; (ii) may be acquired by me within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for my brothers or sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which I am a shareholder, partner
<PAGE>
or beneficiary, but only to the extent of my proportionate interest therein as a
shareholder, partner or beneficiary thereof. I further agree that the Company
may impose stop-transfer instructions with respect to securities to the
foregoing restrictions until the end of such period.
Very truly yours,
--------------------------
< < Optionee > >
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made by and between LJL BIOSYSTEMS, INC., a Delaware
corporation (the "Corporation"), and < < OPTIONEE > > ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds an ISO stock option to purchase shares of common
stock of the Corporation pursuant to the Corporation's 1994 Equity Incentive
Plan (the "Plan") which Purchaser desires to exercise;
WHEREAS, the shares of common stock purchasable under this option are
subject to certain repurchase rights and rights of first refusal in favor of the
Corporation; and
WHEREAS, Purchaser desires to exercise such option which requires that
Purchaser enter into this Agreement;
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to Purchaser, an aggregate of
< < NUMBERSHARES > > shares of the common stock (the "Stock") of the
Corporation, for an exercise price of $ < < EXERCISEPRICEPERSHARE > > per
share (total exercise price: $ < < TOTALEXERCISEPRICE > > ), payable in cash
at closing.
The closing hereunder shall occur at the offices of the Corporation on the
date of this Agreement or at such other time and place as the parties may
mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in the
form of Exhibit A, duly endorsed (with date and number of shares left blank),
joint escrow instructions (the "Joint Escrow Instructions") in the form of
Exhibit B, duly executed by Purchaser, and the total exercise price.
At the closing or as soon thereafter as practicable, the Corporation shall
deliver to the Escrow Agent (as defined in paragraph 8 below) share certificates
for all of the Stock.
2. Until the earlier of: (i) the effective date of the registration
statement filed by the Corporation under the Securities Act of 1933, as amended
(the "Act"), in connection with the
<PAGE>
first underwritten registration of the public offering of any securities of the
Corporation, or (ii) the sale by the Company of all or substantially all of its
assets or a merger or consolidation involving the Company in which there is a
change in the ownership of the Company's stock representing more than 50% of its
total combined voting power, the Stock to be purchased by Purchaser pursuant to
this Agreement shall be subject to the right of repurchase and the right of
first refusal in favor of the Corporation under the following circumstances:
(a) At any time, the Corporation shall have the right (the "Purchase
Option") to purchase all or any portion of the Stock from Purchase or
Purchaser's personal representative, as the case may be, at the price per share
equal to its then fair market value, as determined by the Company's Board of
Directors ("Option Price").
The Corporation shall be entitled to pay for any shares purchased pursuant
to its Purchase Option at the Corporation's option in cash, by offset against
any indebtedness owing to the Corporation by Purchaser including without
limitation any note given in payment for the Stock, or a combination of both.
This Agreement is not an employer contract and nothing in this Agreement
shall be deemed to create in any way whatsoever any obligation on the part of
Purchaser to continue in the employ of the Corporation, or of the Corporation to
continue Purchaser in the employ of the Corporation.
(b) In addition, that Purchaser desires to sell or otherwise transfer
all or any portion of the Stock, Purchaser shall be required to first give
written notice of the intent to transfer to the Secretary of the Corporation.
The notice shall name the proposed transferee and state the number of shares to
be transferred, the proposed consideration, and all other terms and conditions
of the proposed transfer. In addition to its right to exercise its Purchase
Option in accordance with subparagraph 2(a), the Corporation shall have the
right at any time within sixty (60) days after receipt of such notice to
purchase all or any portion of the Stock specified in the notice at the price
and upon the terms set forth in such notice ("Notice Price") In the event the
Corporation elects to purchase all or any portion of the Stock, it shall provide
Purchaser with written notice of its election and payment at the Notice Price.
If, however, the terms and payment set forth in the transfer notice were other
than cash against delivery, the Corporation and/or its assignee(s) shall pay for
the Stock on the same terms and conditions as set forth in the transfer notice.
In the event the Corporation and/or its assignee(s) do not elect to acquire all
of the shares specified in the transfer notice, Purchaser may, within the sixty
(60)-day period following the expiration of the Corporation's purchase right,
transfer any portion of the Stock specified in the notice which was not acquired
by the Corporation and/or its assignee(s) on the terms specified in the original
notice. All shares so sold by Purchaser shall continue to be subject to the
same restrictions as before the transfer.
3. The Purchase Option and the Company's right of first refusal described
in subparagraph 2(b) are hereinafter collectively referred to as the Options.
The Options may be exercised by giving written notice of exercise delivered or
mailed as provided in paragraph 12. Upon providing of such notice and payment
or tender of the purchase price, the Corporation shall
<PAGE>
become the legal and beneficial owner of the Stock being purchased and all
rights and interests therein or related thereto.
4. If from time to time during the term of the Options there is any stock
dividend or liquidating dividend or distribution of cash and/or property, stock
split or other change in the character or amount of any of the outstanding
securities of the Corporation, then, in such event, any and all new, substituted
or additional securities or other property to which Purchaser is entitled by
reason of the ownership of Stock will be immediately subject to the Options and
be included in the word "Stock" for all purposes of the Options with the same
force and effect as the shares of Stock then subject to the Options.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following form:
(i) "The shares represented by this certificate are subject to an
option and restrictions on transfer set forth in an agreement between the
Corporation and the registered holder, or such registered holder's
predecessor in interest, a copy of which is on file at the principal office
of this corporation. Any transfer or attempted transfer of any shares
subject to such option is void without the prior express written consent of
the issuer of these shares."
(ii) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to
the securities under said Act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
(iii) Any legend required to be placed thereon by the California
Commissioner of Corporations.
6. Purchase acknowledges that Purchaser is aware that the Stock to be
issued to Purchaser by the Corporation pursuant to this Agreement has not been
registered under the Act, on the basis that no distribution or public offering
of the Stock is to be affected, and in this connection acknowledges that the
Corporation is relying on the following representations. In this connection,
Purchaser warrants and represents to the Corporation that Purchaser is acquiring
the Stock for investment and not with a view to or for sale in connection with
any distribution of the Stock or with any present intention of distributing or
selling the Stock and Purchaser does not presently have reason to anticipate any
change in circumstances or any particular occasion or event which would cause
Purchaser to sell the stock. Purchaser recognizes that the Stock must be held
indefinitely unless it is subsequently registered under the Act or an exemption
from such registration is available and, further, recognizes that the
Corporation is under no obligation to register the Stock or to comply with any
exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule 144
adopted under
<PAGE>
the Act unless certain conditions are met and until Purchaser has held the Stock
for at least two (2) years. Among the conditions for use of Rule 144 is the
availability of specified current public information about the Corporation.
Purchaser recognizes that the Corporation presently has no plans to make such
information available to the public.
Whether or not either of the Options is exercised or has lapsed, Purchaser
further agrees not to make any disposition of any of the Stock an any event
unless and until:
(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
(b) (i) Purchaser shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
Purchaser shall have given the Corporation an opinion of counsel, which opinion
and counsel shall be satisfactory to the Corporation, to the effect that such
disposition will not require registration of the Stock under the Act.
8. To insure the availability for delivery of Purchaser's Stock upon
exercise of the Options herein provided for, Purchaser agrees, at the closing
hereunder (or as soon thereafter as practicable), to deliver (or have the
Corporation deliver on the Purchaser's behalf) to and deposit with the Secretary
of the Corporation ("Escrow Agent"), as Escrow Agent in this transaction, three
(3) stock assignments duly endorsed (with date and number of shares left blank)
in the form attached hereto as Exhibit A, together with a certificate or
certificates evidencing all of the Stock subject to the Options; said documents
are to be held by the Escrow Agent and delivered by said Escrow Agent pursuant
to the Joint Escrow Instructions of the Corporation and Purchaser set forth in
Exhibit B attached hereto and incorporated herein by this reference, which
instructions shall also be delivered to the Escrow Agent at the closing
hereunder (or as soon thereafter as practicable).
9. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (ii) to treat
as owner of such shares or to accord the right to vote as such owner to pay
dividends to any transferee to whom such shares shall have been so transferred.
10. Subject to the Provisions of paragraph 9 above, Purchaser (but not any
unapproved transferee) shall, during the term of this Agreement, exercise all
rights and privileges of a stockholder of the Corporation with respect to the
Stock.
11. The parties agree to execute such further instruments and to take such
further action as reasonably may be necessary to carry out the intent of this
Agreement.
12. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit
in any United States Post
<PAGE>
Office Box, by registered or certified mail with postage and fees prepaid,
addressed to the other party hereto at the address hereinafter shown below such
party's signature or at such other address as such party may designate ten (10)
days' advance written notice to the other party hereto.
13. This Agreement shall bind and inure to the benefit of the successors
and assigns of the Corporation and, subject to the restrictions on transfer
herein set forth, inure to the benefit of and be binding upon Purchaser and
Purchaser's heirs, executors, administrators, successors, and assigns. Without
limiting the generality of the foregoing, the Options of the Corporation
hereunder shall be assignable by the Corporation at any time or from time to
time, in whole or in part.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
_____ day of __________, 19__.
CORPORATION:
< < COMPANYNAME > >
By:
-----------------------------------
Title:
--------------------------------
Address: 404 Tasman Drive
--------------------------------------
Sunnyvale, CA 94089
--------------------------------------
PURCHASER:
< < OPTIONEE > >
--------------------------------------
Address:
--------------------------------------
--------------------------------------
ATTACHMENTS - AVAILABLE UPON REQUEST
Exhibit A Assignment Separate from Certificate
Exhibit B Joint Escrow Instructions
<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Stock Purchase Agreement
between the undersigned ("PURCHASER") and LJL BioSystems, Inc. (the "COMPANY")
dated _______________ (the "AGREEMENT"), Purchaser hereby sells, assigns and
transfers unto the Company _________________________________ (________) shares
of the Common Stock of the Company standing in Purchaser's name on the Company's
books and represented by Certificate No. _____, and does hereby irrevocably
constitute and appoint ______________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated:
----------------------
Signature:
------------------------------------------
< < Optionee > >
------------------------------------------
Spouse of < < Optionee > > (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT B
JOINT ESCROW INSTRUCTIONS
Venture Law Group
Legal Counsel to
LJL BioSystems, Inc.
404 Tasman Drive
Sunnyvale, CA 94089
As Escrow Agent for both LJL BioSystems, Inc., a Delaware corporation (the
"Corporation") and < < Optionee > > (the "Purchaser"), you are hereby authorized
and directed to hold the documents delivered to you pursuant to the terms of
that certain Stock Purchase Agreement (the "Agreement") dated as of
______________, to which a copy of these Joint Escrow Instructions is attached
as Exhibit B, in accordance with the following instructions:
1. In the event the Corporation or an assignee shall elect to exercise
the Purchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of shares
of stock to be purchased, the purchase price, and the time for a closing
thereunder at the principal office of the Corporation. Purchaser and the
Corporation hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver the same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) for the number of shares of
stock being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and complete any transaction herein contemplated,
including but not limited to any appropriate filing with state or government
officials or bank officials. Subject to the provisions of this paragraph 3,
Purchaser shall exercise all rights and privileges of a shareholders of the
Corporation while the stock is held by you.
4. This escrow shall terminate upon the exercise in full or expiration of
the Purchase Option, whichever occurs first.
<PAGE>
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder; provided, however, that if at the time of
termination of this escrow you are advised by the Corporation that any property
subject to this escrow is the subject of a pledge or other security agreement,
you shall deliver all such property to the pledgeholder or the person designated
by the Corporation.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporations by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Escrow Agent of the Corporation or if you shall resign by
written notice to each party. In the event of any such termination, the
Corporation shall appoint any officer or assistant officer of the Corporation as
successor Escrow Agent and Purchaser hereby confirms the appointment of such
successor as his attorney-in-fact and agent to the full extent of your
appointment.
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
<PAGE>
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery, including delivery
by express courier, of four (4) days after deposit in the United States Post
Office, by registered or certified mail with postage and fees prepaid, addressed
to each of the other parties entitled to such notice at the following addresses,
or at such other addresses as a party may designate by ten days' advance written
notice to each of the other parties hereto.
CORPORATION: LJL BioSystems, Inc.
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER: < < Optionee > >
-----------------------------
-----------------------------
ESCROW AGENT: Venture Law Group
A Professional Corporation
2800 Sand Hill Road
Menlo Park, CA 94025
15. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
16. You shall be entitled to employ such legal counsel and other experts
(including, without limitation, the firm of Venture Law Group) as you may deem
necessary properly to advise you in connection with your obligations hereunder.
You may rely upon the advice of such counsel, and you may pay such counsel
reasonable compensation therefor. The Corporation shall be responsible for all
fees generated by such legal counsel in connection with your obligations
hereunder.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
<PAGE>
18. This Agreement shall be governed by and interpreted and determined in
accordance with the laws of the State of California, as such laws are applied by
California courts to contracts made and to be performed entirely in California
by residents of that state.
