<PAGE>
As filed with the Securities and Exchange Commission on March 28, 2000
Registration No. 333-30758
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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PARADIGM GENETICS, INC.
(Exact name of Registrant as specified in our charter)
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<S> <C> <C>
North Carolina 8731 56-2047837
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number ) Identification Number)
</TABLE>
104 Alexander Drive
Research Triangle Park, North Carolina 27709
(919) 425-3000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
----------------
John A. Ryals, Ph.D.
Chief Executive Officer and President
Paradigm Genetics, Inc.
104 Alexander Drive
Research Triangle Park, North Carolina 27709
(919) 425-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
Jeffrey M. Wiesen, Esq. David W. Pollak, Esq.
Peter S. Lawrence, Esq. Henry P. Nowak, Esq.
Vice President and General Counsel
Stephanie M. Gulkin, Esq.
Mintz, Levin, Cohn,
Ferris, Paradigm Genetics, Inc.
Morgan, Lewis & Bockius
LLP
104 Alexander Drive 101 Park Avenue
Glovsky and Popeo, P.C
Research Triangle Park New York, NY 10178
One Financial Center North Carolina 27709 (212) 309-6000
Boston, MA 02111 (919) 425-3000
(617) 542-6000 ----------------
Approximate date of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), 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, 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
number 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 number of the earlier effective registration statement number for
the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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- ------------------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum Amount of
Title of Securities to be Amount to be Proposed Maximum Aggregate Registration
Registered Registered(1) Price Per Share(2) Offering Price(2) Fee(3)
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share........ 5,750,000 $16.00 $92,000,000 $24,288
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 750,000 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act.
(3) $26,400 was paid in connection with the initial filing on February 18,
2000.
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell securities, and we are not soliciting +
+offers to buy these securities, in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 28, 2000
PROSPECTUS
5,000,000 Shares
[Paradigm Logo Appears Here]
Common Stock
This is an initial public offering of common stock by Paradigm Genetics,
Inc. We are selling 5,000,000 shares of common stock. It is currently estimated
that the initial public offering price will be between $14.00 and $16.00 per
share.
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There is currently no public market for our common stock. We have applied to
list our common stock on the Nasdaq National Market under the symbol PDGM.
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<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Public offering price........................................ $ $
Underwriting discounts....................................... $ $
Proceeds to Paradigm Genetics................................ $ $
</TABLE>
The underwriters may also purchase up to 750,000 additional shares of common
stock from us at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus to cover over-allotments.
Chase Securities Inc. expects to deliver the shares to purchasers on or
about , 2000.
-------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 5.
-------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Chase H&Q
J.P. Morgan & Co.
Pacific Growth Equities, Inc.
Stephens Inc.
, 2000
<PAGE>
[Inside front cover and Gatefold]
[Graphic: Includes graphic depiction summarizing the
steps in our GENEFUNCTION FACTORY. The graphic is titled:
"Our GENEFUNCTION FACTORY(TM). Text underneath the graphic
states: "Our GENEFUNCTION FACTORY(TM) is an assembly-line
process that enables us rapidly to discover genes, alter
genes in plants and other organisms, evaluate the results
of the alterations and determine the function of genes.
We capture information throughout the process in
FUNCTIONFINDER(TM), our computerized system for storing and
analyzing biological information.
Second graphic includes pictures of components of our
FUNCTIONFINDERTM bioinformatics system. The graphic is
entitled "FUNCTIONFINDER(TM)."]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Summary................................................. 1
Risk Factors....................................................... 5
Special Note Regarding Forward-Looking Statements.................. 14
Use of Proceeds.................................................... 15
Dividend Policy.................................................... 15
Capitalization..................................................... 16
Dilution........................................................... 17
Selected Financial Data............................................ 18
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 19
Business........................................................... 23
Management......................................................... 39
Certain Transactions............................................... 49
Principal Stockholders............................................. 51
Description of Capital Stock....................................... 53
Shares Eligible for Future Sale.................................... 56
Underwriting....................................................... 58
Legal Matters...................................................... 61
Experts............................................................ 61
Where You Can Find More Information................................ 61
Index to Financial Statements...................................... F-1
</TABLE>
i
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PROSPECTUS SUMMARY
This summary highlights the most important features of this offering and
the information contained elsewhere in this prospectus. You should read the
entire prospectus carefully, especially the risks of investing in our common
stock discussed under "Risk Factors" beginning on page 5.
Paradigm Genetics, Inc.
Overview
We are industrializing the process of determining gene function by
creating an assembly-line process to generate information that we believe will
enable us to develop novel products in four major sectors of the global
economy: crop production, nutrition, human health and industrial products. We
have developed our GeneFunction Factory to simultaneously study the functions
of many genes in our selected plants and fungi. Our GeneFunction Factory is
designed to be an integrated, rapid, industrial-scale laboratory through which
we can discover and modify genes, understand the consequences of the
modifications and reliably determine the function of those genes. We store and
annotate gene function information in our FunctionFinder bioinformatics system,
which is a computer system that helps us and our partners analyze the large
volumes of complex data generated from our study of genes. We currently have
strategic alliances with Bayer AG in the area of crop production and with The
Monsanto Company in the areas of crop production and nutrition. These alliances
are described in greater detail below.
The Opportunity
In the early 1990s, a worldwide effort began to decipher and make publicly
available the precise sequence of the entire genetic content, or genomes, of
various organisms, including humans, pathogens and agricultural crops. Industry
experts anticipate that researchers will complete the sequencing of the entire
human genome, as well as the genome of the small mustard plant, Arabidopsis, by
the end of the year 2000. However, knowing a gene's sequence does not provide
enough information to determine gene function. In addition, the traditional
process of determining gene function has been slow, labor intensive and
formulaic. Furthermore, new technologies, such as those that measure genes
expression, in the absence of other supporting data, provide insufficient
information to conclude a gene's function.
Our GeneFunction Factory
We believe the most reliable way to determine a gene's precise function is
to study the effects of altered forms of the gene on an organism. The biology
and genetics of certain organisms, which we call model organisms, make them
effective tools for investigating the function of genes of other organisms with
commercial value, which we refer to as target organisms. By applying our
GeneFunction Factory to selected plants and fungi, we and our strategic
partners intend to use the resulting information to develop novel products. By
using our GeneFunction Factory we are able to discover a gene, alter the gene,
measure the consequences of the alteration, determine the function of the gene
and place the resulting large amount of information into our FunctionFinder
bioinformatics system. Our assembly-line approach automates the measurement of
thousands of physical and chemical characteristics of a selected organism at
different times of the organism's life cycle. Our GeneFunction Factory
presently is capable of determining the function of approximately 50 genes per
week, and we believe that it will be able to determine the function of up to
200 genes per week by the end of 2000.
Initially, we are using our GeneFunction Factory to determine the function
of genes in Arabidopsis, rice and six filamentous fungi, which are multi-cell
fungi. Arabidopsis is a useful model organism because it is related to
soybeans, cotton, vegetables and oil seed crops. Rice is an important target
and model organism
1
<PAGE>
because it is one of the world's most important grains, and it is closely
related to corn, wheat, barley, sugarcane, oats and rye. Fungi are useful
target and model organisms for developing potential products in crop
production, nutrition, human health and industrial products. We work with our
model organisms to infer the function of genes in target organisms, when
working directly with the target is not practicable. We have chosen our
particular models because they are relevant to target organisms with commercial
value, are efficient research tools and are amenable to the collection of large
numbers of measurements. We intend to study the function of essentially every
gene in these organisms, and utilize this information to develop novel
products.
Our Strategy
Our goal is to be the leading supplier of gene function information in our
model and target organisms. The key elements of our strategy are to:
. determine the function of genes in our target and model organisms;
. continue to develop our GeneFunction Factory and FunctionFinder
bioinformatics system;
. develop products both with strategic partners and independently;
. focus our development efforts on large market opportunities; and
. pursue intellectual property protection for our GeneFunction Factory and
gene function information.
We will continue to make significant expenditures in excess of our
revenues to pursue our strategy. Through December 31, 1999, we had incurred a
net loss of approximately $10.5 million, and this loss will continue to
increase for the foreseeable future. We may need additional funding to pursue
our strategy and because we are an early stage company and our technology is
unproven, we may not be able to achieve our goals or achieve or maintain
profitability.
Our Strategic Alliances
To date, we have established strategic alliances with Bayer and Monsanto.
The Bayer alliance is focused on the development of new herbicides while the
Monsanto alliance is focused on the development of crop production and
nutrition products. Under these alliances, we have total committed funding of
approximately $56 million and have performance fees, milestone payments and
payments in connection with extension options that could generate as much as an
additional $133 million. We will also earn product development milestones and
sales royalties if products are commercialized from these alliances.
In September 1998, we entered into a three-year collaboration with Bayer
for the development of new chemical herbicides. We will use our GeneFunction
Factory to identify Arabidopsis genes that may be targets for herbicide
discovery and will provide Bayer with assays to screen chemicals for potential
herbicides and access to customized Arabidopsis-based releases of our
FunctionFinder bioinformatics system.
In November 1999, we entered into a six-year strategic alliance with
Monsanto to develop crop production and nutrition products. Monsanto is to
provide us with thousands of gene sequences from Arabidopsis and other
organisms. Using our GeneFunction Factory, we will provide functional analysis
of these genes to Monsanto.
We were incorporated in North Carolina on September 9, 1997. Our directors
and stockholders have approved our plan to reincorporate as a Delaware
corporation, which we intend to complete prior to the completion of this
offering. Our facilities and executive offices are located at 104 Alexander
Drive, Research Triangle Park, North Carolina 27709, and our telephone number
at that address is (919) 425-3000. Our worldwide web address is
www.paragen.com. The information on our web site is not incorporated by
reference into this prospectus.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Common Stock offered by Paradigm Genetics........... 5,000,000 shares
Common Stock to be outstanding after this offering.. 23,911,254 shares
Use of proceeds..................................... Research and development, plant and
equipment and general corporate
purposes, including possible
acquisition of or investment in
complementary businesses, products
or technologies. For a more detailed
discussion of our anticipated use of
proceeds from this offering, see
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. PDGM
</TABLE>
The above information is based on the number of shares outstanding as of
March 27, 2000 and excludes:
. 1,537,760 shares of common stock issuable upon the exercise of stock
options at a weighted average exercise price of $2.55 per share; and
. 763,779 shares of common stock underlying warrants at a weighted
average exercise price of $1.77 per share.
------------------
Unless otherwise indicated, all information contained in this prospectus:
. assumes that the underwriters do not exercise their over-allotment
option; and
. reflects the mandatory conversion of all of our outstanding shares of
Series A and Series B Preferred Stock into a total of 10,353,198 shares
of common stock upon completion of this offering.
The number of shares of common stock to be outstanding after this offering
reflects the mandatory conversion of 3,000,000 shares of our Series C Preferred
Stock, which were sold in January 2000.
3
<PAGE>
Summary Financial Data
The following statement of operations data for the period from inception
(September 9, 1997) through December 31, 1997 and for the years ended December
31, 1998 and 1999 have been derived from our financial statements and the notes
to those financial statements that are included elsewhere in this prospectus.
The summary balance sheet data as of December 31, 1999 are presented (1) on an
actual basis, (2) on a pro forma basis to reflect the mandatory conversion of
all of our outstanding preferred stock at December 31, 1999 into a total of
10,353,198 shares of common stock upon completion of this offering; and (3) on
a pro forma as adjusted basis to reflect the receipt of estimated proceeds from
our sale of 5,000,000 shares of common stock in this offering at an assumed
initial public offering price of $15.00 per share, after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us.
For a more detailed explanation of the financial data, see "Selected
Financial Data" on page 18, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" beginning on page 19 and our financial
statements and the notes to those financial statements beginning on page F-1 of
this prospectus.
<TABLE>
<CAPTION>
Period From
Inception
(September 9, Years Ended December
1997) to 31,
December 31, -----------------------
1997 1998 1999
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(in thousands, except per share
data)
<S> <C> <C> <C>
Statements of Operations Data:
Collaborative research agreements and
grant revenues....................... $ -- $ 871 $ 2,197
Total operating expenses.............. 220 5,171 12,308
Net loss.............................. (220) (4,290) (10,487)
Net loss per share--basic and
diluted.............................. $ (0.19) $ (1.14) $ (2.48)
Weighted average common shares
outstanding--basic and diluted....... 1,160,958 3,750,036 4,236,409
Pro forma net loss per share--basic
and diluted.......................... $ (0.75)
Pro forma weighted average common
shares outstanding--basic and
diluted.............................. 14,046,759
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(unaudited) (unaudited)
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments............................... $ 3,956 $ 3,956 $ 72,706
Working capital............................ (3,635) (3,635) 65,115
Total assets............................... 14,225 14,225 82,975
Long-term debt, less current portion....... 8,047 8,047 8,047
Preferred stock............................ 11,919 -- --
Accumulated deficit........................ (15,029) (15,029) (15,029)
Total stockholders' equity (deficit) ...... (2,827) (2,827) 65,923
</TABLE>
The pro forma and pro forma as adjusted balance sheet data do not reflect
our receipt of proceeds of approximately $15.0 million, or $5.00 per share,
from the sale of 3,000,000 shares of our Series C Preferred Stock in January
2000. If this amount had been included, our total assets would have been
approximately $98.0 million and our total stockholders' equity would have been
approximately $80.9 million.
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially harm our business, operating results and
financial condition and could result in a complete loss of your investment.
Risks Related to our Business
We have a history of net losses. We expect to continue to incur net losses, and
we may not achieve or maintain profitability.
We have incurred net losses in each year since our inception and expect
these losses to continue. We experienced a net loss of approximately $10.5
million for the year ended December 31, 1999. As of December 31, 1999, we had
an accumulated deficit of approximately $15.0 million. To date, all of our
revenues have been derived from only two strategic alliances and a government
grant. We expect to derive revenue in the foreseeable future principally from
strategic alliances. Revenues from strategic alliances and grants are uncertain
and we may not be able to secure future grants and revenues from strategic
alliances. We expect to spend a significant amount of capital to fund research
and development and enhance our core technologies, including our GeneFunction
Factory. As a result, we expect that our operating expenses will increase
significantly in the near term and, consequently, we will need to generate
significant additional revenues to become profitable. Even if we do become
profitable, we may not be able to sustain or increase profitability on a
quarterly or annual basis. We cannot predict when, if ever, we will be
profitable.
We are an early stage company using unproven technologies and, as a result, we
may never achieve, or be able to maintain, profitability.
You should evaluate us in light of the uncertainties affecting an early
stage biotechnology company. Our GeneFunction Factory is still in the early
stages of development. Our technology is largely based on the premise that we
and our collaborators can use knowledge regarding the function of genes in our
selected model organisms to determine the function of genes in commercially
significant target organisms and that this information may result in commercial
products. We have not yet proven that determining the function of a gene in
commercially significant target organisms will necessarily result in commercial
products. Also, we have no experience in using the genes or gene functions we
identify in our GeneFunction Factory to develop our own proprietary products.
If we are unable to maintain our existing strategic alliances or find new
strategic partners, we may not be able to develop or commercialize our
technologies into products.
Since we do not currently possess the resources necessary to develop and
commercialize potential products ourselves, we must enter into strategic
alliances to develop and commercialize products. We have entered into only two
strategic alliances, with Bayer and Monsanto, to fund the development of
certain new products, including herbicides and plants with improved nutritional
and growth characteristics. Substantially all of our revenues to date have been
derived from these two collaborative research and development agreements.
Revenues from research and development strategic alliances depend upon
continuation of the strategic alliances, the achievement of milestones and the
receipt of royalties derived from future products developed from our research.
If we are unable to successfully achieve milestones or our strategic partners
fail to develop successful products, we will not earn the revenues contemplated
under such collaborative agreements. In addition, we may not be able to enter
into additional strategic alliances. Further, any of our existing or potential
strategic alliances may not be successful.
We have limited or no control over the resources that any strategic
partners may devote to our products. Any of our present or future strategic
partners may not perform their obligations as expected. If this occurs, we may
not be able to commercialize our products.
5
<PAGE>
If we have conflicts with our strategic partners in connection with the
proprietary research programs that we intend to conduct, this could harm our
product development efforts.
Our strategic collaborations are limited both by duration and the fields
they cover, which we have negotiated to give us flexibility to pursue our own
proprietary research programs. However, because the type of research and the
fields covered by our existing strategic collaborations and our potential
propietary research programs are similar, we may pursue opportunities in fields
that conflict with our strategic partners or in which our strategic partners
could become active competitors. Any conflict with our strategic partners could
reduce our ability to expand existing, or enter into additional, strategic
alliances and negatively impact our relationship with existing strategic
partners, which could harm our product development efforts.
If we do not develop commercially successful products, we may incur additional
losses.
We may not be successful in the commercial development of our products.
Significant research and development, financial resources and personnel will be
required to advance our technologies, develop commercially viable products and
obtain regulatory approvals. Initially, we intend to rely on our strategic
partners to develop and commercialize products based upon our research and
operations. We have no experience in manufacturing and marketing products, and
we currently do not have the resources or capability to manufacture products on
a commercial scale. In order for us to commercialize our products directly, we
would need to develop, or obtain through outsourcing arrangements or through
acquisitions, the capability to manufacture, market and sell products. We do
not have these capabilities and we may not be able to develop or otherwise
obtain the necessary manufacturing, marketing and sales capabilities.
We may need additional financing, which may not be available, and any
financings may dilute the percentage ownership of our existing stockholders,
cause us to relinquish rights to our technologies or cause us to grant licenses
on unfavorable terms.
Our existing capital resources may not be sufficient to fund our future
operating plans and we may therefore need to raise significant additional
capital. We have expended significant resources in developing our GeneFunction
Factory and expect our capital expenditures and operating expenses to increase
over the next several years as we continue developing the GeneFunction Factory
and increase our research and development activities. The amount of additional
capital which we expect we will need to raise will depend on many factors,
including:
. the number, breadth and progress of our research programs;
. the achievement of the milestones under certain of our existing
strategic alliances;
. our ability to establish additional and maintain current and
additional strategic alliances;
. our strategic partners' success in commercializing products developed
under our strategic alliances;
. our success in commercializing products to which we have retained the
rights under our strategic alliances;
. the costs incurred in enforcing and defending our patent claims and
other intellectual property rights; and
. the costs and timing of obtaining regulatory approvals for any of our
products.
We may need to raise additional capital through public or private equity
offerings, debt financings or additional strategic alliances and licensing
arrangements. We may not be able to find additional financing when we need it
or on terms favorable to our stockholders or us. If we raise additional capital
by issuing equity securities, such an issuance will reduce the percentage
ownership of existing stockholders. Furthermore, it may be necessary for us to
issue securities that have rights, preferences and privileges senior
6
<PAGE>
to our common stock. If we raise additional funds through strategic alliances
and licensing arrangements, we may be required to relinquish rights to certain
of our technologies or product candidates, or to grant licenses on unfavorable
terms.
We may choose to raise additional capital due to market conditions or
strategic considerations even if we have sufficient funds to carry out our
operations.
Since our technologies have many potential applications and we have limited
resources, we might focus our limited resources on areas that are less
profitable than other areas on which we might have focused our resources.
We have limited financial and managerial resources. Because our
technologies, identified genes and identified gene functions potentially have
applications across numerous and diverse industries, we are required to apply
our resources to selective efforts. This requires us to focus on product
candidates in specific industries and forego opportunities with regard to other
products and industries. For example, depending on our ability to allocate
resources, a decision to concentrate on a particular agricultural program may
mean that we will not have resources available to apply the same technology to
a human health project. While our technologies may permit us to work in both
areas, resource commitments may require trade-offs resulting in delays in the
development of, or the failure to develop, certain programs or research areas,
which may make it difficult for us to compete effectively.
Risks Related to our Industry
If stringent laws are enacted that regulate genetically modified agricultural
products, demand for any products that we or our collaborators may develop may
decrease.
As part of our business strategy, we may develop genetically modified
agricultural products. The field-testing, production and marketing of
genetically modified plants and plant products are subject to federal, state,
local and foreign governmental regulation. Regulatory agencies administering
existing or future regulations or legislation may not allow us to produce and
market genetically modified products in a timely manner or under technically or
commercially feasible conditions. In addition, regulatory action or private
litigation could result in expenses, delays or other impediments to our product
development programs or the potential commercialization of resulting products.
Although the Food and Drug Administration has announced in a policy
statement that it will apply the same regulatory standards to foods developed
through genetic modification as applied to foods developed through traditional
plant breeding, genetically modified food products will be subject to FDA
premarket review if these products raise safety questions or are deemed to be
food additives. Our products may be subject to lengthy FDA reviews and
unfavorable FDA determinations if they raise questions or are deemed to be food
additives.
The FDA has also announced in a policy statement that it will not require
that genetically modified agricultural products be labeled as such, provided
that these products are as safe and have the same nutritional characteristics
as conventionally developed products. The FDA may reconsider or change its
policies or local or state authorities may enact labeling requirements, any of
which could cause the demand for our products to decrease.
The United States Department of Agriculture prohibits genetically modified
plants from being grown and transported except pursuant to an exemption, or
under special controls. In general, companies apply for an exemption to
facilitate product development because the special controls are burdensome. The
products we develop might not qualify for such a USDA exemption.
7
<PAGE>
If adverse public or government reaction limits the acceptance of genetically
modified products, demand for any products that we or our collaborators may
develop may decrease.
The commercial success of our product candidates will depend in part on
public acceptance of the use of genetically modified products, including drugs,
plants and plant products. Public attitudes may be influenced by claims that
genetically modified products are unsafe for consumption or pose a danger to
the environment. Any genetically modified products that our collaborators or we
may develop may not gain public acceptance. Due to public reaction in both the
United States and Europe, some food manufacturers and restaurants have already
decided not to sell food that has been genetically altered. If this continues
or increases, this could cause a decrease in demand for products that we or our
collaborators may develop.
The subject of genetically modified products has received negative
publicity, which has aroused public debate. The adverse publicity could lead to
greater regulation and trade restrictions on imports and exports of genetically
modified products, including products that we or our collaborators may develop.
Also, genetic research and resultant products could be subject to greater
domestic regulation and could cause a decrease in the demand for our products.
Trade restrictions and greater regulation of genetically modified products or
genetic research could cause our revenues to decline.
Any products that we or our collaborators develop using the gene function
information we provide may be subject to a lengthy and uncertain government
regulatory process that may not result in the necessary approvals, may delay
the commercialization of these products or may be costly, any of which could
reduce our revenues.
Any new product that we or our strategic partners develop will likely
undergo extensive regulatory review process in the United States by the FDA and
the USDA and by regulators in other countries before it can be marketed or
sold. For example, in the United States, the FDA must approve any drug or
biologic product before it can be marketed in the U.S. This regulatory review
process can take many years and require substantial expense. Changes in the
policies of U.S. and foreign regulatory bodies can increase the time required
to obtain regulatory approval for each new product.
Our efforts to date have been primarily limited to identifying targets.
Significant research and development efforts will be necessary before any
products resulting from such targets can be commercialized. If regulatory
approval is granted for any of our products, this approval may impose
limitations on the uses for which a product may be marketed. Further, once
regulatory approval is obtained, a marketed product and its manufacturer are
subject to continual review, and discovery of previously unknown problems with
a product or manufacturer may result in restrictions and sanctions with respect
to the product, manufacturer and relevant manufacturing facility, including
withdrawal of the product from the market.
If we lose our key personnel or are unable to attract and retain additional
personnel, our operations could be disrupted and our revenues could decrease.
Our success depends on the continued services and on the performance of
our senior management and scientific staff, in particular John Ryals, Ph.D.,
our Chief Executive Officer and President. The loss of the services of Dr.
Ryals or any of our other senior management or scientific staff could seriously
impair our ability to operate and achieve our objectives, which could reduce
our revenues. We have $2 million of key man life insurance on Dr. Ryals. This
amount may not be sufficient to compensate us for the loss of his services. In
addition, recruiting and retaining qualified scientific personnel to perform
future research and development work will be critical to our success.
In order to achieve our business objectives, we must identify, attract,
train and motivate additional personnel with expertise in specific industries
and areas applicable to the products developed through our technologies. We
compete intensely for these personnel and we may be unable to achieve our
personnel goals. Our failure to achieve any of these goals could seriously
limit our ability to improve our operations and financial results.
8
<PAGE>
If we were successfully sued for product liability, we could face substantial
liabilities that exceed our resources.
We may be held liable if any product we develop, or any product which is
made using our technologies, causes injury or is found unsuitable during
product testing, manufacturing, marketing or sale. For example, a genetically
modified food could, after it is sold, be found to cause illness in individuals
who eat the food. Also, like other pharmaceutical products, those produced
through genetically modified plants could be found to cause illness. These
risks are inherent in the development of chemical, agricultural and
pharmaceutical products. We currently do not have product liability insurance.
If we choose to obtain product liability insurance but cannot obtain sufficient
insurance coverage at an acceptable cost or otherwise protect against potential
product liability claims, the commercialization of products that we or our
strategic partners develop may be prevented or inhibited. If we are sued for
any injury caused by our products, our liability could exceed our total assets.
If we do not compete effectively, our losses could increase.
Our technology platform for the industrialization of gene function
determination faces competition from functional genomics technologies, which
are computer hardware and software technologies that researchers use to help
them identify the role that specific genes play within organisms, created by
others, including Exelixis, Inc., CuraGen Corporation, Rosetta Inpharmatics,
Inc. and Large Scale Biology Corporation (formerly known as Biosource
Technologies, Inc.). We expect competition to intensify in genomics research as
technology advances are made and become widely known. Genomic technologies have
undergone and are expected to continue to undergo rapid and significant change.
Our future success will depend in large part on maintaining a competitive
position in the genomics field, and particularly in the functional genomics
field. We or others may make rapid technological developments which may result
in products or technologies becoming obsolete before we recover the expenses we
incur in connection with our development. We or our strategic partners may
offer products which could be made obsolete by less expensive or more effective
crop enhancement, nutrition enhancement, drug discovery and industrial product
development technologies, including technologies that may be unrelated to
genomics. We may not be able to enhance our technology in ways necessary to
compete successfully with newly emerging technologies.
Any products that we may develop alone or in collaboration with others
will compete in highly competitive markets. In the specific markets in which we
apply or intend to apply our technology platform, we face competition from
plant genomics, pharmaceutical, agrochemical and biotechnology companies. Many
of our existing and potential competitors have substantially greater financial
resources, research and development staffs, facilities, manufacturing and
marketing experience, distribution channels and human resources than we do.
Many of these competitors have achieved substantial market penetration in the
crop production, nutrition, human health and industrial products markets.
Our ability to compete in the human health market and the industrial
products markets may be limited by our exclusive use of plant and fungal model
organisms. We believe that our ability to compete in the human health market
may depend on the degree to which information we develop on plant and fungal
gene and pathway functions may relate to human physiology. Competing companies
who use model organisms with greater similarities to human genes, such as mice,
as well as companies that do direct studies of human populations, may have a
substantial advantage in developing products for humans.
If we are not able to adequately protect our proprietary technologies, we may
not remain competitive.
Our business and competitive position will depend in part on our ability
to obtain patents and maintain adequate protection of our other intellectual
property for our technologies and products in the United States and other
countries. As of March 27, 2000, we had 31 patent applications pending covering
our technology with the United States Patent and Trademark Office. We hold no
issued patents and we may
9
<PAGE>
never receive patents on our applications in the U.S. or other countries. The
laws of some foreign countries do not protect proprietary rights to the same
extent as the laws of the United States, and many companies have encountered
significant problems in protecting their proprietary rights in these foreign
countries. These problems can be caused by, for example, a lack of rules and
methods for defending intellectual property rights.
The patent positions of biopharmaceutical and biotechnology companies,
including our patent position, are generally uncertain and involve complex
legal and factual questions. Patent law relating to the scope of claiming the
technology field in which we operate is still evolving. We will be able to
protect our proprietary rights from unauthorized use by third parties only to
the extent that our proprietary technologies are covered by valid and
enforceable patents or are effectively maintained as trade secrets. We will
apply for patents covering both our technologies and products, as we deem
appropriate. However, these applications may be challenged and may not result
in issued patents. Any future patents we obtain may not be sufficiently broad
to prevent others from practicing our technologies or from developing competing
products. Furthermore, others may independently develop similar or alternative
technologies or design around our patented technologies. In addition, our
patents may be challenged, invalidated or fail to provide us with any
competitive advantages.
We rely upon trade secret protection for our confidential and proprietary
information. We have taken security measures to protect our proprietary
information. These measures may not provide adequate protection for our trade
secrets or other proprietary information. Even though we seek to protect our
proprietary information by entering into confidentiality agreements with
employees, strategic partners and consultants, our proprietary information
might still be disclosed and we might not be able to meaningfully protect our
trade secrets. In addition, others may independently develop substantially
equivalent proprietary information or techniques or otherwise gain access to
our trade secrets.
If third parties make or file claims of intellectual property infringement
against us or otherwise seek to establish their intellectual property rights,
we may have to spend time and money in response and shut down some of our
operations.
Third parties have filed, and in the future are likely to file, patent
applications covering genes, gene function or technology upon which our
technology platform depends and on which we may wish to file. If these patent
applications result in issued patents and we wish to use the claimed
technology, we would need to obtain a license from the third party.
Third parties may assert that we are employing their proprietary
technology without authorization. In addition, third parties may obtain patents
in the future and claim that use of our technologies infringes these patents.
We could incur substantial costs and diversion of management and technical
personnel in defending ourselves against any of these claims or enforcing our
patents against others. Furthermore, parties making claims against us may be
able to obtain injunctive or other equitable relief which could effectively
block our ability to further develop, commercialize and sell products, and
could result in the award of substantial damages against us. In the event of a
successful claim of infringement, we may be required to pay damages and obtain
one or more licenses from third parties. We may not be able to obtain these
licenses at a reasonable cost, if at all. Defense of any lawsuit or failure to
obtain any of these licenses could prevent us from commercializing available
products.
Because we may not be able to receive appropriate patents or licenses, we may
not be able to successfully operate our business.
Our patent applications covering methods of preparing gene expression
profiles of an organism, for example, do not cover all techniques for gene
expression profiling. Similarly, our patent applications covering methods for
production of gene knock-out libraries do not cover all techniques for making
organisms with such genetic modifications. Gene knock-out libraries are
collections of seeds or cultures where each member of the collection is an
organism where a known gene has been turned off by altering the genetic
material of
10
<PAGE>
the organism. In addition, our patent applications, if they are granted, may
not protect against the use or importation of gene-based products identified or
manufactured using our technology. For example, other parties could have
blocking patent rights to products made using our technology because of a
proprietary position covering a gene that we have developed, or they could have
blocking rights to our bioinformatics or data mining technologies.
We will seek to obtain licenses to such patents when, in our judgment,
such licenses are needed. If any licenses are required, however, we might not
be able to obtain any such license on commercially favorable terms, if at all,
and if these licenses are not obtained, we might be prevented from using
certain of its technologies or taking certain products to market. Our failure
to obtain a license to any technology or product that may be required may
prevent us from commercializing product candidates. There also can be no
assurances that our core technologies and/or activities taken in the course of
developing or selling our products will not infringe such patents. In general,
our patent protection may not prevent others from developing competitive
products using our technology or other technologies. Similarly, others may
obtain patents that could limit our ability to use, import, manufacture, market
or sell products or impair our competitive position.
Risks Related to this Offering
Our management will have broad discretion as to the use of proceeds from this
offering and may spend the proceeds in ways with which you may not agree.
Our management will have broad discretion over the use of proceeds from
this offering. We currently intend to use the proceeds of this offering for
research and development and general corporate purposes. Our management may
allocate the net proceeds among these purposes as it determines is necessary.
In addition, market factors may require our management to allocate all or
portions of the net proceeds for other purposes. Management may not use the
proceeds in a manner in which you approve. Accordingly, you will be relying on
the judgment of our management with regard to the use of proceeds from this
offering.
Our stock price may be extremely volatile and you may not be able to resell
your shares at or above the initial public offering price.
Prior to this offering, there has been no public market for shares of our
common stock. An active trading market may not develop following completion of
this offering, or if developed, may not be maintained. The initial public
offering price for the shares will be determined by negotiations between us and
representatives of the underwriters. This price may not be indicative of prices
that will prevail later in the market. The stock market has experienced
significant price and volume fluctuations, and the market prices of technology
companies, particularly life science companies, have been highly volatile. You
may not be able to resell your shares at or above the initial public offering
price.
If our results of operations fluctuate and quarterly results are lower than the
expectations of securities analysts, then the price of our common stock could
fall.
Our operating results historically have fluctuated on a quarterly basis
and are likely to continue to do so in the future. These fluctuations could
cause our stock price to fluctuate significantly or decline. Some of the
factors, which could cause our operating results to fluctuate, include:
. expiration of research contracts with strategic partners, which may
not be renewed or replaced;
. the success rate of our discovery efforts leading to milestones and
royalties;
. the timing and willingness of strategic partners to commercialize our
products which would result in royalties; and
. general and industry specific economic conditions, which may affect
our strategic partners' research and development expenditures.