Very truly yours,
"CORPORATION"
LJL BioSystems, Inc.
By:
------------------------------
Its:
------------------------------
"PURCHASER"
---------------------------------
< < Optionee > >
"ESCROW AGENT"
Venture Law Group
By:
---------------------------
<PAGE>
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1997 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means LJL BioSystems, Inc., a Delaware
corporation.
(g) "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
<PAGE>
(i) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
with the status of employment determined based upon such minimum number of hours
or periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(k) "FAIR MARKET VALUE" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported), as quoted on such system or exchange, or the exchange with the
greatest volume of trading in Common Stock for the last market trading day prior
to the time of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(m) "NAMED EXECUTIVE" means any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four highest compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(o) "OPTION" means a stock option granted pursuant to the Plan.
<PAGE>
(p) "OPTIONED STOCK" means the Common Stock subject to an Option
or a Stock Purchase Right.
(q) "OPTIONEE" means an Employee or Consultant who receives an
Option or a Stock Purchase Right.
(r) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(s) "PLAN" means this 1997 Stock Plan.
(t) "REPORTING PERSON" means an officer, director, or greater
than ten percent stockholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(u) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(v) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange
Act, as the same may be amended from time to time, or any successor provision.
(w) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(x) "STOCK EXCHANGE" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
(y) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 below.
(z) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 2,070,750 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, any Shares of Common Stock which are retained by the Company upon
exercise of an Option or Stock Purchase Right in order to satisfy the exercise
or purchase price for such Option or Stock Purchase Right or any withholding
taxes due with respect to such exercise shall be treated as not issued and shall
continue to be available under the Plan. Shares repurchased by the Company
pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.
<PAGE>
4. ADMINISTRATION OF THE PLAN.
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon
which the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE
COMPANY BECOMES SUBJECT TO THE EXCHANGE ACT.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS.
With respect to grants of Options or Stock Purchase Rights to Employees who are
Reporting Persons, such grants shall be made by (A) the Board if the Board may
make grants to Reporting Persons under the Plan in compliance with Rule 16b-3 or
any successor thereto and Section 162(m) of the Code as it applies so as to
qualify grants of Options to Named Executives as performance-based compensation,
or (B) a committee designated by the Board to make such grants under the Plan,
which committee shall be constituted in such a manner as to permit grants under
the Plan to comply with Rule 16b-3, to quality grants of Options to Named
Executive as performance-based compensation under Section 162(m) of the Code and
otherwise so as to satisfy the legal requirements relating to the administration
of incentive stock option plans, if any, of California corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "APPLICABLE LAWS").
Once appointed, such committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
committee and thereafter directly make grants to Reporting Persons under the
Plan, all to the extent permitted by Rule 16b-3 and to the extent required under
Section 162(m) of the Code to qualify grants of Options to Named Executives as
performance-based compensation.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
EMPLOYEES. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are not Reporting Persons, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and
<PAGE>
subject to the approval of any relevant authorities, including the approval, if
required, of any Stock Exchange, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(viii) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan; and
(x) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options or Stock Purchase Rights
to participants who are foreign nationals or employed outside of the United
States in order to recognize differences in local law, tax policies or customs.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options or Stock Purchase Rights.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has
been granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
<PAGE>
(b) TYPE OF OPTION. Each Option shall be designated in the
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that
the aggregate Fair Market Value of Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. LIMITATION ON GRANTS TO EMPLOYEES. Subject to adjustment as
provided in this Plan, the maximum number of Shares which may be subject to
options granted to any one Employee under this Plan for any fiscal year of the
Company shall be 2,000,000 (on a post-split basis). This Section 8 shall not
apply prior to the date upon which the Company becomes subject to the Exchange
Act and following such date, shall not apply until the (i) earliest of: (A) the
first material modification of the Plan (including any increase to the number of
shares reserved for issuance under the Plan in accordance with Section 3); (B)
the issuance of all of the shares of common stock reserved for issuance under
the Plan; (C) the expiration of the Plan; or (D) the first meeting of
shareholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of any equity security under Section 12 of the Exchange Act; or
(ii) such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
<PAGE>
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board and set forth in the applicable agreement, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant
of such Option is a Named Executive of the Company, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of the
grant.
(B) granted to any person other than a Named
Executive, the per Share exercise price shall be such price as is determined
by the Administrator on the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash,
(2) check, (3) promissory note (subject to the provisions of Section 153 of the
Delaware General Corporation Law), (4) other Shares that (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender or such other period as may be
required to avoid a charge to the Company's earnings, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which such Option shall be exercised, (5) authorization for the
Company to retain from the total number of Shares as to which the Option is
exercised that number of Shares having a Fair Market Value on the date of
exercise equal to the exercise price for the total number of Shares as to which
the Option is exercised, (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price and
any applicable income or employment taxes, (7) delivery of an irrevocable
subscription agreement for the Shares that irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
<PAGE>
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, and reflected in the written option
agreement, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and the
Company has received full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 9(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares that thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Subject to Section 10(c), in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant with the Company, such Optionee
may, but only within three (3) months (or such other period of time not less
than thirty (30) days as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding three (3) months) after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that the Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of such termination, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate. No termination shall be deemed to occur and this Section 10(b)
shall not apply if (i) the Optionee is a Consultant who becomes an Employee; or
(ii) the Optionee is an Employee who becomes a Consultant.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 10(b)
above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a
<PAGE>
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) RULE 16b-3. Options granted to Reporting Persons shall
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under
the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, which price shall
be the price determined by the Administrator on the date of offer (which
shall not be less than 100% of the Fair Market Value of the Shares in the
case of an offer to a Named Executive), and the time within which such person
must accept such offer, which shall in no event exceed thirty (30) days from
the date upon which the Administrator made the determination to grant the
Stock Purchase Right. The offer shall be accepted by execution of a
Restricted Stock purchase agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase
Right shall be referred to herein as "Restricted Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original purchase price paid by
<PAGE>
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A STOCKHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Optionee for more
than six months on the date of surrender, and (ii) have a fair market value on
the date of surrender equal to or less than the applicable withholding taxes, or
(d) by electing to have the Company withhold from the Shares to be issued upon
exercise of the Option, or the Shares to be issued in connection with the Stock
Purchase Right, if any, that number of Shares having a fair market value equal
to the amount required to be withheld. For this purpose, the fair market value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined (the "TAX DATE").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made; and
<PAGE>
(c) all elections shall be subject to the consent or disapproval
of the Administrator.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the stockholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, the maximum number of shares of Common Stock for which Option
may be granted to any employee under Section 8 of the Plan, as well as the price
per share of Common Stock covered by each such outstanding Option or Stock
Purchase Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale
of all or substantially all of the Company's assets or a merger of the Company
with or into another corporation where the successor corporation issues its
securities to the Company's stockholders, each outstanding Option or Stock
Purchase Right shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the successor corporation does not agree to assume
the Option or Stock Purchase Right or to substitute an equivalent option or
right, in which case such Option or Stock Purchase Right shall terminate upon
the consummation of the merger or sale of assets.
<PAGE>
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
14. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised or purchased during the lifetime of
the Optionee or Stock Purchase Rights Holder only by the Optionee or Stock
Purchase Rights Holder.
15. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
16. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
17. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any Stock Exchange. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or dis-
<PAGE>
tribute such Shares if, in the opinion of counsel for the Company, such
representation is required by law.
18. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
19. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
20. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
and Stock Purchase Rights issued under the Plan shall become void in the event
such approval is not obtained.
21. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. The time of
issuance of any securities under the Plan, the Company shall provide to the
Optionee or the Purchaser a copy of the Plan and any agreement(s) pursuant to
which securities under the Plan are issued.
<PAGE>
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
< < Optionee > >
< < OptioneeAddress1 > >
< < OptioneeAddress2 > >
You have been granted an option to purchase Common Stock "Common Stock" of
LJL BioSystems, Inc. (the "COMPANY") as follows:
Board Approval Date: < < BoardApprovalDate > >
Date of Grant (Later of Board
Approval Date or Commence-
ment of Employment/Consulting): < < GrantDate > >
Vesting Commencement Date: < < VestingCommenceDate > >
Exercise Price per Share: $< < ExercisePrice > >
Total Number of Shares Granted: < < NoofShares > >
Total Exercise Price: $< < TotalExercisePrice > >
Type of Option: < < NoSharesISO > > Incentive Stock Option
< < NoSharesNSO > > Nonstatutory Stock
Option
Term/Expiration Date: < < ExpirDate > >
Vesting Schedule: This Option may be exercised, in whole or
in part, in accordance with the following
schedule:
______________ of the Shares subject to
the Option shall vest on the _______ month
anniversary of the Vesting Commencement
Date and 1/____th of the total number of
Shares subject to the Option shall vest
on the ___________ anniversary of the
Vesting Commencement Date thereafter.
Termination Period: Option may be exercised for 30 days after
termination of employment or consulting
relationship except as set out in
Sections 6 and 7 of the Stock Option
Agreement (but in no event later than the
Expiration Date).
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1997 Stock Plan and the Stock Option Agreement, both
of which are attached and made a part of this document.
< < OPTIONEE > >: LJL BIOSYSTEMS, INC.
By:
- ------------------------------ --------------------------------
Signature
- ------------------------------ --------------------------------
Print Name Print Name and Title
-2-
<PAGE>
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. LJL BioSystems, Inc., a Delaware corporation (the
"COMPANY"), hereby grants to < < Optionee > > ("OPTIONEE"), an option (the
"OPTION") to purchase a total number of shares of Common Stock (the "SHARES")
set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to
the terms, definitions and provisions of the LJL BioSystems, Inc. 1997 Stock
Plan (the "PLAN") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to
qualify as an Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during its
Term in accordance with the Vesting Schedule set out in the Notice of Stock
Option Grant and with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a
share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 5, 6 and 7 below, subject to the limitation contained in
Section 2(a)(i).
(iii) In no event may this Option be exercised after the
date of expiration of the Term of this Option as set forth in the Notice of
Stock Option Grant.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
execution and delivery of the Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as EXHIBIT A (the "EXERCISE AGREEMENT") or of any
other form of written notice approved for such purpose by the Company which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
<PAGE>
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of applicable law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company
which (i) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by Optionee for more than six (6) months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(d) if there is a public market for the Shares and they are
registered under the Securities Act, delivery of a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds required to pay the exercise
price.
4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the stockholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "TERMINATION
DATE"), exercise this Option during the Termination Period set forth in the
Notice of Stock Option Grant. To the extent that Optionee was not entitled to
exercise this Option at such Termination Date, or if Optionee does not exercise
this Option within the Termination Period, the Option shall terminate.
6. DISABILITY OF OPTIONEE.
(a) Notwithstanding the provisions of Section 5 above, in the
event of termination of Continuous Status as an Employee or Consultant as a
result of Optionee's total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the
Termination Date (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant), exercise this Option to the
-2-
<PAGE>
extent Optionee was entitled to exercise it as of such Termination Date. To the
extent that Optionee was not entitled to exercise the Option as of the
Termination Date, or if Optionee does not exercise such Option (to the extent so
entitled) within the time specified in this Section 6(a), the Option shall
terminate.
(b) Notwithstanding the provisions of Section 5 above, in the
event of termination of Optionee's consulting relationship or Continuous Status
as an Employee as a result of disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant), exercise the
Option to the extent Optionee was entitled to exercise it as of such Termination
Date; provided, however, that if this is an Incentive Stock Option and Optionee
fails to exercise this Incentive Stock Option within three (3) months from the
Termination Date, this Option will cease to qualify as an Incentive Stock Option
(as defined in Section 422 of the Code) and Optionee will be treated for federal
income tax purposes as having received ordinary income at the time of such
exercise in an amount generally measured by the difference between the Exercise
Price for the Shares and the fair market value of the Shares on the date of
exercise. To the extent that Optionee was not entitled to exercise the Option
at the Termination Date, or if Optionee does not exercise such Option to the
extent so entitled within the time specified in this Section 6(b), the Option
shall terminate.
7. DEATH OF OPTIONEE. In the event of the death of Optionee (a) during
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within thirty (30) days after Optionee's Termination
Date, the Option may be exercised at any time within six (6) months following
the date of death (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the Termination Date.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him or her. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. TERM OF OPTION. This Option may be exercised only within the Term
set forth in the Notice of Stock Option Grant, subject to the limitations set
forth in Section 7 of the Plan.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
-3-
<PAGE>
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option
qualifies as an Incentive Stock Option, there will be no regular federal or
California income tax liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price will be treated as an adjustment to the alternative
minimum tax for federal tax purposes and may subject Optionee to the alternative
minimum tax in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does
not qualify as an Incentive Stock Option, there may be a regular federal income
tax liability and a California income tax liability upon the exercise of the
Option. Optionee will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(c) DISPOSITION OF SHARES. In the case of a Nonstatutory Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option,
if Shares transferred pursuant to the Option are held for at least one year
after exercise and are disposed of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. In either case,
the long-term capital gain will be taxed for federal income tax and alternative
minimum tax purposes at a maximum rate of 28% if the Shares are held more than
one year but less than 18 months after exercise and at 20% if the Shares are
held more than 18 months after exercise. If Shares purchased under an Incentive
Stock Option are disposed of within such one-year period or within two years
after the Date of Grant, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the fair market
value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF INCENTIVE STOCK
OPTION SHARES. If the Option granted to Optionee herein is an Incentive Stock
Option, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the Incentive Stock Option on or before the later of
(i) the date two years after the Date of Grant, or (ii) the date one year after
the date of exercise, Optionee shall immediately notify the Company in writing
of such disposition. Optionee acknowledges and agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized by Optionee from the early disposition by payment in cash or out of
the current earnings paid to Optionee.
11. WITHHOLDING TAX OBLIGATIONS. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the Exercise Price.
-4-
<PAGE>
However, the timing of this income recognition may be deferred for up to six
months if Optionee is subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"). If Optionee is an employee, the Company
will be required to withhold from Optionee's compensation, or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income. Additionally, Optionee may at some
point be required to satisfy tax withholding obligations with respect to the
disqualifying disposition of an Incentive Stock Option. Optionee shall satisfy
his or her tax withholding obligation arising upon the exercise of this Option
by one or some combination of the following methods: (a) by cash payment,
(b) out of Optionee's current compensation, (c) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares which
(i) in the case of Shares previously acquired from the Company, have been owned
by Optionee for more than six months on the date of surrender, and (ii) have a
fair market value on the date of surrender equal to or greater than Optionee's
marginal tax rate times the ordinary income recognized, or (d) by electing to
have the Company withhold from the Shares to be issued upon exercise of the
Option that number of Shares having a fair market value equal to the amount
required to be withheld. For this purpose, the fair market value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined (the "TAX DATE").
If Optionee is subject to Section 16 of the Exchange Act (an "INSIDER"),
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("RULE 16b-3").
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval
of the Administrator.
12. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
-5-
<PAGE>
[Signature Page Follows]
-6-
<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
document.
LJL BIOSYSTEMS, INC.
By:
---------------------------------
---------------------------------
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS INCORPORATED
HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO
CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE
IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:
---------------------------- ------------------------------
< < Optionee > >
-7-
<PAGE>
EXHIBIT A
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("AGREEMENT") is made as of ______________, by and between
LJL BioSystems, Inc., a Delaware corporation (the "COMPANY"), and
< < Optionee > > ("PURCHASER"). To the extent any capitalized terms used in
this Agreement are not defined, they shall have the meaning ascribed to them
in the 1997 Stock Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "SHARES") of the Company under and pursuant to
the Company's 1997 Stock Plan (the "PLAN") and the Stock Option Agreement dated
______________, (the "OPTION AGREEMENT"). The purchase price for the Shares
shall be $< < ExercisePrice > > per Share for a total purchase price of
$_______________. The term "SHARES" refers to the purchased Shares and all
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares
under this Agreement shall occur at the principal office of the Company
simultaneously with the execution and delivery of this Agreement in accordance
with the provisions of Section 2(b) of the Option Agreement. On such date, the
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) against
payment of the exercise price therefor by Purchaser by (a) check made payable to
the Company, (b) cancellation of indebtedness of the Company to Purchaser, (c)
delivery of shares of the Common Stock of the Company in accordance with Section
3 of the Option Agreement, or (d) by a combination of the foregoing.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser
or any transferee of Purchaser (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "RIGHT OF FIRST REFUSAL").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the
Shares shall deliver to the Company a written notice (the "NOTICE") stating:
(i) the Holder's bona fide
<PAGE>
intention to sell or otherwise transfer such Shares; (ii) the name of each
proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii) the number
of Shares to be transferred to each Proposed Transferee; and (iv) the terms and
conditions of each proposed sale or transfer. The Holder shall offer the Shares
at the same price (the "OFFERED PRICE") and upon the same terms (or terms as
similar as reasonably possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time
within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("PURCHASE
PRICE") for the Shares purchased by the Company or its assignee(s) under this
Section 3(a) shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in
good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be
made, at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this
Section 3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(a) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this Section
3(a). "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section,
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<PAGE>
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section 3.
(b) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY
TRANSFER. In the event, at any time after the date of this Agreement, of any
transfer by operation of law or other involuntary transfer (including death or
divorce, but excluding a transfer to Immediate Family as set forth in Section
3(a)(vi) above) of all or a portion of the Shares by the record holder thereof,
the Company shall have an option to purchase all of the Shares transferred at
the greater of the purchase price paid by Purchaser pursuant to this Agreement
or the fair market value of the Shares on the date of transfer. Upon such a
transfer, the person acquiring the Shares shall promptly notify the Secretary of
the Company of such transfer. The right to purchase such Shares shall be
provided to the Company for a period of thirty (30) days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(b)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written
notice of the transfer or proposed transfer of Shares. However, if the
Purchaser does not agree with the valuation as determined by the Board of
Directors of the Company, the Purchaser shall be entitled to have the valuation
determined by an independent appraiser to be mutually agreed upon by the Company
and the Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) ASSIGNMENT. The right of the Company to purchase any part
of the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; PROVIDED,
HOWEVER, that an assignee, other than a corporation that is the parent or a 100%
owned subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and fair
market value, if the original purchase price is less than the fair market value
of the Shares subject to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of
Shares or any interest therein will receive and hold such Shares or interest
subject to the provisions of this Agreement. Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are
satisfied.
(f) TERMINATION OF RIGHTS. The right of first refusal granted
the Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(b) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act. Upon
termination of the right of first refusal described in Section 3(a) above, a new
certificate or certificates
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<PAGE>
representing the Shares not repurchased shall be issued, on request, without the
legend referred to in Section 6(a)(ii) herein and delivered to Purchaser.
4. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN
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<PAGE>
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF
THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE
ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
6. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
7. MARKET STAND-OFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the
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<PAGE>
effective date of such registration as may be requested by the Company or such
managing underwriters and to execute an agreement reflecting the foregoing as
may be requested by the underwriters at the time of the public offering.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement
sets forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
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<PAGE>
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
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<PAGE>
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
LJL BIOSYSTEMS, INC.
By:
---------------------------------
Name:
--------------------------------
(print)
Title:
-------------------------------
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER:
< < OPTIONEE > >
-------------------------------------
(Signature)
-------------------------------------
(Print Name)
Address:
< < OptioneeAddress1 > >
< < OptioneeAddress2 > >
I, ______________________, spouse of < < Optionee > >, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting
my spouse the right to purchase the Shares as set forth in the Agreement, I
hereby agree to be irrevocably bound by the Agreement and further agree that
any community property or other such interest shall hereby by similarly bound
by the Agreement. I hereby appoint my spouse as my attorney-in-fact with
respect to any amendment or exercise of any rights under the Agreement.
-------------------------------
Spouse of < < Optionee > >
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<PAGE>
RECEIPT
The undersigned hereby acknowledges receipt of Certificate No.
______ for ____________ shares of Common Stock of LJL BioSystems, Inc. (the
"COMPANY").
The undersigned further acknowledges receipt of a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California, which copy is attached to the aforementioned certificate.
Dated:
----------- -------------------------------
Optionee
<PAGE>
RECEIPT
LJL BioSystems, Inc. (the "COMPANY") hereby acknowledges receipt of
a check in the amount of $______________ given by < < Optionee > > as
consideration for Certificate No. _________ for ____________ shares of Common
Stock of LJL BioSystems, Inc.
Dated:
-------------
LJL BIOSYSTEMS, INC.
By:
-------------------------------
Name:
------------------------------
(print)
Title:
-----------------------------
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the
issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES
<PAGE>
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
[INCLUDES PROMISSORY NOTE IN ADDITION TO OTHER FORMS OF CONSIDERATION - STOCK IS
SUBJECT TO VESTING]
This Restricted Stock Purchase Agreement (the "AGREEMENT") is made as of
______________, __________, by and between LJL BioSystems, Inc., a Delaware
corporation (the "COMPANY"), and < < Purchaser > > ("PURCHASER") pursuant to
the Company's 1997 Stock Plan. To the extent any capitalized terms used in
this Agreement are not defined, they shall have the meaning ascribed to them
in the 1997 Stock Plan.
1. SALE OF STOCK. Subject to the terms and conditions of this
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company,
< < NoofShares > > shares of the Company's Common Stock (the "SHARES") at a
purchase price of $< < PriceperShare > > per Share for a total purchase price
of $< < TotalPurchasePrice > >. The per share purchase price of the Shares
shall be not less than 85% of the Fair Market Value of the Shares as of the
date of the offer of such Shares to the Purchaser, or, in the case of any
person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any
affiliated company), the per share purchase price shall be not less than one
hundred percent (100%) of the Fair Market Value of the Shares as of such
date. The term "SHARES" refers to the purchased Shares and all securities
received in replacement of or in connection with the Shares pursuant to stock
dividends or splits, all securities received in replacement of the Shares in
a recapitalization, merger, reorganization, exchange or the like, and all
new, substituted or additional securities or other properties to which
Purchaser is entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "PURCHASE DATE"). On the Purchase
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by (a) check made
payable to the Company, (b) cancellation of indebtedness of the Company to
Purchaser, (c) subject to the provisions of Section 153 of the Delaware General
Corporation Law, delivery of a Promissory note in the form attached as EXHIBIT A
to this Agreement (or in any form acceptable to the Company), or (d) by a
combination of the foregoing. If Purchaser delivers a promissory note as
partial or full payment of the purchase price, Purchaser will also deliver a
Pledge and Security Agreement in the form attached as EXHIBIT C to this
Agreement (or in any form acceptable to the Company).
<PAGE>
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below), except as provided below.
After any Shares have been released from such Repurchase Option, Purchaser shall
not assign, encumber or dispose of any interest in such Shares except in
compliance with the provisions below and applicable securities laws.
(a) REPURCHASE OPTION.
(i) In the event of the voluntary or involuntary
termination of Purchaser's employment or consulting relationship with the
Company for any reason (including death or disability), with or without cause,
the Company shall upon the date of such termination (the "TERMINATION DATE")
have an irrevocable, exclusive option (the "REPURCHASE OPTION") for a period of
60 days from such date to repurchase all or any portion of the Shares held by
Purchaser as of the Termination Date which have not yet been released from the
Company's Repurchase Option at the original purchase price per Share specified
in Section 1 (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company
by written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Shares shall
initially be subject to the Repurchase Option. Twenty percent (20%) of the
total number of Shares shall be released from the Repurchase Option on the 12
month anniversary of the Vesting Commencement Date (as set forth on the
signature page of this Agreement), and an additional 1/20th of the total number
of Shares shall be released from the Repurchase Option on the three-month
anniversary of the Vesting Commencement Date thereafter (20% per year vesting
schedule), until all Shares are released from the Repurchase Option (all Shares
will be released from Repurchase Option in five years after Vesting Commencement
Date, subject to Purchaser's continued provision of services). Fractional
shares shall be rounded to the nearest whole share.
(b) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or
any transferee of Purchaser (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its
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<PAGE>
assignee(s) shall have a right of first refusal to purchase the Shares on the
terms and conditions set forth in this Section 3(b) (the "RIGHT OF FIRST
REFUSAL").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "NOTICE") stating: (A) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
(C) the number of Shares to be transferred to each Proposed Transferee; and
(D) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "OFFERED PRICE") and upon the same
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("PURCHASE PRICE")
for the Shares purchased by the Company or its assignee(s) under this Section
3(b) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this
Section 3(b), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(b) notwithstanding, the transfer of any
or all of the Shares during the Purchaser's lifetime or on the Purchaser's death
by will or intestacy to the Purchaser's
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<PAGE>
Immediate Family or a trust for the benefit of the Purchaser's Immediate Family
shall be exempt from the provisions of this Section 3(b). "IMMEDIATE FAMILY" as
used herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall
receive and hold the Shares so transferred subject to the provisions of this
Section, and there shall be no further transfer of such Shares except in
accordance with the terms of this Section 3.
(c) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER. In
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce,
but excluding a transfer to Immediate Family as set forth in Section 3(b)(vi)
above) of all or a portion of the Shares by the record holder thereof, the
Company shall have an option to purchase all of the Shares transferred at the
greater of the purchase price paid by Purchaser pursuant to this Agreement or
the fair market value of the Shares on the date of transfer. Upon such a
transfer, the person acquiring the Shares shall promptly notify the Secretary
of the Company of such transfer. The right to purchase such Shares shall be
provided to the Company for a period of thirty (30) days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(c)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written
notice of the transfer or proposed transfer of Shares. However, if the
Purchaser does not agree with the valuation as determined by the Board of
Directors of the Company, the Purchaser shall be entitled to have the valuation
determined by an independent appraiser to be mutually agreed upon by the Company
and the Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) ASSIGNMENT. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the parent or a 100%
owned subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and fair
market value, if the original purchase price is less than the fair market value
of the Shares subject to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Company's option to repurchase under Section 3(a). Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are met.