11
<PAGE>
A large portion of our expenses, including expenses for facilities,
equipment and personnel are relatively fixed. Accordingly, if revenues decline
or do not grow as anticipated due to expiration of research contracts or
government research grants, failure to obtain new contracts or other factors,
we may not be able to correspondingly reduce our operating expenses. In
addition, we plan to significantly increase operating expenses in 2000. Failure
to achieve anticipated levels of revenues could therefore significantly harm
our operating results for a particular fiscal period.
Our operating results in some quarters may not meet the expectations of
stock market analysts and investors. In that case, our stock price would likely
decline.
We may face a financial liability arising out of a possible violation of the
Securities Act of 1933 in connection with e-mails sent to all of our employees
regarding participation in our directed share program.
As part of our initial public offering, we and the underwriters have
determined to make available up to 500,000 shares of our common stock at the
initial public offering price for directors, employees, business associates and
related persons associated with us. On February 28 and March 13, 2000, we sent
e-mail messages with respect to the proposed directed share program to all of
our employees setting forth procedural aspects for participating in the
directed share program and informing them about the administration of the
program and that their friends and families might have an opportunity to
participate in the proposed program. No person who received either e-mail
should rely on it in any manner in making a decision whether to purchase shares
of our common stock in this offering. We did not deliver a preliminary
prospectus prior to distribution of the e-mails, and each e-mail may constitute
a non-conforming prospectus under the Securities Act of 1933. As a result, we
may have a contingent liability under the Securities Act of 1933. Any liability
would depend upon the number of shares of our common stock purchased by the
recipients of the e-mails. The recipients of the e-mails who purchase shares of
our common stock in this offering may have a right for a period of one year
from the date of the purchase to obtain recovery of the consideration paid in
connection with their purchase of shares of our common stock or, if they had
already sold the stock, sue us for damages resulting from their purchase of
shares of our common stock. If any liability is asserted with respect to either
e-mail, we will vigorously contest the matter. However, if all of the
purchasers in the directed share program who received the e-mails are awarded
damages after an entire or substantial loss of their investment, the damages
could total up to approximately $4.5 million plus interest based on an assumed
initial public offering price of $15.00 per share and based on the Company's
intention to allocate up to 300,000 of the potential 500,000 shares to such
persons. Although the Company does not intend to allocate more than 300,000
shares to employees who received the e-mails, or their friends and families, if
a violation of the Securities Act were deemed to apply to the entire allocation
of 500,000 shares in the directed share program, our damages could total up to
approximately $7.5 million plus interest based on an assumed initial public
offering price of $15.00 per share. If this occurs, our financial condition
would be adversely affected.
If our stockholders sell substantial amounts of our common stock after this
offering, the market price of our common stock may fall.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be 23,911,254 shares of common stock
outstanding immediately after this offering, or 24,661,254 shares if the
underwriters exercise their over-allotment option in full. All of the shares
sold in this offering will be freely transferable without restriction or
further registration under the Securities Act, except for any shares purchased
by our "affiliates," as defined in Rule 144 of the Securities Act, and except
for any shares that are subject to 180-day lock-up agreements providing that
the stockholders will not offer, sell, pledge or otherwise dispose of their
shares for a period of 180 days after this date of this prospectus without the
prior written consent of Chase Securities Inc. The remaining shares of
12
<PAGE>
common stock outstanding will be "restricted securities" as defined in Rule
144. These shares may be sold in the future without registration under the
Securities Act to the extent permitted by Rule 144 or other exemptions under
the Securities Act. See "Shares Eligible for Future Sale."
Anti-takeover provisions of Delaware law and our charter could make a third-
party acquisition of us difficult.
Our board of directors and our stockholders have approved our plan to
reincorporate as a Delaware corporation, which we intend to complete prior to
the completion of this offering. The anti-takeover provisions of Delaware law
could make it more difficult for a third party to acquire control of us, even
if the change in control would be beneficial to stockholders. We will be
subject to the provisions of Section 203 of the General Corporation Law of
Delaware. Section 203 will prohibit us from engaging in certain business
combinations, unless the business combination is approved in a prescribed
manner. Accordingly, Section 203 may discourage, delay or prevent someone from
acquiring or merging with us. In addition, upon completion of this offering,
our restated certificate of incorporation and by-laws will contain certain
provisions that may make a third party acquisition of us difficult, including:
. a classified board of directors, with three classes of directors each
serving a staggered three-year term;
. the ability of the board of directors to issue preferred stock; and
. the inability of our stockholders to call a special meeting or act by
written consent.
Some of our existing stockholders can exert control over us, and may not make
decisions that are in the best interests of all stockholders.
After this offering, our officers, directors and stockholders who
beneficially own more than five percent of our common stock will together
control 17,173,448, or approximately 65.7%, of our outstanding common stock. As
a result, these stockholders, if they act together, will be able to exert a
significant degree of influence over our management and affairs and over
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. In addition, this concentration
of ownership may delay or prevent a change in control of us and might affect
the market price of our common stock, even when a change may be in the best
interests of all stockholders. In addition, the interests of this concentration
of ownership may not always coincide with our interests or the interests of
other stockholders and accordingly, they could cause us to enter into
transactions or agreements, which we would not otherwise consider.
Future issuances of preferred stock may dilute the rights of our common
stockholders.
Our board of directors will have the authority to issue up to 5,000,000
shares of preferred stock and to determine the price, rights, privileges and
other terms of these shares. The board of directors may exercise this authority
without the approval of the stockholders. The rights of the holders of any
preferred stock that we may issue in the future may adversely affect the rights
of holders of our common stock.
You will experience immediate dilution in the book value per share of the
common stock you purchase.
The assumed initial public offering price is substantially higher than the
book value per share of our common stock. Investors purchasing common stock in
this offering will, therefore, incur immediate dilution of $11.57 in net
tangible book value per share of common stock, based on an assumed initial
public offering price of $15.00 per share. Investors will incur additional
dilution based on the exercise of outstanding stock options and warrants.
13
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this prospectus are forward-looking
statements concerning our operations, economic performance and financial
condition. Forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, are included, for example, in
the discussions about:
. our strategy;
. sufficiency of our cash resources;
. revenues from existing and new strategic alliances;
. product development;
. our research and development and other expenses; and
. our operational and legal risks.
These statements involve risks and uncertainties. Actual results may
differ materially from those expressed or implied in those statements. Factors
that could cause these differences include, but are not limited to, those
discussed under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
------------------
"Paradigm Genetics", the Paradigm Genetics logo and FunctionFinder are
trademarks of Paradigm Genetics, Inc. The Company has filed a trademark
application for GeneFunction Factory. Other trademarks and trade names
appearing in this prospectus are the property of their holders.
14
<PAGE>
USE OF PROCEEDS
The net proceeds that we will receive from our sale of shares of common
stock in this offering are estimated to be approximately $68.8 million, after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by us and assuming an initial public offering price of $15.00
per share. If the underwriters exercise their over-allotment option in full, we
estimate the net proceeds from this offering will be approximately $79.2
million. We intend to use the net proceeds of this offering for the following
purposes:
. approximately 45% for research and development;
. approximately 35% for acquisitions of plant and equipment;
. approximately 10% for the development of our physical infrastructure;
and
. approximately 10% for general corporate purposes, including the
possible acquisition of or investment in complementary businesses,
products or technologies.
At the present time, we have no understandings, commitments or agreements with
respect to any material acquisition. Pending the use of the net proceeds of
this offering for the purposes described above, we intend to invest these
proceeds in short-term, interest-bearing, investment-grade securities.
The foregoing information is based on current expectations, and we may
allocate the net proceeds among these purposes as we deem necessary or
appropriate. The amounts and timing of our actual expenditures will depend upon
numerous factors, including the time actually required to reach profitability,
the status of our product development efforts, the success of our strategic
alliances, the amount of proceeds actually raised in this offering, the amount
of cash generated by our operations and competition. In addition, these and
other market factors, some of which are not yet known, may require us to
allocate portions of the net proceeds for purposes other than those described
above. See "Risk Factors--Risks Related to This Offering--Our management will
have broad discretion as to the use of proceeds from this offering and may
spend the proceeds in ways with which you may not agree" on page 11.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable
future.
Our loan security agreement with Transamerica Business Credit Corporation
prohibits the payment of any cash dividends to any of our stockholders,
warrantholders or optionholders until we have paid in full all amounts under
the terms of the agreement. See note 7 of our financial statements.
15
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of December
31, 1999 (1) on an actual basis; (2) on a pro forma basis to reflect the
mandatory conversion of all of our outstanding preferred stock at December 31,
1999 into a total of 10,353,198 shares of common stock upon the completion of
this offering; and (3) on a pro forma as adjusted basis to reflect the receipt
of the estimated proceeds from our sale of 5,000,000 shares of common stock in
this offering at an assumed initial public offering price of $15.00 per share,
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us. This information should be read in conjunction
with our financial statements and the notes to those financial statements
beginning on page F-1 of this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- ----------- -----------
(unaudited) (unaudited)
(in thousands, except
share data)
<S> <C> <C> <C> <C>
Long-term debt, less current portion..... $ 8,047 $ 8,047 $ 8,047
Stockholders' equity (deficit):
Series A Preferred Stock, $0.01 par
value; 8,000,000 shares designated,
7,562,500 shares issued and
outstanding, actual; no shares issued
or outstanding, pro forma and pro forma
as adjusted............................ 5,951 -- --
Series B Preferred Stock, $0.01 par
value; 2,790,698 shares designated,
2,790,698 shares issued and
outstanding, actual; no shares issued
or outstanding, pro forma and pro forma
as adjusted............................ 5,968 -- --
Common stock, $0.01 par value;
30,000,000 shares authorized; 5,224,257
shares issued and outstanding, actual;
18,577,455 shares issued and
outstanding, pro forma; and 23,577,455
shares issued and outstanding, pro
forma as adjusted...................... 52 156 206
Additional paid-in capital.............. 2,510 14,325 83,025
Deferred compensation................... (2,279) (2,279) (2,279)
Accumulated deficit..................... (15,029) (15,029) (15,029)
-------- -------- --------
Total stockholders' equity
(deficit)........................... (2,827) (2,827) 65,923
-------- -------- --------
Total capitalization............... $ 5,220 $ 5,220 73,970
======== ======== ========
</TABLE>
The pro forma amounts above do not include the effect on total
capitalization of the receipt of approximately $15.0 million of proceeds from
the sale of 3,000,000 shares of our Series C Preferred Stock at a sales price
of $5.00 per share. After giving effect to the sale of the Series C Preferred
Stock, our pro forma total capitalization would be approximately $20.2 million
and our pro forma as adjusted total capitalization would be approximately $89.0
million.
The outstanding share information is based on our shares outstanding as of
December 31, 1999 and excludes:
. 1,537,760 shares of common stock issuable upon the exercise of stock
options outstanding as of March 27, 2000 at a weighted average exercise
price of $2.55 per share; and
. 763,779 shares of common stock issuable upon the exercise of warrants
outstanding as of March 27, 2000 at a weighted average exercise price
of $1.77 per share.
See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and
Results of Operations" and the financial statements and notes thereto included
in this prospectus.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1999, after
giving effect to the mandatory conversion of all of our outstanding preferred
stock into a total of 10,353,198 shares of common stock was negative $2.8
million or ($0.18) per share of common stock. Pro forma net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding.
After further giving effect to the sale of 3,000,000 shares of our Series C
Preferred Stock for $5.00 per share on January 21, 2000, our pro forma net
tangible book value as of December 31, 1999 was $12,147,299 or $0.65 per
share. This represents an increase in pro forma net tangible book value of
$0.83 per share of common stock. Further, assuming the sale by us of 5,000,000
shares of common stock in this offering at an assumed initial public offering
price of $15.00 per share, our pro forma net tangible book value as of
December 31, 1999 would have been approximately $65.9 million, or $3.43 per
share of common stock. This represents an immediate increase in pro forma net
tangible book value of $2.78 per share to our existing stockholders and an
immediate dilution in pro forma net tangible book value of $11.57 per share to
new investors purchasing shares in this offering. The following table
illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $15.00
Pro forma net tangible book value per share at December 31,
1999......................................................... $(0.18)
Increase per share attributable to our sale of Series C
Preferred Stock.............................................. $ 0.83
------
Pro forma net tangible book value per share at December 31,
1999 after giving effect to our sale of Series C Preferred
Stock........................................................ $ 0.65
Increase per share attributable to new investors.............. $ 2.78
Pro forma net tangible book value per share after the offering.. $ 3.43
------
Dilution per share to new investors............................. $11.57
======
</TABLE>
The following table summarizes, as of December 31, 1999, on a pro forma
basis, the number of shares of stock purchased from us, including amounts paid
by purchasers of preferred stock, the total consideration paid to us and the
average price per share paid by existing stockholders, including the Series C
Preferred Stock stockholders and by new investors, based upon an assumed
initial public offering price of $15.00 per share for shares purchased in this
offering, before deducting the estimated underwriting discounts and
commissions and estimated offering expenses. This table illustrates that
although investors purchasing common stock in this offering will have
contributed about 73.5% of the total consideration paid to us for our
outstanding common stock, they will only own about 21.2% of our outstanding
common stock.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders as
of December 31, 1999... 15,577,455 66.1% $ 12,095,998 11.8% $ 0.78
Series C Preferred Stock
Stockholders........... 3,000,000 12.7% $ 14,975,000 14.7% $ 4.99
New investors........... 5,000,000 21.2% $ 75,000,000 73.5% $15.00
---------- ------ ------------ ------
Total................. 23,577,455 100.0% $102,070,998 100.0% $ 4.33
========== ====== ============ ======
</TABLE>
The above tables assume no exercise of any outstanding stock options or
warrants to purchase common stock. As of March 27, 2000, there were:
. 1,537,760 shares of common stock issuable upon the exercise of stock
options outstanding at a weighted average exercise price of $2.55 per
share; and
. 763,779 shares of common stock issuable upon the exercise of warrants
outstanding at a weighted average exercise price of $1.77 per share.
To the extent these options or warrants are exercised, there will be further
dilution to the new investors.
17
<PAGE>
SELECTED FINANCIAL DATA
The statement of operations data for the period from inception (September
9, 1997) through December 31, 1997, and for 1998 and 1999 and the balance sheet
data as of December 31, 1998 and 1999 have been derived from our audited
financial statements beginning on page F-1 of this prospectus. The balance
sheet data as of December 31, 1997 have been derived from audited financial
statements that are not included in this prospectus. The historical results are
not necessarily indicative of the operating results to be expected in the
future. The selected financial data shown below should be read in conjunction
with our financial statements and the notes to those financial statements
beginning on page F-1 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" beginning on page 19 of this prospectus.
<TABLE>
<CAPTION>
Period from
Inception
(September Years Ended December
1997) to 31,
December 31, ------------------------
1997 1998 1999
------------ ----------- -----------
(in thousands, except per share
amounts)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Collaborative research agreements..... $ -- $ 820 $ 2,052
Grant revenue......................... -- 51 145
---------- ----------- -----------
Total revenues....................... -- 871 2,197
Operating costs and expenses:
Research and development (excludes $0,
$0 and $13, respectively, of stock
based compensation).................. 71 3,641 7,528
Selling, general and administrative
(excludes $0, $6 and $53,
respectively, of stock based
compensation)........................ 149 1,524 4,714
Stock based compensation.............. -- 6 66
---------- ----------- -----------
Total operating costs and expenses... 220 5,171 12,308
---------- ----------- -----------
Loss from operations................... (220) (4,300) (10,111)
---------- ----------- -----------
Interest income (expense), net......... -- 10 (376)
---------- ----------- -----------
Net loss............................... $ (220) $ (4,290) $ (10,487)
========== =========== ===========
Net loss per share--basic and diluted.. $ (0.19) $ (1.14) $ (2.48)
========== =========== ===========
Weighted average common shares
outstanding--basic and diluted........ 1,160,958 3,750,036 4,236,409
========== =========== ===========
Pro forma net loss per share--basic and
diluted............................... $ (0.75)
===========
Pro forma weighted average common
shares outstanding--basic and
diluted............................... 14,046,759
===========
<CAPTION>
December 31,
-------------------------------------
1997 1998 1999
------------ ----------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments........................... $ 18 $ 3,455 $ 3,956
Working capital........................ (224) 1,148 (3,635)
Total assets........................... 63 7,435 14,225
Long-term debt, net of current
portion............................... -- 3,539 8,047
Preferred stock........................ -- 5,951 11,919
Accumulated deficit.................... (253) (4,543) (15,029)
Total stockholders' equity (deficit)... (216) 1,452 (2,827)
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that are based
upon current expectations. Our actual results and the timing of events could
differ materially from those anticipated in our forward-looking statements as a
result of many factors, including those set forth under "Risk Factors",
"Special Note Regarding Forward-Looking Statements" and elsewhere in this
prospectus.
You should read the following discussion and analysis in conjunction with
the "Selected Financial Data" financial statements and related notes included
elsewhere in this prospectus.
Overview
To date, we have generated revenues from a collaborative herbicide
discovery and commercialization agreement with Bayer and a grant from the U.S.
Department of Energy. The agreement with Bayer was signed in September 1998 and
generated substantially all of our revenues for fiscal years 1998 and 1999. In
November 1999, we signed a joint development and commercialization agreement
with Monsanto. This agreement will not contribute to our revenue until the
first quarter of fiscal year 2000.
We have invested heavily in establishing our GeneFunction Factory and in
our bioinformatics infrastructure. Our total number of employees increased from
four employees at December 31, 1997 to 47 employees at December 31, 1998 and to
92 employees at December 31, 1999. Of our total number of employees on December
31, 1999, 74% were engaged in research and development activities. Our research
and development efforts consisted of work performed under our collaborative
research agreements and our federal government grant and work advancing our own
core technologies.
We have incurred significant losses since our inception. As of December
31, 1999, our accumulated deficit was approximately $15.0 million and total
stockholders' deficit was approximately $2.8 million. Operating expenses
increased from approximately $220,000 during the period from inception through
December 31, 1997, to approximately $5.2 million in the year ended December 31,
1998 and to approximately $12.3 million in the year ended December 31, 1999. We
expect to incur additional operating losses over at least the next two years as
we continue to expand our research and development efforts on our core
technologies and establish the infrastructure necessary to support our
business.
Source of Revenue and Revenue Recognition Policy
We recognize revenues from collaborative research agreements on a
percentage of completion basis in accordance with the applicable performance
requirements of each agreement. Revenues related to our government grant are
recognized as related research and development expenses are incurred. Milestone
payments under collaborative research agreements are recognized when milestones
have been achieved and acknowledged by the relevant strategic partner. Payments
received in excess of revenue recognized that are related to future performance
are deferred and recognized as revenue as performance occurs. As of December
31, 1999, we had deferred revenues of approximately $5.8 million. Our sources
of potential revenue for the next two years are likely to be payments under
existing and possible future collaborative research agreements, government
research grants and milestone payments received under collaborative research
agreements.
19
<PAGE>
Results of Operations
Years Ended December 31, 1998 and 1999.
Revenues. Revenues are comprised of amounts recognized under a
collaborative research agreement and a grant from the U.S. Department of
Energy. Total revenues increased 152% from approximately $871,000 in 1998 to
approximately $2.2 million in 1999. This increase was primarily a result of our
signing a collaborative research agreement in September 1998 with Bayer for the
development of novel screening targets in the field of herbicides.
Revenues earned under collaborative research agreements increased 150%
from approximately $820,000 in 1998 to approximately $2.1 million in 1999. This
increase was the result of an increase in revenues earned under the Bayer
collaborative research agreement in 1999 as compared to 1998 due to the fact
that this agreement was not signed until September 1998. Substantially all of
our revenues during 1998 and 1999 relate to the collaborative research
agreement with Bayer. Assuming our collaborative research agreements are
continued for the full terms under those agreements, Bayer will contribute
future committed revenues of approximately $11.8 million in 2000 through 2001
and Monsanto will contribute future committed revenues of approximately $41.5
million in 2000 through 2005.
Grant revenues increased 187% from approximately $51,000 in 1998 to
approximately $145,000 in 1999. This increase was the result of the grant being
extended in 1999.
Research and Development Expenses. Research and development expenses
consist primarily of personnel costs, facility costs, cost of supplies and
depreciation of laboratory equipment. Research and development expenses
increased 107% from approximately $3.6 million in 1998 to approximately
$7.5 million in 1999. Of this increase, approximately $2.5 million was due to
an increased number of research and development staff, approximately $334,000
was due to higher facilities costs, and approximately $886,000 was due to
depreciation of additional laboratory equipment to support our collaborative
research agreements and development of our core technology. We expect to
continue to devote substantial resources to research and development. We also
expect that research and development expenses will continue to increase and
that net losses will continue as a result.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist primarily of personnel costs, facilities costs,
business development costs and professional expenses, such as legal and
accounting fees. Selling, general and administrative expenses increased 209%
from approximately $1.5 million in 1998 to approximately $4.7 million in 1999.
Of this increase, approximately $1.3 million was due to increased staffing
necessary to manage and support our growth, approximately $209,000 was due to
higher facilities costs, approximately $267,000 was due to an increase in
professional expenses and approximately $397,000 was due to increased
depreciation expenses. We expect that our selling, general and administrative
expenses will continue to increase as we expand our legal, accounting and
business development staff, add infrastructure, incur additional costs related
to being a public company, including directors' and officers' insurance
premiums, investor relations programs and increased professional fees and
continue to make commission payments related to our collaborative research
agreements.
Stock Based Compensation Expense. Stock based compensation expense
represents the amortization of deferred compensation related to stock options
granted to employees with an exercise price below the estimated fair value of
our common stock at the date of grant, as determined by our board of directors.
Deferred compensation is amortized over the vesting period of the related stock
options, which is generally four years. We recognized approximately $6,000 in
non-cash compensation expense related to amortization of deferred compensation
in 1998 as compared to approximately $66,000 in 1999.
20
<PAGE>
Deferred compensation for options granted to employees has been determined
as the difference between the estimated fair value for financial reporting
purposes of our common stock on the date the options were granted and the
exercise price. Deferred compensation for options granted to consultants has
been determined in accordance with Statement of Financial Accounting Standards
No. 123 as the fair value of equity instruments issued. In connection with the
grant of stock options to employees, we recorded deferred compensation of
approximately $2.3 million in 1999.
Net Interest Income (Expense). Net interest income (expense) represents
interest earned on our cash and cash equivalents and short-term investments
offset by interest expense on long-term debt and capital leases. Net interest
income was approximately $11,000 in 1998, as compared to net interest expense
of approximately $376,000 in 1999. This change was attributable to increases in
senior long-term debt and an increase in notes payable secured by capital
equipment purchases, partially offset by an increase in interest income.
The Period from Inception (September 9, 1997) through December 31, 1997, and
the Year Ended December 31, 1998.
Revenues. Total revenues increased from zero during 1997 to approximately
$871,000 in 1998. The revenues in 1998 were attributable primarily to the Bayer
collaborative research agreement.
Research and Development Expenses. Research and development expenses
increased from approximately $71,000 in 1997 to approximately $3.6 million in
1998. Of this increase approximately $1.3 million was due to an increase in the
number of our research and development staff, approximately $901,000 was due to
increases in the cost of supplies, approximately $250,000 was due to
depreciation of laboratory equipment and approximately $226,000 was due to
increases in facilities costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from approximately $149,000 in 1997 to
approximately $1.5 million in 1998. Of this increase, approximately $586,000
was due to an increase in the number of administrative staff necessary to
manage and support the growth of our business, approximately $251,000 was due
to increased business development activities related to the negotiation of our
collaboration agreement with Bayer and $160,000 was due to increased
professional expenses.
Net Interest Income (Expense). Net interest expense was de minimus in
1997, as compared to net interest income of approximately $11,000 in 1998. The
increase in net interest income was attributable to higher average cash
balances during 1998.
Liquidity and Capital Resources
We have historically financed our operations through the sale of preferred
stock, debt and capital lease financing and payments received from
collaborative research agreements and a government grant. From our inception
through December 31, 1999, we have raised approximately $11.9 million in net
cash proceeds from the sale of preferred stock.
We had cash, cash equivalents and short-term investments of approximately
$18,000 at December 31, 1997, compared to approximately $3.5 million at
December 31, 1998 and approximately $4.0 million at December 31, 1999.
We had a working capital deficit of approximately $224,000 at December 31,
1997, working capital of approximately $1.1 million at December 31, 1998 and a
working capital deficit of approximately $3.6 million at December 31, 1999. The
increase in working capital between 1997 and 1998 was primarily due to
borrowings and the issuance of convertible preferred stock in 1998. The
decrease in working capital between 1998 and 1999 was primarily due to
increases in deferred revenue from our strategic partners in 1999 with which we
financed part of our operations, expenditures for property and equipment and
funding of our operating loss partially offset by proceeds from sales of
preferred stock and issuance of notes payable.
21
<PAGE>
Assuming our collaborative research agreements with our strategic partners are
continued for their full terms, Bayer will contribute committed working capital
of approximately $8.0 million in 2000 through 2001 and Monsanto will contribute
committed working capital of approximately $39.5 million in 2000 through 2005.
Our operating activities used cash of approximately $233,000 in 1997,
approximately $2.1 million in 1998 and approximately $4.4 million in 1999. Cash
used in operating activities was primarily related to net operating losses.
Cash used by investing activities totaled approximately $4,000 in 1997,
approximately $6.1 million in 1998 and approximately $7.6 million in 1999.
Investing activities consist primarily of additions to property and equipment
and net purchases of short-term investments. We expect to continue to make
significant investments in the purchase of property and equipment to support
our expanding operations. A portion of our cash may be used to acquire or
invest in complementary businesses, products or technologies, or to obtain the
right to use such complementary technologies.
Financing activities provided cash of approximately $254,000 in 1997,
approximately $9.2 million in 1998 and approximately $11.5 million in 1999.
Cash provided by financing activities resulted from the receipt of
approximately $6.0 million in net proceeds from the sale of Series A Preferred
Stock in 1998, including $350,000 in proceeds from bridge loans which were
converted to Series A Preferred Stock and approximately $6.0 million in net
proceeds from the sale of Series B Preferred Stock in 1999. In addition, we had
net borrowings of approximately $250,000 in 1997, approximately $3.6 million in
1998 and approximately $5.5 million in 1999, from borrowings under our notes
payable for equipment financing of approximately $3.8 million and our senior
note payable of approximately $2.0 million.
In January 2000, we completed the sale of our Series C Preferred Stock for
gross proceeds of approximately $15.0 million and received approximately $9.0
million in payments under collaboration agreements.
Our forecast of the period of time through which our financial resources
will be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of
a number of factors. We believe that our existing cash and investment
securities and anticipated cash flow from existing collaborations together with
the net proceeds of this offering will be sufficient to support our current
operating plan for at least the next two years. We have based this estimate on
assumptions that may prove to be wrong. Our future capital requirements will
depend on many factors, including:
. the number, breadth and progress of our research programs;
. the achievement of the milestones under certain of our existing
strategic alliances;
. our ability to establish additional and maintain current and
additional strategic alliances;
. our strategic partners' success in commercializing products developed
under our strategic alliances;
. our success in commercializing products to which we have retained the
rights under our strategic alliances;
. the costs incurred in enforcing and defending our patent claims and
other intellectual property rights; and
. the costs and timing of obtaining regulatory approvals for any of our
products.
22
<PAGE>
BUSINESS
Overview
We are industrializing the process of determining gene function to
generate information that will enable us to develop novel products in four
major sectors of the global economy: crop production, nutrition, human health
and industrial products. We have developed our GeneFunction Factory to
simultaneously study the functions of many genes in our selected plants and
fungi. Our GeneFunction Factory is designed to be an integrated, rapid,
industrial scale laboratory through which we can discover and modify genes,
understand the consequences of the modifications and reliably determine the
function of those genes. Our assembly-line approach automates the measurement
of thousands of physical and chemical characteristics of a selected organism at
different times in the organism's life cycle using the following techniques:
. gene expression profiling, a process of determining the level of
activity of genes in an organism at a specific time;
. metabolic profiling, a process of determining the identity and
quantities of chemicals in an organism at a specific time; and
. phenotypic profiling, a process of measuring the physical and chemical
characteristics of an organism at a specific time.
The resulting large amounts of information are then fed into our FunctionFinder
bioinformatics system. Our GeneFunction Factory presently is capable of
determining the function of approximately 50 genes per week, and we believe
that it will be capable of determining the function of up to 200 genes per week
by the end of 2000.
To date, we have established strategic alliances with Bayer and Monsanto.
The Bayer alliance is focused on the development of new herbicides while the
Monsanto alliance is focused on the development of crop production and
nutrition products. Under these alliances, we have total committed funding of
approximately $56 million and have performance fees, milestone payments and
payments in connection with extension options that could generate as much as an
additional $133 million. We will also earn product development milestones and
sales royalties if products are commercialized from these alliances.
Background
Genes
The physical and chemical characteristics of an organism, whether animal,
plant or microbe, are determined by its genes. The entire genetic content of an
organism is called its genome. Genes consist of organized units of molecules
called deoxyribonucleic acid, or DNA, which in turn consist of four different
chemical bases, called nucleotides. Each nucleotide pairs with its
complementary nucleotide in the double helix structure of DNA, forming what
scientists call a base pair. The precise sequence of the nucleotides in a gene
determines the physical and chemical activity that the gene produces in an
organism. Each cell of an organism contains at least one complete copy of the
organism's genes, but each cell type expresses only those genes that are
necessary for the cell to perform its role. When a gene is expressed, it acts
alone or in combination with other expressed genes to synthesize structural
proteins and enzymes. The activity of these proteins causes the cell to perform
biological functions, which may influence the physical and chemical
characteristics of the organism. A modification in a gene sequence may lead to
the over- or under-production of a protein, modifying the normal biological
function of the cell, and potentially affecting the physical and chemical
characteristics of the entire organism.
The Industrialization of Gene Sequencing
In the early 1990s, a worldwide effort began to decipher the precise
sequence of the genomes of various organisms, including humans, pathogens and
agricultural crops. This effort was fueled by the search to identify genes and
their encoded proteins that are associated with both health and disease.
Advances in
23
<PAGE>
DNA sequencing technology and instrumentation have allowed researchers to begin
to sequence genes on an industrial scale by creating "sequencing factories,"
instead of sequencing genes one at a time. During the last two decades, the
speed at which scientists can sequence the building blocks of genes, or base
pairs, has increased from hundreds per week to millions per week, while the
cost of sequencing a base pair has decreased proportionately. Large sequencing
centers at universities, research institutes and private companies produce tens
of thousands of gene sequences each week. To date, scientists have cataloged
the complete genomes of over forty species of bacteria, Baker's Yeast and a
nematode, which is a small worm-like organism. In an effort called the Human
Genome Project, scientists funded by the government, as well as several
foundations, have been systematically sequencing human DNA since the late
1980s. Industry experts anticipate that researchers will complete the
sequencing of the entire human genome, as well as the genome of the plant
Arabidopsis, by the end of the year 2000. Additionally, the government and
private industry are funding researchers attempting to complete the sequencing
of the entire genomes of several species of crops, such as rice, corn, tomato
and soybean, as well as bacteria, protists and fungi. It is expected that the
entire DNA sequences of these organisms will be determined in the near future.
The gene sequence information that has been discovered to date provides a
vast and diverse starting point for gene function research. However, in the
absence of other information, a gene's sequence does not provide any clues to a
gene's function. Without understanding function, researchers will have a
limited ability to translate this gene sequence data into information necessary
to develop new commercial products.
Determining Gene Function
Historically, gene function determination has been a slow, labor intensive
and formulaic process, pursuant to which an investigator typically would take
the following steps:
. identify a gene;
. determine its sequence;
. gather information on how the gene was expressed in an organism's
tissues;
. determine the activity of the protein corresponding to the gene;
. isolate or create modifications in the gene; and
. investigate the impact of modifications on the organism.
Most of this type of genetic research has been conducted by individual research
laboratories in different locations using variations on the same techniques to
study different genes, one gene at a time. Only recently have methods been
developed to study the function of many genes at one time and in one place,
using one or more of the following techniques, each of which is explained in
the corresponding paragraphs below:
. gene annotation and homology determination;
. gene expression profiling; and
. model organism functional genomics.
Gene Annotation and Homology Determination
Researchers can use search and alignment algorithms to determine the
degree to which a newly discovered gene sequence is similar, or homologous, to
previously known sequences. Researchers can then examine any remarks, or
annotations, written by other scientists about the characteristics, activity or
function of the previously studied sequence, and draw inferences about the
function of the new gene sequence based on its structural similarity, or
homology, to the known gene sequence. It is possible to find similarities among
gene sequences from different species, because many gene families are found in
certain groups of organisms, and some are even found in all organisms.
Although gene annotation and homology determination may provide insight
into the function of a newly discovered gene, there are limitations to the
value of the information that can be inferred. First, even
24
<PAGE>
if a similar gene has been studied, very few of the studied genes have reliable
annotation about function. Second, of the genes that currently have been
annotated for function, most annotations relate to fundamental processes, such
as respiration, which address only a fraction of the potential commercial
applications of functional genomics, which is the assignment of a function to a
gene. Third, genes with similar sequences often have very different functions.