-4-
<PAGE>
(f) TERMINATION OF RIGHTS. The right of first refusal granted the
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(c) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act. Upon
termination of the right of first refusal described in Section 3(b) and the
expiration or exercise of the Company's repurchase option described in
Section 3(a) above, a new certificate or certificates representing the Shares
not repurchased shall be issued, on request, without the legend referred to in
Section 6(a)(ii) herein and delivered to Purchaser.
4. ESCROW OF UNVESTED SHARES. For purposes of facilitating the
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Company's
Repurchase Option described in Section 3(a), to deliver such certificate(s),
together with an Assignment Separate from Certificate in the form attached to
this Agreement as EXHIBIT C executed by Purchaser and by Purchaser's spouse (if
required for transfer), in blank, to the Secretary of the Company, or the
Secretary's designee, to hold such certificate(s) and Assignment Separate from
Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement.
Purchaser hereby acknowledges that the Secretary of the Company, or the
Secretary's designee, is so appointed as the escrow holder with the foregoing
authorities as a material inducement to make this Agreement and that said
appointment is coupled with an interest and is accordingly irrevocable.
Purchaser agrees that said escrow holder shall not be liable to any party hereof
(or to any other party). The escrow holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may resign
at any time. Purchaser agrees that if the Secretary of the Company, or the
Secretary's designee, resigns as escrow holder for any or no reason, the Board
of Directors of the Company shall have the power to appoint a successor to serve
as escrow holder pursuant to the terms of this Agreement. Purchaser has the
right to take possession of certificates representing any or all vested Shares
(i.e. Shares which have been released from the Repurchase Option).
5. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must
-5-
<PAGE>
hold the Shares indefinitely unless they are registered with the Securities and
Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. Purchaser
acknowledges that the Company has no obligation to register or qualify the
Shares for resale. Purchaser further acknowledges that if an exemption from
registration or qualification is available, it may be conditioned on various
requirements including, but not limited to, the time and manner of sale, the
holding period for the Shares, and requirements relating to the Company which
are outside of the Purchaser's control, and which the Company is under no
obligation and may not be able to satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA,
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<PAGE>
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In
this context, "RESTRICTION" means the right of the Company to buy back the
Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) ELECTION") of the
Code with the Internal Revenue Service within 30 days from the date of purchase.
Even if the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "ACKNOWLEDGMENT"), attached hereto as
EXHIBIT D. Purchaser further
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<PAGE>
agrees that Purchaser will execute and submit with the Acknowledgment a copy of
the 83(b) Election, attached hereto as EXHIBIT E, if Purchaser has indicated in
the Acknowledgment his or her decision to make such an election.
9. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
-8-
<PAGE>
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
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<PAGE>
The parties have executed this Agreement as of the date first set
forth above.
LJL BIOSYSTEMS, INC.
By:
------------------------------
Title:
-----------------------------
Address:
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER:
< < PURCHASER > >
---------------------------------
(Signature)
Address:
< < PurchaserAddress1 > >
< < PurchaserAddress2 > >
Vesting Commencement
Date: < < VestingCommenceDate > >
I, ________________________________, spouse of < < Purchaser > >, have read
and hereby approve the foregoing Agreement. In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, I hereby agree to be irrevocably bound by the Agreement and
further agree that any community property or other such interest shall be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
---------------------------------
Spouse of < < Purchaser > >
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<PAGE>
EXHIBIT A
PROMISSORY NOTE
$__________ __________, California
_______________, ____
For value received, the undersigned promises to pay < < CompanyName > >,
a Delaware corporation (the "COMPANY"), at its principal office the principal
sum of $__________ with interest from the date hereof at a rate of _____% per
annum, compounded semiannually, on the unpaid balance of such principal sum.
Such principal and interest shall be due and payable on __________.
If the undersigned's employment or consulting relationship with the Company
is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest, and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
-----------------------------------
< < Purchaser > >
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<PAGE>
EXHIBIT B
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement (the "AGREEMENT") is entered into this
_____ day of ____________ by and between LJL BioSystems, Inc., a Delaware
corporation (the "COMPANY") and < < Purchaser > > ("PURCHASER").
RECITALS
In connection with Purchaser's purchase of certain shares of the Company's
Common Stock (the "SHARES") pursuant to a Restricted Stock Purchase Agreement
dated _________________ between Purchaser and the Company, Purchaser is
delivering a promissory note of even date herewith (the "NOTE") in full or
partial payment of the exercise price for the Shares. The company requires that
the Note be secured by a pledge of the Shares on the terms set forth below.
AGREEMENT
In consideration of the Company's acceptance of the Note as full or partial
payment of the exercise price of the Shares, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. The Note shall become payable in full upon the voluntary or
involuntary termination or cessation of employment of Purchaser with the
Company, for any reason, with or without cause (including death or disability).
2. Purchaser shall deliver to the Secretary of the Company, or his or her
designee (hereinafter referred to as the "PLEDGE HOLDER"), all certificates
representing the Shares, together with an Assignment Separate from Certificate
in the form attached to this Agreement as ATTACHMENT A executed by Purchaser and
by Purchaser's spouse (if required for transfer), in blank, for use in
transferring all or a portion of the Shares to the Company if, as and when
required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal, extension or
modification of the Note, Purchaser hereby grants to the Company a security
interest in and pledges with and delivers to the Company Purchaser's Shares
(sometimes referred to herein as the "COLLATERAL").
4. In the event that Purchaser prepays all or a portion of the Note, in
accordance with the provisions thereof, Purchaser intends, unless written notice
to the contrary is delivered to the Pledge Holder, that the Shares represented
by the portion of the Note so repaid, including annual interest thereon, shall
continue to be so held by the Pledge Holder, to serve as independent collateral
for the outstanding portion of the Note for the purpose of commencing the
holding period set forth in Rule 144(d) promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT").
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<PAGE>
5. In the event of any foreclosure of the security interest created by
this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the
establishment of a public market for the Shares of the Company, the securities
laws affecting sale of the Shares make a public sale of the Shares commercially
unreasonable. The parties further agree that the repurchasing of such Shares by
the Company, or by any person to whom the Company may have assigned its rights
under this Agreement, is commercially reasonable if made at a price determined
by the Board of Directors in its discretion, fairly exercised, representing what
would be the fair market value of the Shares reduced by any limitation on
transferability, whether due to the size of the block of shares or the
restrictions of applicable securities laws.
6. In the event of default in payment when due of any indebtedness under
the Note, the Company may elect then, or at any time thereafter, to exercise all
rights available to a secured party under the California Commercial Code
including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; PROVIDED, HOWEVER,
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
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<PAGE>
The parties have executed this Pledge and Security Agreement as of the date
first set forth above.
COMPANY:
LJL BIOSYSTEMS, INC.
By:
-------------------------------
Name:
------------------------------
(print)
Title:
-----------------------------
Address:
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER:
< < PURCHASER > >
-----------------------------------
(Signature)
-----------------------------------
(Print Name)
Address:
< < PurchaserAddress1 > >
< < PurchaserAddress2 > >
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<PAGE>
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("PURCHASER") and LJL BioSystems, Inc. (the
"COMPANY") dated _______________, ____ (the "AGREEMENT"), Purchaser hereby
sells, assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company, standing in Purchaser's
name on the books of the Company and represented by Certificate No. ____, and
does hereby irrevocably constitute and appoint
________________________________________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.
Dated:
-------------
Signature:
---------------------------------------
< < Purchaser > >
---------------------------------------
Spouse of < < Purchaser > >
(if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to perfect the security interest of the
Company pursuant to the Agreement.
<PAGE>
EXHIBIT C
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Purchase
Agreement between the undersigned ("PURCHASER") and LJL BioSystems, Inc. (the
"COMPANY") dated _______________, ____ (the "AGREEMENT"), Purchaser hereby
sells, assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company, standing in Purchaser's
name on the books of the Company and represented by Certificate No. ____, and
does hereby irrevocably constitute and appoint
________________________________________________ to transfer said stock on the
books of the Company with full power of substitution in the premises. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated:
---------------------
Signature:
---------------------------------------
< < Purchaser > >
---------------------------------------
Spouse of < < Purchaser > >
(if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT D
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned's spouse), a purchaser
of < < NoofShares > > shares of Common Stock of LJL BioSystems, Inc., a
Delaware corporation (the "COMPANY") by exercise of stock purchase right (the
"RIGHT") granted pursuant to the Company's 1997 Stock Plan (the "PLAN"),
hereby states as follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to
the offering of such shares. The undersigned has carefully reviewed the Plan
and the stock purchase agreement pursuant to which the Right was granted.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and local
tax consequences of purchasing shares under the Plan, and particularly
regarding the advisability of making elections pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended (the "CODE")
and pursuant to the corresponding provisions, if any, of applicable
state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Restricted Stock Purchase Agreement, an executed form entitled
"Election Under Section 83(b) of the Internal Revenue Code of 1986;"
or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of shares under the Plan
or of the making or failure to make an election pursuant to Section 83(b) of the
Code or the corresponding provisions, if any, of applicable state law.
Date:
------------ ------------------------------
< < Purchaser > >
Date:
------------ ------------------------------
Spouse of < < Purchaser > >
-2-
<PAGE>
EXHIBIT E
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: < < Purchaser > >
NAME OF SPOUSE: _______________
ADDRESS: < < PurchaserAddress1 > >
< < PurchaserAddress2 > >
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: _______________
2. The property with respect to which the election is made is described as
follows:
__________ shares of the Common Stock (the "SHARES"), $0.001 par value, of
LJL BioSystems, Inc., a Delaware corporation (the "COMPANY").
3. The date on which the property was transferred is: _______________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: < < TotalPurchasePrice > >
6. The amount (if any) paid for such property: < < TotalPurchasePrice > >
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated:
------------- ------------------------------
< < Purchaser > >
Dated:
------------- ------------------------------
Spouse of < < Purchaser > >
<PAGE>
RECEIPT
LJL BioSystems, Inc. hereby acknowledges receipt of (check as applicable):
_____ A check in the amount of $__________
_____ The cancellation of indebtedness in the amount of $__________
_____ A promissory note in the amount of $__________
given by < < Purchaser > > as consideration for Certificate No.
< < CertificateNo > > for < < NoofShares > > shares of Common Stock of
LJL BioSystems, Inc.
Dated: ________________
LJL BIOSYSTEMS, INC.
By:
----------------------------
Title:
-------------------------
<PAGE>
RECEIPT AND CONSENT
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. < < CertificateNo. > > for < < NoofShares > > shares of Common Stock of
LJL BioSystems, Inc. (the "COMPANY").
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated:
-------------------
-----------------------------------
< < Purchaser > >
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the
issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES
<PAGE>
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
[FULLY VESTED FOR ISSUANCE OF BONUS SHARES]
This Restricted Stock Purchase Agreement (the "AGREEMENT") is made as of
______________, __________, by and between LJL BioSystems, Inc., a Delaware
corporation (the "COMPANY"), and < < Purchaser > > ("PURCHASER") pursuant to
the Company's 1997 Stock Plan. To the extent any capitalized terms used in
this Agreement are not defined, they shall have the meaning ascribed to them
in the 1997 Stock Plan.
1. SALE OF STOCK. Subject to the terms and conditions of this
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company,
< < NoofShares > > shares of the Company's Common Stock (the "SHARES") at a
purchase price of $ < < PriceperShare > > per Share for a total purchase
price of $ < < TotalPurchasePrice > >. The per share purchase price of the
Shares shall be not less than 85% of the Fair Market Value of the Shares as
of the date of the offer of such Shares to the Purchaser, or, in the case of
any person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any
affiliated company), the per share purchase price shall be not less than one
hundred percent (100%) of the Fair Market Value of the Shares as of such
date. The term "SHARES" refers to the purchased Shares and all securities
received in replacement of or in connection with the Shares pursuant to stock
dividends or splits, all securities received in replacement of the Shares in
a recapitalization, merger, reorganization, exchange or the like, and all
new, substituted or additional securities or other properties to which
Purchaser is entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "PURCHASE DATE"). On the Purchase
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by cancellation of
amounts due to Purchaser for prior services rendered to the Company (the
"DEBT"). As of the purchase date, and simultaneously with the issuance of the
Shares to Purchaser, the Debt shall automatically be deemed to be discharged in
its entirety.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or
any transferee of Purchaser (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its
<PAGE>
assignee(s) shall have a right of first refusal to purchase the Shares on the
terms and conditions set forth in this Section 3(a) (the "RIGHT OF FIRST
REFUSAL").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "NOTICE") stating: (A) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
(C) the number of Shares to be transferred to each Proposed Transferee; and
(D) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "OFFERED PRICE") and upon the same
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("PURCHASE PRICE")
for the Shares purchased by the Company or its assignee(s) under this Section
3(a) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this
Section 3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(a) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate
-2-
<PAGE>
Family or a trust for the benefit of Purchaser's Immediate Family shall be
exempt from the provisions of this Section 3(a). "IMMEDIATE FAMILY" as used
herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall
receive and hold the Shares so transferred subject to the provisions of this
Section 3, and there shall be no further transfer of such Shares except in
accordance with the terms of this Section 3.
(b) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER.
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(a)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(b)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written
notice of the transfer or proposed transfer of Shares. However, if the
Purchaser does not agree with the valuation as determined by the Board of
Directors of the Company, the Purchaser shall be entitled to have the valuation
determined by an independent appraiser to be mutually agreed upon by the Company
and the Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) ASSIGNMENT. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the parent or a 100%
owned subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and fair
market value, if the original purchase price is less than the fair market value
of the Shares subject to the assignment.
(d) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Company's Shares
shall be void unless the provisions of this Agreement are met.
(e) TERMINATION OF RIGHTS. The right of first refusal granted the
Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer
-3-
<PAGE>
granted the Company by Section 3(b) above shall terminate upon the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act. Upon termination of the right of first
refusal described in Section 3(a), a new certificate or certificates
representing the Shares not repurchased shall be issued, on request, without the
legend referred to in Section 5(a)(ii) herein and delivered to Purchaser.
4. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN
-4-
<PAGE>
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL FOR THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT
OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(iii) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE
COMMISSIONER'S RULES.
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
-5-
<PAGE>
7. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
-6-
<PAGE>
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
-7-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
LJL BIOSYSTEMS, INC.
By:
--------------------------------
Title:
-----------------------------
Address:
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER:
< < PURCHASER > >
-----------------------------------
(Signature)
Address:
< < PurchaserAddress1 > >
< < PurchaserAddress2 > >
I, ________________________________, spouse of < < Purchaser > > , have read
and hereby approve the foregoing Agreement. In consideration of the
Company's granting my spouse the right to purchase the Shares as set forth in
the Agreement, I hereby agree to be irrevocably bound by the Agreement and
further agree that any community property or other such interest shall be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
-----------------------------------
Spouse of < < Purchaser > >
-8-
<PAGE>
RECEIPT
LJL BioSystems, Inc., hereby acknowledges receipt of services rendered by
< < Purchaser > > as consideration for Certificate No. _______________ for
< < NoofShares > > shares of Common Stock of LJL BioSystems, Inc.
Dated:
---------------------
LJL BioSystems, Inc.
By:
-----------------------------
Title:
--------------------------
<PAGE>
RECEIPT
The undersigned hereby acknowledges receipt of Certificate No.
_____________ for _____________ shares of Common Stock of LJL BioSystems, Inc.
(the "COMPANY").
The undersigned further acknowledges receipt of a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California, which copy is attached to the aforementioned certificate.
Dated:
----------------------
-----------------------------
< < Purchaser > >
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the
issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES
<PAGE>
LJL BIOSYSTEMS, INC.
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
[CONSIDERATION IS CHECK, CANCELLATION OF DEBT, AND/OR SERVICES PREVIOUSLY
RENDERED (NO PROMISSORY NOTE) - STOCK IS SUBJECT TO VESTING]
This Restricted Stock Purchase Agreement (the "AGREEMENT") is made as of
______________, __________, by and between LJL BioSystems, Inc., a Delaware
corporation (the "COMPANY"), and < < Purchaser > > ("PURCHASER") pursuant to
the Company's 1997 Stock Plan. To the extent any capitalized terms used in
this Agreement are not defined, they shall have the meaning ascribed to them
in the 1997 Stock Plan.
1. SALE OF STOCK. Subject to the terms and conditions of this
Agreement, on the Purchase Date (as defined below) the Company will issue and
sell to Purchaser, and Purchaser agrees to purchase from the Company,
< < NoofShares > > shares of the Company's Common Stock (the "SHARES") at a
purchase price of $ < < PriceperShare > > per Share for a total purchase
price of $ < < TotalPurchasePrice > > . The per share purchase price of the
Shares shall be not less than 85% of the Fair Market Value of the Shares as
of the date of the offer of such Shares to the Purchaser, or, in the case of
any person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any
affiliated company), the per share purchase price shall be not less than one
hundred percent (100%) of the Fair Market Value of the Shares as of such
date. The term "SHARES" refers to the purchased Shares and all securities
received in replacement of or in connection with the Shares pursuant to stock
dividends or splits, all securities received in replacement of the Shares in
a recapitalization, merger, reorganization, exchange or the like, and all
new, substituted or additional securities or other properties to which
Purchaser is entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "PURCHASE DATE"). On the Purchase
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by (a) check made
payable to the Company, (b) cancellation of indebtedness of the Company to
Purchaser, (c) cancellation of amounts due to Purchaser for prior services
rendered to the Company, or (d) by a combination of the foregoing. In the event
of a purchase pursuant to subsection (b) or (c) hereof, as of the purchase date,
and simultaneously with the issuance of the Shares to Purchaser, the debt in
connection with the indebtedness and/or amount due to Purchaser for prior
services rendered to the Company shall automatically be deemed to be discharged
in its entirety.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in
<PAGE>
the Shares while the Shares are subject to the Company's Repurchase Option (as
defined below), except as provided below. After any Shares have been released
from such Repurchase Option, Purchaser shall not assign, encumber or dispose of
any interest in such Shares except in compliance with the provisions below and
applicable securities laws.
(a) REPURCHASE OPTION.
(i) In the event of the voluntary or involuntary
termination of Purchaser's employment or consulting relationship with the
Company for any reason (including death or disability), with or without cause,
the Company shall upon the date of such termination (the "TERMINATION DATE")
have an irrevocable, exclusive option (the "REPURCHASE OPTION") for a period of
60 days from such date to repurchase all or any portion of the Shares held by
Purchaser as of the Termination Date which have not yet been released from the
Company's Repurchase Option at the original purchase price per Share specified
in Section 1 (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company
by written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) One hundred percent (100%) of the Shares shall
initially be subject to the Repurchase Option. Twenty percent (20%) of the
total number of Shares shall be released from the Repurchase Option on the
12-month anniversary of the Vesting Commencement Date (as set forth on the
signature page of this Agreement), and an additional 1/20th of the total number
of Shares shall be released from the Repurchase Option on the three-month
anniversary of the Vesting Commencement Date thereafter (20% per year vesting
schedule), until all Shares are released from the Repurchase Option (all Shares
will be released from Repurchase Option in five years after Vesting Commencement
Date subject to Purchaser's continued provision of service). Fractional shares
shall be rounded to the nearest whole share.
(b) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or
any transferee of Purchaser (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "RIGHT OF FIRST REFUSAL").
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<PAGE>
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "NOTICE") stating: (A) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (B) the
name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
(C) the number of Shares to be transferred to each Proposed Transferee; and
(D) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "OFFERED PRICE") and upon the same
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("PURCHASE PRICE")
for the Shares purchased by the Company or its assignee(s) under this Section
3(b) shall be the Offered Price. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration shall
be determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this
Section 3(b), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to
the contrary contained in this Section 3(b) notwithstanding, the transfer of any
or all of the Shares during Purchaser's lifetime or on Purchaser's death by will
or intestacy to Purchaser's Immediate Family or to a trust for the benefit of
Purchaser's Immediate Family shall be exempt from the provisions of this
Section. "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal
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<PAGE>
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section.
(c) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER.
In the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce, but
excluding a transfer to Immediate Family as set forth in Section 3(b)(vi) above)
of all or a portion of the Shares by the record holder thereof, the Company
shall have an option to purchase all of the Shares transferred at the greater of
the purchase price paid by Purchaser pursuant to this Agreement or the fair
market value of the Shares on the date of transfer. Upon such a transfer, the
person acquiring the Shares shall promptly notify the Secretary of the Company
of such transfer. The right to purchase such Shares shall be provided to the
Company for a period of thirty (30) days following receipt by the Company of
written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any
stock to be transferred pursuant to Section 3(c)(i), the price per Share shall
be a price set by the Board of Directors of the Company that will reflect the
current value of the stock in terms of present earnings and future prospects of
the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written
notice of the transfer or proposed transfer of Shares. However, if the
Purchaser does not agree with the valuation as determined by the Board of
Directors of the Company, the Purchaser shall be entitled to have the valuation
determined by an independent appraiser to be mutually agreed upon by the Company
and the Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(d) ASSIGNMENT. The right of the Company to purchase any part of
the Shares may be assigned in whole or in part to any stockholder or
stockholders of the Company or other persons or organizations; provided,
however, that an assignee, other than a corporation that is the parent or a 100%
owned subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and fair
market value, if the original purchase price is less than the fair market value
of the Shares subject to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Company's option to repurchase under Section 3(a). Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are met.
(f) TERMINATION OF RIGHTS. The right of first refusal granted the
Company by Section 3(b) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(c) above shall
terminate upon the first sale of Common Stock
-4-
<PAGE>
of the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act. Upon termination of the right of first refusal described in
Section 3(b) and the expiration or exercise of the Company's repurchase option
described in Section 3(a) above, a new certificate or certificates representing
the Shares not repurchased shall be issued, on request, without the legend
referred to in Section 6(a)(ii) herein and delivered to Purchaser.
4. ESCROW OF UNVESTED SHARES. For purposes of facilitating the
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Company's
Repurchase Option described in Section 3(a), to deliver such certificate(s),
together with an Assignment Separate from Certificate in the form attached to
this Agreement as EXHIBIT A executed by Purchaser and by Purchaser's spouse (if
required for transfer), in blank, to the Secretary of the Company, or the
Secretary's designee, to hold such certificate(s) and Assignment Separate from
Certificate in escrow and to take all such actions and to effectuate all such
transfers and/or releases as are in accordance with the terms of this Agreement.
Purchaser hereby acknowledges that the Secretary of the Company, or the
Secretary's designee, is so appointed as the escrow holder with the foregoing
authorities as a material inducement to make this Agreement and that said
appointment is coupled with an interest and is accordingly irrevocable.
Purchaser agrees that said escrow holder shall not be liable to any party hereof
(or to any other party). The escrow holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may resign
at any time. Purchaser agrees that if the Secretary of the Company, or the
Secretary's designee, resigns as escrow holder for any or no reason, the Board
of Directors of the Company shall have the power to appoint a successor to serve
as escrow holder pursuant to the terms of this Agreement. Purchaser has the
right to take possession of certificates representing any or all vested Shares
(i.e. Shares which have been released from the Repurchase Option).
5. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
-5-
<PAGE>
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(iii) IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
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<PAGE>
Purchaser understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to this Agreement.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
8. SECTION 83(b) ELECTION. Purchaser understands that Section 83(a) of
the Internal Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In
this context, "RESTRICTION" means the right of the Company to buy back the
Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) ELECTION") of the
Code with the Internal Revenue Service within 30 days from the date of purchase.
Even if the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which the date of this Agreement falls.
Purchaser acknowledges that the foregoing is only a summary of the effect of
United States federal income taxation with respect to purchase of the Shares
hereunder, and does not purport to be complete. Purchaser further acknowledges
that the Company has directed Purchaser to seek independent advice regarding the
applicable provisions of the Code, the income tax laws of any municipality,
state or foreign country in which Purchaser may reside, and the tax consequences
of Purchaser's death.
Purchaser agrees that he will execute and deliver to the Company with
this executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "ACKNOWLEDGMENT"), attached hereto as
EXHIBIT B. Purchaser further agrees that Purchaser will execute and submit with
the Acknowledgment a copy of the 83(b)
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<PAGE>
Election, attached hereto as EXHIBIT C, if Purchaser has indicated in the
Acknowledgment his or her decision to make such an election.
9. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
10. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient when delivered personally or
sent by telegram or fax or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, and addressed
to the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
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<PAGE>
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES
IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
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<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
LJL BIOSYSTEMS, INC.
By:
--------------------------------
Title:
-----------------------------
Address:
404 Tasman Drive
Sunnyvale, CA 94089
PURCHASER:
< < PURCHASER > >
-----------------------------------
(Signature)
Address:
< < PurchaserAddress1 > >
< < PurchaserAddress2 > >
Vesting Commencement
Date: < < VestingCommenceDate > >
I, ________________________________, spouse of < < Purchaser > > , have read
and hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be irrevocably bound by the Agreement and further
agree that any community property or other such interest shall be similarly
bound by the Agreement. I hereby appoint my spouse as my attorney-in-fact
with respect to any amendment or exercise of any rights under the Agreement.