Gene Expression Profiling
A gene expression profile provides a snapshot of genes that are expressed
in specific tissues of specific organisms at specific points in time. This
snapshot tells an investigator where, when and to what extent a particular gene
is expressed in a cell, tissue or organism and what physiological pathways are
active in the cell. Gene expression technology has progressed rapidly over the
past few years. Currently, various profiling technologies such as gene chips
are used to analyze the expression patterns of tens of thousands of genes at
once.
Although gene expression profiling may provide clues to a gene's function
in a particular process or pathway, it does not provide sufficient information
to conclusively determine a gene's function or its commercial value. A gene
expression profile shows that a gene was expressed in a cell at the time a
certain biological function occurred in the cell. However, the profile does not
show whether the expression of the gene was causally related to the cellular
activity, or how the gene interacted with other genes that were expressed at
the same time. Also, the profile does not show the chemical and physical
effects of changes in gene expression in an organism.
Model Organism Functional Genomics
We believe the most reliable way to determine a gene's precise function is
to study the effects of modified, or variant, forms of the gene on an organism.
The biology and genetics of certain organisms, which we call model organisms,
make them effective tools for investigating the function of genes of other
organisms with commercial value, which we refer to as target organisms.
Generally, model organisms must be similar enough to associated target
organisms to allow meaningful comparisons. They must also be easier, faster and
less costly to investigate. Model organisms may also serve as targets for gene
discovery when there is commercial potential for the model organism itself.
Researchers use model organisms to determine the function of a gene from a
target organism by comparing the physical and chemical characteristics produced
by normal and variant forms of a comparable gene from the model organism, and
extrapolating the results to the target organism. We refer to this process as
model organism functional genomics.
Companies utilizing model organism functional genomics face several
critical challenges. First, they must choose a model organism that is relevant
to target organisms with commercial value. Second, they must choose model
organisms with physical and chemical characteristics that make them efficient
research tools. Third, they must collect large amounts of information about a
small number of genes in a model in their normal and variant states. Fourth,
they must have powerful informatics tools to manage and analyze collected data.
However, even when these challenges are met, determination of gene function
using model organisms typically occurs on a small scale, with individual
investigators studying a small number of genes at a time.
25
<PAGE>
Our Approach to Industrializing Gene Function Discovery: Our GeneFunction
Factory
The existing approaches to determining gene function have produced limited
results, as evidenced by the fact that the functions of most genes are still
unknown. We believe that an inexpensive, rapid, large-scale approach to
determining gene function is necessary to address this problem. We have
responded to this need by developing our GeneFunction Factory to study gene
function for numerous genes simultaneously in our selected organisms. Our
GeneFunction Factory is designed to be an integrated, rapid, reliable,
industrial scale laboratory through which we can discover and modify genes,
measure the consequences of the modifications and reliably determine the
function of those genes. We believe that by determining gene function we will
be able to develop novel products in our target markets. In effect, we are
industrializing the discovery of gene function.
GENEFUNCTION FACTORY CHART
Our GeneFunction Factory is organized as a series of steps. Each step
consists of one or more work stations designed to perform complex tasks
rapidly, efficiently, routinely and repetitively in an assembly-line manner.
Organisms and genetic material pass from station to station to be studied for
gene function. Each step in the process can be scaled to increase the number of
genes that move through our GeneFunction Factory. Scalability, speed and our
proprietary processes distinguish this method of gene function determination
from other methods. Our GeneFunction Factory presently is capable of
determining the function of approximately 50 genes per week, and we believe it
will be capable of determining the function of up to 200 genes per week by the
end of 2000.
In the steps of our GeneFunction Factory, we first identify genes and
produce organisms with modified forms of the genes, leading to an over- or
under-expression of the encoded protein. We then
26
<PAGE>
measure thousands of physical and chemical characteristics of the variant
organisms at different times of the organisms' life using gene expression,
metabolic and phenotype profiling. Next, we organize and store the data
associated with the measurements taken in the previous step. Finally, we
analyze the data to elucidate function of the genes.
Our Model and Target Organisms
We carefully select the organisms we study in our GeneFunction Factory.
Some researchers use yeast and the bacterium Escherichia coli as general model
organisms, and others use the mouse as a model for humans. Yeast and bacteria
are efficient model organisms, but are such simple organisms that extrapolating
information about gene function to more complex target organisms is often not
meaningful. Mice are more useful for annotating genes of higher organisms, but
have long life cycles and are expensive to maintain and study. We conduct our
research directly in target organisms when feasible, but when a model organism
is needed, we have chosen, and will likely continue to choose, those organisms
that are comparable to the target organism, are economical and efficient to
maintain and study, have short life cycles and whose genes are easy to modify.
The first eight organisms we have decided to study are a mustard plant known as
Arabidopsis, rice and six fungi.
Arabidopsis is a useful model organism because it is related to soybeans,
cotton, vegetables and oil seed crops. It is an efficient model organism
because it has a short life cycle of seven weeks and a small genome. Rice is an
important target and model organism because it is one of the world's most
important grains, and it is closely related to corn, wheat, barley, sugarcane,
oats and rye. We are currently studying three fungi that cause diseases in
cereals, rice and broadleaf plants. We intend to study three additional fungi
that have commercial value for fermentation, human fungal disease and natural
product discovery. We believe we can use our GeneFunction Factory to study the
function of essentially every gene in these organisms.
Gene Discovery and Variant Generation
One constraint in gene function discovery has been the time consuming
nature of constructing gene variants. In gene discovery, libraries of DNA
fragments are constructed for an organism. The DNA fragments are sequenced and
altered to produce a gene variant. In plants, we produce two types of variants:
knock-out variants, in which we have modified the selected gene to under-
produce its encoded protein, and over-expression variants, in which we have
modified the selected gene to over-produce its protein. In fungi, we use
proprietary technology to activate or inactivate genes using specialized DNA
fragments that we can insert into genes to modify the gene. We then introduce
the modified gene into the fungal nucleus where it efficiently and precisely
replaces the normal gene. Using these proprietary technologies, we have
modified hundreds of plant genes and thousands of fungal genes.
Variant Analysis
Traditionally, the process of understanding the often-subtle difference
between a variant and normal organism has required years of experimentation. We
have solved this problem by rapidly and accurately collecting large volumes of
data for many different gene modifications with our automated workstations,
sample tracking and data collection software that constitute our GeneFunction
Factory. The three types of data that we collect for each variant are gene
expression profiles, metabolic profiles and phenotype profiles.
Gene Expression Profiling. Gene expression profiling provides a snapshot
of the genes expressed in an organism at a given time. By comparing gene
expression profiles of a variant organism to a normal organism, we gather
information about the function of the modified gene as well as the effect of
that gene on the expression of other normal genes. By determining how a
modified gene affects normal genes, we gain insight into biochemical pathways
of an organism.
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<PAGE>
Metabolic Profiling. Metabolic profiling provides a snapshot of the
chemicals in an organism's cell, including vitamins, minerals and other
biochemicals, at a given time. We are collaborating to develop a proprietary
method for extracting chemicals from an organism, which has traditionally been
the most time-consuming step in the metabolic profiling process. We detect and
measure these extracted chemicals using combinations of mass spectroscopy,
which separates molecules by electrical charge and size, and chromatography,
which separates molecules by size and chemical properties.
Phenotype Profiling. Phenotype profiling is the measurement of physical
and chemical characteristics of an organism at one or more times during its
life cycle. Characteristics of our target and model organisms that we measure
include flowering time, plant height, plant weight, seed set, seed shape, leaf
shape, color reflectance, root density, nutrient utilization and appearance.
Different measurements, when taken at specified times, produce a phenotype
profile for a variant that we can compare to a phenotype profile for a normal
organism to help understand the function of the modified gene. We have
developed a proprietary method for obtaining a phenotype profile for an
organism that is an important part of our variant analysis.
Our FunctionFinder Bioinformatics System
Data Management. Laboratory researchers typically track and collect data
using notebooks, which makes it difficult to organize, store and access the
volumes of data generated. We are addressing the issue of data management by
developing a proprietary Laboratory Information Management System, or LIMS,
utilizing barcodes and other automated data collection devices to track samples
and store data. We have also developed technology to improve the organization,
formatting and storage of data collected from our variant analyses. Our LIMS
system allows us to record and manage the thousands of daily measurements
produced by our GeneFunction Factory.
Data Analysis. The challenge with the vast amounts of data that have been
collected and stored for so many genes is being able to retrieve and make sense
of relevant information to determine the function of genes. To meet this
challenge, we have developed our FunctionFinder bioinformatics system, which
incorporates information obtained from our variant analyses and from public
sources. FunctionFinder includes tools for storing, retrieving, analyzing and
mining data to create knowledge about genes. The FunctionFinder bioinformatics
system contains proprietary software that we have developed.
Market Opportunities
By determining the function of genes in Arabidopsis, rice and six
filamentous fungi, we believe that we and our strategic partners will be able
to develop novel products in four major sectors of the global economy. We have
focused our initial efforts on generating gene function information that can be
used to develop crop and nutrition products. In the future, we intend to use
our GeneFunction Factory to discover gene function information on an industrial
scale that can be used to develop human health and industrial products. Our
target sectors and markets are:
<TABLE>
<CAPTION>
Crop
Production Nutrition Human Health Industrial Products
---------- --------- ------------ -------------------
<S> <C> <C> <C>
Herbicides Additives Anti-Fungals Fermentation
Fungicides Botanicals Nutraceuticals Fiber
Fertilizers Foods Pharmaceuticals Industrial Enzymes
Seeds Health Foods Vaccines Specialty Chemicals
Crop Outputs
</TABLE>
Our near-term strategy in these sectors is to establish strategic
alliances with leading companies in order to develop commercial products. To
date, we have entered into strategic alliances with Bayer to develop novel
herbicides and with Monsanto to develop crop outputs and nutritional and human
health products.
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Crop Production
The crop production sector consists of crop inputs and crop outputs.
Herbicides, fungicides, fertilizers and seeds are examples of crop inputs.
Harvested grain, vegetables and fiber are examples of crop outputs. We intend
to utilize the information derived from our GeneFunction Factory to develop
commercial products, independently or with strategic partners, in the following
areas:
Crop Inputs
Herbicides. Herbicides are chemicals that kill weeds that cause
substantial crop loss. The herbicide market is a mature market in which
innovative products have historically been introduced only about once per
decade. In 1998, global sales of herbicides were approximately $15 billion,
with Roundup(R) being the leading product. While there are many herbicides
on the market today, there is still a need for new types of products. For
example, there is a need for a herbicide that can be applied at the same
time seeds are planted, remains active in the field for several weeks, is
environmentally friendly and kills a broad spectrum of weeds quickly.
Conventionally, researchers have discovered new herbicide products by
spraying various chemicals on weeds in the hope of finding a chemical that
kills weeds without killing crops. Once a promising chemical is discovered,
researchers use labor-intensive genetics, physiology and biochemistry
techniques to determine the protein in the weed that is affected by the
chemical. This conventional approach is expensive and slow and has a low
success rate. Typically, 80,000 chemicals must be screened to find a
commercial product.
We believe our GeneFunction Factory may provide new herbicide targets
for chemical screening faster and more economically than the conventional
method. As part of our collaboration with Bayer, we use our GeneFunction
Factory to identify Arabidopsis genes that may be promising targets for new
herbicides. We then produce the proteins encoded by these promising genes
in quantities that are sufficient for large-scale high-throughput, or high
volume, chemical screening for herbicides. Finally, our assay group
produces assays, or test kits, containing those proteins that can be used
to screen for new herbicides. By narrowly focusing our discovery efforts on
finding chemicals that disable specific genes within weeds, we believe
that, together with our strategic partners, we may be able to discover
environmentally friendly herbicides more efficiently than our competition.
Fungicides. Fungal plant diseases impose greater costs upon food growers
than any other plant disease. Chemicals used to control these diseases are
called fungicides. The global market for fungicides, such as Tilt(R) and
Ridomil PC(R), was approximately $6 billion in 1998. There is a need for
better and safer fungicides, particularly those that treat currently
untreatable fungal diseases or fungal strains that become resistant to
existing fungicides.
As with herbicides, researchers conventionally have discovered
fungicides by spraying various chemicals on crops in the hope of finding a
chemical that inhibits fungal infections on crops without killing the crops
themselves. Until recently, an approach based upon the determination of
gene function has not been used for fungicide discovery. We believe our
GeneFunction Factory will provide potential new fungicide targets for
screening chemicals faster and more economically than the conventional
method. We are currently examining three filamentous fungi, including
Magnaporthe grisea, a rice pathogen, and Mycosphaerella graminicola, a
wheat pathogen. We plan to identify genes in these fungi that are essential
for the survival of the fungi, but not the crop. We believe that these
genes will provide promising targets for chemical screening using assays
produced by us or our strategic partners.
Fertilizers. Fertilizers are products that are applied to the soil to
provide crops with the nutrients needed to produce high yields. The primary
ingredients of most fertilizers are nitrogen, potassium and phosphorus. The
global market for fertilizers in 1998 was about $50 billion. In general,
current product
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discovery efforts for fertilizers are focused on blending or reformulating
known fertilizer compounds and reducing production costs. Plants are
limited in their ability to utilize fertilizers. Excess fertilizer enters
the environment either as run-off or ground water seepage, both of which
are major environmental concerns. We believe that products that enhance
fertilizer utilization will dramatically improve the economics and lessen
environmental concerns of crop production because growers will be able to
use less fertilizer to produce the same yields. We believe that our
GeneFunction Factory may allow us to identify genes in crops that improve
their ability to utilize fertilizer.
Seeds. Typical commercial seeds include hybrid corn seeds, registered
wheat seeds and vegetable seeds. The global market for commercial seeds in
1998 was over $15 billion. Currently, there is a need for new commercial
seeds that can increase crop yields and improve the quality of foods and
fibers. One commercial seed that has successfully increased crop yield
while reducing the use of pesticides is the Bollgard(TM) cottonseed. Its
developers inserted a microbial gene into cottonseed that encodes a protein
that kills the cotton budworm, a significant pest of cotton. The resulting
seed produces a high yield of cotton while avoiding both the cost and
negative environmental impact of budworm pesticide.
Historically, time-consuming plant breeding techniques have dominated
research in the seed industry. Recently, the seed industry has invested
heavily in the genetic modification of crops, which has resulted in a
number of commercialized products and products in development. The seed
industry now has the technology to efficiently insert genes into seeds, and
products such as the Bollgard cottonseed have demonstrated the commercial
viability of this technology. We believe that there is a market need for a
technology that can rapidly generate information about the function of a
large number of genes and identify those genes that code for commercially
valuable crop traits that could then be bred or inserted into crops.
Examples of valuable crop traits are disease resistance, vitamin content
and resistance to herbicides and fungicides.
Crop Outputs
The output side of crop production consists of harvested crops. The
global value of harvested crops in 1998 was approximately $700 billion with
additional value created through crop processing. While there are more than
170 crops grown worldwide, only a few key crops, such as corn, soybean,
rice, wheat, potatoes and tomatoes, account for most of the value. Two
major market opportunities involve improving processing and product
attributes. An example of a processing improvement is a reduction in the
soluble fiber present in wheat. Pasta made from this type of wheat would be
faster drying than ordinary pasta and could therefore be produced and
packaged at a reduced cost. An example of an improved product attribute is
an increased amount of oil in each ton of processed canola. We believe that
our GeneFunction Factory may allow us to quickly and efficiently identify
novel genes that control processing and product attributes.
Nutrition
We believe that advances in functional genomics will make it possible for
companies to enhance the nutritional content of foods and develop foods that
can reduce the risk of disease in consumers. The nutrition market includes
additives, botanicals, foods and health foods. Product examples include
cholesterol-reducing margarines and nutritionally enhanced breakfast cereals.
It has been estimated that the size of the market for enhanced nutrition foods
will reach $15 billion in 2000 and $500 billion by 2010. Some of these foods
will result from genetic variants, while others will be produced through
methods that do not involve genetic variants. For example, functional genomics
can identify which plants have certain nutritional qualities and these
qualities can be isolated and added to foods. Because many foods and additives
come from plants and microbes, we believe our GeneFunction Factory can be used
to develop food products with improved nutritional content.
Food production companies are exploring ways to create foods with
pharmaceutical benefits. For example, in January 2000, DuPont's Protein
Technologies International and General Mills, Inc. announced plans to
collaborate in developing and marketing functional foods containing proprietary
soy technology consistent with the FDA approved health claim that there is an
association between consumption of soy
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protein and the reduced risk of coronary heart disease. According to General
Mills, sales for soy foods are expected to top $2.5 billion in 2000 and grow at
a 15% to 20% compound annual rate over the next five years.
We believe that our GeneFunction Factory may, in the future, generate gene
function information that could be used to develop food products that contain:
. elevated levels of vitamins and essential amino acids in foods;
. novel proteins useful in the prevention or treatment of medical
conditions;
. elevated levels of compounds that are present in plants and reduce
serum cholesterol levels; and
. reduced levels of saturated fats.
Human Health
We are focusing our efforts in the human health sector on the discovery of
novel anti-fungal targets for drug discovery and the use of our model organisms
and our FunctionFinder bioinformatics system to understand the genetic basis of
human disease. There is a need for novel anti-fungals to treat immune-
compromised individuals coping with AIDS, recovering from transplant surgery or
undergoing cancer therapy.
We believe that the model organisms that we are studying may be useful in
discovering novel gene targets for the prevention and treatment of human
disease. By using the sequence and function information of each gene in our
model organisms and identifying the similarity of these known genes to human
genes using our FunctionFinder bioinformatics system, we may provide a powerful
tool for human drug discovery.
Industrial Products
Within the industrial products sector, we are targeting the markets for
industrial enzymes, fermentation, fiber and specialty chemicals. Proteases for
laundry detergent, paper and plastic are examples of products from such
markets. These industries are capital intensive, and research has focused on
improving current products. There is a need for industrial products that are
novel, effective, inexpensive and environmentally friendly. To fill this need,
major companies in each of these industries have recently made significant
investments in biotechnology. For example, a new plastic made from natural
plant chemicals is being developed and is expected to be as versatile and
strong as some common synthetic plastics, yet less expensive and more
biodegradable.
Since many industrial products are derived from biological sources, we
believe that by understanding how gene function dictates product
characteristics, we may be able to develop information that will significantly
reduce production costs as well as lead to the creation of novel products. We
believe that the use of our GeneFunction Factory may lead to the discovery of
gene function information useful for the development of various industrial
products, including:
. improved or novel fermentation products, such as enzymes and specialty
chemicals;
. improved fiber products such as wood, plastics, cotton and linen; and
. improved industrial processes such as wastewater treatment.
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Our Strategy
Our goal is to be the leading provider of gene function information to
accelerate the commercialization of improved applications in crop production,
nutrition, human health and industrial products. The key elements of our
strategy are to:
Determine the Function of Genes in Our Target and Model Organisms.
Using our GeneFunction Factory, we intend to determine the function of
essentially every gene in each of our target and model organisms and
incorporate this data into our FunctionFinder bioinformatics system. We intend
to establish our FunctionFinder bioinformatics system as the definitive source
of gene function information for these target and model organisms, as well as
other target organisms related to our model organisms.
Continue to Develop Our GeneFunction Factory.
In order to expand our capability in the industrialization of gene
function determination, we will continue to develop our GeneFunction Factory.
In addition to internal efforts to further streamline our industrialization
process, we plan to license and acquire technologies that complement our core
capabilities. We intend to utilize our partners' expertise and information to
expand our FunctionFinder bioinformatics system and improve the capabilities of
our GeneFunction Factory. In addition to expanding our technology, we plan to
expand our facilities, equipment and personnel in order to increase
productivity.
Develop Products Both with Strategic Partners and Internally.
We intend to establish additional strategic alliances with leading
companies in the crop production, nutrition, human health and industrial
products industries. We seek to receive short-term financial support to advance
our internal discovery and development efforts, as well as generate long-term
revenues from milestone and royalty payments on any commercialized products. We
also intend to develop products independently when opportunities arise.
Focus Our Development Efforts on Large Market Opportunities.
We intend to utilize our GeneFunction Factory to develop products in the
crop production, nutrition, human health and industrial products sectors. We
believe there are substantial opportunities in these sectors for novel products
that can be efficiently developed with information from our GeneFunction
Factory. We intend to focus our development efforts on large opportunities
within these sectors.
Pursue Intellectual Property Protection for Our GeneFunction Factory and Gene
Function Information.
We intend to continue to aggressively pursue patents for our discovery
methods, our research platform and aspects of our bioinformatics system.
Additionally, we intend to aggressively pursue patents on discoveries of novel
genes and gene functions. As of March 27, 2000, we have rights to 31 U.S.
patent applications, relating to our technologies and genes. We intend to
protect and build on our existing patent portfolio and also rely on trade
secrets to protect our proprietary technologies. Where necessary, we will seek
licenses to implement aspects of our research platform subject to ownership
rights of others.
Strategic Alliances
As part of our business strategy, we have established strategic alliances
with pharmaceutical and agricultural companies in the fields of herbicide
development, crop production and nutrition. Assuming our research efforts for
existing strategic alliances are continued for the full research terms under
those
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agreements, we will have total committed funding of approximately $56 million
from strategic partners. In addition, performance fees, milestone payments and
payments made in connection with the exercise of options to extend these
strategic alliances could generate as much as an additional $133 million. We
will also earn sales royalties and product milestones in the event that any of
our strategic alliances yield commercial products. To date, we have entered
into significant strategic alliances with Bayer and Monsanto.
Bayer
In September 1998, we entered into a collaboration research agreement with
Bayer for the development of new chemical herbicides. Under the terms of the
agreement, we have agreed to use our GeneFunction Factory to identify
Arabidopsis genes that may be targets for herbicide discovery. We will provide
exclusively to Bayer assays based on these targets for use in high throughput
screening for herbicides, as well as access to customized Arabidopsis-based
releases of FunctionFinder for use in herbicide discovery. The collaboration
has an initial term of three years unless terminated earlier by Bayer because
we do not achieve specific milestones, and Bayer has the option to extend it
for two additional years. The agreement provides that we are entitled to
committed research funds, additional fees based on the number of assays we
deliver and our success in delivering customized releases of FunctionFinder,
and milestone and royalty payments for any products that might emerge from the
collaboration.
We have achieved two milestones in our collaboration research agreement
with Bayer. These milestones include the delivery of the first assays for high
throughput screening and the delivery of the first release of a customized
FunctionFinder bioinformatics system for discovery of novel herbicide targets.
Monsanto
In November 1999, we entered into a collaboration agreement with Monsanto
to provide certain Arabidopsis-based gene function data for the development of
crop inputs and outputs. Under the terms of this agreement, Monsanto is to
provide us with thousands of genes from Arabidopsis and other organisms. We are
to perform a functional analysis of such genes for Monsanto using our
GeneFunction Factory. Monsanto will either own or have exclusive licenses to
certain patents that result from this project. The collaboration has an initial
term of six years unless terminated earlier by Monsanto because we do not
achieve specific milestones, and Monsanto has the option to extend it for up to
two years and nine months. Monsanto may expand the collaboration either by
increasing the number of genes that we are to analyze in Arabidopsis or by
requiring us to analyze gene function in a second model, or both, for
additional research and possible milestone payments. The agreement provides
that we are entitled to committed research funds, additional fees based on the
number of genes analyzed and royalty payments for any products that might
emerge from the collaboration.
LION bioscience
We have entered into a binding letter of intent with LION bioscience to
negotiate an agreement for the co-development and co-marketing of
bioinformatics software products for analyzing gene function. The companies
initially intend to focus on the development of metabolic profiling informatics
tools, and later develop improved phenotype profiling tools. We may not
successfully negotiate a definitive agreement with LION bioscience.
Research and Development
Our research and development efforts are directed towards the development
of our GeneFunction Factory, including our FunctionFinder bioinformatics system
and research activities in connection with our strategic alliances and our
government grant. We spent approximately $72,000 in 1997, approximately $3.6
million in 1998 and approximately $7.5 million in 1999 on our research and
development efforts.
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Competition
We face competition from functional genomics companies, including
Exelixis, Inc., CuraGen Corporation, Rosetta Inpharmatics, Inc. and Large Scale
Biology Corporation (formerly known as Biosource Technologies, Inc.). We expect
competition to intensify in genomics research as technology advances are made
and become widely known. Genomic technologies have undergone and are expected
to continue to undergo rapid and significant change. Our future success will
depend in large part on maintaining a competitive position in the genomics
field, and particularly in the functional genomics field. We or others may make
rapid technological development which may result in products or technologies
becoming obsolete or noncompetitive before we recover the expenses we incur in
connection with our development. Products that we or our strategic partners
offer could be made obsolete by less expensive or more effective crop
production, nutrition enhancement, human health and industrial application
product development technologies, including technologies that may be unrelated
to genomics. We may not be able to make the enhancements to our technology
necessary to compete successfully with newly emerging technologies.
Any products that we may develop alone or in collaboration with others
will compete in highly competitive markets. In the specific markets in which we
apply or intend to apply our FunctionFinder bioinformatics system, we face
competition from plant genomics, pharmaceutical, agrochemical and biotechnology
companies. Many of our existing and potential competitors have substantially
greater financial resources, research and development staffs, facilities,
manufacturing and marketing experience, distribution channels and human
resources than we do. Many of these competitors have achieved substantial
market penetration in the crop enhancement, nutrition, human health and
industrial product sectors. We have entered into strategic alliances with Bayer
and Monsanto in the crop production and nutrition sectors, but have not yet
entered into any strategic alliances or commenced development work in the human
health and industrial products sectors. Moreover, our competitors may obtain
patent protection or other intellectual property rights that could limit our
rights or our strategic partners' ability to use our technologies or
commercialize products in the crop production, nutrition, human health and
industrial products sectors.
Our ability to compete in the human health sector and the industrial
products sector may be limited by our exclusive use of plant and fungal model
organisms. We believe that our ability to compete in the human health sector
will depend on the degree to which information we develop on plant and fungal
gene and pathway function is useful in developing information about how similar
human genes and pathways code for human pathology. Although our models have
several advantages, competing companies that use model organisms with greater
similarities to human genes, such as mice, as well as companies that do direct
studies of human populations, may have a substantial advantage in developing
products for humans. Similarly, we believe that as it relates to industrial
products, our FunctionFinder bioinformatics system will only be useful in the
development of products that are plant or fungal based, such as enzymes and
alcohols.
Government Regulation
Regulation of Development and Commercialization of Agricultural Products
Federal, state, local and foreign government regulations and regulatory
agencies will govern our efforts, alone or together with our strategic
partners, to develop and commercialize genetically enhanced nutrition and crop
products. These regulations and agencies may prevent us and our strategic
partners from developing and marketing nutrition and crop product candidates in
a timely manner or under technically or commercially feasible conditions, and
may impose expenses, delays and other impediments to our efforts to develop
such product candidates.
The FDA has adopted the policy that it will apply the same regulatory
standards to genetically modified foods that it applies to foods developed
through traditional plant breeding. This means that a food or food ingredient
developed by genetic modification must meet the same rigorous safety standards
under the Federal Food, Drug, and Cosmetic Act as other food products. Under
this policy, the FDA will
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ordinarily only require premarket review of genetically modified foods if they
raise significant safety concerns, such as elevated levels of toxicants or the
presence of allergens, or if they are deemed to contain a food additive.
Premarket approval as food additives for products from introduced genes is
required only if the product differs substantially in structure and function
from similar naturally occurring substances. Also, the FDA does not currently
require that genetically modified products be labeled as such, as long as they
are as safe and have the same nutritional characteristics as conventional
products. The FDA is considering the adoption of a Premarket Notification
procedure, pursuant to which our strategic partners and we would have to inform
the FDA when we intend to commercialize a genetically modified food product and
that our internal safety procedure is complete.
The USDA prohibits genetically modified plants from being grown and
transported except pursuant to an exemption or under special controls. In
general, companies apply for an exemption to facilitate product development
because the special controls are burdensome. However, we can not guarantee that
the products we develop will qualify for such an exemption.
Regulatory policies for genetically modified nutrition and crop products
vary widely, are currently the subject of intense political controversy, and
may change substantially in the near future. Accordingly, labeling, premarket
notification or other restrictions in foreign countries where we and our
strategic partners may want to develop and/or market genetically modified
product candidates may impose additional expenses and delays on such product
candidates or may make commercialization in such countries impracticable.
Our future nutrition and crop product candidates may also be subject to
other regulations and regulatory agencies, such as the Occupational Safety and
Health Act, the Toxic Substances Control Act, the National Environmental Policy
Act, other federal water, air and environmental quality statutes, import/export
control legislation and other laws. Any product candidates relating to
pesticides will be subject to the jurisdiction of the Environmental Production
Agency.
Regulation of Drug Development and Commercialization
Prior to the marketing of any new drug developed by us or our strategic
partners, that new drug must undergo an extensive regulatory review process in
the United States and other countries. This regulatory process, which includes
preclinical studies and clinical trials, and may include post-marketing
surveillance of any compound to establish its safety and efficacy, can take
many years and require the expenditure of substantial resources. Data obtained
from preclinical studies and clinical trials are subject to varying
interpretations that could delay, limit or prevent marketing. Delays or
rejections may also be encountered based on changes in government agency
policies for drug review. Delays in obtaining marketing clearance could delay
the commercialization of any drugs or diagnostic products developed by us or
our strategic partners, impose costly procedures on our strategic partners'
activities, diminish any competitive advantages that our strategic partners may
attain and lessen our potential royalties.
Even if regulatory clearance is obtained, a marketed product and its
manufacturer are subject to continuing review. Discovery of previously unknown
problems with a product may result in withdrawal of the product from the
market, which could reduce our revenue sources and hurt our financial results.
No product resulting from the use of our FunctionFinder bioinformatics
system has been approved for commercialization in the United States or
elsewhere. In addition, no investigational new drug application has been
submitted by us our any of our strategic partners for any such product
candidate. We cannot be certain if or when we or our strategic partners will
submit an application for regulatory review, or whether we or our strategic
partners will be able to obtain marketing approval for any products on a timely
basis, if at
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all. If we and our strategic partners fail to obtain required governmental
approvals, it will prevent us from marketing drugs or diagnostic products. The
occurrence of any of these events may cause our business, financial condition
and results of operations to suffer.
Environmental Regulation
Our research and development activities involve the controlled use of
hazardous materials and chemicals. We are subject to federal, state and local
laws and regulations governing the use, storage, handling and disposal of such
materials and certain waste products. The risk of accidental contamination or
injury from these materials cannot be eliminated. In the event of an accident,
we could be held liable for any damages that result, and any liability could
exceed our resources.
Intellectual Property
We seek U.S. and foreign patent protection for major components of our
GeneFunction Factory. We also rely on trade secret protection for certain of
our confidential and proprietary information, and we use license agreements
both to access external technologies and assets and to convey certain
intellectual property rights to others. Our commercial success will be
dependent in part on our ability to obtain commercially valuable patent claims
and to protect our intellectual property portfolio. As of March 27, 2000, we
had filed 31 U.S. patent applications, which are subject to rights that we have
granted to various collaborators and development partners. We have filed 16
trademark applications in the United States and have received allowances on six
of them.
The patent positions of life science companies are generally uncertain and
involve complex legal and factual questions. Our business could be hurt by any
of the following:
. our pending patent applications may not result in issued patents;
. the claims of any issued patents may not provide meaningful
protection;
. we may be unsuccessful in developing additional proprietary
technologies that are patentable;
. our patents may not provide a basis for commercially viable products
or provide us with any competitive advantages and may be challenged by
third parties; and
. others may have patents that relate to our technology or business.
In addition, patent law relating to the scope of claims in the technology
field in which we operate is still evolving. The extent of future patent
protection is uncertain. In particular, we are aware of several groups that are
attempting to identify and patent gene fragments and full-length genes, both
characterized and uncharacterized. There is substantial uncertainty regarding
the possible patent protection for gene fragments or genes without known
function or correlation with specific functions. Furthermore, others may
independently develop similar or alternative technologies, duplicate any of our
technologies, and if patents are licensed or issued to us, design around the
patented technologies licensed to or developed by us. In addition, we could
incur substantial costs in litigation if we are required to defend ourselves in
patent suits brought by third parties or if we initiate such suits.
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We are aware of a number of U.S. patents and patent applications and
related foreign patents and patent applications owned by third parties relating
to gene sequences and the analysis of gene function. These other technologies
may provide third parties with competitive advantages over us and may hurt our
business. In addition, some third party patent applications contain broad
claims, and it is not possible to determine whether or not such claims will be
narrowed during prosecution or will be allowed and issued as patents, even if
such claims appear to cover prior art or have other defects. An owner or
licensee of a patent in the field may threaten or file an infringement action
and we may or may not prevail in any such action. The cost of defending an
infringement action may be substantial, which could significantly increase our
expenses and increase our losses. Furthermore, required licenses may not be
made available on commercially viable terms, if at all. Failure to obtain any
required license could prevent us from utilizing or commercializing one or more
of our technologies or gene-related products.
We have applied, and intend to make additional applications, for patent
protection for:
. methods relating to gene sequencing, phenotype analysis, gene
expression profiling, metabolic profiling and other methods for
determination of gene function;
. bioinformatic technologies;
. function specific patterns of gene expression we identify; and
. individual genes and targets we discover.