-----------------------------------
Spouse of < < Purchaser > >
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<PAGE>
EXHIBIT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock Purchase
Agreement between the undersigned ("PURCHASER") and LJL BioSystems, Inc. (the
"COMPANY") dated _______________, ____ (the "AGREEMENT"), Purchaser hereby
sells, assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company, standing in Purchaser's
name on the books of the Company and represented by Certificate No. ____, and
does hereby irrevocably constitute and appoint___________________________ to
transfer said stock on the books of the Company with full power of substitution
in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE
AGREEMENT AND THE EXHIBITS THERETO.
Dated:
-----------------
Signature:
-----------------------------------------
< < Purchaser > >
-----------------------------------------
Spouse of < < Purchaser > > (if
applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
EXHIBIT B
ACKNOWLEDGMENT AND STATEMENT OF DECISION
REGARDING SECTION 83(b) ELECTION
The undersigned (which term includes the undersigned's spouse), a purchaser
of < < NoofShares > > shares of Common Stock of LJL BioSystems, Inc., a Delaware
corporation (the "COMPANY") by exercise of stock purchase right (the "RIGHT")
granted pursuant to the Company's 1997 Stock Plan (the "PLAN"), hereby states as
follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to
the offering of such shares. The undersigned has carefully reviewed the Plan
and the stock purchase agreement pursuant to which the Right was granted.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and local
tax consequences of purchasing shares under the Plan, and particularly
regarding the advisability of making elections pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended (the "CODE")
and pursuant to the corresponding provisions, if any, of applicable
state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Restricted Stock Purchase Agreement, an executed form entitled
"Election Under Section 83(b) of the Internal Revenue Code of 1986;"
or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of shares under the Plan
or of the making or failure to make an election pursuant to Section 83(b) of the
Code or the corresponding provisions, if any, of applicable state law.
Date:
--------------- ------------------------
< < Purchaser > >
Date:
--------------- ------------------------
Spouse of < < Purchaser > >
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<PAGE>
EXHIBIT C
ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: < < Purchaser > >
NAME OF SPOUSE: _______________
ADDRESS: < < PurchaserAddress1 > >
< < PurchaserAddress2 > >
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: _______________
2. The property with respect to which the election is made is described as
follows:
< < NoofShares > > shares of the Common Stock (the "SHARES"), $0.001 par
value, of LJL BioSystems, Inc., a Delaware corporation (the "COMPANY").
3. The date on which the property was transferred is: _______________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: < < TotalPurchasePrice > >
6. The amount (if any) paid for such property: < < TotalPurchasePrice > >
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
THE UNDERSIGNED UNDERSTANDS THAT THE FOREGOING ELECTION MAY NOT BE REVOKED
EXCEPT WITH THE CONSENT OF THE COMMISSIONER.
Dated:
---------------- -----------------------------------
< < Purchaser > >
Dated:
---------------- -----------------------------------
Spouse of < < Purchaser > >
<PAGE>
RECEIPT
LJL BioSystems, Inc. hereby acknowledges receipt of a check in the amount
of $ < < TotalPurchasePrice > > given by < < Purchaser > > as consideration for
Certificate No. < < CertificateNo > > for < < NoofShares > > shares of Common
Stock of LJL BioSystems, Inc.
Dated:
--------------
LJL BIOSYSTEMS, INC.
By:
----------------------------
Title:
-------------------------
<PAGE>
RECEIPT AND CONSENT
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. < < CertificateNo > > for < < NoofShares > > shares of Common Stock of
LJL BioSystems, Inc. (the "COMPANY").
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated:
--------------------
-----------------------------------
< < Purchaser > >
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer has
been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a
copy of this section to be delivered to each issuee or transferee of such
security at the time the certificate evidencing the security is delivered to the
issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of
the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or
custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of the
broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien
given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113
or 25121 of the Code, of the securities to be transferred, provided that no
order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or
25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries
who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law
or to the administrator of the unclaimed property law of another state;
(15) by the State Controller pursuant to the Unclaimed Property Law
or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at
the sale that transfer of the securities is restricted under this rule,
(ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES
<PAGE>
LJL BIOSYSTEMS, INC.
1998 DIRECTORS' STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their
continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean LJL Biosystems, Inc., a Delaware
corporation.
(e) "CONTINUOUS STATUS AS A DIRECTOR" shall mean the absence of any
interruption or termination of service as a Director.
(f) "DIRECTOR" shall mean a member of the Board.
(g) "EMPLOYEE" shall mean any person, including any officer or
director, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "OPTION" shall mean a stock option granted pursuant to the Plan.
All options shall be nonstatutory stock options (i.e., options that are not
intended to qualify as incentive stock options under Section 422 of the Code).
(j) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(k) "OPTIONEE" shall mean an Outside Director who receives an
Option.
(l) "OUTSIDE DIRECTOR" shall mean a Director who is not an Employee.
(m) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
<PAGE>
(n) "PLAN" shall mean this 1998 Directors' Stock Option Plan.
(o) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(p) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 150,000 Shares (the "POOL") of Common Stock. The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. If Shares which were acquired upon
exercise of an Option are subsequently repurchased by the Company, such Shares
shall not in any event be returned to the Plan and shall not become available
for future grant under the Plan.
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATOR. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) PROCEDURE FOR GRANTS. All grants of Options hereunder shall be
automatic and nondiscretionary and shall be made strictly in accordance with
the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director who first becomes an Outside Director
after the effective date of the Company's initial public offering shall be
automatically granted an Option to purchase 20,000 Shares (the "FIRST OPTION")
on the date on which such person first becomes an Outside Director, whether
through election by the stockholders of the Company or appointment by the Board
of Directors to fill a vacancy.
(iii) Each Outside Director (including Outside Directors who
first became Outside Directors before the effective date of the Company's
initial public offering) shall be automatically granted an Option to purchase
5,000 Shares (a "SUBSEQUENT OPTION") on the date of each Annual Meeting of the
Company's stockholders immediately following which such Outside Director is
serving on the Board, provided that, on such date, he or she shall have served
on the Board for at least six (6) months prior to the date of such Annual
Meeting.
<PAGE>
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously purchased
upon exercise of Options to exceed the Pool, then each such automatic grant
shall be for that number of Shares determined by dividing the total number of
Shares remaining available for grant by the number of Outside Directors
receiving an Option on such date on the automatic grant date. Any further
grants shall then be deferred until such time, if any, as additional Shares
become available for grant under the Plan through action of the stockholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
(v) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any grant of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 17 hereof shall be
conditioned upon obtaining such stockholder approval of the Plan in accordance
with Section 17 hereof.
(vi) The terms of each First Option granted hereunder shall be
as follows:
(1) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the First Option, determined in
accordance with Section 8 hereof; and
(3) the First Option shall become exercisable in
installments cumulatively as to 25% of the Shares subject to the First Option
on each of the first, second, third and fourth anniversaries of the date of
grant of the Option.
(vii) The terms of each Subsequent Option granted hereunder
shall be as follows:
(1) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 9 hereof;
(2) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent Option,
determined in accordance with Section 8 hereof; and
(3) the Subsequent Option shall become exercisable as to
one hundred percent (100%) of the Shares subject to the Subsequent Option on
the fourth anniversary of the date of grant of the Subsequent Option.
(c) POWERS OF THE BOARD. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the
<PAGE>
Common Stock; (ii) to determine the exercise price per share of Options to be
granted, which exercise price shall be determined in accordance with Section
8(a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and
rescind rules and regulations relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted hereunder; and (vi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(d) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and
any other holders of any Options granted under the Plan.
(e) SUSPENSION OR TERMINATION OF OPTION. If the President or his or
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the Outside
Director accused of such misconduct). If the Board of Directors (excluding the
Outside Director accused of such misconduct) determines an Optionee has
committed an act of embezzlement, fraud, dishonesty, nonpayment of an
obligation owed to the Company, breach of fiduciary duty or deliberate
disregard of the Company rules resulting in loss, damage or injury to the
Company, or if an Optionee makes an unauthorized disclosure of any Company
trade secret or confidential information, engages in any conduct constituting
unfair competition, induces any Company customer to breach a contract with the
Company or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his or her estate
shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director accused
of such misconduct) shall act fairly and shall give the Optionee an opportunity
to appear and present evidence on Optionee's behalf at a hearing before the
Board or a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth
in Section 4(b) hereof. An Outside Director who has been granted an Option
may, if he or she is otherwise eligible, be granted an additional Option or
Options in accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective on the
effectiveness of the registration statement under the Securities Act of 1933,
as amended, relating to the Company's initial public offering of securities.
It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.
7. TERM OF OPTIONS. The term of each Option shall be ten (10) years
from the date of grant thereof.
<PAGE>
8. EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per Share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) FAIR MARKET VALUE. The fair market value shall be determined by
the Board; PROVIDED, HOWEVER, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices of the Common Stock in the over-the-counter market on the date of
grant, as reported in THE WALL STREET JOURNAL (or, if not so reported, as
otherwise reported by the National Association of Securities Dealers Automated
Quotation ("Nasdaq") System) or, in the event the Common Stock is traded on the
Nasdaq National Market or listed on a stock exchange, the fair market value per
Share shall be the closing price on such system or exchange on the date of
grant of the Option (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in THE WALL
STREET JOURNAL. With respect to any Options granted hereunder concurrently
with the initial effectiveness of the Plan, the fair market value shall be the
Price to Public as set forth in the final prospectus relating to such initial
public offering.
(c) FORM OF CONSIDERATION. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of cash,
check, other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised (which, if acquired from the Company, shall have been
held for at least six months), or any combination of such methods of payment
and/or any other consideration or method of payment as shall be permitted under
applicable corporate law.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be exercisable
prior to stockholder approval of the Plan in accordance with Section 17 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a stockholder
shall exist with respect to the Optioned Stock, notwithstanding the exercise of
the Option. A share certificate for the number of Shares so acquired shall be
issued to the Optionee as soon as practicable after exercise
<PAGE>
of the Option. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS A DIRECTOR. If an Outside Director
ceases to serve as a Director, he or she may, but only within ninety (90) days
after the date he or she ceases to be a Director of the Company, exercise his
or her Option to the extent that he or she was entitled to exercise it at the
date of such termination. Notwithstanding the foregoing, in no event may the
Option be exercised after its term set forth in Section 7 has expired. To the
extent that such Outside Director was not entitled to exercise an Option at the
date of such termination, or does not exercise such Option (which he or she was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding Section 9(b) above, in
the event a Director is unable to continue his or her service as a Director
with the Company as a result of his or her total and permanent disability (as
defined in Section 22(e)(3) of the Code), he or she may, but only within six
(6) months (or such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of such termination, exercise his or her
Option to the extent he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent
that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or she was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee:
(i) During the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and remained
in Continuous Status as Director for six (6) months (or such lesser period of
time as is determined by the Board) after the date of death. Notwithstanding
the foregoing, in no event may the Option be exercised after its term set forth
in Section 7 has expired.
(ii) Three (3) months after the termination of Continuous Status
as a Director, the Option may be exercised, at any time within six (6) months
following the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only
to the extent of the right to exercise that had accrued at the date of
termination. Notwithstanding the foregoing, in no event may the option be
exercised after its term set forth in Section 7 has expired.
<PAGE>
10. NONTRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order (as defined by the Code or the rules thereunder). The
designation of a beneficiary by an Optionee does not constitute a transfer. An
Option may be exercised during the lifetime of an Optionee only by the Optionee
or a transferee permitted by this Section.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each
outstanding Option, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the
Company; PROVIDED, HOWEVER, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option.
(b) CORPORATE TRANSACTIONS. In the event of (i) a dissolution or
liquidation of the Company, (ii) a sale of all or substantially all of the
Company's assets, (iii) a merger or consolidation in which the Company is not
the surviving corporation, or (iv) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, the Company shall give to the Outside Director, at the time of
adoption of the plan for liquidation, dissolution, sale, merger, consolidation
or reorganization, either a reasonable time thereafter within which to exercise
the Option, including Shares as to which the Option would not be otherwise
exercisable, prior to the effectiveness of such liquidation, dissolution, sale,
merger, consolidation or reorganization, at the end of which time the Option
shall terminate, or the right to exercise the Option, including Shares as to
which the Option would not be otherwise exercisable (or receive a substitute
option with comparable terms), as to an equivalent number of shares of stock of
the corporation succeeding the Company or acquiring its business by reason of
such liquidation, dissolution, sale, merger, consolidation or reorganization.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
<PAGE>
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
PROVIDED THAT, to the extent necessary and desirable to comply with Rule 16b-3
under the Exchange Act (or any other applicable law or regulation), the Company
shall obtain approval of the stockholders of the Company to Plan amendments to
the extent and in the manner required by such law or regulation.