Such patents may include claims relating to novel genes and gene fragments and
to novel uses for known genes or gene fragments identified through our
discovery programs. We may not be able to obtain meaningful patent protection
for our discoveries; even if patents are issued, the scope of the coverage or
protection they would afford is uncertain. Failure to secure such meaningful
patent protection would endanger our competitive position.
With respect to proprietary know-how that is not patentable and for
processes for which patents are difficult to enforce, we rely on trade secret
protection and confidentiality agreements to protect our interests, including
several elements of our FunctionFinder bioinformatics system. In addition, we
are developing a proprietary index of plant and fungal gene and gene fragment
sequences which we update on an ongoing basis. Some of this data will be the
subject of patent applications, whereas other data will be maintained as
proprietary trade secret information. We have taken security measures to
protect our proprietary know-how and technologies and confidential data and
continue to explore further methods of protection. While we require all
employees, consultants and strategic partners to enter into confidentiality
agreements, we cannot be certain that proprietary information will not be
disclosed, that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to our trade
secrets, or that we can meaningfully protect our trade secrets. In the case of
arrangements with our strategic partners that require the sharing of data, our
policy is to make available to our strategic partners only such data as is
relevant to our agreements with such strategic partners, under controlled
circumstances, and only during the contractual term of those agreements, and
subject to a duty of confidentiality on the part of our customer. However, such
measures may not adequately protect our data. Any material leak of confidential
data into the public domain or to third parties may harm our business.
We are a party to various license agreements that give us rights to use
technologies and biological materials in our research and development
processes. We may not be able to maintain such rights on commercially
reasonable terms, if at all. Failure by us to maintain such rights could harm
our business.
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Employees
As of March 27, 2000, we had 118 full-time employees, of whom 33 hold
Ph.D. degrees. Of our total workforce, 92 are engaged in research and
development activities and 26 are engaged in business development, finance and
administration. None of our employees is represented by a collective bargaining
agreement. We believe that our relations with our employees are good.
Facilities
We currently lease an aggregate of approximately 48,000 square feet of
single-story office and laboratory facilities in Research Triangle Park, North
Carolina. The first building lease, for approximately 28,000 square feet on
Alexander Drive in Research Triangle Park, expires on March 31, 2000 but then
is automatically renewable on a month-to-month basis. The second building
lease, for approximately 20,000 square feet on S. Miami Boulevard in Durham,
expires August 31, 2002. We have the option to renew both leases.
In July 1999, we entered into an agreement with a real estate investment
trust to develop and finance long-term laboratory and office facilities for us
on 11 acres adjacent to our current facilities in Research Triangle Park. Under
the terms of the agreement, the real estate investment trust has agreed to
develop a two-story laboratory and office complex covering approximately 54,000
square feet and a single-story plant facility incorporating growth rooms and
greenhouse space covering approximately 32,000 square feet. Both facilities are
scheduled to be completed by the end of 2000. We also have an option to require
the real estate investment trust to develop and finance an additional two-story
laboratory and office facility covering approximately 50,000 square feet on the
same site.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding our executive
officers and directors as of March 27, 2000.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John A. Ryals, Ph.D. ..... 45 Chief Executive Officer, President and Director
Henry P. Nowak, Esq. ..... 44 Vice President of Intellectual Property,
General Counsel and Secretary
Richard E. Kouri, Ph.D. .. 56 Vice President of Business Development
Ian A.W. Howes............ 41 Vice President of Finance and Operations,
Chief Financial Officer and Treasurer
Athanasios Maroglou,
Ph.D. ................... 41 Vice President of Project Management
Scott J. Uknes, Ph.D. .... 39 Vice President of Business Strategy
John Hamer, Ph.D. ........ 42 Vice President of Research
Craig Liddell, Ph.D. ..... 41 Vice President of Informatics
G. Steven Burrill (1)..... 55 Director and Chairman of the Board
Dennis Dougherty (1)...... 52 Director
Robert Goodman, Ph.D.
(2)...................... 54 Director
Terrance McGuire (2)...... 43 Director
Michael Summers (2)....... 57 Director
Henri Zinsli, Ph.D. (1)... 58 Director
</TABLE>
- ------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
John A. Ryals, Ph.D. co-founded our company in September 1997 and has
served as our Chief Executive Officer and President since inception. From
October 1996 to September 1997, Dr. Ryals was Vice President of Research for
Novartis Crop Protection, Inc. and Head of the Biotechnology and Genomics
Center of Novartis in Research Triangle Park, North Carolina, where he was
responsible for worldwide biotechnology and genomics research and target-based
discovery. Dr. Ryals has 15 years of experience in agricultural biotechnology
working in various positions at the Agricultural Biotechnology Research Unit of
Ciba-Geigy Corporation, including Head of Agricultural Biotechnology Research
and Vice-President of Biotechnology at Ciba Seeds, a position which he held
from 1993 to 1996. Dr. Ryals received his Ph.D. in Molecular Biology from the
University of Texas at Dallas in 1982 and is an Adjunct Professor at North
Carolina State University.
Henry P. Nowak, Esq. has been our Vice President of Intellectual Property,
General Counsel and Secretary since May 1998. From March 1995 to April 1998,
Mr. Nowak served as the legal and patent counsel at Novartis Pharmaceuticals
and Systemix. Previously, he served as legal and patent counsel for Somatogen,
Amgen, Ciba-Geigy Agriculture and Schering-Plough. He is a member of three
state bars and the Federal Patent Bar. Mr. Nowak received his joint J.D./M.B.A.
degree from Florida State University in 1986 and a M.S. in Biochemistry from
Utah State University in 1981.
Richard E. Kouri, Ph.D. has served as our Vice President of Business
Development since June 1999. From January 1997 to January 1999, he was Senior
Vice President of Research at VIMRX Pharmaceuticals, Inc. and President and
Chief Executive Officer of VIMRX Genomics, Inc., a subsidiary of VIMRX
Pharmaceuticals, Inc. From June 1994 to January 1997, he was Chief Operating
Officer, Chief Technical Officer and Senior Vice President at Gene Logic, Inc.
Dr. Kouri received the Ph.D. degree in Radiation Biology from the University of
Tennessee and was a post-doctoral fellow at the Roche Institute of Molecular
Biology.
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<PAGE>
Ian A. W. Howes has served as our Vice President of Finance and Operations
and Chief Financial Officer and Vice President of Finance and Operations since
January 1999. From February 1998 to December 1998, Mr. Howes was Chief
Financial Officer at Analytika, Inc., a provider of pharmaceutical data mining
software and services. From October 1995 to January 1998, he was Chief
Financial Officer at American Care Communities. From May 1991 to August 1995,
Mr. Howes was Chief Financial Officer at EnSys, Inc., a publicly traded
biotechnology company. Mr. Howes received his M.B.A. from the Kenan-Flagler
Business School at the University of North Carolina at Chapel Hill in 1997 and
is a Chartered Accountant in England and Wales.
Athanasios Maroglou, Ph.D. has served as our Vice President of Project
Management since October 1999. From 1985 to 1999, Dr. Maroglou was Research and
Development Manager at E. I. DuPont De Nemours & Company. As Research and
Development Manager, he was responsible for discovery and commercialization of
new herbicides and for product support and renewal. In his 14 years at DuPont,
Dr. Maroglou also served as Process Development Manager, Operations Supply
Chain Manager and Manufacturing Area Manager. He received his Ph.D. in Chemical
Engineering at the University of Birmingham, England.
Scott J. Uknes, Ph.D. co-founded our company in September 1997 and has
served as our Vice President of Business Strategy since March 1999. From
inception to March 1999, he served as our Vice President of Fungal Research.
From 1990 to September 1997, Dr. Uknes held various positions at Ciba-Geigy
Corporation, including Research Director for the Seeds Disease Control
projects, where he led a research program aimed at meeting the market need for
disease resistant crops. Dr. Uknes is an adjunct professor at North Carolina
State University and serves on the Scientific Advisory Board of Biolex, Inc.
Dr. Uknes received his Ph.D. in Plant Molecular Biology from Washington
University, St. Louis, Missouri, in 1990.
John Hamer, Ph.D. has served as our Vice President of Research since
February 2000. From March 1999 to February 2000, Dr. Hamer served as our
Director of Microbial Research. From September 1998 to March 1999, he served as
our Director of Fungal Biology. From September 1989 to September 1998, Dr.
Hamer served as Professor of Biological Sciences and Adjunct Professor of
Microbiology and Immunology at Purdue University. While at Purdue, Dr. Hamer
was awarded the David and Lucille Packard Fellowship and the National Science
Foundation Presidential Faculty Fellowship. He is currently editor-in-chief of
the academic press journal Fungal Genetics and Biology and currently serves on
the NSF-Microbial Genetics Study Panel. Dr. Hamer received his Ph.D. in
Microbiology from the University of California, Davis in 1987.
Craig Liddell, Ph.D. has served as our Vice President of Informatics since
February 2000. Since July 1998 through February 2000, Dr. Liddell served as our
Director of Informatics. Dr. Liddell has been an Adjunct Professor of Plant
Pathology and since 1991 he has been a Principal Investigator at the Computing
Research Laboratory at New Mexico State University. From July 1996 to July
1998, Dr. Liddell was an Associate Professor of Plant Pathology and from 1989
to July 1996, Dr. Liddell was an Assistant Professor of Plant Pathology at New
Mexico State University. Dr. Liddell was a Postdoctoral Research Scientist in
the Departments of Plant Pathology at the University of California, Davis and
the University of Wisconsin - Madison. He is the senior editor of the journal
Phytopathology. Dr. Liddell received his Ph.D. in Plant Pathology from the
University of Sydney, Australia in 1986.
G. Steven Burrill has been a member of our board of directors since March
1999, and has served as the chairman of our board of directors since December
1999. Mr. Burrill is the Chief Executive Officer of Burrill & Company, a
private merchant bank focused on life science companies, which he founded in
1996. Prior to starting Burrill & Company, Mr. Burrill spent 27 years with
Ernst & Young, including the last 17 years as partner of the firm. Mr. Burrill
received his BBA degree from the University of Wisconsin - Madison. Mr. Burrill
currently serves on the boards of directors of DepoMed, Inc. and Transgene SA.
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<PAGE>
Dennis Dougherty has been a member of our board of directors since
February 1998. Since October 1984, Mr. Dougherty has been a General Partner of
Intersouth Partners, a series of venture capital funds which invests in life
science and technology companies throughout the Mid-Atlantic and Southeast. Mr.
Dougherty currently serves on the boards of directors of six private life
science companies, which include Xanthon, Inc., Cogent Neuroscience, Inc.,
Biolex, Inc., Insmed Pharmaceuticals, Inc. and Encelle, Inc.
Terrance McGuire has been a member of our board of directors since
February 1998. Mr. McGuire is a founder and has been a general partner of
Polaris Venture Funds, Inc., a venture capital fund, since March 1996. Since
1992, he has served as a general partner of Burr, Eagan, Deleage and Co., a
venture capital firm, and since 1989 he has served as general partner of Beta
Partners, a venture capital firm. He is also a member of the board of directors
of Akamai Technologies, Inc., Aspect Medical Systems, Inc., Inspire
Pharmaceuticals, Inc., Wrenchead.com, Inc. and deCODE Genetics, Inc. Mr.
McGuire received his B.S. in Physics and Economics from Hobart College, his
M.S. in Engineering from Dartmouth College and his M.B.A. from the Harvard
Business School.
Michael Summers has been a member of our board of directors since March
1998. Since October 1990, Mr. Summers has been a managing partner of Summers
Associates, a specialized international business development organization. Mr.
Summers is also managing director of Floranova Limited. He received his B.S. in
Botany from the University of Exeter in 1964.
Robert M. Goodman, Ph.D. has been a member of our board of directors since
June 1998. Since September 1991, Dr. Goodman has been a Professor of Plant
Pathology at the University of Wisconsin-Madison. Dr. Goodman is also a member
of the Department of Microbiology graduate program, the interdepartmental
program in plant genetics and plant breeding, the Institute of Environmental
Studies, the graduate program in cellular and molecular biology and the
biotechnology training program. Dr. Goodman received a Ph.D. in plant virology
from Cornell University in 1973.
Henri Zinsli, Ph.D. has been a member of our board of directors since June
1998. Since 1997, Dr. Zinsli has served as the Chairman of Discovery
Technologies Ltd. in Allschwil, Switzerland, and since 1999, he has also served
as the Chief Executive Officer of Discovery Technologies Ltd. Since 1998, he
has served as the Chairman of Zeptosens Inc. in Witterswil, Switzerland. He is
also a non-executive Director of Plasmon, plc, in Royston, UK, a position which
he has held since 1996. Until 1996, he was the head of Corporate Business
Development at Ciba-Geigy Ltd. in Basel. Dr. Zinsli has over 30 years of
experience at Ciba-Geigy Ltd. He received his Ph.D. in economics at the
University of St. Gallen, Switzerland in 1968.
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed. There are no family
relationships among any of our directors or executive officers. No director has
a contractual right to serve as a member of our board of directors.
Scientific Advisory Board
The following individuals are members of our Scientific Advisory Board:
Michael Bevan, Ph.D. heads the Molecular Genetics Department at the John
Innes Institute in the United Kingdom. Dr. Bevan also leads the European arm of
the Arabidopsis genome sequencing effort.
Joseph R. Ecker, Ph.D. is Professor of Plant Biology at the Salk Institute
in La Jolla California. In addition, he leads the U.S. Arabidopsis genome
sequencing effort.
Luis Herrera-Estrella, Ph.D. is Professor of Plant Genetic Engineering in
the Department of Genetics, Centro de Investigacion y Estudios Avanzanidos del
I.P.N.
41
<PAGE>
Mark Johnston, Ph.D. is Professor of Genetics at Washington University
School of Medicine. Dr. Johnston led the U.S. effort to sequence the genome of
Baker's yeast.
Ingo Potrykus, Ph.D. is Professor of Plant Sciences at the Institute of
Plant Sciences, Swiss Federal Institute of Technology in Zurich, Switzerland.
A. Ian Scott, Ph.D. is Distinguished Professor of Chemistry at Texas A&M
University and is the C.J. Davidson Chair in Science. He is a Fellow of the
Royal Society and the American Association for the Advancement of Science.
Bruce C. Weir is the William Neal Reynolds Professor of Statistics and
Genetics at North Carolina State University.
Board Composition
Upon completion of this offering, our board of directors will consist of
seven members divided into three classes, with two members in two of the
classes and three members in the third class. Each year, the stockholders will
elect the members of one of the three classes to a three-year term of office.
Upon completion of this offering, Mr. McGuire and Mr. Dougherty will serve in
the class whose term will expire at the annual meeting of our stockholders in
2001; Mr. Summers and Dr. Zinsli will serve in the class whose term will expire
at the annual meeting of our stockholders in 2002; and Mr. Burrill, Dr. Ryals
and Dr. Goodman will serve in the class whose term will expire at the annual
meeting of our stockholders in 2003. In addition, our certificate of
incorporation provides that the authorized number of directors may be changed
only by resolution of the board of directors. This classification of the board
of directors may have the effect of delaying or preventing changes in control
or management of us.
Board Committees
Audit Committee. Our audit committee, consisting of Dr. Goodman, Mr.
McGuire and Mr. Summers, reviews our internal accounting procedures and the
services provided by our independent auditors.
Compensation Committee. Our compensation committee, consisting of Mr.
Burrill, Mr. Dougherty and Dr. Zinsli, reviews and recommends to our board of
directors the compensation and benefits of all our officers and executive
management and establishes and reviews general policies relating to
compensation and benefits of our employees.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been one
of our officers or employees. No member of the compensation committee serves a
member of the board of directors or compensation committee of any entity that
has an executive officer serving as a member of our board of directors or
compensation committee.
Compensation of Directors
Our directors who are also our employees receive no compensation for
serving on the board of directors. We provide cash compensation to our non-
employee directors of $2,000 per board meeting attended in person, $1,000 per
board meeting via telephone and $500 per committee meeting that does not occur
on the same day as a board meeting. We reimburse our non-employee directors for
reasonable expenses incurred in attending board and committee meetings. Our
non-employee directors also receive on the date of each annual meeting of our
stockholders non-qualified options to purchase 5,000 shares of our common
stock, which vest immediately and have an exercise price equal to the fair
market value of our common stock on the date of grant.
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<PAGE>
In June 1998, Dr. Goodman, Mr. Summers and Dr. Zinsli each received
options to purchase 50,000 shares of our common stock at an exercise price of
$0.08 per share. In December 1999, Dr. Goodman, Mr. Summers and Dr. Zinsli each
received options to purchase 2,666 shares of our common stock at an exercise
price of $0.60 per share. These options vest ratably beginning on the grant
date of the option and extending through the next four years of service. In
March 2000, Mr. Burrill, Mr. Dougherty and Mr. McGuire each received options to
purchase 50,000 shares of our common stock, which vest ratably beginning on the
grant date of the option and extending through the next three years of service
and have an exercise price equal to the public offering price that appears on
the cover page of this prospectus. For more information, see "Benefit Plans--
1998 Stock Option Plan."
Limitations of Liability; Indemnification of Directors and Officers
The Delaware General Corporation Law authorizes corporations to limit or
eliminate, subject to certain conditions, the personal liability of directors
to corporations and their stockholders for monetary damages for breach of their
fiduciary duties. In connection with the consummation of this offering, we will
adopt and file an amended and restated certificate of incorporation and amended
and restated bylaws. Our amended and restated certificate of incorporation will
limit the liability of our directors to the fullest extent permitted by
Delaware law.
Our amended and restated certificate of incorporation and bylaws will also
provide that we will indemnify any of our directors and officers who, by reason
of the fact that he or she is one of our officers or directors, is involved in
a legal proceeding of any nature. We will repay certain expenses incurred by a
director or officer in connection with any civil or criminal action or
proceeding, specifically including actions by us or in our name (derivative
suits). Such indemnifiable expenses include, to the maximum extent permitted by
law, attorney's fees, judgments, civil or criminal fines, settlement amounts
and other expenses customarily incurred in connection with legal proceedings. A
director or officer will not receive indemnification if he or she is found not
to have acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, our best interest.
Such limitation of liability and indemnification does not affect the
availability of equitable remedies. In addition, we have been advised that in
the opinion of the SEC, indemnification for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act and
is therefore unenforceable.
There is no pending litigation or proceeding involving any of our
directors, officers, employees or agents in which indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
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<PAGE>
Executive Compensation
The following table sets forth the total compensation, during the year
ended December 31, 1999, paid to or accrued by our Chief Executive Officer and
each of our four other most highly compensated executive officers whose total
salary and bonus for 1999 exceeded $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------------
Annual Number of
Compensation Securities
----------------- Underlying All Other
Name and Principal Position Salary Bonus Options Compensation
- --------------------------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C>
John A. Ryals, Ph.D. ............ $221,825 $ 58,438 77,917 $ 600(1)
Chief Executive Officer,
President and Director
Ian A.W. Howes................... 155,400 41,250 303,300 --
Vice President of Finance and
Operations, Chief Financial
Officer and Treasurer
Henry P. Nowak, Esq.............. 145,000 41,250 303,300 --
Vice President of Intellectual
Property, General Counsel and
Secretary
Scott J. Uknes, Ph.D. ........... 131,250 33,750 9,000 --
Vice President of Business
Strategy
John Hamer, Ph.D. ............... 142,500 37,500 167,500 5,000(2)
Vice President of Research
</TABLE>
- ------------------
(1) Represents life insurance premiums paid on behalf of Dr. Ryals.
(2) Represents reimbursements for moving expenses paid to Dr. Hamer.
Option Grants in 1999
The following table presents each grant of stock options during the fiscal
year ended December 31, 1999, to each of the individuals listed in the Summary
Compensation Table.
All options were granted under our 1998 Stock Option Plan. The following
options are immediately exercisable in full at the date of grant, but shares
purchased on exercise of unvested options are subject to a repurchase right in
our favor that entitles us to repurchase unvested shares at their original
exercise price on termination of the employee's services with us.
The potential realizable value is calculated based on the ten year term of
the option at the time of grant. Stock price appreciation of 0%, 5% and 10% is
assumed pursuant to the rules promulgated by the SEC and does not represent our
estimate of future stock price performance. The potential realizable value at
0%, 5% and 10% appreciation are calculated by:
. multiplying the number of shares of common stock under the option by
the assumed public offering price of $15.00 per share;
. assuming that the aggregate stock value derived from that calculation
compounds at the annual 0%, 5% or 10% rate shown in the table until
the expiration of the options; and
. subtracting from that result the aggregate option exercise price.
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<PAGE>
Percentages shown under "Percentage of Total Options Granted to Employees
in 1999" are based in an aggregate of 1,633,119 options granted to our
employees and directors under our 1998 Stock Option Plan during 1999.
<TABLE>
<CAPTION>
Potential Realization
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
----------------------------------------------- ---------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Per Expiration
Name Granted 1999 Share Date 0% 5% 10%
- ---- ---------- ------------- --------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John A. Ryals, Ph.D. ... 77,917(1) 4.8% $0.60 12/14/2006 $1,122,005 $1,857,029 $ 2,984,699
Ian A.W. Howes.......... 270,300(2) 16.6% 0.08 01/01/2006 4,032,876 6,582,729 10,494,705
33,000(1) 2.0% 0.60 12/14/2006 475,200 786,503 1,264,103
Henry P. Nowak, Esq. ... 33,000(1) 2.0% 0.60 12/14/2006 475,200 786,503 1,264,103
Scott J. Uknes, Ph.D.... 9,000(1) 0.6% 0.60 12/14/2006 129,600 214,501 344,755
John Hamer, Ph.D........ 50,000(3) 3.1% 0.22 06/29/2006 739,000 1,210,671 1,934,307
17,500(1) 1.1% 0.60 12/14/2006 252,000 417,085 670,357
</TABLE>
- ------------------
(1) Our repurchase right lapses in equal monthly installments over the four
years commencing on the grant date.
(2) Includes 27,030 options as to which our repurchase right lapsed at the
grant date, 60,818 options as to which our repurchase right lapsed on the
first anniversary of the grant date, and 182,452 options as to which our
repurchase right will lapse in equal monthly installments over the 36
months following the first anniversary of the grant date.
(3) Includes 12,500 options as to which our repurchase right will lapse on the
first anniversary of the grant date and 37,500 options as to which our
repurchase right will lapse in equal monthly installments over the 36
months following the first anniversary of the grant date.
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<PAGE>
Option Values at December 31, 1999
The following table presents the number and value of unexercised options
and securities issuable upon the exercise of options that were held by each of
the individuals listed in the Summary Compensation Table as of December 31,
1999.
These options are immediately exercisable in full at the grant date, but
shares purchased by exercise of unvested options are subject to a repurchase
right in our favor that entitles us to repurchase unvested shares at their
original exercise price on termination of the employee's services with us. The
value realized is based on the fair market value of the underlying securities
as of the date of exercise, minus the per share exercise price, multiplied by
the number of shares underlying the option. The value of unexercised in-the-
money options is based on a value of $4.50 per share, the fair market value of
our common stock on December 31, 1999 as determined in good faith by our board
of directors. Amounts reflected are based on the value of $4.50 per share,
minus the per share exercise price, multiplied by the number of shares
underlying the option.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Value
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options at the-Money Options at
Shares December 31, 1999 December 31, 1999
Acquired Value -------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John A. Ryals, Ph.D. ... -- -- 77,919(1) -- 83,371 --
Ian A.W. Howes.......... 303,300 132,618 -- -- -- --
Henry P. Nowak, Esq. ... 270,300 97,308 33,000(1) -- 35,310 --
Scott J. Uknes, Ph.D. .. -- -- 9,000(1) -- 9,630 --
John Hamer, Ph.D. ...... 33,333 52,999 134,167(2) -- 197,226 --
</TABLE>
- ------------------
(1) As of December 31, 1999, our repurchase right had not lapsed as to any of
these options. Accordingly, these options were exercisable but not vested
on that date.
(2) As of December 31, 1999, our repurchase right had lapsed as to 33,333.
Accordingly, the remaining 134,167 options were exercisable, but not
vested, on that date.
Employment Agreements and Termination of Employment Agreements
At the time of commencement of employment, most of our employees sign
offer letters and employment agreements. These employment agreements provide
for employment at will and contain standard provisions relating to confidential
information and invention assignment by which the employee agrees not to
disclose any confidential information received during his or her employment
with us and that, with some exceptions, he or she will assign to us any and all
inventions conceived or developed during employment.
In February 1998, we entered into employment agreements with Dr. Ryals and
Dr. Uknes. Pursuant to these employment agreements, initial annual base
salaries were set at $180,000 for Dr. Ryals and $120,000 for Dr. Uknes. In
addition, each is entitled to receive annual bonuses of 25% of base salary to
be awarded on the basis of mutually agreed upon objectives and criteria between
each of Dr. Ryals and Dr. Uknes and us. The agreements provide that the
employment relationship may be terminated with or without cause at any time by
the individual or us. Furthermore, the agreements provide that, if we terminate
either of Dr. Ryals or Dr. Uknes with or without "cause", as defined in the
agreements, we have no obligation to pay severance beyond the individual's
accrued base salary and bonus up to the date of termination. However, if we
continue to pay either of Dr. Ryals or Dr. Uknes an amount equal to his current
monthly salary for a three month period following a termination without cause,
he shall be prohibited from competing with us for that three
46
<PAGE>
month period. Moreover, upon proper notice to Dr. Ryals or Dr. Uknes, we may
extend the non-compete period to a total of twelve months provided we continue
to pay him such amounts. If we terminate Dr. Ryals or Dr. Uknes for cause or if
either terminates his employment relationship, he shall be prohibited from
competing with us for a period of twelve months following the date of
termination. These employment agreements also provide that employment is
contingent upon execution of separate agreements pursuant to which Dr. Ryals or
Dr. Uknes agrees that he will not disclose any confidential information
received during his employment with us and, that, with some exceptions, he will
assign to us any and all inventions conceived or developed during his
employment with us. Termination for any reason other than for cause results in
accelerated vesting of all of their restricted stock.
Benefit Plans
2000 Employee, Director and Consultant Stock Option Plan
Our 2000 Employee, Director and Consultant Stock Option Plan was approved
by our board of directors in February 2000 and by our stockholders in March
2000. Under this plan, we may grant both incentive stock options and
nonqualified stock options. As of March 27, 2000, a total of 1,800,000 shares
of common stock have been reserved for issuance under this plan. No options
have been granted under this plan.
Our board of directors administers the 2000 plan. Our board of directors
may delegate authority to administer the 2000 plan to a committee of our board
of directors. Subject to the terms of the plan, our board of directors or its
authorized committee determines recipients and the terms of options granted
pursuant to this plan including:
. the exercise price and the number of shares subject to each option;
. the vesting schedule for options;
. the termination or cancellation provisions applicable to options; and
. the conditions relating to our right to reacquire shares subject to
options.
The maximum term of options granted under this plan is ten years.
If we are acquired, our board of directors or its designated committee
will provide that outstanding options under this plan shall be: (1) assumed by
the successor or acquiring company; (2) exercised within a specified number of
days or the options will terminate; or (3) terminated in exchange for a cash
payment equal to the value of the option at the time we are acquired. If we are
acquired, our board of directors or its designated committee may also provide
that all outstanding options fully vest.
2000 Employee Stock Purchase Plan
Our 2000 Employee Stock Purchase Plan was approved by our board of
directors in March 2000 and will be submitted to our stockholders for their
approval prior to the completion of this offering. Under this plan, we may
issue up to a total of 500,000 shares of our common stock to participating
employees. Employees, including officers, who are employed as of the first
business day of each offering period of the plan, an offering period generally
being a period of six months, is eligible to participate. However, an employee
who would immediately after the grant own 5% or more of the total combined
voting power or value of our stock or permits his or her rights to purchase
stock to accrue at a rate which exceeds $25,000 of the 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 are not eligible to
participate. There is a maximum number of shares that each employee may
purchase in any one offering period.
47
<PAGE>
During each offering period, each eligible employee may deduct a
percentage of their base pay to purchase our common stock under the plan. The
purchase price will be 85% of the fair market value of a share of our common
stock on the first business day of the offering period or 85% of the fair
market value of a share of our common stock on the exercise date, whichever is
lower.
In the event we are acquired, each option under the Plan may be assumed or
substituted with an equivalent option by the successor corporation. In lieu of
assumption or substitution, our board of directors in its discretion may
shorten the offering period in progress.
1998 Stock Option Plan
In October 1998, we adopted our 1998 Stock Option Plan. The stockholders
approved the plan in June 1999. We amended the 1998 Plan in November and
December 1999 to increase its number of options that could be issued. The 1998
Plan authorizes the issuance of up to 4,015,000 shares of common stock. Since
March 21, 2000, after our stockholders approved our new stock option plan, no
additional grants of stock options are being made under the 1998 Plan. As of
March 27, 2000, options to purchase an aggregate of 1,537,760 shares of common
stock at a weighted average exercise price of $2.55 per share were outstanding
under the 1998 Plan.
Options granted to purchase shares of our common stock under our 1998
Stock Option Plan are generally immediately exercisable by the optionee but are
subject to a right of repurchase pursuant to the vesting schedule of each
specific grant. In the event that a purchaser ceases to provide service to us
and our affiliates, we have the right to repurchase any of that person's
unvested shares of common stock at the original option exercise price.
Our board of directors or its designated committee may, in its sole
discretion, accelerate or extend the date or dates on which all or any
particular option or options granted under the 1998 Plan may be exercised. In
the event of a decline in the value of our common stock, our board of directors
or its designated committee has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new options below
our priced options.
The maximum term of options granted under this plan is ten years.
If we are acquired, all our outstanding options under the plan either will
be assumed or substituted for by any surviving entity or our parent or
subsidiary corporation, if any. For stock options granted, if the surviving
entity or our parent or subsidiary corporation, if any, determines not to
assume or substitute the options, the board of directors shall provide for the
options to be fully exercisable for a period of 30 days from the date of
notice. If the board of directors makes the options fully exercisable for this
30-day period, the options will terminate at the end of this period.
401(k) Plan
We maintain a retirement and deferred savings plan for our employees that
is intended to qualify as a tax-qualified plan under the Internal Revenue Code.
The 401(k) Plan provides that each participant may contribute up to 15% of his
or her pre-tax compensation to the savings plan, subject to statutorily
prescribed annual limits, which is $10,500 in the calendar year 2000. Under
this plan each participant who makes pre-tax contributions is eligible to have
a matching contribution in cash made by us to his or her matching plan account
in an amount up to 25% of the participant's savings plan contribution with a
maximum annual employer contribution of 6% of each participant's annual salary,
subject to statutorily prescribed annual limits. The matching contributions
vest annually over a three year period. We may make additional discretionary
contributions for all participants to their matching plan accounts.
48
<PAGE>
CERTAIN TRANSACTIONS
The following executive officers, directors, founders or holders of more
than five percent of our voting securities purchased securities in the amounts
as set forth below. Each share of our Series A, Series B and Series C Preferred
Stock is convertible into one share of our common stock.
<TABLE>
<CAPTION>
Shares of Preferred Stock
-----------------------------
Common Stock Series A Series B Series C Warrants (10)
------------ --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Directors and Executive
Officers
John A. Ryals (1)....... 1,195,181
Henry P. Nowak (2)...... 271,300
Richard E. Kouri........
Ian A.W. Howes ......... 303,300
Athanasios Maroglou..... 165,000
Scott J. Uknes.......... 852,272
John Hamer (3).......... 39,333
Craig Liddell...........
G. Steven Burrill (4)... 1,395,349 400,000
Dennis Dougherty (5).... 2,687,500 516,389 200,000 250,000
Robert Goodman.......... 52,666
Terrance McGuire (6).... 1,875,000 329,610 1,800,000
Michael Summers.........
Henri Zinsli............ 50,000
Founders
Sandy Stewart........... 852,272
Jorn Gorlach............ 852,272
Five Percent
Stockholders
The Burrill AgBio
Capital Fund L.P. ..... 1,395,349 400,000
Intersouth Partners
(7).................... 2,687,500 516,389 200,000 250,000
Polaris Venture Funds
(8).................... 1,875,000 329,610 1,800,000
Innotech Investments
Limited (9)............ 2,937,500 549,350 200,000 187,500
</TABLE>
- ------------------
(1) Includes 2,000 shares held by Dr. Ryals' wife.
(2) Includes 1,000 shares held by Mr. Nowak's wife.
(3) Includes 6,000 shares held by Dr. Hamer's wife.
(4) Represents shares held of record by The Burrill AgBio Capital Fund L.P.
Mr. Burrill, the chairman of our board directors, is Chief Executive
Officer of Burrill & Company, the General Partner of Burrill AgBio Capital
Fund L.P.
(5) Represents shares and warrants held of record by Intersouth Partners IV,
L.P. and Intersouth Partners III, L.P. Mr. Dougherty, one of our
directors, is General Partner of Intersouth Partners IV, L.P. and
Intersouth Partners III, L.P.