Notwithstanding the foregoing, the provisions set forth in Section 4 of this
Plan (and any other Sections of this Plan that affect the formula award terms
required to be specified in this Plan by Rule 16b-3) shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall not
affect Options already granted to such Optionee and such Options shall remain
in full force and effect as if this Plan had not been amended or terminated,
unless mutually agreed otherwise between the Optionee and the Board, which
agreement must be in writing and signed by the Optionee and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held
<PAGE>
subsequent to the granting of an Option hereunder. If such stockholder
approval is obtained at a duly held stockholders' meeting, it may be obtained
by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon.
If such stockholder approval is obtained by written consent, it may be
obtained by the written consent of the holders of a majority of the
outstanding shares of the Company. Options may be granted, but not
exercised, before such stockholder approval.
<PAGE>
LJL BIOSYSTEMS, INC.
1998 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
< < Optionee > >
< < OptioneeAddress1 > >
< < OptioneeAddress2 > >
You have been granted an option to purchase Common Stock of LJL
BIOSYSTEMS, INC. (the "COMPANY") as follows:
Date of Grant < < GrantDate > >
Vesting Commencement Date < < VestingStartDate > >
Exercise Price per Share < < ExercisePrice > >
Total Number of Shares Granted 20,000 Shares
Total Exercise Price < < TotalExercisePrice > >
Expiration Date < < ExpirDate > >
Vesting Schedule This Option may be exercised, in whole
or in part, in accordance with the following
schedule: 25% of the total number of Shares
subject to this Option are exercisable on
each of the first, second, third and fourth
anniversaries of the Date of Grant.
Termination Period This Option may be exercised for 90 days
after termination of Optionee's Continuous
Status as a Director, or such longer period
as may be applicable upon death or
Disability of Optionee as provided in the
Plan, but in no event later than the
Expiration Date as provided above.
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1998 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: LJL BIOSYSTEMS, INC.
By:
- ----------------------------- -------------------------------------
Signature
Title:
- ----------------------------- ----------------------------------
Print Name
<PAGE>
LJL BIOSYSTEMS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. The Board of Directors of the Company hereby grants
to the Optionee named in the Notice of Stock Option Grant attached as Part I of
this Agreement (the "OPTIONEE"), an option (the "OPTION") to purchase a number
of Shares, as set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "EXERCISE
PRICE"'), subject to the terms and conditions of the 1998 Directors' Stock
Option Plan (the "PLAN"), which is incorporated herein by reference.
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and the applicable provisions of the Plan and this Nonstatutory Stock
Option Agreement. In the event of Optionee's death, disability or other
termination of Optionee's employment or consulting relationship, the
exercisability of the Option is governed by the applicable provisions of the
Plan and this Nonstatutory Stock Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of
an exercise notice, in the form attached as EXHIBIT A (the "EXERCISE NOTICE"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "EXERCISED SHARES"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date
the Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
<PAGE>
(b) check;
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Nonstatutory Stock
Option Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
federal and California tax consequences relating to this Option under the law
in effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) EXERCISING THE OPTION. Since this Option does not qualify as an
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market
value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option Shares
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. The long-term capital gain will be taxed for federal income tax and
alternative minimum tax purposes as a maximum rate of 28% if the Shares are
held more than one year but less than 18 months after exercise and at 20% if
the Shares are held more than 18 months after exercise.
-2-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan
and Nonstatutory Stock Option Agreement.
LJL BIOSYSTEMS, INC.
By:
- --------------------------------- -----------------------------------
< < Optionee > >
Title:
--------------------------------
-3-
<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for
the undersigned with respect to any amendment or exercise of rights under the
Plan or this Nonstatutory Stock Option Agreement.
-----------------------------------------
Spouse of Optionee
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: LJL BIOSYSTEMS, INC.
Attn: Stock Option Administrator
Subject: NOTICE OF INTENTION TO EXERCISE STOCK OPTION
This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase __________ shares of LJL BIOSYSTEMS,
INC. Common Stock, under and pursuant to the Company's 1998 Directors' Stock
Option Plan and the Nonstatutory Stock Option Agreement dated _______________,
as follows:
Grant Number: ________________________________
Date of Purchase: ________________________________
Number of Shares: ________________________________
Purchase Price: ________________________________
Method of Payment of
Purchase Price: ________________________________
Social Security No.: ________________________________
The shares should be issued as follows:
Name: ______________________________
Address: ______________________________
______________________________
______________________________
Signed: ______________________________
Date: ______________________________
<PAGE>
LJL BIOSYSTEMS, INC.
1998 DIRECTORS' STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
< < Optionee > >
< < OptioneeAddress1 > >
< < OptioneeAddress2 > >
You have been granted an option to purchase Common Stock of LJL
BIOSYSTEMS, INC. (the "COMPANY") as follows:
Date of Grant < < GrantDate > >
Vesting Commencement Date < < VestingStartDate > >
Exercise Price per Share < < ExercisePrice > >
Total Number of Shares Granted 5,000 Shares
Total Exercise Price < < TotalExercisePrice > >
Expiration Date < < ExpirDate > >
Vesting Schedule This Option shall become exercisable in
full on the fourth anniversary of the Date
of Grant.
Termination Period This Option may be exercised for 90 days
after termination of Optionee's Continuous
Status as a Director, or such longer period
as may be applicable upon death or
Disability of Optionee as provided in the
Plan, but in no event later than the
Expiration Date as provided above.
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1998 Directors' Stock Option Plan and the
Nonstatutory Stock Option Agreement, all of which are attached and made a part
of this document.
OPTIONEE: LJL BIOSYSTEMS, INC.
By:
- ---------------------------- -----------------------------------
Signature
Title:
- ---------------------------- --------------------------------
Print Name
<PAGE>
LJL BIOSYSTEMS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. The Board of Directors of the Company hereby grants
to the Optionee named in the Notice of Stock Option Grant attached as Part I of
this Agreement (the "OPTIONEE"), an option (the "OPTION") to purchase a number
of Shares, as set forth in the Notice of Stock Option Grant, at the exercise
price per share set forth in the Notice of Stock Option Grant (the "EXERCISE
PRICE"'), subject to the terms and conditions of the 1998 Directors' Stock
Option Plan (the "PLAN"), which is incorporated herein by reference.
(Capitalized terms not defined herein shall have the meanings ascribed to such
terms in the Plan.) In the event of a conflict between the terms and conditions
of the Plan and the terms and conditions of this Nonstatutory Stock Option
Agreement, the terms and conditions of the Plan shall prevail.
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Stock Option
Grant and the applicable provisions of the Plan and this Nonstatutory Stock
Option Agreement. In the event of Optionee's death, disability or other
termination of Optionee's employment or consulting relationship, the
exercisability of the Option is governed by the applicable provisions of the
Plan and this Nonstatutory Stock Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by delivery of
an exercise notice, in the form attached as EXHIBIT A (the "EXERCISE NOTICE"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "EXERCISED SHARES"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date
the Option is exercised with respect to such Exercised Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash;
<PAGE>
(b) check;
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or the rules
thereunder) and may be exercised during the lifetime of Optionee only by the
Optionee or a transferee permitted by Section 10 of the Plan. The terms of the
Plan and this Nonstatutory Stock Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Stock Option Grant, and may be exercised during such
term only in accordance with the Plan and the terms of this Nonstatutory Stock
Option Agreement.
6. TAX CONSEQUENCES. Set forth below is a brief summary of certain
federal and California tax consequences relating to this Option under the law
in effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) EXERCISING THE OPTION. Since this Option does not qualify as an
incentive stock option under Section 422 of the Code, the Optionee may incur
regular federal and California income tax liability upon exercise. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market
value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price.
(b) DISPOSITION OF SHARES. If the Optionee holds the Option Shares
for more than one year, gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and California income tax
purposes. The long-term capital gain will be taxed for federal income tax and
alternative minimum tax purposes as a maximum rate of 28% if the Shares are
held more than one year but less than 18 months after exercise and at 20% if
the Shares are held more than 18 months after exercise.
-2-
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Nonstatutory Stock Option Agreement.
Optionee has reviewed the Plan and this Nonstatutory Stock Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Nonstatutory Stock Option Agreement and fully understands all
provisions of the Plan and Nonstatutory Stock Option Agreement. Optionee
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan
and Nonstatutory Stock Option Agreement.
LJL BIOSYSTEMS, INC.
By:
- --------------------------------- -------------------------------------
< < Optionee > >
Title:
----------------------------------
-3-
<PAGE>
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Nonstatutory Stock Option Agreement. In
consideration of the Company's granting his or her spouse the right to purchase
Shares as set forth in the Plan and this Nonstatutory Stock Option Agreement,
the undersigned hereby agrees to be irrevocably bound by the terms and
conditions of the Plan and this Nonstatutory Stock Option Agreement and further
agrees that any community property interest shall be similarly bound. The
undersigned hereby appoints the undersigned's spouse as attorney-in-fact for
the undersigned with respect to any amendment or exercise of rights under the
Plan or this Nonstatutory Stock Option Agreement.
-----------------------------------------
Spouse of Optionee
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: LJL BIOSYSTEMS, INC.
Attn: Stock Option Administrator
Subject: NOTICE OF INTENTION TO EXERCISE STOCK OPTION
This is official notice that the undersigned ("OPTIONEE") intends to
exercise Optionee's option to purchase __________ shares of LJL BIOSYSTEMS,
INC. Common Stock, under and pursuant to the Company's 1998 Directors' Stock
Option Plan and the Nonstatutory Stock Option Agreement dated _______________,
as follows:
Grant Number: _______________________________
Date of Purchase: _______________________________
Number of Shares: _______________________________
Purchase Price: _______________________________
Method of Payment of
Purchase Price: _______________________________
Social Security No.: _______________________________
The shares should be issued as follows:
Name: _______________________________
Address: _______________________________
_______________________________
_______________________________
Signed: _______________________________
Date: _______________________________
<PAGE>
LJL BIOSYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1998 Employee Stock Purchase
Plan of LJL BioSystems, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the Common Stock of the Company.
(d) "COMPANY" shall mean LJL BioSystems, Inc., a Delaware
corporation.
(e) "COMPENSATION" shall mean all regular straight time gross
earnings and commissions, and shall not include payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation.
(f) "CONTINUOUS STATUS AS AN EMPLOYEE" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, PROVIDED that such leave is for a period of
not more than 90 days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.
(g) "CONTRIBUTIONS" shall mean all amounts credited to the account of
a participant pursuant to the Plan.
(h) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(i) "EMPLOYEE" shall mean any person, including an Officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
<PAGE>
(j) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "PURCHASE DATE" shall mean the last day of each Purchase Period
of the Plan.
(l) "OFFERING DATE" shall mean the first business day of each
Offering Period of the Plan.
(m) "OFFERING PERIOD" shall mean a period of twenty-four (24) months
commencing on February 1 and August 1 of each year, except for the first
Offering Period as set forth in Section 4(a).
(n) "OFFICER" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(o) "PLAN" shall mean this Employee Stock Purchase Plan.
(p) "PURCHASE PERIOD" shall mean a period of six (6) months within an
Offering Period, except for the first Purchase Period as set forth in Section
4(b).
(q) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. ELIGIBILITY.
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company, or (ii) if such option would permit
his or her rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its Subsidiaries to
accrue at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time.
4. OFFERING PERIODS AND PURCHASE PERIODS.
(a) OFFERING PERIODS. The Plan shall be implemented by a series of
Offering Periods of twenty-four (24) months duration, with new Offering Periods
commencing on or about February 1 and August 1 of each year (or at such other
time or times as may be determined
-2-
<PAGE>
by the Board of Directors). The first Offering Period shall commence on the
beginning of the effective date of the Registration Statement on Form S-1 for
the initial public offering of the Company's Common Stock (the "IPO DATE") and
continue until January 31, 2000. The Plan shall continue until terminated in
accordance with Section 19 hereof. The Board of Directors of the Company shall
have the power to change the duration and/or the frequency of Offering Periods
with respect to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected. Eligible employees may not participate in
more than one Offering Period at a time.
(b) PURCHASE PERIODS. Each Offering Period shall consist of four (4)
consecutive purchase periods of six (6) months duration. The last day of each
Purchase Period shall be the "PURCHASE DATE" for such Purchase Period. A
Purchase Period commencing on February 1 shall end on the next July 31. A
Purchase Period commencing on August 1 shall end on the next January 31. The
first Purchase Period shall commence on the IPO Date and shall end on July 31,
1998. The Board of Directors of the Company shall have the power to change the
duration and/or frequency of Purchase Periods with respect to future purchases
without stockholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Purchase Period to be
affected.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given offering. The
subscription agreement shall set forth the percentage of the participant's
Compensation (which shall be not less than 1% and not more than 20%) to be paid
as Contributions pursuant to the Plan.
(b) Payroll deductions shall commence on the first payroll following
the Offering Date and shall end on the last payroll paid on or prior to the last
Purchase Period of the Offering Period to which the subscription agreement is
applicable, unless sooner terminated by the participant as provided in
Section 10.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
(a) The participant shall elect to have payroll deductions made on
each payday during the Offering Period in an amount not less than one
percent (1%) and not more than twenty percent (20%) of such participant's
Compensation on each such payday. All payroll deductions made by a participant
shall be credited to his or her account under the Plan. A participant may not
make any additional payments into such account.