(6) Represents shares held of record by Polaris Venture Partners III, L.P.,
Polaris Venture Partners Founders' Fund L.P. and Polaris Venture Partners
L.P. Mr. McGuire is a founding partner of Polaris Venture Partners
Founders' Fund L.P., Polaris Venture Partners, L.P. and Polaris Venture
Partners III, L.P.
(7) Represents shares and warrants held of record by Intersouth Partners IV,
L.P. and Intersouth Partners III, L.P.
(8) Represents shares held of record by Polaris Venture Partners L.P., Polaris
Venture Partners Founders' Fund L.P. and Polaris Venture Partners III,
L.P.
(9) Represents shares of our common stock and warrants to purchase shares of
our common stock held of record by Innotech Investments Limited, an
investment company incorporated in the United Kingdom which has investment
and voting power over the shares. All of the issued capital stock of
Innotech Investments Limited is owned by a Blind Trust, the sole Trustee
of which is Miss J S Portrait, who, as a result of her control of the
shares of Innotech, may be deemed to be the beneficial owner of the
Paradigm shares held by Innotech.
(10) Consists of warrants issued in connection with the Series A Preferred
Stock round. They are warrants to purchase shares of Series A Preferred
Stock at an exercise price of $0.80 per share. These warrants expire on
February 2008.
49
<PAGE>
We have entered into the following agreements and transactions with our
executive officers, directors and holders of more than five percent of our
voting securities:
We, our founders, including Drs. Ryals and Uknes, the preferred
stockholders listed above and other stockholders have entered into an Amended
and Restated Registration Rights Agreement. Under this Agreement, they will
have registration rights with respect to their shares of common stock following
this offering. See "Description of Capital Stock -- Registration Rights" on
page 55 for a more detailed description of the terms of this agreement.
In June 1998, Dr. Zinsli, Mr. Summers and Dr. Goodman each received
options to purchase a total of 50,000 shares at an exercise price of $0.08 per
share. In December 1999, Dr. Zinsli, Mr. Summers and Dr. Goodman each received
options to purchase a total of 2,666 shares of common stock at an exercise
price of $0.60 per share. In March 2000, Mr. Burrill, Mr. Dougherty and Mr.
McGuire each received options to purchase a total of 50,000 shares of our
common stock, which options vested immediately and have an exercise price equal
to the public offering price that appears on the cover page of this prospectus
.
In February 1998, we entered into Founder Stock Repurchase and Vesting
Agreements with our founders, including Drs. Ryals and Uknes. Pursuant to the
terms of these vesting agreements, we have the right to repurchase unvested
shares of common stock held by each of them at the initial purchase price in
the event that he ceases his employment with us. These vesting agreements apply
to 1,193,181 shares of common stock held by Dr. Ryals and 852,272 shares of
common stock held by Dr. Uknes. As of March 2000, 50% of the shares subject to
these vesting agreements had vested, and the remaining shares vest in equal
monthly installments over the following 24 months. Our repurchase right with
respect to these shares will terminate in the event that the shares of common
stock sold in this offering are sold at a price of $10 per share or greater and
at an aggregate public offering price of $20 million or greater.
In February 2000, the Company agreed to pay Deborah Ryals, the wife of Dr.
Ryals, $14,250 and agreed to grant to Mrs. Ryals stock options to purchase
6,000 shares of common stock in settlement of her prior employment with the
Company during the period from September 1997 to January 1998.
We believe that all of the transactions described above were made on terms
no less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans, between us and our officers,
directors, principal stockholders and our affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested directors, and will continue to be on terms no less favorable to
us than could be obtained from unaffiliated third parties.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides summary information known to us regarding the
beneficial ownership of our outstanding common stock as of March 27, 2000, as
adjusted to reflect the sale of 5,000,000 shares of common stock in this
offering and the conversion of all outstanding shares of our convertible
preferred stock into shares of common stock, by:
. each person or group known to us who beneficially owns more than 5% of
outstanding our common stock;
. each of our directors and each named executive officer; and
. all of our directors and executive officers as a group.
Beneficial ownership of shares is determined under the rules of the
Securities and Exchange Commission. Unless otherwise indicated, the persons
included in the table have sole voting and investment power with respect to all
shares beneficially owned, subject to community property laws, where
applicable.
Shares of common stock subject to options currently exercisable or
exercisable within 60 days of March 27, 2000 are treated as outstanding for the
purpose of computing the percentage ownership of the person holding such
options. However, these shares are not treated as outstanding for the purposes
of computing the percentage ownership of any other person. Applicable
percentage ownership in the following table is based on 18,911,254 shares of
common stock outstanding as of March 27, 2000, after giving effect to the
conversion of all outstanding shares of preferred stock into common stock upon
the closing of this offering, and 23,911,254 shares of common stock outstanding
immediately following the completion of this offering. Unless otherwise
indicated, the address of each of the named individuals is c/o Paradigm
Genetics, Inc., 104 Alexander Drive, Research Triangle Park, North Carolina
27709. The percentages in the "After Offering" Column assumes that the
underwriters do not exercise their over-allotment option to purchase up to
750,000 shares.
<TABLE>
<CAPTION>
Percentage of
Common Stock
Beneficially Owned
---------------------
Number of Shares Before After
Beneficial Owner Beneficially Owned Offering Offering
- ---------------- ------------------ --------- ---------
<S> <C> <C> <C>
Directors and Executive Officers
Terrance McGuire (1)................ 4,054,610 21.4% 16.9%
Dennis Dougherty (2)................ 3,703,889 19.3% 15.3%
G. Steven Burrill (3)............... 1,845,349 9.7% 7.7%
John A. Ryals (4)................... 1,279,195 6.8% 5.3%
Scott J. Uknes (5).................. 861,272 4.6% 3.6%
Henry P. Nowak (6).................. 304,300 1.6% 1.3%
Ian A.W. Howes (7).................. 280,300 1.5% 1.2%
Craig Liddell (8)................... 167,500 * *
John Hamer (9)...................... 183,700 * *
Robert Goodman (10)................. 52,666 * *
Michael Summers (11)................ 52,666 * *
Henri Zinsli (12)................... 52,666 * *
Richard E. Kouri (13)............... 290,725 1.5% 1.2%
Athanasios Maroglou (14)............ 170,260 * *
All executive officers and directors
as a group (14 persons)............ 13,299,098 66.2% 53.0%
Five Percent Stockholders
Polaris Venture Funds (1)........... 4,054,610 21.4% 16.9%
Innotech Investments Limited (15)... 3,874,350 20.3% 16.1%
Intersouth Partners (2)............. 3,703,889 19.3% 15.3%
The Burrill AgBio Capital Fund L.P.
(3)................................ 1,845,349 9.7% 7.7%
</TABLE>
- ------------------
* Less than one percent (1%).
(1) Represents shares held of record by Polaris Venture Partners III, L.P.,
Polaris Venture Partners Founders' Fund L.P. and Polaris Venture Partners
L.P. Mr. McGuire is a founding partner of each of those entities. Mr.
McGuire
51
<PAGE>
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in those entities. Includes 50,000 shares that are
subject to immediately exercisable stock options. As of March 27, 2000, we
had the right to repurchase 50,000 shares issuable upon exercise of these
options if Mr. McGuire ceases his directorship with us.
(2) Includes shares held of record by Intersouth Partners IV, L.P. and
Intersouth Partners III, L.P. Includes a warrant to purchase 31,250 shares
of common stock held by Intersouth Partners IV, L.P. and a warrant to
purchase 218,750 shares of common stock held by Intersouth Partners III,
L.P. Mr. Dougherty is General Partner of those entities. Mr. Dougherty
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in those entities. Includes 50,000 shares that are
subject to immediately exercisable stock options. As of March 27, 2000, we
had the right to repurchase 50,000 shares issuable upon exercise of these
options if Mr. Dougherty ceases his directorship with us.
(3) Represents shares held of record by The Burrill AgBio Capital Fund L.P.
Mr. Burrill is Chief Executive Officer of Burrill & Company, the General
Partner of Burrill Ag Bio Capital Fund L.P. Mr. Burrill disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest in Burrill AgBio Capital Fund L.P. Includes 50,000 shares that
are subject to immediately exercisable stock options. As of March 27,
2000, we had the right to repurchase 50,000 shares issuable upon exercise
of these options if Mr. Burrill ceases his directorship with us.
(4) Includes 8,000 shares held by Dr. Ryals' wife and 77,917 shares that are
subject to immediately exercisable stock options. As of March 27, 2000, we
had the right to repurchase 73,047 shares issuable upon exercise of these
options if Dr. Ryals ceases his employment with us. Includes 1,193,181
shares of common stock subject to a vesting agreement described in
"Certain Transactions."
(5) Includes 9,000 shares which are subject to immediately exercisable
options. As of March 27, 2000, we had the right to repurchase 8,438 shares
issuable upon exercise of these options if Dr. Uknes ceases his employment
with us. Includes 852,272 shares of common stock subject to a vesting
agreement described in "Certain Transactions."
(6) Includes 1,000 shares held by Mr. Nowak's wife, 33,000 shares that are
subject to immediately exercisable stock options and 270,300 shares which
were issued upon the exercise of immediately exercisable stock options. As
of March 27, 2000, we had the right to repurchase 177,350 of the shares
issued or issuable upon exercise of these options if Mr. Nowak ceases his
employment with us.
(7) As of March 27, 2000, we had the right to repurchase 203,254 shares which
were issued upon exercise of options if Mr. Howes ceases his employment
with us.
(8) Includes options to purchase 167,500 shares that are subject to
immediately exercisable stock options. As of March 27, 2000, we had the
right to repurchase 114,323 shares issuable upon exercise of these options
if Dr. Liddell ceases his employment with us.
(9) Includes 6,000 shares which were issued upon the exercise of immediately
exercisable options and 10,200 immediately exercisable options held by Dr.
Hamer's wife. Also includes 33,333 shares of common stock that were issued
upon the exercise of immediately exercisable options and 134,167 shares
that are subject to immediately exercisable stock options held by Dr.
Hamer. As of March 27, 2000, we had the right to repurchase 126,823 shares
that are issuable upon exercise of Dr. Hamer's options if Dr. Hamer ceases
his employment with us.
(10) Consists of 52,666 shares subject to immediately exercisable options. As
of March 27, 2000, we had the right to repurchase 30,624 shares issued
upon exercise of options if Dr. Goodman ceases his directorship with us.
(11) Includes 52,666 shares that are subject to immediately exercisable stock
options. As of March 27, 2000, we had the right to repurchase 30,624
shares issuable upon exercise of these options if Mr. Summers ceases his
directorship with us.
(12) Includes 2,666 shares that are subject to immediately exercisable stock
options and 50,000 shares which were issued upon the exercise of stock
options. As of March 27, 2000, we had the right to repurchase 30,624 of
these shares issued or issuable upon exercise of these options if Dr.
Zinsli ceases his directorship with us.
(13) Includes 290,725 shares that are subject to immediately exercisable stock
options. As of March 27, 2000, we had the right to repurchase 289,874
shares issuable upon exercise of these options if Dr. Kouri ceases his
employment with us.
(14) Includes 5,260 shares that are subject to immediately exercisable options
and 165,000 shares that were issued upon the exercise of immediately
exercisable stock options. As of March 27, 2000, we had the right to
repurchase 170,041 of the shares issued or issuable upon exercise of these
options if Mr. Maroglou ceases his employment with us.
(15) Represents 3,686,850 shares of our common stock and warrants to purchase
187,500 shares of our common stock held of record by Innotech Investment
Limited, an investment company incorporated in the United Kingdom which
has investment and voting power over the shares. All of the issued capital
stock of Innotech Investment Limited is owned by a Blind Trust, the sole
Trustee of which is Miss J S Portrait, who as a result of her control of
the shares of Innotech, may be deemed to be the beneficial owner of the
Paradigm shares held by Innotech.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering and the filing of our restated
certificate of incorporation, we will be authorized to issue 50 million shares
of common stock, $0.01 par value per share, and 5 million shares of preferred
stock, $0.01 par value per share, and there will be 23,911,254 shares of common
stock and no shares of preferred stock outstanding. Assuming the conversion of
our preferred stock, as of March 27, 2000, we had 18,911,254 shares of common
stock outstanding held of record by 148 stockholders, and there were
outstanding options to purchase 1,537,760 shares of common stock and
outstanding warrants to purchase 763,779 shares of common stock.
Common Stock
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, and do not
have cumulative voting rights. Subject to preferences that may be applicable to
any outstanding shares of preferred stock, holders of common stock are entitled
to receive ratably such dividends, if any, as may be declared from time to time
by our board of directors out of funds legally available for dividend payments.
All outstanding shares of common stock are fully paid and nonassessable, and
the holders of common stock have no preferences or rights of conversion,
exchange or pre-emption. In the event of any liquidation, dissolution or
winding-up of our affairs, holders of common stock will be entitled to share
ratably in our assets that are remaining after payment or provision for payment
of all of our debts and obligations and after liquidation payments to holders
of outstanding shares of preferred stock, if any.
Preferred Stock
The preferred stock, if issued, would have priority over the common stock
with respect to dividends and other distributions, including the distribution
of assets upon liquidation. Our board of directors has the authority, without
further stockholder authorization, to issue from time to time shares of
preferred stock in one or more series and to fix the terms, limitations,
relative rights and preferences and variations of each series. Although we have
no present plans to issue any shares of preferred stock, the issuance of shares
of preferred stock, or the issuance of rights to purchase such shares, could
decrease the amount of earnings and assets available for distribution to the
holders of common stock, could adversely affect the rights and powers,
including voting rights, of the common stock, and could have the effect of
delaying, deterring or preventing a change in control of us or an unsolicited
acquisition proposal.
Warrants
As of March 27, 2000 the following warrants were outstanding.
. Warrants to purchase 437,500 shares of Series A Preferred Stock at an
exercise price of $0.80 per share. These warrants expire five years
after the completion of this offering.
. A warrant to purchase 150,000 shares of our common stock at an
exercise price of $3.00 per share. The warrant expires five years
after the completion of this offering.
. A warrant to purchase 116,279 shares of our common stock at an
exercise price of $ 2.15 per share. The warrant expires in July 2006.
. A warrant to purchase 60,000 shares of our common stock at an exercise
price of $5.00 per share. The warrant expires January 2010. The
issuance of the warrant is subject to the terms of an escrow
agreement.
Each of these warrants contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of
the warrant in the event of stock dividends, stock splits, reorganizations, and
reclassifications and consolidations.
53
<PAGE>
Registration Rights
The holders of the following shares of our common stock are entitled to
certain registration rights with respect to those shares. These registration
rights are subject to certain conditions and limitations, including the right
of the underwriters of an offering to limit the number of shares included in
any such registration under certain circumstances. All expenses incurred in
connection with registrations effected in connection with the following rights
will be borne by us.
Demand Rights. Beginning 180 days after completion of this offering, the
holders of 17,103,195 shares of common stock and 553,779 shares of common stock
issuable upon the exercise of outstanding warrants will have certain rights to
cause us to register those shares under the Securities Act. We may be required
to effect only one such registration. Stockholders with these registration
rights who are not part of an initial registration demand are entitled to
notice and are entitled to include their shares of common stock in the
registration.
Piggyback Rights. If at any time after this offering we propose to
register any of our equity securities under the Securities Act, other than in
connection with a registration relating solely to our stock option plans or
other employee benefit plans, or a registration relating solely to a business
combination or merger involving us, the holders of 17,103,195 shares of common
stock and 703,779 shares of common stock issuable upon the exercise of
outstanding warrants are entitled to notice of such registration and are
entitled to include their common stock in the registration.
S-3 Registration Rights. In addition, the holders of 17,103,195 shares of
common stock and 553,779 shares of common stock issuable upon the exercise of
outstanding warrants will have the right to cause us to register these shares
on a Form S-3, provided that we are eligible to use this form, subject to
certain limitations. We are not required to effect such a registration unless
the aggregate offering price of the shares to be registered, based on the then
current market price is at least $750,000. Also, we are only required to effect
one such registration during any 12-month period. Stockholders with these
registration rights who are not part of an initial registration demand are
entitled to notice and are entitled to include their shares of common stock in
the registration.
Delaware Law and Certain Charter and By-Law Provisions
Upon completion of this offering, the provisions of Delaware law and of
our restated certificate of incorporation and by-laws discussed below could
discourage or make it more difficult to accomplish a proxy contest or other
change in our management or the acquisition of control by a holder of a
substantial amount of our voting stock. It is possible that these provisions
could make it more difficult to accomplish, or could deter, transactions that
stockholders may otherwise consider to be in their best interests or the best
interests of Paradigm Genetics.
Delaware Statutory Business Combinations Provision. In general, Section
203 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, or the transaction in which
the person became an interested stockholder was, approved in a prescribed
manner or another prescribed exception applies. For purposes of Section 203, a
"business combination" is defined broadly to include a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder, and, subject to certain exceptions, an "interested stockholder" is
a person who, together with his or her affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's voting
stock.
Classified Board of Directors. Upon completion of this offering, our board
of directors will be divided into three classes. Each year the stockholders
will elect the members of one of the three classes to a three-year term of
office.
54
<PAGE>
All directors elected to our classified board of directors will serve
until the election and qualification of their respective successors or their
earlier resignation or removal. Only the board of directors will be authorized
to create new directorships and to fill such positions so created and be
permitted to specify the class to which any such new position is assigned. The
person filling such position would serve for the term applicable to that class.
Only the board of directors (or its remaining members, even if less than a
quorum) will be empowered to fill vacancies on the board of directors occurring
for any reason for the remainder of the term of the class of directors in which
the vacancy occurred. Members of the board of directors will only be able to be
removed for cause. These provisions are likely to increase the time required
for stockholders to change the composition of the board of directors. For
example, in general, at least two annual meetings will be necessary for
stockholders to effect a change in a majority of the members of the board of
directors.
Advance Notice Provisions for Stockholder Proposals and Stockholder
Nominations of Directors. Our by-laws will provide that, for nominations to
the board of directors or for other business to be properly brought by a
stockholder before a meeting of stockholders, the stockholder must first have
given timely notice of the proposal in writing to our Secretary. For an annual
meeting, a stockholder's notice generally must be delivered not less than 45
days nor more than 75 days prior to the anniversary of the mailing date of the
proxy statement for the previous year's annual meeting. For a special meeting,
the notice must generally be delivered by the later of 90 days prior to the
special meeting or ten days following the day on which public announcement of
the meeting is first made. Detailed requirements as to the form of the notice
and information required in the notice will be specified in the by-laws. If it
is determined that business was not properly brought before a meeting in
accordance with our by-law provisions, such business will not be conducted at
the meeting.
Special Meetings of Stockholders. Special meetings of the stockholders
will be able to be called only by our board of directors pursuant to a
resolution adopted by a majority of the total number of directors.
No Stockholder Action by Written Consent. Our restated certificate of
incorporation will not permit our stockholders to act by written consent. As a
result, any action to be effected by our stockholders must be effected at a
duly called annual or special meeting of the stockholders.
Super-Majority Stockholder Vote Required for Certain Actions. The Delaware
General Corporation Law provides generally that the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless the corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. Our restated certificate of incorporation will require the
affirmative vote of the holders of at least 80% of our outstanding voting stock
to amend or repeal any of the provisions discussed in this section of this
prospectus entitled "Delaware Law and Certain Charter and By-law Provisions".
This 80% stockholder vote would be in addition to any separate class vote that
might in the future be required pursuant to the terms of any preferred stock
that might then be outstanding. A 80% vote will also be required for any
amendment to, or repeal of, our by-laws by the stockholders. Our by-laws will
be able to be amended or repealed by a simple majority vote of the board of
directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock will be American
Stock Transfer and Trust Company.
55
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, because
only a limited number of shares will be available for sale shortly after this
offering because of contractual and legal restrictions on resale as described
below, sales of substantial amounts of our common stock in the public market
could occur after these restrictions lapse. This may adversely affect the
prevailing market price and our ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding 23,911,254
shares of common stock, assuming no exercise of the underwriters' over-
allotment option and no exercise of outstanding options or warrants after March
27, 2000. Of these shares, the 5,000,000 shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act, unless these shares are purchased by affiliates. The remaining
18,911,254 shares of common stock held by existing stockholders are restricted
securities. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration described
below under Rules 144, 144(k) or 701 promulgated under the Securities Act.
As a result of the contractual 180 day lock-up period described below and
the provisions of Rules 144, 144(k) and 701, the restricted shares will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
Number of Shares Date
---------------- ----
<S> <C>
62,500 ............ On the date of this prospectus
3,583 ............ After 90 days from the date of this prospectus
16,548,950 ............ After 180 days from the date of this prospectus
(subject, in some cases, to volume limitations)
3,060,000 ............ After various times after 180 days from the date of
this prospectus (subject, in some cases, to volume
limitations)
</TABLE>
Lock-Up Agreements
We, our directors and executive officers and certain of our stockholders
and option holders have each agreed not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of common stock or
any securities convertible into or exercisable or exchangeable for common
stock, for a period of at least 180 days after the date of this prospectus,
without the prior written consent of Chase Securities Inc., subject to limited
exceptions. Chase Securities Inc., however, may in its sole discretion, at any
time without notice, release all or any portion of the shares subject to lock-
up agreements.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
this offering, a person, or persons whose shares are aggregated, who owns
shares that were purchased from us, or any affiliate, at least one year
previously, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of our then-outstanding shares of
common stock, which will equal about 239,113 shares immediately after this
offering, or the average weekly trading volume of our common stock on the
Nasdaq National Market during the four calendar weeks preceding the filing of a
notice of the sale on Form 144. Sales under Rule 144 are also subject to manner
of sale provisions, notice requirements and the availability of current public
information about us. Any person, or persons whose shares are aggregated, who
is not deemed to have been one of our affiliates at any time during the three
months preceding a sale, and who owns shares within the definition of
"restricted securities" under Rule 144 that were purchased from us,
56
<PAGE>
or any affiliate, at least two years previously, would be entitled to sell
shares under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.
Rule 701
Subject to limitations on the aggregate offering price of a transaction
and other conditions, Rule 701 may be relied upon with respect to the resale of
securities originally purchased from us by our employees, directors, officers
or consultants prior to the date we become subject to the reporting
requirements of the Securities Exchange Act of 1934, or the Exchange Act, under
written compensatory benefit plans or written contracts relating to the
compensation of these persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Exchange Act, along with the shares acquired upon exercise of the options,
including exercises after the date of this prospectus. Securities issued in
reliance on Rule 701 are restricted securities and, subject to the contractual
restrictions described above, beginning 90 days after the date of this
prospectus, may be sold by persons other than affiliates subject only to the
manner of sale provisions of Rule 144 and by affiliates under Rule 144 without
compliance with its minimum holding period requirements.
Registration Rights
Upon completion of this offering, the holders of 17,103,195 shares of
common stock and 763,779 shares of common stock issuable upon the exercise of
and warrants or their transferees, will be entitled to various rights with
respect to the registration of these shares under the Securities Act.
Registration of these shares under the Securities Act would result in these
shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration, except for shares
purchased by affiliates. See "Description of Capital Stock--Registration
Rights" on page 55 for a more complete description of these registration
rights.
Stock Options
As of March 27, 2000 options to purchase a total of 1,537,760 shares of
common stock under our stock option plans were outstanding and 1,537,760 were
exercisable. All of the shares subject to options are subject to lock-up
agreements. An additional 669,181 shares of common stock were available for
future option grants under our stock plans.
Upon completion of this offering, we intend to file a registration
statement under the Securities Act covering all shares of common stock subject
to outstanding options or issuable pursuant to our stock option and stock
purchase plans. Subject to Rule 144 volume limitations applicable to
affiliates, shares registered under any registration statements will be
available for sale in the open market, beginning 90 days after the date of the
prospectus, except to the extent that the shares are subject to vesting
restrictions with us or the contractual restrictions described above.
57
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. Chase Securities Inc., J.P. Morgan & Co., Incorporated, Pacific Growth
Equities, Inc. and Stephens Inc. are acting as representatives of the
underwriters.
The underwriting agreement provides for the purchase of a specific number
of shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject to the terms
and conditions of the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares of common stock set forth opposite its
name below.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Chase Securities Inc. ............................................
J.P. Morgan Securities Inc. ......................................
Pacific Growth Equities, Inc. ....................................
Stephens Inc. ....................................................
---------
Total........................................................... 5,000,000
=========
</TABLE>
This is a firm commitment underwriting. This means that the underwriters
have agreed to purchase all of the shares offered by this prospectus, other
than those covered by the over-allotment option described below, if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances. We have agreed to indemnify the underwriters against certain
civil liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect of such liabilities.
The representatives have advised us that the underwriters propose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the representatives may offer
some of the shares to certain securities dealers at such price less a
concession of $ per share. The underwriters may also allow to dealers, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the shares are released for sale to the public,
the representatives may change the offering price and other selling terms at
various times.
We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 750,000 additional shares
from us to cover over-allotments. If the underwriters exercise all or part of
this option, they will purchase shares covered by the option at the public
offering price that appears on the cover page of this prospectus, less the
underwriting discount. If this option is exercised in full, the total price to
public will be $ million and our net proceeds will be approximately $
million. The underwriters have severally agreed that, to the extent the over-
allotment option is exercised, they will each purchase a number of additional
shares proportionate to the underwriter's initial amount reflected in the above
table.
58
<PAGE>
The following table provides information regarding the amount of the
discount to be paid to the underwriters by us. Such amount is shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares.
UNDERWRITING DISCOUNT PAID BY US
<TABLE>
<CAPTION>
NO FULL
EXERCISE EXERCISE
-------- --------
<S> <C> <C>
Per Share ................................................ $ $
Total..................................................... $ $
</TABLE>
We estimate that the total expenses of the offering, excluding the
underwriting discount, will be approximately $1.0 million.
We have agreed to indemnify each underwriter against all liabilities to
which they may become subject under the federal securities laws or other law,
including reimbursement of expenses, arising out of any untrue statements or
alleged untrue statement of a material fact contained in the registration
statement, including the prospectus, or the omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements not misleading, except that there is no indemnification for specific
information furnished by the underwriters. This includes contribution to any
payments which may be made by the underwriters in the event that
indemnification is not available.
Our executive officers, directors and certain of our stockholders, who
will own in the aggregate 17,173,448 shares of our common stock after the
offering, have agreed that they will not, without the prior written consent of
Chase Securities Inc., offer, sell, pledge or otherwise dispose of any shares
of common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock owned by
them during the 180-day period following the effectiveness of the registration
statement. We have agreed that we will not, without the prior written consent
of Chase Securities Inc., offer, sell or otherwise dispose of any shares of
common stock, options or warrants to acquire shares of common stock or
securities exchangeable for or convertible into shares of common stock during
the 180-day period following the date of this prospectus, except that we may
(1) issue shares upon the exercise of options granted prior to the date hereof
or upon the exercise of warrants outstanding as of the date hereof, (2) grant
additional options under our stock option plan, provided that, without prior
written consent of Chase Securities Inc., such additional options shall not be
exercisable during such period, (3) issue any shares of common stock or other
rights to acquire shares of common stock issued pursuant to equipment or lease
financing activities entered into in the ordinary course of our business and
(4) issue any shares of common stock or other rights to acquire shares of
common stock issued in connection with any strategic alliance, collaboration,
license, acquisition, marketing agreement, distribution agreement, advertising
arrangement, promotional arrangement or similar agreement, arrangement or
transaction, provided that the total amount of securities issued pursuant to
clauses (3) and (4) would not exceed 2 million shares of common stock or
securities exchangeable or convertible into shares of common stock and provided
further that securities may only be issued pursuant to clauses (3) and (4) to
the extent the recipient of such securities agrees to the same transfer
restrictions imposed on us by Chase Securities Inc. as set forth above.
The underwriters have reserved for sale up to 500,000 shares for
employees, directors and certain other persons associated with us. These
reserved shares will be sold at the public offering price that appears on the
cover of this prospectus. The number of shares available for sale to the
general public in the offering will be reduced to the extent reserved shares
are purchased by these persons. The underwriters will offer to the general
public, on the same terms as other shares offered by this prospectus, any
reserved shares that are not purchased by these persons.
59
<PAGE>
Prior to this offering, there has been no public market for the common
stock. Consequently, the offering price for the common stock will be determined
by negotiations between us and the underwriters and is not necessarily related
to our asset value, net worth or other established criteria of value. The
factors considered in these negotiations, in addition to prevailing market
conditions, will include the history of and prospects for the industry in which
we compete, an assessment of our management, our prospects, our capital
structures, prevailing market conditions, our results of operations in recent
periods and other factors as we deem relevant.
Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution of the shares is completed. However,
the underwriters may engage in the following activities in accordance with the
rules:
. Stabilizing transactions. The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price
of the shares, so long as stabilizing bids do not exceed a specified
maximum.
. Over-allotments and syndicate covering transactions. The underwriters
may create a short position in the shares by selling more shares than
are shown on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may
engage in syndicate covering transactions by purchasing shares in the
open market. The representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option.
. Penalty bids. If the representatives purchase shares in the open
market in a stabilizing transaction or syndicate covering transaction,
they may reclaim a selling concession from underwriters and selling
group members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of those transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither we nor the underwriters makes any representation or prediction as
to the effect that the transactions described above may have on the price of
the shares. These transactions may occur on the Nasdaq National Market or
otherwise. If these transactions are commenced, they may be discontinued
without notice at any time.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
such sale is made.
The representatives have informed us that they do not intend to confirm
the sales to discretionary accounts that exceed 5% of the total number of
shares of common stock offered by them.
One or more members of the underwriting selling group may make copies of
the preliminary prospectus available over the Internet to certain customers
through its or their websites. The representatives expect to allocate a limited
number of shares to that member or members of the selling group for sale to
brokerage account holders.
60
<PAGE>
LEGAL MATTERS
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, Massachusetts 02111 will provide us with an opinion as to the validity
of the common stock offered under this prospectus. Morgan, Lewis and Bockius
LLP, 101 Park Avenue, New York, New York 10178 will pass upon certain legal
matters related to this offering for the underwriters.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for the
period from inception (September 9, 1997) to December 31, 1997 and for the
years ended December 31, 1998 and 1999 included in this prospectus have been so
included in reliance upon the report of PricewaterhouseCoopers LLP, independent
accountants, given as the authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered under this prospectus. This prospectus does not
contain all of the information in the registration statement and the exhibits
and schedule to the registration statement. For further information with
respect to us and our common stock, we refer you to the registration statement
and to the exhibits and schedule to registration statement. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance, we
refer you to the copy of the contract or other document filed as an exhibit to
the registration statement. Each of these statements is qualified in all
respects by this reference. You may inspect a copy of the registration
statement without charge at the SEC's principal office in Washington, D.C., and
copies of all or any part of the registration statement may be obtained from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of fees prescribed by the SEC. The SEC maintains a
website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the web site is http://www.sec.gov. The SEC's toll free investor
information service can be reached at 1-800-SEC-0330. Information contained on
the web site does not constitute part of this prospectus.
Upon completion of this offering, we will be subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file reports, proxy statements and other information with the SEC.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and
quarterly reports for the first three fiscal quarters of each fiscal year
containing unaudited interim financial information. Our telephone number is
(919) 425-3000.
61
<PAGE>
PARADIGM GENETICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Balance Sheets.............................................................. F-3
Statements of Operations.................................................... F-4
Statements of Stockholders' Equity (Deficit)................................ F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Paradigm Genetics, Inc.
In our opinion, the accompanying balance sheets and related statements of
operations, of stockholders' equity (deficit), and of cash flows present
fairly, in all material respects, the financial position of Paradigm Genetics,
Inc. (the "Company") at December 31, 1998 and 1999, and the results of its
operations and its cash flows for the period from inception (September 9, 1997)
through December 31, 1997 and the years ended December 31, 1998 and 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
February 17, 2000
F-2
<PAGE>
PARADIGM GENETICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
December 31,
December 31, 1999
------------------------- (unaudited)
1998 1999 (Note 2)
----------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 970,688 $ 468,342 $ 468,342
Short-term investments................ 2,484,132 3,488,108 3,488,108
Accounts receivable................... 89,025 256,844 256,844
Prepaid expenses...................... 48,166 1,157,851 1,157,851
----------- ------------ -----------
Total current assets................. 3,592,011 5,371,145 5,371,145
Property and equipment, net............ 3,822,293 8,816,665 8,816,665
Other assets, net...................... 20,667 37,494 37,494
----------- ------------ -----------
Total assets......................... $ 7,434,971 $ 14,225,304 $14,225,304
=========== ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable...................... $ 319,421 $ 1,327,423 $ 1,327,423
Accrued liabilities................... 222,462 571,184 571,184
Deferred revenue...................... 1,484,850 5,825,237 5,825,237
Long-term debt--current portion....... 327,244 1,182,456 1,182,456
Capital lease obligation--current
portion.............................. 90,365 100,075 100,075
----------- ------------ -----------
Total current liabilities............ 2,444,342 9,006,375 9,006,375
Long-term debt......................... 3,215,737 7,823,780 7,823,780
Capital lease obligation............... 322,925 222,850 222,850
----------- ------------ -----------
Total liabilities.................... 5,983,004 17,053,005 17,053,005
----------- ------------ -----------
Commitments (Note 11)
Stockholders' equity (deficit):
Convertible preferred stock, $0.01 par
value; 15,000,000 shares authorized:
Series A Convertible Preferred Stock,
8,000,000 shares designated;
7,562,500 shares issued and
outstanding as of December 31, 1998
and 1999, respectively; no shares
issued and outstanding pro forma.... 5,950,899 5,950,899 --
Series B Convertible Preferred Stock;
2,790,698 shares designated; -0- and
2,790,698 shares issued and
outstanding as of December 31, 1998
and 1999, respectively; no shares
issued and outstanding pro forma.... -- 5,967,819 --
Common Stock, $.01 par value;
30,000,000 shares authorized;
3,750,247 and 5,224,257 shares issued
and outstanding as of December 31,
1998 and 1999, respectively,
15,577,455 shares issued and
outstanding pro forma................ 37,502 52,242 155,774
Additional paid-in capital............. 6,389 2,509,510 14,324,696
Deferred compensation.................. -- (2,278,788) (2,278,788)
Accumulated deficit.................... (4,542,823) (15,029,383) (15,029,383)
----------- ------------ -----------
Total stockholders' equity
(deficit)........................... 1,451,967 (2,827,701) (2,827,701)
----------- ------------ -----------
Total liabilities and stockholders'
equity (deficit).................... $ 7,434,971 $ 14,225,304 $14,225,304
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
PARADIGM GENETICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------
For the
Period from
Inception
(September 9,
1997) to
December 31,
1997 1998 1999
------------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Collaborative research agreements.... $ -- $ 820,150 $ 2,052,113
Grant revenues....................... -- 50,409 144,862
--------- ----------- ------------
Total revenues...................... -- 870,559 2,196,975
--------- ----------- ------------
Operating expenses:
Research and development (excludes
$0, $0 and $12,730, respectively, of
stock based compensation)........... 71,534 3,641,033 7,527,866
Selling, general and administrative
(excludes $0, $6,371 and $53,482,
respectively, of stock based
compensation)....................... 148,663 1,523,365 4,713,675
Stock based compensation............. -- 6,371 66,212
--------- ----------- ------------
Total operating expenses............ 220,197 5,170,769 12,307,753
--------- ----------- ------------
Loss from operations.................. (220,197) (4,300,210) (10,110,778)
--------- ----------- ------------
Interest income (expense), net:
Interest income...................... -- 139,494 246,896
Interest expense..................... (13) (128,797) (622,678)
--------- ----------- ------------
Interest income (expense), net....... (13) 10,697 (375,782)
--------- ----------- ------------
Net loss.............................. $(220,210) $(4,289,513) $(10,486,560)
========= =========== ============
Net loss per share--basic and
diluted.............................. $ (0.19) $ (1.14) $ (2.48)
========= =========== ============
Weighted average Common shares
outstanding--basic and diluted....... 1,160,958 3,750,036 4,236,409
========= =========== ============
Pro forma net loss per share--basic
and diluted.......................... $ (0.75)
============
Pro forma weighted average Common
shares outstanding-- basic and
diluted.............................. 14,046,759
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
PARADIGM GENETICS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock Common Stock Additional
-------------------- -------------------- ----------------- Paid In Deferred Accumulated
Shares Amount Shares Amount Shares Amount Capital Compensation Deficit
--------- ---------- --------- ---------- --------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
inception
(September 9,
1997)........... -- $ -- -- $ -- -- $ -- $ -- $ -- $ --
Issuance of
Common Stock... -- -- -- -- 3,749,997 37,500 -- -- (33,100)
Net loss........ -- -- -- -- -- -- -- -- (220,210)
--------- ---------- --------- ---------- --------- ------- ---------- ----------- ------------
Balance at
December 31,
1997............ -- -- -- -- 3,749,997 37,500 -- -- (253,310)
Stock based
compensation... -- -- -- -- -- -- 6,371 -- --
Issuance of
Series A
Preferred
Stock.......... 7,125,000 5,600,899 -- -- -- -- -- -- --
Notes payable
converted to
Series A
Preferred
Stock.......... 437,500 350,000 -- -- -- -- -- -- --
Exercise of
stock options.. -- -- 250 2 18 -- --
Net loss........ -- -- -- -- -- -- -- -- (4,289,513)
--------- ---------- --------- ---------- --------- ------- ---------- ----------- ------------
Balance at
December 31,
1998............ 7,562,500 5,950,899 -- -- 3,750,247 37,502 6,389 -- (4,542,823)
Issuance of
Series B
Preferred
Stock.......... -- -- 2,790,698 5,967,819 -- -- -- -- --
Exercise of
stock options.. -- -- -- -- 1,474,010 14,740 158,121 -- --
Deferred
compensation .. -- -- -- -- -- -- 2,345,000 (2,345,000) --
Amortization of
deferred
compensation... -- -- -- -- -- -- -- 66,212 --
Net loss........ -- -- -- -- -- -- -- -- (10,486,560)
--------- ---------- --------- ---------- --------- ------- ---------- ----------- ------------
Balance at
December 31,
1999............ 7,562,500 $5,950,899 2,790,698 $5,967,819 5,224,257 $52,242 $2,509,510 $(2,278,788) $(15,029,383)
========= ========== ========= ========== ========= ======= ========== =========== ============
<CAPTION>
Total
Stockholders'
Equity
(Deficit)
--------------
<S> <C>
Balance at
inception
(September 9,
1997)........... $ --
Issuance of
Common Stock... 4,400
Net loss........ (220,210)
--------------
Balance at
December 31,
1997............ (215,810)
Stock based
compensation... 6,371
Issuance of
Series A
Preferred
Stock.......... 5,600,899
Notes payable
converted to
Series A
Preferred
Stock.......... 350,000
Exercise of
stock options.. 20
Net loss........ (4,289,513)
--------------
Balance at
December 31,
1998............ 1,451,967
Issuance of
Series B
Preferred
Stock.......... 5,967,819
Exercise of
stock options.. 172,861
Deferred
compensation .. --
Amortization of
deferred
compensation... 66,212
Net loss........ (10,486,560)
--------------
Balance at
December 31,
1999............ $ (2,827,701)
==============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
PARADIGM GENETICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
For the
Period from
Inception
(September 9,
1997) to
December 31,
1997 1998 1999
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss............................ $(220,210) $ (4,289,513) $(10,486,560)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Deferred revenue.................... -- 1,484,850 4,340,387
Depreciation and amortization....... 312 299,044 1,588,762
Stock based compensation............ -- 6,371 66,212
Changes in operating assets and
liabilities
Accounts receivable................ (500) (88,525) (167,819)
Prepaid expenses................... (41,570) (27,263) (1,126,512)
Accounts payable................... 29,017 290,404 1,008,002
Accrued liabilities................ -- 222,462 348,722
--------- ------------ ------------
Net cash used in operating
activities....................... (232,951) (2,102,170) (4,428,806)
--------- ------------ ------------
Cash flows from investing activities:
Purchase of property and equipment.. (3,741) (3,650,783) (6,583,134)
Purchase of investments............. -- (15,021,015) (26,214,499)
Maturities of investments........... -- 12,536,883 25,210,522
--------- ------------ ------------
Net cash used in investing
activities....................... (3,741) (6,134,915) (7,587,111)
--------- ------------ ------------
Cash flows from financing activities:
Borrowings under notes payable...... 250,000 3,682,506 5,765,761
Repayments of notes payable......... -- (39,525) (302,506)
Repayments of capital lease
obligations........................ -- (53,835) (90,364)
Proceeds from issuance of
convertible preferred stock, net... -- 5,600,899 5,967,819
Proceeds from issuance of Common
Stock.............................. 4,400 -- --
Proceeds from exercise of stock
options............................ -- 20 172,861
--------- ------------ ------------
Net cash provided by financing
activities....................... 254,400 9,190,065 11,513,571
--------- ------------ ------------
Net increase in cash and cash
equivalents......................... 17,708 952,980 (502,346)
Cash and cash equivalents, beginning
of period........................... -- 17,708 970,688
--------- ------------ ------------
Cash and cash equivalents, end of
period.............................. $ 17,708 $ 970,688 $ 468,342
========= ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. The Company
Paradigm Genetics, Inc. (the "Company" or "Paradigm") was organized on
September 9, 1997 to discover the function of genes in plant and fungal
organisms. The Company is industrializing the process of determining gene
function by creating an assembly-line process to generate information that will
enable it to develop novel products in four major sectors of the global
economy: crop production, nutrition, human health and industrial products. The
Company has developed its GeneFunction Factory to simultaneously study the
functions of many genes in plants and fungi. The GeneFunction Factory is
designed to be an integrated, rapid, industrial-scale laboratory through which
it can discover and alter genes, understand the consequences of the
modifications and reliably determine the function of those genes. The Company
stores and annotates gene function information in its FunctionFinder
bioinformatics system. Paradigm generates revenues by licensing information
mined from the data in FunctionFinder for the development of products in crop
production, nutrition, human health and industrial applications. If the
Company's strategic partners commercialize products resulting from this
information, the Company is entitled to receive royalty payments based upon
product revenues.
2. Summary of Significant Accounting Policies
Unaudited Pro Forma Balance Sheet
The Board of Directors has authorized the Company to file a Registration
Statement with the Securities and Exchange Commission permitting the Company to
sell shares of Common Stock in an initial public offering ("IPO"). If the IPO
is consummated as presently anticipated, all shares of Series A and Series B
Preferred Stock will automatically convert into 10,353,198 shares of the
Company's Common Stock at a one-for-one conversion ratio. The unaudited pro
forma balance sheet reflects the subsequent conversion of the Series A and
Series B Preferred Shares into Common Stock as if such conversion had occurred
as of December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less at the date of purchase to be cash equivalents.
Investments
The Company considers all investments in debt and equity securities
purchased with a maturity of between three months and one year from the balance
sheet date to be short-term investments. All investments are considered as
available for sale and are carried at fair value. Unrealized gains and losses
on investments are recognized as a component of other comprehensive income
(loss). At December 31, 1998 and 1999, the amortized costs of the Company's
investments approximated their fair value. Realized gains and losses on sales
of investments are determined using the specific identification method.
Realized gains and losses on sales of investments were not significant during
the period from inception (September 9, 1997) to December 31, 1997 or the years
ended December 31, 1998 and 1999.
F-7
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment is primarily comprised of laboratory equipment,
computer equipment, furniture, and leasehold improvements which are recorded at
cost and depreciated using the straight-line method over their estimated useful
lives which range from one to seven years. Expenditures for maintenance and
repairs are charged to operations as incurred; major expenditures for renewals
and betterments are capitalized and depreciated. Property and equipment
acquired under capital leases are being depreciated over their estimated useful
lives or the respective lease term, if shorter.
Other Assets
Other assets includes deposits for building leases which will be returned
to the Company upon the expiration of related leases.
Fair Value of Financial Instruments
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, investments, accounts payable, capital lease obligations
and long-term debt, are accounted for in accordance with the SFAS No. 115.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its property and equipment and
other long-lived assets when circumstances indicate that an event of impairment
may have occurred in accordance with the provisions of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of'' ("SFAS No. 121"). SFAS No. 121 requires recognition of impairment
of long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets or the business to
which such assets relate. Impairment is measured based on the difference
between the carrying value of the related assets or businesses and the
discounted future cash flows of such assets or businesses. No impairment was
required to be recognized during the period from inception (September 9, 1997)
to December 31, 1997 or the years ended December 31, 1998 and 1999.
Income Taxes
The Company accounts for income taxes using the liability method which
requires the recognition of deferred tax assets or liabilities for the
temporary differences between financial reporting and tax bases of the
Company's assets and liabilities and for tax carryforwards at enacted statutory
rates in effect for the years in which the differences are expected to reverse.
The effect on deferred taxes of a change in tax rates is recognized in income
in the period that includes the enactment date. In addition, valuation
allowances are established where necessary to reduce deferred tax assets to the
amounts expected to be realized.
Revenue Recognition
Revenues are derived from collaborative research agreements with strategic
partners and from government grants. Revenues are recognized under the
collaborative research agreements on a percentage of completion basis in
accordance with the applicable performance requirements of each collaboration
agreement. Milestone payments under collaborative agreements will be recognized
as revenue when the applicable milestone has been achieved and such achievement
has been acknowledged by the other party to the collaboration agreement.
Revenues from government grants are recognized as expenses are incurred
F-8
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
over the period of each grant. Cash received in excess of revenues recognized
under collaborative agreements and grants is recorded as deferred revenue.
Payments received under the Company's collaborative agreements and government
grants are generally non-refundable regardless of the outcome of the future
research and development activities to be performed by the Company under these
arrangements.
Research and Development
Research and development costs include expenses incurred by the Company to
develop its proprietary Gene Function Factory, perform required services under
collaborative research agreements and government grants and perform research
and development on internal projects. Research and development costs are
expensed as incurred.
Stock Based Compensation
The Company accounts for stock-based compensation based on the provisions
of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25") which states that no compensation expense
is recorded for stock options or other stock-based awards to employees that are
granted with an exercise price equal to or above the estimated fair value of
the Company's Common Stock on the grant date. In the event that stock options
are granted with an exercise price below the estimated fair value of the
Company's Common Stock at the grant date, the difference between the fair value
of the Company's Common Stock and the exercise price is recorded as deferred
compensation. The Company recognized deferred compensation of $2,345,000 to
reflect the difference between the aggregate fair market value and exercise
price of all options granted during 1999 with an exercise price below the fair
market value of the Company's Common Stock at the date of grant. Deferred
compensation is amortized to compensation expense over the vesting period of
the related stock option. The Company recognized $66,212 in non-cash
compensation expense related to amortization of deferred compensation during
the year ended December 31, 1999. The Company did not recognize any non-cash
compensation expense for the year ended December 31, 1998 or the period from
inception (September 9, 1997) through December 31, 1997 related to stock
options granted to employees as no stock options were granted to employees with
an exercise price below the estimated fair value of the Company's Common Stock
until 1999. The Company has adopted the disclosure requirements of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," ("SFAS
123") as it relates to stock options granted to employees, which requires
compensation expense to be disclosed based on the fair value of the options
granted at the date of grant. Stock options or warrants granted to non-
employees are accounted for in accordance with SFAS 123, which requires that
these options and warrants be valued using the Black-Scholes model and the
resulting charge is recognized on the date of the grant.
Cash Flow
The Company made cash payments for interest of $13, $128,797, and $622,678
for the period from inception (September 9, 1997) to December 31, 1997 and the
years ended December 31, 1998 and 1999, respectively.
The Company acquired property and equipment through the assumption of
capital lease obligations amounting to $467,125 for the year ended December 31,
1998.
F-9
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk
Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of temporary cash and short-
term investments and trade receivables. The Company primarily places its
temporary cash and short-term investments with high-credit quality financial
institutions which invest primarily in U.S. Government securities, commercial
paper of prime quality and certificates of deposit guaranteed by banks which
are members of the FDIC. Cash deposits are all in financial institutions in the
United States. The Company performs ongoing credit evaluations to reduce credit
risk and requires no collateral from its customers. Management estimates the
allowance for uncollectible accounts based on their historical experience and
credit evaluation.
The Company has one strategic partner which accounted for 100% of the
Company's collaborative research revenues and 94% and 93% of total revenues for
the years ended December 31, 1998 and 1999, respectively (see Note 8).
Comprehensive Income (Loss)
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display comprehensive income and its
components in the financial statements. Comprehensive income, as defined,
includes all changes in equity during a period from non-owner sources. The
Company had no items of other comprehensive income during the period from
inception (September 9, 1997) to December 31, 1997 or during the years ended
December 31, 1998 and 1999.
Net Income (Loss) Per Common Share
Historical
The Company computes net income (loss) per common share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
("SFAS 128") and SEC Staff Accounting Bulletin No. 98 ("SAB No. 98"). Under the
provisions of SFAS 128 and SAB No. 98, basic net income (loss) per Common share
("Basic EPS") is computed by dividing net income (loss) by the weighted average
number of Common shares outstanding. Diluted net income (loss) per Common share
("Diluted EPS") is computed by dividing net income (loss) by the weighted
average number of Common shares and dilutive potential Common shares
equivalents then outstanding. Potential Common shares consist of shares
issuable upon the exercise of stock options and warrants and shares issuable
upon the conversion of outstanding convertible Preferred Stock. The calculation
of the net loss per share for the years ended December 31, 1998 and 1999 does
not include zero and 8,487,520 potential shares of Common Stock equivalents,
respectively, as their impact would be antidilutive.
Pro Forma (Unaudited)
Pro forma net income (loss) per common share is calculated assuming the
conversion of all convertible Preferred Stock which will convert automatically
upon the effectiveness of the Company's initial public offering into 10,353,198
shares of Common Stock (see Note 9) at January 1, 1999 or the date of issuance,
if later.
F-10
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Segment Reporting
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). This statement requires companies to report information about
operating segments in interim and annual financial statements. It also requires
segment disclosures about products and services, geographic areas and major
customers. The Company adopted SFAS 131 effective for its year ended December
31, 1998. The Company has determined that it operates in only one segment as of
December 31, 1998 and 1999.
Internal Use Software
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Public Accountants ("AICPA"), issued Statement of
Position No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" ("SOP No. 98-1"), which provides guidance regarding
when software developed or obtained for internal use should be capitalized. The
Company adopted SOP No. 98-1 effective January 1, 1999. The adoption of SOP No.
98-1 did not have a material impact on the Company's financial position or
results of operations as the predominant portion of the software applications
used by the Company was purchased from third parties.
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"). SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as "derivatives"), and for hedging
activities. SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with earlier
application encouraged. The Company does not currently, nor does it intend in
the future, to use derivative instruments and therefore does not expect that
the adoption of SFAS 133 will have any impact on its financial position or the
results of operations.
3. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-----------------------
1998 1999
---------- -----------
<S> <C> <C>
Buildings.............................................. $ -- $ 408,079
Leasehold improvements................................. 240,923 2,700,467
Furniture and laboratory equipment..................... 1,974,561 4,513,141
Computer equipment..................................... 1,906,165 3,083,096
---------- -----------
Total costs.......................................... 4,121,649 10,704,783
Less accumulated depreciation.......................... (299,356) (1,888,118)
---------- -----------
Property and equipment, net.......................... $3,822,293 $ 8,816,665
========== ===========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1998 and 1999 was $299,044 and $1,588,762, respectively.
The Company leases certain equipment under capital lease agreements. The
cost of equipment under capital leases at December 31, 1998 and 1999 was
$467,125. The accumulated amortization for equipment under capital leases was
$116,701 at December 31, 1999.
F-11
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts payable and
accounts receivable at December 31, 1998 and 1999 approximated their fair value
due to the short-term nature of these items.
The fair value of the Company's short-term investments at December 31,
1998 and 1999 was determined based on quoted financial market prices and
approximated their carrying values as these investments were primarily in
short-term corporate obligations.
The historical carrying value of the Company's capital lease obligations
and long-term debt approximated their fair value because the interest rates on
these obligations approximate rates currently available to the Company.
5. Accrued Liabilities
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Payroll...................................................... $109,024 $539,184
Taxes other than income...................................... 50,000 --
Other........................................................ 63,438 32,000
-------- --------
$222,462 $571,184
======== ========
</TABLE>
6. Income Taxes
No provision for federal or state income taxes has been recorded as the
Company has incurred net operating losses since inception.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 1998 and 1999 consist of the following:
<TABLE>
<CAPTION>
1998 1999
Deferred tax assets: ----------- -----------
<S> <C> <C>
Domestic net operating loss carryforwards........... $ 1,265,198 $ 3,778,046
Deferred revenue.................................... 575,899 2,259,318
Stock based compensation............................ -- 28,151
Compensation accruals............................... 25,594 60,004
Other .............................................. 19,393 2,794
----------- -----------
Total deferred tax assets........................... 1,886,084 6,128,313
Valuation allowance for deferred tax assets......... (1,733,030) (5,779,626)
----------- -----------
Deferred tax assets, net ........................... 153,054 348,688
----------- -----------
Deferred tax liabilities:
Property and equipment.............................. 153,054 348,688
----------- -----------
Total deferred tax liabilities...................... 153,054 348,688
=========== ===========
Net deferred tax asset (liability).................. $ -- $ --
=========== ===========
</TABLE>
F-12
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1998 and 1999, the Company provided a full valuation
allowance against its net deferred tax assets since it could not be determined
that it was more likely than not that the Company would realize these deferred
tax assets. The increase in the valuation allowance in 1999 resulted primarily
from the additional net operating loss carryforward generated.
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of $9,741,000. These net operating loss carryforwards begin
to expire in 2012. The utilization of the federal net operating loss
carryforwards is subject to an annual limitation of $1,569,000 under the rules
regarding a change in stock ownership as determined by the Internal Revenue
Code due to changes in ownership resulting from the Company's preferred stock
financings.
Taxes computed at the statutory federal income tax rate of 34% are
reconciled to the provision for income taxes as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- ----------- -----------
<S> <C> <C> <C>
Effective Rate............................ 0% 0% 0%
-------- ----------- -----------
United States federal tax at statutory
rate..................................... $(74,871) $(1,458,434) $(3,565,430)
State taxes (net of federal benefit)...... (8,902) (203,635) (499,238)
Change in valuation allowance............. 82,460 1,650,571 4,046,596
Other nondeductible expenses.............. 1,313 11,498 18,072
-------- ----------- -----------
Provision for income taxes................ $ -- $ -- $ --
-------- ----------- -----------
</TABLE>
7. Long Term Debt
The Company's long term debt at December 31, 1998 and 1999 consists of the
following:
<TABLE>
<CAPTION>
1998 1999
---------- -----------
<S> <C> <C>
Senior note payable.................................... $ -- $ 2,000,000
Notes payable for equipment financing.................. 3,542,981 7,006,236
---------- -----------
Total Notes payable.................................. 3,542,981 9,006,236
Less current maturities................................ (327,244) (1,182,456)
---------- -----------
Long-term portion.................................... $3,215,737 $ 7,823,780
========== ===========
</TABLE>
In February 1998, a bridge loan in the amount of $250,000 was converted
into 312,500 shares of the Company's Series A Preferred Stock at a conversion
price of $0.80 per share in conjunction with the closing of the Company's
initial round of financing (See Note 9).
The equipment financing consists of several notes payable to two financial
institutions for the financing of equipment purchases made in 1998 and 1999.
The payment amount is specified in each note agreement and is approximately 1%
of the outstanding balance for the first twelve months and then increases to 3%
of the outstanding balance for the remaining 36 months. A balloon payment of
the remaining balance on the notes is due at the maturity date of the
respective notes. The stated interest rate ranges from 11.3% to 14.2%. The
notes are collateralized by the equipment pledged against these proceeds by the
Company.
Subsequent to December 31, 1999, the Company entered into an additional
equipment financing loan agreement for $3.5 million with an additional $3.5
million available upon completion of an initial public
F-13
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
offering. The loan term will commence upon delivery of equipment with a monthly
payment equal to 2.519% of original principal for a period of 48 months. No
additional borrowings will be available under this loan agreement after January
31, 2001.
During July 1999, the Company entered into a $2 million senior debt
agreement with a financial institution. The note has interest-only payments
until March 1, 2002, followed by six equal principal and interest payments. The
loan is collateralized by the Company's equipment, intellectual property and
receivables. In connection with the debt, Paradigm issued the financial
institution 116,279 warrants to purchase the Company's Common Stock at an
exercise price of $2.15. The Company did not record any debt discount related
to these warrants as their fair value as determined by the Black-Scholes
valuation method was deminimis. This loan agreement prohibits the payment of
any cash dividends until we have fully repaid this loan.
Annual maturities of the long-term debt for the years subsequent to
December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000............................................................ $1,182,456
2001............................................................ 2,081,292
2002............................................................ 4,278,615
2003............................................................ 1,273,607
2004............................................................ 190,266
----------
Total....................................................... $9,006,236
==========
</TABLE>
8. Collaborative Agreements
In September 1998, Paradigm entered into a collaborative research
agreement with Bayer in which the Company is developing assays for the
development of new herbicides. If the collaborative agreement continues for the
full initial research term, the Company will receive a minimum of $14.7 million
in quarterly and up front payments during the three-year period from September
1998 through October 2001. If the agreement is extended and the Company meets
all of its milestones, the Company will receive up to a maximum of an
additional $25.1 million. The Company has recognized $2.9 million in cumulative
revenues from the collaboration agreement through December 31, 1999.
In addition, the Company is entitled to receive a royalty of the annual
net sales of herbicides developed by Bayer for a defined period of time.
In November 1999, Paradigm entered into a collaborative agreement with
another strategic partner for the development of crop products and nutrition
products. If the collaborative agreement continues for the full research term,
the Company will receive $41.5 million in quarterly and up front payments
during the six-year period from November 1999 through January 2006. The
strategic partner has options to extend the agreement. If the agreement is
extended and all the required milestones are met, the Company will also receive
up to an additional $107.5 million.
9. Stockholders' Equity (Deficit)
In September 1997, the Company issued 4,400 shares of Common Stock to the
founders of the Company for gross proceeds of $4,400. On February 12, 1998, the
Company issued a Common Stock dividend of 851.2727 shares for each issued and
outstanding share of Common Stock which increased the
F-14
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
number of shares of outstanding Common Stock to 3,749,997. All share amounts in
the accompanying financial statements for all periods presented prior to the
date of this dividend have been retroactively adjusted to reflect this
dividend.
During 1998, the Company's Articles of Incorporation were amended and
restated to authorize 20,000,000 shares of Common Stock with a par value of
$0.01 per share and 10,000,000 shares of Preferred Stock with a par value of
$0.01 per share, of which 9,275,000 shares were designated as Series A
Preferred Stock. The remaining 725,000 shares were undesignated.
In March 1999, the Company's Articles of Incorporation were amended and
restated to increase the number of authorized shares of Preferred Stock to
15,000,000, of which 8,000,000 shares were designated Series A Preferred Stock,
of which 7,562,500 shares were issued and outstanding at December 31, 1998 and
1999, and 2,790,698 shares were designated Series B Preferred Stock, of which
all were issued and outstanding as of December 31, 1999. The remaining
4,209,302 shares were undesignated. Also, in March 1999 the number of
authorized shares of Common Stock was increased to 30,000,000 shares, of which
3,750,247 and 5,224,257 shares were issued and outstanding at December 31, 1998
and 1999, respectively.
The Company is required at all times to reserve a number of shares of
unissued Common Stock for the purpose of effecting the conversion of the issued
and outstanding shares of the Series A and Series B Preferred Stock and the
exercise of all outstanding warrants and options to purchase the Company's
Common Stock. At December 31, 1999, the Company had 17,755,020 shares of Common
Stock reserved for this purpose.
In February 1998, the Company sold a total of 4,625,000 shares of Series A
Preferred Stock in a private placement transaction in exchange for gross
proceeds of $3,700,000 or $0.80 per share and issued 375,000 shares of Series A
Preferred Stock in exchange for the cancellation of notes payable of $300,000.
The notes payable were issued in the last quarter of 1997 and in January 1998.
Two of the purchasers of the Series A Preferred Stock each received 187,500
warrants for the purchase of Series A Preferred Stock with an exercise price of
$0.80 per share. Also, in consideration for being a lead investor, the Company
issued an additional 62,500 warrants in total to one of the two purchasers with
an exercise price of $0.80 per share. The Company did not record any additional
paid-in capital related to the value of these warrants, because the fair market
value of the warrants, as calculated using the Black-Scholes pricing model, was
de minimis.
In March 1998, 62,500 shares of Series A Preferred Stock were issued to an
investor for the cancellation of convertible debt of $50,000, which borrowing
was made in January 1998.
In May 1998, 2,500,000 shares of Series A Preferred Stock were sold to the
same group of purchasers in a second private placement transaction for gross
proceeds of $2,000,000 or $0.80 per share.
In March 1999, the Company sold 2,790,698 shares of Series B Preferred
Shares in a private placement transaction in exchange for gross proceeds of $
6,000,000 or $2.15 per share. The purchasers of the Series B Preferred Shares
were primarily the same as the holders of the Series A Preferred Stock. All of
the Series B Preferred Shares were issued at a price of $2.15. The rights and
preferences of the Series B Preferred Stock are essentially the same as the
Series A Preferred Stock with certain exceptions which are detailed below.
Rights, Preferences and Terms of Capital Stock
The following is a summary of the rights, preferences, and terms of the
Company's outstanding series of Common and Preferred Stock.
F-15
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Dividends
The holders of the Series A and Series B Preferred Stock shall be entitled
to receive in any fiscal year of the Company, when and if declared by the Board
of Directors, dividends payable in cash in an amount per share of Series A and
Series B Preferred Stock for such fiscal year at least equal to the product of
(a) the per share amount multiplied by (b) the number of whole shares of Common
Stock into which each such share of Series A and B Preferred Stock is
convertible immediately after the close of business on the record date fixed
for such dividend. No dividend shall be paid on Series A Preferred Stock unless
an equivalent dividend can be paid on the Series B Preferred Stock. The right
to such dividends shall not be cumulative, and no right shall accrue. Nor shall
any undeclared or unpaid dividend bear or accrue interest.
Liquidity
In the event of any liquidation, the holders of Series B Preferred Stock
shall be entitled to receive prior and in preference to any distribution of any
of the assets or surplus funds of the Company to the holders of Series A
Preferred Stock and Common Stock an amount equal to $2.15 per share plus all
accrued or declared but unpaid dividends. The holders of Series A Preferred
Stock shall be entitled to receive, prior and in preference to any distribution
of any of the assets or surplus funds of the Company to holders of Common Stock
and any series of Preferred Stock the terms of which specifically provide that
such series ranks junior and subordinate to the Series A Preferred Stock with
respect to distribution of assets upon any liquidation or deemed liquidation,
an amount equal to $0.80 per share, adjusted for any stock splits or dividends,
plus all accrued but unpaid dividends. After payment to the holders of the
Series A Preferred Stock, the entire remaining assets and funds of the Company
legally available for distribution shall be distributed among the holders of
the Common Stock in proportion to the shares of Common Stock then held by the
holders of the Common Stock.
Voting
Series A Preferred Stock and Series B Preferred Stock shall be voted
equally with shares of Common Stock at any annual or special meeting of
stockholders of the Company. As long as twenty percent of each series of
Preferred shares originally issued remain outstanding, the affirmative vote or
written consent of the holders of at least two-thirds of the outstanding shares
shall be required to approve all matters brought before the stockholders for
approval.
Conversion
Each share of Series A or Series B Preferred Stock shall be convertible,
at the option of the holder, into shares of the Company's Common Stock. The
initial conversion price per share of Series A Preferred Stock shall be $0.80.
The initial conversion price and value for the Series B Preferred Shares is
$2.15. Each share of Series A and Series B Preferred Stock shall automatically
be converted into a share of Common Stock at the then-effective conversion
rate, immediately upon the closing of the sale of the Company's Common Stock in
a firm commitment, underwritten public offering, at a public offering price
equal to or exceeding $10.00 per share of Common Stock and with aggregate gross
proceeds to the Company and any selling stockholders which equal or exceed
$20,000,000.
10. Stock Options and Warrants
In February 1998, the Company adopted the 1998 Stock Option Plan ("the
Plan") which provided for the grant of up to 1,765,000 employee stock options.
In March 1999, the Plan was amended to provide for the grant of up to 2,515,000
employee stock options. The board amended the Plan in November 1999 to
F-16
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
increase the options available for grant to 3,715,000. In December 1999, the
board authorized an additional 300,000 options for the Plan. Stock options
granted under the Plan are to have exercise periods not to exceed ten years.
Options granted under the Plan generally vest over a period of four years from
the date of grant. Option grants to new employees are generally made within 90
days of commencement of service with the Company and vest over a period of four
years retroactively from the date of hire. The Plan provides the right to
exercise options before they are vested into shares of Common Stock subject to
a repurchase right by the Company.
A summary of the status of the Plan as of December 31, 1999 and changes
during the years ended December 31, 1998 and 1999 presented below:
<TABLE>
<CAPTION>
Shares Underlying Weighted Average
Options Exercise Price
----------------- ----------------
<S> <C> <C>
Outstanding at December 31, 1997............. -- $ --
Granted.................................... 1,412,750 0.08
Forfeited.................................. (2,000) 0.08
Exercised.................................. (250) 0.08
---------- -----
Outstanding at December 31, 1998............. 1,410,500 0.08
Granted.................................... 1,633,119 0.29
Forfeited.................................. (95,823) 0.08
Exercised.................................. (1,474,010) 0.12
---------- -----
Outstanding at December 31, 1999............. 1,473,786 $0.28
========== =====
</TABLE>
As of December 31, 1999, the Company had 831,340 shares of Common Stock
outstanding which were subject to the Company's lapsing right of repurchase in
the event the holder's association with the Company terminates. These shares
are the result of the exercise of unvested stock options by employees. The
shares which relate to the exercise of unvested stock options generally vest
over the four year vesting period of the underlying exercised stock options.
There were no options granted during the period from inception (September
9, 1997) to December 31, 1997. All options granted during the year ended
December 31, 1998 were granted with an exercise price equal to the fair value
of the underlying Common Stock on the grant date, as determined by the board of
directors.