(b) A participant may discontinue his or her participation in the
Plan as provided in Section 10, or, on one occasion only during the Offering
Period, may decrease the rate of his or her Contributions during the Offering
Period by completing and filing with the Company a new subscription agreement.
The change in rate shall be effective as of the
-3-
<PAGE>
beginning of the next calendar month following the date of filing of the new
subscription agreement, if the agreement is filed at least ten (10) business
days prior to such date and, if not, as of the beginning of the next succeeding
calendar month.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Offering
Period and any other Offering Period ending within the same calendar year equal
$21,250. Payroll deductions shall re-commence at the rate provided in such
participant's subscription Agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10.
7. GRANT OF OPTION.
(a) On the Offering Date of each Offering Period, each eligible
Employee participating in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of shares of the Company's Common Stock
determined by dividing such Employee's Contributions accumulated prior to such
Purchase Date and retained in the participant's account as of the Purchase Date
by the lower of (i) eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date, or (ii) eighty-five
percent (85%) of the fair market value of a share of the Company's Common Stock
on the Purchase Date; PROVIDED, HOWEVER, that the maximum number of shares an
Employee may purchase during each calendar year of an Offering Period shall be
determined at the Offering Date by dividing $25,000 by the fair market value of
a share of the Company's Common Stock on the Offering Date, and PROVIDED FURTHER
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 13. The fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 7(b).
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market value of a
share of the Common Stock of the Company on the Offering Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Purchase Date. The fair market value of the Company's Common Stock on a given
date shall be determined by the Board in its discretion based on the closing
price of the Common Stock for such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market or, if such price is not reported, the mean of the bid
and asked prices per share of the Common Stock as reported by Nasdaq or, in the
event the Common Stock is listed on a stock exchange, the fair market value per
share shall be the closing price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in THE WALL STREET JOURNAL. For purposes of the
Offering Date under the first Offering Period under the Plan, the fair market
value of a share of the Common Stock of the Company shall be the Price to Public
as set forth in the final prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424 under the Securities Act of 1933, as amended.
-4-
<PAGE>
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in paragraph 10, his or her option for the purchase of shares will be
exercised automatically on each Purchase Date of an Offering Period, and the
maximum number of full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account. The shares purchased upon exercise of an option hereunder shall be
deemed to be transferred to the participant on the Purchase Date. During his or
her lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. DELIVERY. As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option. No fractional shares shall be issued. Any cash remaining to
the credit of a participant's account under the Plan after a purchase by him or
her of shares at the termination of each Purchase Period, which is insufficient
to purchase a full share of Common Stock of the Company, shall be carried over
to the next Purchase Period if the Employee continues to participate in the
Plan, or if the Employee does not continue to participate, shall be returned to
said participant. All other monies shall be returned to the participant as soon
as reasonably practicable after the end of the Purchase Period.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time at least
five (5) business days prior to each Purchase Date by giving written notice to
the Company. All of the participant's Contributions credited to his or her
account will be paid to him or her promptly after receipt of his or her notice
of withdrawal and his or her option for the current period will be automatically
terminated, and no further Contributions for the purchase of shares will be made
during the Offering Period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Purchase Date of an Offering Period for any reason,
including retirement or death, the Contributions credited to his or her account
will be returned to him or her or, in the case of his or her death, to the
person or persons entitled thereto under Section 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
Offering Period in which the employee is a participant, he or she will be deemed
to have elected to withdraw from the Plan and the Contributions credited to his
or her account will be returned to him or her and his or her option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. AUTOMATIC WITHDRAWAL. If the fair market value of the shares on each
Purchase Date of an Offering Period other than the last Purchase Date is less
than the fair market value of the shares on the Offering Date for such Offering
Period, then every participant shall
-5-
<PAGE>
automatically (i) be withdrawn from such Offering Period at the close of such
Purchase Date and after the acquisition of shares for such Purchase Period, and
(ii) be enrolled in the Offering Period commencing on the first business day
subsequent to such Purchase Period.
12. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
13. STOCK.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 300,000 post-split
shares, subject to adjustment upon changes in capitalization of the Company as
provided in Section 18. If the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a) on the Offering Date of an
Offering Period exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby and shall similarly
reduce the rate of Contributions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a participant
-6-
<PAGE>
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such participant's death, the Company shall deliver such
shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
shares and/or cash to the spouse or to any one or more dependents or relatives
of the participant, or if no spouse, dependent or relative is known to the
Company, then to such other person as the Company may designate.
16. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 15) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with Section 10.
17. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
18. REPORTS. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following each Purchase Date, which statements will set forth the
amounts of Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) ADJUSTMENT. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but have not
yet been placed under option (collectively, the "Reserves"), as well as the
price per share of Common Stock covered by each option under the Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; PROVIDED,
HOWEVER, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
(b) CORPORATE TRANSACTIONS. In the event of the proposed dissolution
or liquidation of the Company, the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Board. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the
-7-
<PAGE>
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Purchase Date (the "NEW PURCHASE DATE"). If the Board shortens
the Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify each participant
in writing, at least ten (10) days prior to the New Purchase Date, that the
Purchase Date for his or her option has been changed to the New Purchase Date
and that his or her option will be exercised automatically on the New Purchase
Date, unless prior to such date he or she has withdrawn from the Offering Period
as provided in Section 10. For purposes of this paragraph, an option granted
under the Plan shall be deemed to be assumed if, following the sale of assets or
merger, the option confers the right to purchase, for each share of option stock
subject to the option immediately prior to the sale of assets or merger, the
consideration (whether stock, cash or other securities or property) received in
the sale of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); PROVIDED,
HOWEVER, that if such consideration received in the sale of assets or merger was
not solely common stock of the successor corporation or its parent (as defined
in Section 424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time terminate
or amend the Plan. Except as provided in Section 19, no such termination may
affect options previously granted, nor may an amendment make any change in any
option theretofore granted which adversely affects the rights of any
participant. In addition, to the extent necessary to comply with Rule 16b-3
under the Exchange Act or Section 423 of the Code (or any successor rule or
provision or any applicable law or regulation), the Company shall obtain
stockholder approval in such a manner and to such a degree as so required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the
-8-
<PAGE>
Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon
the earlier to occur of its adoption by the Board of Directors or its approval
by the stockholders of the Company. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under Section 20.
24. ADDITIONAL RESTRICTIONS OF RULE 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-9-
<PAGE>
LJL BIOSYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
New Election ______
Change of Election ______
1. I, ________________________, hereby elect to participate in the LJL
Biosystems, Inc. 1998 Employee Stock Purchase Plan (the "PLAN") for the Offering
Period ______________, 19__ to _______________, 19__, and subscribe to purchase
shares of the Company's Common Stock in accordance with this Subscription
Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 10% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on the Purchase
Date of each Offering Period unless I otherwise withdraw from the Plan by giving
written notice to the Company for such purpose.
4. I understand that I may discontinue at any time prior to the Purchase
Date my participation in the Plan as provided in Section 10 of the Plan. I also
understand that I can decrease the rate of my Contributions on one occasion only
during any Offering Period by completing and filing a new Subscription Agreement
with such decrease taking effect as of the beginning of the calendar month
following the date of filing of the new Subscription Agreement, if filed at
least ten (10) business days prior to the beginning of such month. Further, I
may change the rate of deductions for future Offering Periods by filing a new
Subscription Agreement, and any such change will be effective as of the
beginning of the next Offering Period. In addition, I acknowledge that, unless
I discontinue my participation in the Plan as provided in Section 10 of the
Plan, my election will continue to be effective for each successive Offering
Period.
<PAGE>
5. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "LJL Biosystems, Inc. 1998 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
6. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
------------------------------
------------------------------
7. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ------------------------------
(First) (Middle) (Last)
- -------------------- ------------------------------
(Relationship) (Address)
------------------------------
8. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Offering Date (the first day of the
Offering Period during which I purchased such shares) or within 1 year after the
Purchase Date, I will be treated for federal income tax purposes as having
received ordinary compensation income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares on the
Purchase Date over the price which I paid for the shares, regardless of whether
I disposed of the shares at a price less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER
THE DATE OF ANY SUCH DISPOSITION, AND I WILL MAKE ADEQUATE PROVISION FOR
FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON
THE DISPOSITION OF THE COMMON STOCK. The Company may, but will not be obligated
to, withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
9. If I dispose of such shares at any time after expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received compensation income only to the extent of
an amount equal to the lesser of (1) the excess of the fair market value of the
shares at the time of such disposition over the purchase price which I paid for
the shares under the option, or (2) 15% of the fair market value of the
-2-
<PAGE>
shares on the Offering Date. The remainder of the gain or loss, if any,
recognized on such disposition will be treated as capital gain or loss.
I UNDERSTAND THAT THIS TAX SUMMARY IS ONLY A SUMMARY AND IS SUBJECT TO
CHANGE. I further understand that I should consult a tax advisor concerning the
tax implications of the purchase and sale of stock under the Plan.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE:
----------------------
SOCIAL SECURITY #:
--------------
DATE:
---------------------------
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
- ---------------------------------
(Signature)
- ---------------------------------
(Print name)
-3-
<PAGE>
LJL BIOSYSTEMS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I, __________________________, hereby elect to withdraw my participation in
the LJL Biosystems, Inc. 1998 Employee Stock Purchase Plan (the "PLAN") for the
Offering Period _________. This withdrawal covers all Contributions credited to
my account and is effective on the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
The undersigned further understands and agrees that he or she shall be
eligible to participate in succeeding offering periods only by delivering to the
Company a new Subscription Agreement.
Dated:
-------------------- ------------------------------
Signature of Employee
------------------------------
Social Security Number
<PAGE>
EXHIBIT 11.1
COMPUTATION OF PRO FORMA NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Weighted average shares of common stock outstanding.................................. 4,501,000 4,501,000
Add common stock equivalents issued or granted within twelve months of the initial
public offering, pursuant to Staff Accounting Bulletin No. 83:
Options to purchase common stock................................................. 471,000 471,000
Series A mandatorily redeemable preferred stock.................................. 3,622,000 3,622,000
Warrants to purchase Series A mandatorily redeemable preferred stock............. 37,000 37,000
------------ -------------
Shares used to compute pro forma net income (loss) per share......................... 8,631,000 8,631,000
------------ -------------
------------ -------------
Pro forma net income (loss).......................................................... $ 156,000 $ (781,000)
------------ -------------
------------ -------------
Pro forma net income (loss) per share................................................ $ 0.02 $ (0.09)
------------ -------------
------------ -------------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated February 21, 1997, except
as to Note 6 which is as of January , 1998, relating to the financial
statements of LJL BioSystems, Inc., which appears in such Prospectus. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
San Jose California
January , 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF KOLISCH, HARTWELL, DICKINSON, MCCORMACK & HEUSER
[LETTERHEAD OF KOLISCH HARTWELL DICKINSON MCCORMACK & HEUSER]
December 31, 1997
RE: Registration Statement and
Prospectus of LJL BioSystems, Inc.
We consent to the reference to our firm as follows:
Certain legal matters with respect to information contained in this
Prospectus under the captions "Risk Factors--Intellectual Property
Risks" and "Business--Intellectual Property," will be passed upon by
Kolisch, Hartwell, Dickinson, McCormack & Heuser, patent counsel to the
Company.
under the caption "Legal Matters" in the Registration Statement (Form S-1) and
related Prospectus of LJL BioSystems, Inc. for the registration of 2,875,000
shares of its Common Stock.
/s/ PIERRE C. VAN RYSSELBERGHE
------------------------------------------
Pierre C. Van Rysselberghe
Kolisch, Hartwell, Dickinson, McCormack &
Heuser
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 1,166 7,122
<SECURITIES> 0 0
<RECEIVABLES> 448 169
<ALLOWANCES> 51 0
<INVENTORY> 673 137
<CURRENT-ASSETS> 71 49
<PP&E> 643 952
<DEPRECIATION> 492 579
<TOTAL-ASSETS> 2,458 7,850
<CURRENT-LIABILITIES> 2,602 1,382
<BONDS> 0 0
0 8,989
0 0
<COMMON> 5 5
<OTHER-SE> (192) (2,576)
<TOTAL-LIABILITY-AND-EQUITY> 2,458 7,850
<SALES> 5,622 4,233
<TOTAL-REVENUES> 9,285 4,875
<CGS> 2,755 2,035
<TOTAL-COSTS> 9,201 6,002
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5 7
<INCOME-PRETAX> 260 (981)
<INCOME-TAX> 2 12
<INCOME-CONTINUING> 258 (993)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 258 (993)
<EPS-PRIMARY> .02 (.09)
<EPS-DILUTED> 0 0
</TABLE>