During 1999, the Company issued stock options to certain employees with
exercise prices below the deemed fair value of its Common Stock at the date of
grant. In accordance with the requirements of APB 25, the Company has recorded
deferred compensation and additional paid-in capital for the difference between
the exercise price of the stock options and the estimated fair value of the
Company's Common Stock at the date of grant. This deferred compensation is
amortized to expense over the period during which the options or restricted
Common Stock, subject to repurchase, vest using the straight line method over a
period which is generally four years. During 1999, the Company recognized
$2,345,000 in deferred compensation related to these options of which $66,212
was amortized to expense during the year ended December 31, 1999.
F-17
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following is an analysis of stock options granted to employees
subsequent to December 31, 1999 (unaudited):
<TABLE>
<CAPTION>
Options Exercise
Date of Grant Granted Price
------------- ------- ---------
<S> <C> <C>
January 17, 2000 57,052 $ 2.50
January 20, 2000 63,902 4.50
February 8, 2000 148,000 5.00
February 16, 2000 4,439 10.00
February 28, 2000 8,310 10.00
February 28, 2000 6,000 0.08
March 21, 2000 90 0.60
March 21, 2000 500 2.50
March 21, 2000 5,970 10.00
March 21, 2000 150,000 IPO Price
</TABLE>
The Company will record deferred compensation related to these option
grants in an amount of approximately $1,750,000, which represents the
difference between the estimated fair value of the Company's Common Stock and
the exercise price of these options at the respective dates of grant. In
addition, in February 2000 the Company granted 12,000 options with an exercise
price of $5.00 per share to members of its Scientific Advisory Board. The
Company will record a charge of $72,000 at the date of the grant which
represents the fair value of these options determined through use of the Black-
Scholes model.
The following table summarizes information about the Company's stock
options at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding
----------------------------------------------------
Weighted Average Weighted Average
Range of Exercise Prices Number Outstanding Contracted Life Exercise Price
- ------------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C>
$ 0.08 533,817 8.6 $0.08
$ 0.22 581,149 9.5 $0.22
$ 0.60 306,320 10.0 $0.60
$ 1.00 52,500 10.0 $1.00
</TABLE>
At December 31, 1999, the Company had 437,500 warrants outstanding to
purchase the Company's Common Stock at a price of $0.80 which expire in
February 2008. The warrants were issued in connection with the Series A
Preferred Stock financing.
In July 1999, the Company entered into a senior debt agreement. In
connection with the agreement the Company issued 116,279 warrants to purchase
the Company's Common Stock with an exercise price of $2.15 which will expire in
July 2009. Also in July 1999, the Company entered into an operating lease
agreement for a new facility being constructed. In connection with the
agreement, the Company issued 150,000 warrants to purchase the Company's Common
Stock with an exercise price of $3.00 per share which will expire in July 2009.
The fair value of these warrants as determined using the Black-Scholes model in
accordance with SFAS 123 was de minimis.
F-18
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The activity for stock warrants is presented in the following table:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1999
--------------------------- ---------------------------
Shares Weighted Average Shares Weighted Average
Underlying Exercise Price Underlying Exercise Price
Warrants Per Share Warrants Per Share
---------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of year................ -- $ -- 437,500 $0.80
Issued.................. 437,500 0.80 266,279 2.63
Outstanding at end of
year................... 437,500 0.80 703,779 1.49
Exercisable at end of
year................... 437,500 0.80 703,779 1.49
</TABLE>
Subsequent to December 31, 1999, and in connection with an expansion of
the July 1999 operating lease agreement for a new facility, the Company issued
an additional 60,000 warrants to purchase the Company's Common Stock with an
exercise price of $5.00 per share. These warrants have an exercise period of 10
years. The fair value of these warrants at the date of grant was determined
using the Black-Scholes option-pricing model to be $361,000. This amount will
be deferred and recognized as an increase to rent expense over the life of the
related lease.
The Company continues to apply APB No. 25 and related interpretations in
accounting for the Plan. Had compensation costs for the Plan been determined
based on the fair value at the grant date for awards under the Plan consistent
with the methods of SFAS No. 123, the Company's net loss for the years ended
December 31, 1998 and 1999 would have been increased to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
Net Loss Pro Forma
Per Share As Net Loss
As Reported Pro Forma Reported Per Share
------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
1998 net loss................ $ (4,289,513) $ (4,293,951) $(1.14) $(1.15)
============ ============ ====== ======
1999 net loss................ $(10,486,560) $(11,034,381) $(2.48) $(2.60)
============ ============ ====== ======
</TABLE>
The per share weighted average fair value of stock options granted during
fiscal 1998 and 1999 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions for 1998
and 1999: expected dividend yield of 0%; risk free interest rate of 6.0% in
1998 and 6.1% in 1999; an expected option life of approximately five years; and
a volatility factor of 0%.
F-19
<PAGE>
PARADIGM GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
11. Commitments
The Company leases software under a noncancellable capital lease and
leases office space and certain equipment under operating leases. Future
minimum lease payments required under the leases at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
--------- ----------
<S> <C> <C>
2000.................................................. $ 128,560 $1,006,731
2001.................................................. 128,560 1,403,288
2002.................................................. 117,847 1,250,641
2003.................................................. 1,175,782
Thereafter............................................ 1,229,520
--------- ----------
Total minimum lease payments........................ 374,967 $6,065,962
==========
Less: amount representing interest.................... (52,042)
---------
Present value of net minimum lease payments......... 322,925
Less: current portion................................. (100,075)
---------
Long-term portion capital lease obligations......... $ 222,850
=========
</TABLE>
Rent expense under operating leases totaled $ 5,788, $282,206 and $604,418
for the period from inception (September 9, 1997) through December 31, 1997 and
the years ended December 31, 1998 and 1999, respectively.
In March 1998, the Company entered into an agreement with a consultant to
identify collaboration opportunities for the Company. The consultant will
receive a monthly fee for its services plus a success fee based on the amount
of funding received by the Company under collaboration agreements entered into
during the term of this consulting agreement.
Based on the amount of funds received by the Company from its
collaboration agreements through December 31, 1999, the Company has paid this
consultant success fees of approximately $296,000. If the Company receives the
maximum amount of funding under its existing collaboration agreements,
approximately an additional $1.9 million in success fees will be required to be
paid to this consultant.
12. Subsequent Events (unaudited)
In January 2000, the Company sold 3,000,000 shares of Series C Preferred
Stock to a group of investors for gross proceeds of $15,000,000 or $5.00 per
share. The Series C Preferred Stock automatically converts into shares of the
Company's Common Stock upon the effectiveness of a qualified initial public
offering at a one-to-one conversion ratio. The Company will record a beneficial
conversion feature charge of $12,000,000 to reflect the difference between the
estimated fair value of the Company's Series C Preferred Stock of $9.00 per
share and the $5.00 per share sales price of these shares.
As part of the Company's initial public offering of the Common Stock, the
Company and its underwriters have determined to make available up to 500,000
shares at the initial public offering price for directors, employees, business
associates and related persons associated with the Company (the "directed share
program"). On February 28 and March 13, 2000, prior to effectiveness of the
Company's registration statement, the Company sent e-mail messages with respect
to the proposed directed share program to all of the Company's employees
setting forth procedural aspects for participating in the directed share
program
F-20
<PAGE>
and informing them about the administration of the program and that their
friends and families might have an opportunity to participate in the proposed
program. The Company did not deliver a preliminary prospectus prior to
distribution of the e-mails, and each e-mail may have constituted a non-
conforming prospectus under the Securities Act of 1933. As a result, the
Company may have a contingent liability under the Securities Act of 1933. Any
liability would depend upon the number of shares of our common stock purchased
by the recipients of the e-mails. The recipients of the e-mails who purchase
shares of our common stock in the initial public offering may have a right for
a period of one year from the date of the purchase to obtain recovery of the
consideration paid in connection with their purchase of shares of common stock
or, if they had already sold the stock, file a claim against the Company for
damages resulting from their purchase of the common shares. If any liability is
asserted with respect to the e-mails, the Company will vigorously contest the
matter. However, if all of the purchasers in the directed share program who
received the e-mails are awarded damages after an entire or substantial loss of
their investment, the damages could total up to approximately $4.5 million plus
interest based on the initial public offering price of $15.00 per share and
based on the Company's intention to allocate up to 300,000 of the potential
500,000 shares to such persons. Although the Company does not intend to
allocate more than 300,000 shares to employees who received the e-mails, or
their friends and families, if a violation of the Securities Act were deemed to
apply to the entire allocation of 500,000 shares in the directed share program,
the damages could total up to approximately $7.5 million plus interest based on
an assumed initial public offering price of $15.00 per share. Although there
can be no assurance as to the ultimate disposition of this matter, it is the
opinion of the Company's management, based upon the information available at
this time, that the expected outcome of this matter would not have a material
adverse effect on the results of operations or on the financial condition of
the Company.
F-21
<PAGE>
[inside back cover]
[Graphic: pictures representing our four target market
sectors: crop production, nutrition, human health and
industrial products. Text above the pictures states: "We
have created an assembly-line process to determine gene
function and generate information that we believe will
enable us to develop novel products in four major sectors
of the global economy: crop production, nutrition, human
health, and industrial products.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5,000,000 Shares
[Paradigm Logo appears here]
Common Stock
----------------
PROSPECTUS
----------------
Chase H&Q
J.P. Morgan & Co.
Pacific Growth Equities, Inc.
Stephens Inc.
-------------
, 2000
-------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell or a
solicitation of an offer to buy our common stock in any jurisdiction where it
is unlawful. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
Until , 2000 (or 25 days after the date of this prospectus) all
dealers that buy, sell or trade Paradigm's common stock, whether or not
participating in this offering may be required to deliver a prospectus. The
delivery requirement is in addition to the dealers' obligation to deliver a
prospectus when serving as underwriters and with respect to their unsold
allotment or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 24,288
Nasdaq National Market Listing Fee............................. 90,000
----------
NASD Filing Fee................................................ 9,700
----------
Printing and Engraving Fees.................................... 150,000
----------
Legal Fees and Expenses........................................ 375,000
----------
Accounting Fees and Expenses................................... 325,000
----------
Blue Sky Fees and Expenses..................................... 10,000
----------
Transfer Agent and Registrar Fees.............................. 10,000
----------
Miscellaneous.................................................. 6,012
----------
Total...................................................... $1,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Upon completion of the offering, our restated certificate of incorporation
will provide that we shall indemnify, to the fullest extent authorized by the
Delaware General Corporation Law, each person who is involved in any litigation
or other proceeding because such person is or was a director or officer of
Paradigm Genetics, Inc. or is or was serving as an officer or director of
another entity at our request, against all expense, loss or liability
reasonably incurred or suffered in connection therewith. Our proposed amended
and restated certificate of incorporation provides that the right to
indemnification includes the right to be paid expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that
such advance payment will only be made upon delivery to us of an undertaking,
by or on behalf of the director or officer, to repay all amounts so advanced if
it is ultimately determined that such director is not entitled to
indemnification. If we do not pay a proper claim for indemnification in full
within 60 days after we receive a written claim for such indemnification, our
bylaws authorize the claimant to bring an action against us and prescribes what
constitutes a defense to such action.
Section 145 of the Delaware General Corporation Law permits a corporation
to indemnify any director or officer of the corporation against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with any action, suit or
proceeding brought by reason of the fact that such person is or was a director
or officer of the corporation, if such person acted in good faith and in a
manner that he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, if he or she had no reason to believe his or her conduct was
unlawful. In a derivative action (i.e., one brought by or on behalf of the
corporation), indemnification may be provided only for expenses actually and
reasonably incurred by any director or officer in connection with the defense
or settlement of such an action or suit if such person acted in good faith and
in a manner that he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation, except that no indemnification shall be
provided if such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court in which the action
or suit was brought shall determine that the defendant is fairly and reasonably
entitled to indemnity for such expenses despite such adjudication of liability.
II-1
<PAGE>
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law,
Article Tenth of our proposed amended and restated certificate of incorporation
eliminates the liability of a director to us or our stockholders for monetary
damages for such a breach of fiduciary duty as a director, except for
liabilities arising:
. from any breach of the director's duty of loyalty to us or our
stockholders;
. from acts or omissions that the director knew at the time of the
breach knew or believed were clearly in conflict with the best
interests of the corporation;
. under Section 174 of the Delaware General Corporation Law; and
. from any transaction from which the director derived an improper
personal benefit.
We carry insurance policies insuring our directors and officers against
certain liabilities that they may incur in their capacity as directors and
officers.
Additionally, reference is made to the Underwriting Agreement filed as
Exhibit 1.1 hereto, which provides for indemnification by the underwriters of
Paradigm, our directors and officers who sign the Registration Statement and
persons who control Paradigm, under certain circumstances.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this Registration Statement, we
have sold the following securities that were not registered under the
Securities Act.
(a) Issuances of Capital Stock and Warrants
The sale and issuance of the securities described in paragraphs (1)
through (12) below were deemed to be exempt from registration under the
Securities Act by virtue of Section 4(2) or Regulation D promulgated
thereunder.
(1) On September 9, 1997, we issued 4,400 shares of common stock the
founders of the Company for $1.00 per share.
(2) On February 12, 1998, we issued a common stock dividend of 851.2727
shares for each issued and outstanding share of common stock.
(3) On February 12, 1998, we sold and issued a total of 4,625,000 shares
of Series A Preferred Stock for $0.80 per share to two investors in a
private placement. Each share of Series A Preferred Stock is convertible
into one share of our common stock.
(4) On February 12, 1998, we issued warrants to purchase an aggregate of
437,500 shares of our Series A Preferred Stock at an exercise price of
$0.80 per share to two investors.
(5) On February 12, 1998, we issued 375,000 shares of Series A Preferred
Stock in exchange for the cancellation of notes payable of $300,000.
(6) On March 6, 1998, we issued a total of 62,500 shares of Series A
Preferred Stock in exchange for the cancellation of convertible debt of
$50,000.
(7) On May 29, 1998, we sold and issued a total of 2,500,000 shares of
Series A Preferred Stock for $0.80 per share to two investors in a private
placement.
II-2
<PAGE>
(8) On March 12, 1999, we sold and issued a total of 2,790,698 shares of
Series B Preferred Stock for $2.15 per share to four investors in a
private placement. Each share of our Series B Preferred Stock is
convertible into one share of our common stock.
(9) On July 20, 1999, we issued warrants to purchase an aggregate of
116,279 shares of common stock at an exercise price of $2.15 per share to
one investor.
(10) On July 27, 1999, we issued warrants to purchase an aggregate of
150,000 shares of common stock at an exercise price of $3.00 per share to
one investor.
(11) On January 19, 2000, we issued warrants to purchase an aggregate of
60,000 shares of common stock at an exercise price of $5.00 per share to
one investor.
(12) On January 21, 2000, we sold and issued a total of 3,000,000 shares
of Series C Convertible Preferred Stock for $5.00 per share to five
investors in a private placement. Each share of our Series C Convertible
Preferred Stock is convertible into one share of our common stock.
(b) Certain Grants and Exercises of Stock Options
The sale and issuance of the securities described below were deemed to be
exempt from registration under the Securities Act in reliance on Rule 701
promulgated under Section 3(b) of the Securities Act, as transactions by an
issuer not involving a public offering or transactions pursuant to compensatory
benefit plans and contracts relating to compensation as provided under Rule
701.
Pursuant to our 1998 Stock Option Plan, we have issued options to purchase
an aggregate of 3,502,132 shares of common stock. Of these options:
. options to purchase 156,313 shares of common stock have been canceled
or lapsed without being exercised;
. options to purchase 1,808,059 shares of common stock have been
exercised; and
. options to purchase a total of 1,537,760 shares of common stock are
currently outstanding, at a weighted average exercise price of $2.55
per share.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
**3.1 Restated Articles of Incorporation of the Registrant - North Carolina
3.1.1 Certificate of Incorporation of the Registrant - Delaware - to be
effective upon the completion of the Delaware reincorporation
*3.2 Restated Certificate of Incorporation of the Registrant - Delaware -
to be filed upon completion of this offering
**3.3 By-laws of the Registrant - North Carolina
3.3.1 By-laws of the Registrant - Delaware- to be effective upon the
completion of the Delaware reincorporation
3.4 Amended and Restated By-laws of the Registrant - Delaware - to be
effective upon completion of this offering
*4.1 Form of Common Stock Certificate
*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
**10.1 Registrant's 1998 Stock Option Plan
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
**10.2 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and John A. Ryals
**10.3 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Scott J. Uknes
**10.4 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and John A. Ryals
**10.5 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Scott Uknes
**10.6 Amended and Restated Registration Rights Agreement, dated January 21,
2000, between the Registrant and certain Founders and Investors
**+10.7 Agreement by and between Bayer AG and the Registrant dated September
22, 1998, as amended
**+10.8 Collaboration Agreement, dated November 17, 1999, by and between The
Monsanto Company and the Registrant
10.9 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Jorn Gorlach
10.10 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Sandy J. Stewart
10.11 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Jorn Gorlach
10.12 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Sandy J. Stewart
10.13 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and John A. Ryals
10.14 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Jorn Gorlach
10.15 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Sandy J. Stewart
10.16 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Scott Uknes
*10.17 Employment Agreement between the Registrant and Ian Howes
*10.18 Employment Agreement between the Registrant and Henry Nowak
*10.19 Employment Agreement between the Registrant and John Hamer
10.20 Agreement of Sublease, dated September 18, 1998, between the
Registrant and Integrated Energy Services
10.21 Sublease Amendment Agreement and Assignment of Lease between the
Registrant and Integrated Energy Services
10.22 Lease, dated September 7, 1999, as amended between the Registrant and
Parker-Raleigh Development XXXII, Limited Partnership
10.23 Agreement of Lease between the Registrant and Triangle Service Center,
Inc.
10.24 Amendment of Lease between the Registrant and Triangle Service Center,
Inc.
*10.25 Lease Agreement between the Registrant and ARE-104 Alexander Road LLC
dated July 27, 1999
10.26 Work Letter Agreement, dated July 27, 1999, between the Registrant and
ARE-104 Alexander Road LLC
10.27 Cost Sharing Agreement, dated July 27, 1999, between the Registrant
and ARE-104 Alexander Road LLC
10.28 Memorandum of Lease Agreement, dated July 27, 1999, between the
Registrant and ARE-104 Alexander Road LLC
10.29 Tenant Certificate and Agreement, dated January 11, 2000, between the
Registrant and ING Investment Management, LLC
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.30 Master Loan and Security Agreement, dated May 13, 1998, between the
Registrant and Transamerica Business Credit Corporation.
10.31 Loan and Security Agreement, dated July 20, 1999, between the
Registrant and Transamerica Business Credit Corporation
10.32 Intellectual Property Security Agreement, dated July 20, 1999, between
the Registrant and Transamerica Business Credit Corporation
10.33 Promissory Note, dated July 23, 1999, issued by the Registrant to
Transamerica Business Credit Corporation
10.34 Master Loan and Security Agreement, dated June 18, 1998, between the
Registrant and Oxford Venture Leasing LLC
*10.35 Equipment Schedule No. 1 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.36 Equipment Schedule No. 2 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
*10.37 Equipment Schedule No. 3 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.38 Equipment Schedule No. 4 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.39 Equipment Schedule No. 5 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.40 Equipment Schedule No. 6 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.41 Equipment Schedule No. 7 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
*10.42 Acknowledgment of Assignment of Loan, dated December 7, 1999, by
Oxford Venture Finance Leasing LLC
10.43 Warrant to Purchase Common Stock, dated July 27, 1999, issued by the
Registrant to ARE-104 Alexander Road LLC
10.44 Warrant to Purchase Common Stock, dated July 20, 1999, issued by the
Registrant to TBCC Funding Trust II
10.45 Warrant to Purchase Common Stock, dated January 19, 2000, issued by
the Registrant to ARE-104 Alexander Road LLC, and Escrow Agreement
10.46 Warrants to Intersouth Partners III, LP and Intersouth Partners IV, LP
dated February 12, 1998
10.47 Warrant to Innotech Investments Limited dated February 12, 1998
10.48 2000 Employee, Director and Consultant Stock Option Plan
*10.49 2000 Employee Stock Purchase Plan
23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
**24.1 Powers of Attorney
**27 Financial Data Schedule--1997 and 1998
**27.1 Financial Data Schedule--1999
</TABLE>
- ------------------
* To be filed by amendment.
** Previously filed with the SEC.
+ Confidential Treatment requested as to certain provisions, which portions
have been omitted and filed separately with the SEC.
II-5
<PAGE>
(b) Financial Statement Schedules
Financial Statement Schedules are omitted because the information is
included in our financial statements or notes to those financial statements.
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 provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 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 undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Boston, Massachusetts, on March 28, 2000.
PARADIGM GENETICS, INC.
/s/ John A. Ryals
By: _________________________________
John A. Ryals
Chief Executive Officer and
President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities held on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------- -------------------------- -------------------
<S> <C> <C>
/s/ John A. Ryals Chief Executive Officer, March 28, 2000
______________________________________ President and Director
John A. Ryals (principal executive
officer)
/s/ Ian A. W. Howes Vice President of Finance March 28, 2000
______________________________________ and Chief Financial
Ian A. W. Howes Officer (principal
financial and accounting
officer)
* Director March 28, 2000
______________________________________
G. Steven Burrill
* Director March 28, 2000
______________________________________
Dennis Dougherty
* Director March 28, 2000
______________________________________
Terrance McGuire
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- -------------------------------------- -------------------------- -------------------
<S> <C> <C>
* Director March 28, 2000
______________________________________
Michael Summers
* Director March 28, 2000
______________________________________
Robert Goodman
* Director March 28, 2000
______________________________________
Henri Zinsli
</TABLE>
* By executing his name hereto on March 28, 2000, John A. Ryals is signing
this document on behalf of the persons indicated above pursuant to powers of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
/s/ John A. Ryals
By: ________________________________________
John A. Ryals
Attorney-in-fact
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
**3.1 Restated Articles of Incorporation of the Registrant - North Carolina
3.1.1 Certificate of Incorporation of the Registrant - Delaware - to be
effective upon the completion of the Delaware reincorporation
*3.2 Restated Certificate of Incorporation of the Registrant - Delaware -
to be filed upon completion of this offering
**3.3 By-laws of the Registrant - North Carolina
3.3.1 By-laws of the Registrant - Delaware- to be effective upon the
completion of the Delaware reincorporation
3.4 Amended and Restated By-laws of the Registrant - Delaware - to be
effective upon completion of this offering
*4.1 Form of Common Stock Certificate
*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
**10.1 Registrant's 1998 Stock Option Plan
**10.2 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and John A. Ryals
**10.3 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Scott J. Uknes
**10.4 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and John A. Ryals
**10.5 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Scott Uknes
**10.6 Amended and Restated Registration Rights Agreement, dated January 21,
2000, between the Registrant and certain Founders and Investors
**+10.7 Agreement by and between Bayer AG and the Registrant dated September
22, 1998, as amended
**+10.8 Collaboration Agreement, dated November 17, 1999, by and between The
Monsanto Company and the Registrant
10.9 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Jorn Gorlach
10.10 Founder Employment Agreement, dated February 12, 1998, between the
Registrant and Sandy J. Stewart
10.11 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Jorn Gorlach
10.12 Founder Proprietary Information and Inventions Agreement, dated
February 12, 1998, between the Registrant and Sandy J. Stewart
10.13 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and John A. Ryals
10.14 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Jorn Gorlach
10.15 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Sandy J. Stewart
10.16 Founder Stock Repurchase and Vesting Agreement, dated February 12,
1998, between the Registrant and Scott Uknes
*10.17 Employment Agreement between the Registrant and Ian Howes
*10.18 Employment Agreement between the Registrant and Henry Nowak
*10.19 Employment Agreement between the Registrant and John Hamer
10.20 Agreement of Sublease, dated September 18, 1998, between the
Registrant and Integrated Energy Services
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
10.21 Sublease Amendment Agreement and Assignment of Lease between the
Registrant and Integrated Energy Services
10.22 Lease, dated September 7, 1999, as amended between the Registrant and
Parker-Raleigh Development XXXII, Limited Partnership
10.23 Agreement of Lease between the Registrant and Triangle Service Center,
Inc.
10.24 Amendment of Lease between the Registrant and Triangle Service Center,
Inc.
*10.25 Lease Agreement between the Registrant and ARE-104 Alexander Road LLC
dated July 27, 1999
10.26 Work Letter Agreement, dated July 27, 1999, between the Registrant and
ARE-104 Alexander Road LLC
10.27 Cost Sharing Agreement, dated July 27, 1999, between the Registrant
and ARE-104 Alexander Road LLC
10.28 Memorandum of Lease Agreement, dated July 27, 1999, between the
Registrant and ARE-104 Alexander Road LLC
10.29 Tenant Certificate and Agreement, dated January 11, 2000, between the
Registrant and ING Investment Management, LLC
10.30 Master Loan and Security Agreement, dated May 13, 1998, between the
Registrant and Transamerica Business Credit Corporation
10.31 Loan and Security Agreement, dated July 20, 1999, between the
Registrant and Transamerica Business Credit Corporation
10.32 Intellectual Property Security Agreement, dated July 20, 1999, between
the Registrant and Transamerica Business Credit Corporation
10.33 Promissory Note, dated July 23, 1999, issued by the Registrant to
Transamerica Business Credit Corporation
10.34 Master Loan and Security Agreement, dated June 18, 1998, between the
Registrant and Oxford Venture Leasing LLC
*10.35 Equipment Schedule No. 1 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.36 Equipment Schedule No. 2 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
*10.37 Equipment Schedule No. 3 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.38 Equipment Schedule No. 4 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.39 Equipment Schedule No. 5 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.40 Equipment Schedule No. 6 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
10.41 Equipment Schedule No. 7 to Master Loan and Security Agreement between
the Registrant and Oxford Venture Leasing LLC
*10.42 Acknowledgment of Assignment of Loan, dated December 7, 1999, by
Oxford Venture Finance Leasing LLC
10.43 Warrant to Purchase Common Stock, dated July 27, 1999, issued by the
Registrant to ARE-104 Alexander Road LLC
10.44 Warrant to Purchase Common Stock, dated July 20, 1999, issued by the
Registrant to TBCC Funding Trust II
10.45 Warrant to Purchase Common Stock, dated January 19, 2000, issued by
the Registrant to ARE-104 Alexander Road LLC, and Escrow Agreement
10.46 Warrants to Intersouth Partners III, LP and Intersouth Partners IV, LP
dated February 12, 1998
10.47 Warrant to Innotech Investments Limited dated February 12, 1998
10.48 2000 Employee, Director and Consultant Stock Option Plan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
*10.49 2000 Employee Stock Purchase Plan
23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)
**24.1 Powers of Attorney
**27 Financial Data Schedule--1997 and 1998
**27.1 Financial Data Schedule--1999
</TABLE>
- ------------------
* To be filed by amendment.
** Previously filed with the SEC.
+ Confidential Treatment requested as to certain provisions, which portions
have been omitted and filed separately with the SEC.
<PAGE>
EXHIBIT 3.1.1
CERTIFICATE OF INCORPORATION
OF
PARADIGM GENETICS, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "Corporation")
is
PARADIGM GENETICS, INC.
SECOND: The address, including street, number, city, and county, of the
registered office of the Corporation in the State of Delaware is 1013 Centre
Road, City of Wilmington, County of New Castle; and the name of the registered
agent of the Corporation in the State of Delaware is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business to be conducted and the purposes of the
Corporation are: to engage in any lawful act or activity or carry on any
business for which corporations may be organized under the Delaware General
Corporation Law or any successor statute.
FOURTH:
A. The total number of shares of all classes of stock which the Corporation
shall have authority to issue is Sixty Eight Million Three Hundred Fifty Three
Thousand One Hundred Ninety Eight (68,353,198), consisting of:
(i) 50,000,000 shares of Common Stock, One Cent ($0.01) Par Value per
share (the "Common Stock");
(ii) 7,562,500 shares of Series A Preferred Stock, One Cent ($0.01) Par
Value per share (the "Series A Preferred Stock");
(iii) 2,790,698 shares of Series B Preferred Stock, Zero Dollars and
One Cent ($0.01) Par Value per share (the "Series B Preferred Stock");
<PAGE>
(iv) 3,000,000 shares of Series C Preferred Stock, One Cent ($0.01) Par
Value per share (the "Series C Preferred Stock"); and
(v) 5,000,000 shares of Preferred Stock, One Cent ($0.01) Par Value per
share (the "Preferred Stock").
B. Common Stock. The holders of the Common Stock are entitled to one vote
for each share held; provided, however, that, except as otherwise required by
law or set forth in any Preferred Stock designation, holders of Common Stock
shall not be entitled to vote on any amendment to this Certificate of
Incorporation (including any certificate of designation relating to Preferred
Stock) that relates solely to the terms of one or more outstanding series of
Preferred Stock if the holders of such affected series are entitled, either
separately or together as a class with the holders of one or more other such
series, to vote thereon by law or pursuant to this Certificate of Incorporation
(including any certificate of designation relating to Preferred Stock).
C. Preferred Stock. The shares of Preferred Stock may be issued from time
to time in one or more series, the shares of each series to have such
designations, preferences, relative rights, and powers, including voting powers
(or qualifications, limitations or restrictions thereof) as are stated in the
resolution or resolutions providing for the issuance of such series adopted by
the Board of Directors of the Corporation. This paragraph is intended to afford
to the Board of Directors the maximum authority permitted under Section 151(g)
of Delaware General Corporation Law.
D. Designation of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock
1. DIVIDENDS. The holders of the Series A Preferred Stock shall be entitled
to receive in any fiscal year of the Corporation, when and as declared by the
Board of Directors, out of any assets at the time legally available therefor,
before any cash dividend shall be paid upon or set aside for the Common Stock in
such fiscal year, dividends payable in cash in an amount per share of Series A
Preferred Stock for such fiscal year at least equal to the product of (a) the
per share amount, if any, of the cash dividend declared, paid or set aside for
the Common Stock in such fiscal year, multiplied by (b) the number of whole
shares of Common Stock into which each such share of Series A Preferred Stock is
convertible immediately after the close of business on the record date fixed for
such dividend. The holders of Series B Preferred Stock shall be entitled to
receive in any fiscal year of the Corporation, when and as declared by the Board
of Directors, out of any assets at the time legally available therefor, before
any cash dividend shall be paid upon or set aside for the Common Stock in such
fiscal year, dividends payable in cash in an amount per share of Series B
Preferred Stock for such fiscal year at least equal to the product of (c) the
per share amount, if any, of the cash dividend declared, paid or set aside for
the Common Stock in such fiscal year, multiplied by (d) the number of whole
shares of Common Stock into which each such share of
-2-
<PAGE>
Series B Preferred Stock is convertible immediately after the close of business
on the record date fixed for such dividend. The holders of Series C Preferred
Stock shall be entitled to receive in any fiscal year of the Corporation, when
and as declared by the Board of Directors, out of any assets at the time legally
available therefor, before any cash dividend shall be paid upon or set aside for
the Common Stock in such fiscal year, dividends payable in cash in an amount per
share of Series C Preferred Stock for such fiscal year at least equal to the
product of (e) the per share amount, if any, of the cash dividend declared, paid
or set aside for the Common Stock in such fiscal year, multiplied by (f) the
number of whole shares of Common Stock into which each such share of Series C
Preferred Stock is convertible immediately after the close of business on the
record date fixed for such dividend. No dividend shall be paid on the Series A
Preferred Stock unless equivalent dividends, on an as converted basis, are
declared and paid concurrently on the Series B Preferred Stock and the Series C
Preferred Stock. No dividends shall be paid on the Series B Preferred Stock
unless equivalent dividends, on an as converted basis, are declared and paid
concurrently on the Series C Preferred Stock. The right to such dividends on
shares of Series Preferred Stock shall not be cumulative, and no right shall
accrue to holders of shares of Series Preferred Stock by reason of the fact that
dividends on such shares are not declared in any prior year, nor shall any
undeclared or unpaid dividend bear or accrue interest. After payment of
dividends to the holders of Series Preferred Stock, dividends may be declared
and distributed among all holders of Common Stock; provided, however, that no
dividend may be declared and distributed among holders of Common Stock at a rate
greater than the rate at which dividends are paid to the holders of Preferred
Stock based on the number of shares of Common Stock into which such shares of
Preferred Stock are convertible (as adjusted for any stock dividends,
combinations or splits with respect to such shares) on the date such dividend is
declared.
2. LIQUIDATION PREFERENCE.
(a) Series C Rights on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the Series C Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of Common Stock, Series A Preferred Stock, and
Series B Preferred Stock, and any series of preferred stock the terms of which
specifically provide that such series ranks junior and subordinate to the Series
C Preferred Stock with respect to distribution of assets upon any liquidation or
deemed liquidation, an amount equal to $5.00 per share (as adjusted for any
stock dividends, combinations or splits with respect to such shares) plus all
accrued or declared but unpaid dividends on such share for each share of Series
C Preferred Stock then held by them. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series C Preferred
Stock shall be insufficient to permit the payment to such holders of the full
preferential amount described in this Section 2(a), then the entire assets and
funds of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series C Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
-3-
<PAGE>
(b) Series B Rights on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of the Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of Common Stock and Series A Preferred Stock, and
any series of preferred stock the terms of which specifically provide that such
series ranks junior and subordinate to the Series B Preferred Stock with respect
to distribution of assets upon any liquidation or deemed liquidation, an amount
equal to $2.15 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares) plus all accrued or declared but unpaid
dividends on such share for each share of Series B Preferred Stock then held by
them. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series B Preferred Stock shall be
insufficient to permit the payment to such holders of the full preferential
amount described in this Section 2(b), then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(c) Series A Rights on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
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 or surplus funds of
the Corporation to the holders of Common Stock and any series of preferred stock
the terms of which specifically provide that such series ranks junior and
subordinate to the Series A Preferred Stock with respect to distribution of
assets upon any liquidation or deemed liquidation, an amount equal to $0.80 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such shares) plus all accrued or declared but unpaid dividends on such share
for each share of Series A Preferred Stock then held by them. 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 preferential amount described in this
Section 2(c), then 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.
d) Distribution of Remaining Assets. After payment to the holders of the
Series Preferred Stock of the amounts set forth in Article FOURTH (D), Sections
2(a), 2(b) and 2(c) above, the entire remaining assets and funds of the
Corporation legally available for distribution, if any, shall be distributed
among the holders of the Common Stock in proportion to the shares of Common
Stock then held by them.
e) Certain Other Transactions. For purposes of this Article FOURTH (D),
Section 2, a liquidation, dissolution or winding up of the Corporation shall be
deemed to be occasioned by, or to include, (A) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be
-4-
<PAGE>
issued, by the acquiring corporation or its subsidiary (other than a mere
reincorporation transaction) or (B) a sale of all or substantially all of the
assets of the Corporation; unless, in either case, 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 at least fifty percent (50%) of the voting power of the surviving or
acquiring entity, or unless the fair market value of the consideration received
by holders of the Series A Preferred Stock (assuming conversion of such shares
to Common Stock) is valued at greater than $0.80 per share of Common Stock, the
fair market value of the consideration received by the holders of the Series B
Preferred Stock (assuming conversion of such shares to Common Stock) is valued
at greater than $2.15 per share of Common Stock and the fair market value of the
consideration received by holders of the Series C Preferred Stock (assuming
conversion of such shares to Common Stock) is valued at greater than $5.00 per
share of Common Stock (in each case as adjusted for any stock dividends,
combinations or splits with respect to such shares) (each such event, a
"Combination"). In the event of the occurrence of any Combination, and in the
event the holders of shares of the Series Preferred Stock do not elect to
convert pursuant to Section 4 below prior to or contemporaneously with such
Combination, then such holders shall continue to have the other rights set forth
in this Article FOURTH (D), including under Sections 2(a), 2(b) and 2(c) above.
(f) Valuation of Non-Cash Assets. Whenever the distribution provided for
in this Article FOURTH (D), Section 2 shall be payable in securities or property
other than cash, the value of such distribution shall be the fair market value
of such securities or other property as determined in good faith by the Board of
Directors.
3. VOTING RIGHTS.
(a) Generally. Except as otherwise required by applicable law or as set
forth herein, the shares of Series Preferred Stock shall be voted equally with
the shares of Common Stock (voting together with the shares of Common Stock as a
single class) at any annual or special meeting of stockholders of the
Corporation, or may act by written consent in the same manner as Common Stock,
upon the following basis: each holder of one or more shares of Series Preferred
Stock shall be entitled to notice of any stockholders' meeting in accordance
with the Bylaws of the Corporation and to such number of votes for the shares of
Series Preferred Stock held by him on the record date fixed for such meeting, or
on the effective date of such written consent, as shall be equal to the number
of whole shares of Common Stock into which all of his shares of Series Preferred
Stock are convertible immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent.
b) Special Voting Rights. So long as at least twenty percent (20%) of
the Series A Preferred Stock, the Series B Preferred Stock or the Series C
Preferred Stock shares issued on or after the Original Issue Date (defined
below) remain outstanding (taken together as a single class), the affirmative
vote or written consent of the holders of at least two-thirds of the outstanding
shares of Series Preferred Stock
-5-
<PAGE>
(voting together as a single class, on the basis that the holder's Series
Preferred Stock shall be entitled to such number of votes as shall be equal to
the number of whole shares of Common Stock into which such holder's shares of
Series Preferred Stock are convertible at such time) shall be required for (i)
any amendment to the Corporation's Certificate of Incorporation or Bylaws, or
any repeal of any provision thereof or addition thereto, or any other action,
that adversely alters or changes the rights, preferences or privileges of any of
the Series Preferred Stock, (ii) any action that creates a new class or series
of shares having a preference or priority as to dividends or assets superior to
or on a parity with that of any of the Series Preferred Stock, (iii) any
issuance of bonds, notes, debentures or other securities that are convertible
into or exchangeable for securities of the Corporation having a preference or
priority as to dividends or assets superior to or on a parity with that of any
of the Series Preferred Stock, (iv) any reclassification of any class or series
of shares into securities having a preference or priority as to dividends or
assets superior to or on a parity with that of any of the Series Preferred Stock
(including without limitation with respect to Series Preferred Stock issued
after the Original Issue Date), (v) any application of the Corporation's assets
to the redemption or acquisition of any shares of stock, except from employees,
officers, or directors of, or consultants to, the Corporation at a price per
share equal to the original issue price therefor, pursuant to vesting
arrangements approved by the Board of Directors, (vi) any action that would
result in the acquisition of the Corporation by means of a merger or other form
of corporate reorganization or the sale of all or substantially all of the
assets of the Corporation (other than an acquisition, sale or other transaction
in which the Corporation's shareholders of record as constituted immediately
prior to such transaction will, immediately after such transaction (by virtue of
securities issued as consideration for the Corporation's acquisition, sale or
otherwise), hold at least fifty percent (50%) of the voting power of the
surviving or acquiring entity, or (vii) the voluntary liquidation, dissolution
or winding up of the Corporation.
4. CONVERSION. The holders of the Series Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series 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. Each share of Series Preferred Stock shall be converted into the
number of fully-paid and nonassessable shares of Common Stock as is determined
by dividing the "Conversion Price" per share in effect for such Series Preferred
Stock at the time of conversion into the "Conversion Value" per share for such
Series Preferred Stock. The number of shares of Common Stock into which each
share of each Series Preferred Stock is convertible is hereinafter collectively
referred to as the "Conversion Rate." The initial Conversion Price per share of
Series A Preferred Stock shall be $0.80, the initial Conversion Price per share
of Series B Preferred Stock shall be $2.15, and the initial Conversion Price per
share of Series C Preferred Stock shall be $5.00. The initial Conversion Price
of each of the Series Preferred Stock shall be subject to adjustment as set
forth in Article FOURTH (D), Section 4(d). The Conversion Value per share of
Series A Preferred Stock shall be
-6-
<PAGE>
$0.80, the Conversion Value per share of Series B Preferred Stock shall be
$2.15, and the Conversion Value per share of Series C Preferred Stock shall be
$5.00. No adjustment shall be made to the voluntary conversion rights of Series
Preferred Stock for declared but unpaid dividends on the shares of Series
Preferred Stock surrendered for conversion or on the shares of Common Stock
delivered upon any such conversion.
(b) Automatic Conversion. Each share of Series Preferred Stock shall
automatically be converted into shares of Common Stock at the then-effective
Conversion Rate for such series, immediately upon the closing of the sale of the
Corporation's Common Stock in a firm commitment, underwritten public offering
registered under the Securities Act of 1933, as amended (the "Securities Act"),
at a public offering price (prior to underwriters' discounts and expenses) equal
to or exceeding $10.00 per share of Common Stock (as adjusted for any stock
dividends, combinations or splits with respect to such shares) and the aggregate
gross proceeds to the Corporation and/or any selling stockholders (before
deduction for underwriters' discounts and expenses relating to the issuance,
including without limitation fees of the Corporation's counsel) of which equal
or exceed $20,000,000 (a "Qualified Public Offering"). Each share of Series A
Preferred Stock shall automatically be converted into shares of Common Stock at
the then-effective Conversion Rate for such series, immediately upon the consent
of the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock. Each share of Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the then-effective Conversion Rate for
such series, immediately upon the consent of the holders of at least two-thirds
of the outstanding shares of Series B Preferred Stock. Each share of Series C
Preferred Stock shall automatically be converted into shares of Common Stock at
the then-effective Conversion Rate for such series, immediately upon the consent
of the holders of at least two-thirds of the outstanding shares of Series C
Preferred Stock.
c) Mechanics of Conversion. Before any holder of Series Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or of any transfer agent for such stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series Preferred Stock, a certificate or certificates
for the number of shares of Common Stock to which he shall be entitled. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series 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 on such date. If the
conversion is in connection with an underwritten offering of securities pursuant
to the Securities Act, the conversion may, at the option of any holder tendering
shares of Series 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 the Common Stock upon conversion
of
-7-
<PAGE>
the Series Preferred Stock shall not be deemed to have converted such Series
Preferred Stock until immediately prior to the closing of such sale of
securities. Notwithstanding that any certificate for Series Preferred Stock to
be converted in a mandatory conversion shall not have been surrendered as of the
date fixed for conversion, each holder of Series Preferred Stock shall
thereafter be treated for all purposes as the record holder of the number of
shares of Common Stock issuable to such holder upon conversion.
(d) Conversion Price Adjustments of Preferred Stock. The Conversion
Price of the Series Preferred Stock shall be subject to adjustment from time to
time as set forth below.
i) Special Definitions. For purposes of this Article FOURTH (D),
Section 4(d), the following definitions apply:
(1) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Article FOURTH (D), Section 4(d)(iii),
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(A) upon conversion of shares of any of the Series
Preferred Stock;
(B) to officers, non-employee directors or employees of,
or consultants to, the Corporation pursuant to stock option or stock purchase
plans or agreements or other stock incentive plans or arrangements on terms
approved by the Board of Directors, but not exceeding Four Million, Fifteen
Thousand (4,015,000) shares of Common Stock (in each case net of any repurchases
of such shares or cancellations or expirations of options), subject to
adjustment for all subdivisions and combinations;
(C) as a dividend or distribution to all holders of
Series A Preferred Stock, Series B Preferred Stock, or Series C Preferred Stock,
or as a dividend or distribution to all holders of Common Stock and Series
Preferred Stock, in each case as authorized herein;
(D) for which adjustment of the Conversion Price for any
of the Series Preferred Stock is made pursuant to Article FOURTH (D), Section
4(e); or
(E) pursuant to the exercise of Options (as defined
below) granted prior to the Original Issue Date.
(2) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock and Series Preferred Stock) or
other securities convertible into or exchangeable for Common Stock.
-8-
<PAGE>
(3) "Original Issue Date" shall mean (A) with respect to the
Series A Preferred Stock, the date on which a share of Series A Preferred Stock
was first issued, (B) with respect to the Series B Preferred Stock, the date on
which a share of Series B Preferred Stock was first issued, and (C) with respect
to the Series C Preferred Stock, the date on which a share of Series C Preferred
Stock was first issued.
(4) "Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(ii) No Adjustment of Conversion Price. Any provision herein to the
contrary notwithstanding, no adjustment in the Conversion Price for any share of
Series Preferred Stock shall be made in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share (determined pursuant
to Article FOURTH (D), Section 4(d)(v) hereof) for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price for such series of Preferred Stock in effect on the date of,
and immediately prior to, such issue.
(iii) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation, after the Original Issue
Date shall issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Article FOURTH (D), Section
4(d)(iv)) without consideration or for a consideration per share less than the
Conversion Price for the Series A Preferred Stock, Series B Preferred Stock, or
Series C Preferred Stock, as the case may be, in effect immediately prior to
such issue, then and in such event, such Conversion Price shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
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 issue plus the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price in effect immediately prior to such issue, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock
outstanding immediately prior to such issue shall be calculated on a fully-
diluted basis, as if all shares of Series Preferred Stock and all Convertible
Securities had been fully converted into shares of Common Stock immediately
prior to such issuance and any outstanding Options had been fully exercised
immediately prior to such issuance (and the resulting securities fully converted
into shares of Common Stock, if so convertible) as of such date.
(iv) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the
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instrument relating thereto without regard to any provisions contained therein
designed to protect against dilution or any other adjustment) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price of any of
the Series Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or decrease or increase in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price of the applicable Series Preferred Stock
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities (provided, however,
that no such adjustment of the Conversion Price of any of the Series Preferred
Stock shall affect Common Stock previously issued upon conversion of any of the
Series Preferred Stock);
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Price of the Series Preferred Stock computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:
(A) in the case of Convertible Securities or Options for
Common Stock the only Additional Shares of Common Stock issued were the shares
of Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange; and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the
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Corporation for the Additional Shares of Common Stock deemed to have been then
issued was the consideration actually received by the Corporation for the issue
of all such Options, whether or not exercised, plus the consideration deemed to
have been received by the Corporation (determined pursuant to Article FOURTH
(D), Section 4(d)(v)) upon the issue of the Convertible Securities with respect
to which such Options were actually exercised;
(4) no readjustment pursuant to clause (2) or (3) above shall
have the effect of increasing the Conversion Price for the Series Preferred
Stock to an amount which exceeds the lower of (a) the Conversion Price on the
original adjustment date, or (b) the Conversion Price that would have resulted
from any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(5) in the case of any Options which expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of the
Conversion Price for any of the Series Preferred Stock shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall be
made in the same manner provided in clause (3) above; and
(6) if any such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price for any of the Series
Preferred Stock which became effective on such record date shall be cancelled as
of the close of business on such record date and shall instead be made on the
actual date of issuance, if any.
(v) Determination of Consideration. For purposes of this Article
FOURTH (D), Section 4(d), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(1) Cash and property. Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
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(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Article FOURTH (D), Section 4(d)(iv), relating
to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution or any other adjustment)
payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against the dilution or any other
adjustment) issuable upon the exercise of such Options or conversion or exchange
of such Convertible Securities.
(e) Adjustments to Conversion Price for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the Corporation
at any time or from time to time after the Original Issue Date shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Conversion Price for each of the Series
Preferred Stock in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately decreased or increased,
as appropriate. In the event that this Corporation shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Corporation shall be deemed to have
made a dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire Common
Stock.
(f) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for in Article FOURTH (D),
Section 4(e) above or a merger or other reorganization treated as a liquidation,
dissolution or winding up of the Corporation under Article FOURTH (D), Section
2(c) above), the Conversion Price for
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each of the Series Preferred Stock then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock, or other securities or property, which
the holders would otherwise have been entitled to receive, a number of shares of
such other class or classes of stock equivalent to the number of shares of
Common Stock that would have been subject to receipt by the holders upon
conversion of the Series Preferred Stock immediately before that change.
g) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Article FOURTH (D), Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series Preferred Stock against impairment.
(h) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Article
FOURTH (D), 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 Preferred Stock a certificate executed by the
Corporation's President and Chief Executive Officer or Chief Financial Officer
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 Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price for each series of
Preferred Stock at the time in effect, and (iii) 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 each series of Preferred Stock.
i) Notices of Record Date. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock (other than by purchase of shares of Common Stock of employees, officers
or directors of, or consultants to, the Corporation pursuant to the termination
of such person's status as such or pursuant to the Corporation's exercise of
rights of first refusal with respect to its shares), whether in cash, property,
stock or other securities, whether or not a regular cash dividend and whether or
not out of earnings or earned surplus; (ii) to offer for subscription pro rata
to the holders of any class or series of its stock any additional shares of
stock of any class or series or other rights; (iii) to effect any re-
classification or recapitalization of its Common Stock outstanding involving a
change in the Common Stock; or (iv) to merge or consolidate with or into any
other corporation, or sell, lease or convey all or substantially all of its
assets, or to liquidate, dissolve or wind up; then, in connection with each such
event, the Corporation shall send to the holders of Preferred Stock:
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(1) at least twenty (20) days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and (iv) above,
at least twenty (20) days' prior written notice of the date when the same shall
take place (and specifying the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event).
Notwithstanding the foregoing, the Corporation's obligation to give
any such notice to the holders of one or more shares of Preferred Stock shall be
deemed waived if the holders of at least two-thirds of the then outstanding
shares of Preferred Stock shall execute and deliver to the Corporation a written
waiver of such notice.
(j) Issue Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on mandatory conversion of any Series Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
(k) Reservation of Common 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 Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series 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 the
Series 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 purpose, including, without limitation, engaging in best efforts to
obtain the requisite stockholder approval of any necessary amendment to this
Certificate of Incorporation.
l) Fractional Shares. No fractional shares of Common Stock shall be
issued upon the conversion of any share or shares of Series Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Series Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned aggregation,
the conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
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m) Multiple Issuance Dates. Notwithstanding anything in this Article
FOURTH (D), Section 4 to the contrary, in the event the Corporation issues
shares of the same series of Preferred Stock on more than one date, the
Conversion Price shall be adjusted only once for the issuance of shares of such
series of Preferred Stock, such adjustment to occur upon the earlier of (i) one
hundred twenty (120) days after the first issuance thereof, (ii) upon the final
closing of the issuance thereof, or (iii) immediately prior to any conversion or
repurchase of such Preferred Stock.
(n) Notices. Any notice required by the provisions of this Article
FOURTH (D), Section 4 to be given to the holders of shares of any Series
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, or if sent by facsimile or delivered personally by hand or
nationally recognized courier and addressed to each holder of record at such
holders address or facsimile number appearing in the records of the Corporation.
5. INCREASING PREFERRED STOCK. The number of authorized shares of
Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the Common Stock, without a vote of the holders of the Preferred
Stock, or of any series thereof, unless a vote of any such holders is required
pursuant to the terms of any Preferred Stock designation.
6. NO REISSUANCE OF SERIES PREFERRED STOCK. No share or shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock acquired
by the Corporation by reason of redemption, purchase, conversion or otherwise
shall be reissued and all such shares shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue.
FIFTH: The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
---- ---------------
Henry Nowak Paradigm Genetics, Inc.
104 Alexander Drive
Building 2
Research Triangle Park, North Carolina 27709
SIXTH: Reserved.
SEVENTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authority expressly
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conferred upon them by statute or by this Certificate of Incorporation or the
By-Laws of the Corporation as in effect from time to time, the directors are
hereby empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written ballot
unless the By-Laws so provide.
C. Following the closing of the sale of the Corporation's Common Stock in
a firm commitment, underwritten public offering registered under the Securities
Act of 1933, as amended (the "Securities Act"), at a public offering price
(prior to underwriters' discounts and expenses) equal to or exceeding $10.00 per
share of Common Stock (as adjusted for any stock dividends, combinations or
splits with respect to such shares) and the aggregate gross proceeds to the
Corporation and/or any selling stockholders (before deduction for underwriters'
discounts and expenses relating to the issuance, including without limitation
fees of the Corporation's counsel) of which equal or exceed $20,000,000 (a
"Qualified Public Offering"), any action required or permitted to be taken by
the stockholders of the Corporation may be effected only at a duly called annual
or special meeting of stockholders of the Corporation and not by written
consent.
D. Following the closing of a Qualified Public Offering, special meetings
of the stockholders may only be called by the Board of Directors.
EIGHTH: A. Following the closing of a Qualified Public Offering, subject to
the rights of the holders of shares of any series of Preferred Stock then
outstanding to elect additional directors under specified circumstances, the
number of directors shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the Board of
Directors.
B. Effective upon the closing of a Qualified Public Offering, subject to the
rights of the holders of shares of any series of Preferred Stock then
outstanding to elect additional directors under specified circumstances, the
Board of Directors of the Corporation shall be divided into three classes, with
the term of office of the first class to expire at the 2001 annual meeting of
stockholders or any special meeting in lieu thereof, the term of office of the
second class to expire at the 2002 annual meeting of stockholders or any special
meeting in lieu thereof, and the term of office of the third class to expire at
the 2003 annual meeting of stockholders or any special meeting in lieu thereof.
At each annual meeting of stockholders or any special meeting in lieu thereof,
directors elected to succeed those directors whose terms expire, other than
directors elected by the holders of any series of Preferred Stock, shall be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders or special meeting in lieu thereof after their election and until
their successors are duly elected and qualified.
C. Following the closing of a Qualified Public Offering, 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
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Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause shall 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 and not by the stockholders.
D. Following the closing of a Qualified Public Offering, advance notice of
stockholder nominations for the election of directors and of business to be
brought by stockholders before any meeting of the stockholders of the
Corporation shall be given in the manner provided in the By-Laws of the
Corporation.
E. Following the closing of a Qualified Public Offering, subject to the
rights of the holders of any series of Preferred Stock then outstanding, any
director, or the entire Board of Directors, may be removed from office at any
time only for cause and only by the affirmative vote of the holders of at least
eighty percent (80%) of the voting power of all of the outstanding shares of
capital stock then entitled to vote at an election of the directors. A director
may be removed for cause only after a reasonable notice and opportunity to be
heard by the stockholders.
NINTH: The Board of Directors is expressly empowered to adopt, amend or
repeal By-Laws of the Corporation. Any adoption, amendment or repeal of the By-
Laws of the Corporation by the Board of Directors shall require the approval of
a majority of the entire Board of Directors. The stockholders shall also have
power to adopt, amend or repeal the By-Laws of the Corporation; provided,
however that following the closing of a Qualified Public Offering, that in
addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by this Restated Certificate of Incorporation,
the affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for the stockholders to adopt,
amend or repeal any provision of the By-Laws of the Corporation.
TENTH: A. To the fullest extent permitted by the Delaware General
Corporation Law as the same now exists or may hereafter be amended, the
Corporation shall indemnify, and advance expenses to, its directors and officers
and to any person who is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, if such person was or is
made a party to or is threatened to be made a party to or is otherwise involved
(including, without limitation, as a witness) in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, trustee,
employee or agent of another corporation, or of a partnership, joint venture,
trust or other enterprise, including service with respect to an employee benefit
plan; provided, that except with respect to proceedings to enforce rights to
indemnification or as is otherwise required by law, the Corporation shall not be
required to indemnify, and advance expenses to, any director, officer or other
person in connection with a proceeding (or part thereof)
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initiated by such director, officer or other person, unless such proceeding (or
part thereof) was authorized by the Board of Directors.
B. The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article TENTH shall not be deemed exclusive of any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
C. The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, trustee, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under this
Article TENTH.
D. The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article TENTH shall, unless otherwise specified when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person. No repeal or amendment of this
Article TENTH shall adversely affect any rights of any person pursuant to this
Article TENTH which existed at the time of such repeal or amendment with respect
to acts or omissions occurring prior to such repeal or amendment.
ELEVENTH: No director shall be personally liable to the Corporation or
its stockholders for any monetary damages for breaches of fiduciary duty as a
director; provided that this provision shall not eliminate or limit the
liability of a director, to the extent that such liability is imposed by
applicable law, (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) under
Section 174 or successor provisions of the Delaware General Corporation Law; or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal. If the Delaware General Corporation Law is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. All references in this Article ELEVENTH to a
director shall also be deemed to refer to any such director acting in his or her
capacity as a Continuing Director (as defined in Article THIRTEENTH).
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TWELFTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the Delaware General Corporation Law and all rights conferred upon
stockholders are granted subject to this reservation; provided that, following
the closing of a Qualified Public Offering, in addition to the vote of the
holders of any class or series of stock of the Corporation required by law or by
this Certificate of Incorporation, the affirmative vote of the holders of shares
of voting stock of the Corporation representing at least eighty percent (80%) of
the voting power of all of the then outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend, alter or repeal, or
adopt any provision to the Corporation's Certificate of Incorporation, or any
provision inconsistent with, Articles SEVENTH, EIGHTH, NINETH, TENTH, ELEVENTH
and this Article TWELFTH of this Certificate of Incorporation.
THIRTEENTH: The Board of Directors is expressly authorized to cause the
Corporation to issue rights pursuant to Section 157 of the DGCL and, in that
connection, to enter into any agreements necessary or convenient for such
issuance, and to enter into other agreements necessary and convenient to the
conduct of the business of the Corporation. Any such agreement may include
provisions limiting, in certain circumstances, the ability of the Board of
Directors of the Corporation to redeem the securities issued pursuant thereto or
to take other action thereunder or in connection therewith unless there is a
specified number or percentage of Continuing Directors then in office. Pursuant
to Section 141(a) of the DGCL, the Continuing Directors shall have the power and
authority to make all decisions and determinations, and exercise or perform such
other acts, that any such agreement provides that such Continuing Directors
shall make, exercise or perform. For purposes of this Article THIRTEENTH and
any such agreement, the term, "Continuing Directors," shall mean (1) those
directors who were members of the Board of Directors of the Corporation at the
time the Corporation entered into such agreement and any director who
subsequently becomes a member of the Board of Directors, if such director's
nomination for election to the Board of Directors is recommended or approved by
the majority vote of the Continuing Directors then in office or (2) such members
of the Board of Directors designated in, or in the manner provided in, such
agreement as Continuing Directors.
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I, the undersigned, being the sole incorporator, for the purpose of forming
a Corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, to certify that the facts herein stated are
true, and accordingly have hereto set my hand this __ day of March, 2000.
/s/ Henry Nowak
________________________
Henry Nowak
A:\Paradigm Genetics Inc. Certificate of Incorporation (DE).DOC
03/26/00 7:58 PM
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EXHIBIT 3.3.1
-------------
PARADIGM GENETICS, INC.
BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at ten o'clock a.m. or
such other time as is determined by the Board of Directors, on such date (other
than a Saturday, Sunday or legal holiday) as is determined by the Board of
Directors, which date shall be within thirteen (13) months subsequent to the
later of the date of incorporation or the last annual meeting of stockholders,
and at such place as the Board of Directors shall each year fix.
Section 2. Special Meetings.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation, special meetings of stockholders of the Corporation
may be called only by the Board of Directors pursuant to a resolution adopted by
a majority of the total number of directors authorized. Special meetings of the
stockholders may be held at such place within or without the State of Delaware
as may be stated in such resolution.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is
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more than thirty (30) days after the date for which the meeting was originally
noticed, or if a new record date is fixed for the adjourned meeting, written
notice of the place, date, and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted
which might have been transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting or
the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
Section 5. Organization.
The Chairman of the Board of Directors or, in his or her absence, such
person as the Board of Directors may have designated or, in his or her absence,
the chief executive officer of the Corporation or, in his or her absence, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman of the meeting appoints.
Section 6. Conduct of Business.
The Chairman of the Board of Directors or his or her designee or, if neither
the Chairman of the Board nor his or her designee is present at the meeting,
then a person appointed by a majority of the Board of Directors, shall preside
at, and act as chairman of, any meeting of the stockholders. The chairman of
any meeting of stockholders shall determine the order of business and the
procedures at the meeting, including such regulation of the manner of voting and
the conduct of discussion as he or she deems to be appropriate.
Section 7. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
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Each stockholder shall have one (1) vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a vote by
ballot shall be taken.
Except as otherwise provided in the terms of any class or series of
preferred stock of the Corporation, all elections shall be determined by a
plurality of the votes cast, and except as otherwise required by law, all other
matters shall be determined by a majority of the votes cast.
Section 8. Action Without Meeting.
Any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be (1) signed and dated 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 and (2) delivered to the Corporation within sixty (60)
days of the earliest dated consent by delivery to its registered office in the
State of Delaware (in which case delivery shall be by hand or by certified or
registered mail, return receipt requested), its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Section 9. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. Such list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
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ARTICLE II - BOARD OF DIRECTORS
Section 1. Number, Election, Tenure and Qualification.
The number of directors which shall constitute the whole board shall be
determined by resolution of the Board of Directors or by the stockholders at the
annual meeting or at any special meeting of stockholders. The directors shall
be elected at the annual meeting or at any special meeting of the stockholders,
except as provided in Section 2 of this Article, and each director elected shall
hold office until his or her successor is elected and qualified, unless sooner
displaced. Directors need not be stockholders.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any class or series of preferred
stock of the Corporation to elect directors, 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, though less than a
quorum, or the sole remaining director. No decrease in the number of authorized
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Section 3. Resignation and Removal.
Any director may resign at any time upon written notice to the Corporation
at its principal place of business or to the chief executive officer or
secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event. Any director or the entire Board of Directors may be removed, with or
without cause, by the holders of a majority of the shares then entitled to vote
at an election of directors, unless otherwise specified by law or the
Certificate of Incorporation.
Section 4. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
written notice of each regular meeting shall not be required.
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Section 5. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman of
the Board of Directors, if any, the President, the Treasurer, the Secretary or
one or more of the directors then in office and shall be held at such place, on
such date, and at such time as they or he or she shall fix. Notice of the
place, date, and time of each such special meeting shall be given each director
by whom it is not waived by mailing written notice not less than three (3) days
before the meeting or orally, by telegraph, telex, cable or telecopy given not
less than twenty-four (24) hours before the meeting. Unless otherwise indicated
in the notice thereof, any and all business may be transacted at a special
meeting.
Section 6. Quorum.
At any meeting of the Board of Directors, a majority of the total number of
members of the Board of Directors shall constitute a quorum for all purposes.
If a quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date, or time, without further notice or
waiver thereof.
Section 7. Action by Consent.
Unless otherwise restricted by the Certificate of Incorporation or these By-
Laws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
Section 8. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or 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 shall
constitute presence in person at such meeting.
Section 9. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
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Section 10. Powers.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, to borrow funds and
guarantee obligations, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and
agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it
may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these By-Laws, for the management of the Corporation's business
and affairs.
Section 11. Compensation of Directors.
Directors, as such, may receive, pursuant to a resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
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ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-Laws of the Corporation. Any committee so designated may
exercise the power and authority of the Board of Directors to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger pursuant to Section 253 of the Delaware General Corporation
Law if the resolution which designates the committee or a supplemental
resolution of the Board of Directors shall so provide. In the absence or
disqualification of any member of any committee and any alternate member in his
or her place, the member or members of the committee present at the meeting and
not disqualified from voting, whether or not he or she or they constitute a
quorum, may by unanimous vote appoint another member of the Board of Directors
to act at the meeting in the place of the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting
its business and shall act in accordance therewith, except as otherwise provided
herein or required by law. Adequate provision shall be made for notice to
members of all meetings; one-third (1/3) of the members shall constitute a
quorum; and all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of such committee.
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ARTICLE IV - OFFICERS
Section 1. Enumeration.
The officers of the Corporation shall be the President, the Treasurer, the
Secretary and such other officers as the Board of Directors or the Chairman of
the Board may determine, including, but not limited to, the Chairman of the
Board of Directors, one or more Vice Presidents, Assistant Treasurers and
Assistant Secretaries.
Section 2. Election.
The Chairman of the Board, if any, the President, the Treasurer and the
Secretary shall be elected annually by the Board of Directors at their first
meeting following the annual meeting of the stockholders. The Board of
Directors or the Chairman of the Board, if any, may, from time to time, elect or
appoint such other officers as it or he or she may determine, including, but not
limited to, one or more Vice Presidents, Assistant Treasurers and Assistant
Secretaries.
Section 3. Qualification.
No officer need be a stockholder. The Chairman of the Board, if any, and
any Vice Chairman appointed to act in the absence of the Chairman, if any, shall
be elected by and from the Board of Directors, but no other officer need be a
director. Two or more offices may be held by any one person. If required by
vote of the Board of Directors, an officer shall give bond to the Corporation
for the faithful performance of his or her duties, in such form and amount and
with such sureties as the Board of Directors may determine. The premiums for
such bonds shall be paid by the Corporation.
Section 4. Tenure and Removal.
Each officer elected or appointed by the Board of Directors shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of the stockholders and until his or her successor is elected or
appointed and qualified, or until he or she dies, resigns, is removed or becomes
disqualified, unless a shorter term is specified in the vote electing or
appointing said officer. Each officer appointed by the Chairman of the Board,
if any, shall hold office until his or her successor is elected or appointed and
qualified, or until he or she dies, resigns, is removed or becomes disqualified,
unless a shorter term is specified by any agreement or other instrument
appointing such officer. Any officer may resign by giving written notice of his
or her resignation to the Chairman of the Board, if any, the President, or the
Secretary, or to the Board of Directors at a meeting of the Board, and such
resignation shall become effective at the time specified therein. Any officer
elected or appointed by the Board of Directors may be removed from office with
or without cause by vote of a majority of the directors. Any officer appointed
by the Chairman of the Board, if any, may be removed with or without cause by
the Chairman of the Board.
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Section 5. Chairman of the Board.
The Chairman of the Board, if any, shall preside at all meetings of the
Board of Directors and stockholders at which he or she is present and shall have
such authority and perform such duties as may be prescribed by these By-Laws or
from time to time be determined by the Board of Directors. The Chairman of the
Board shall also have the power and authority to determine the compensation and
duties of all officers, employees and agents of the Corporation.
Section 6. Chief Executive Officer
The Chief Executive Officer shall have general authority and supervision
over the officers and employees of the Corporation, and shall perform such other
duties as may be prescribed from time to time by the board of directors. All
officers shall report to him except to the extent specifically required by the
board of directors. He shall consult with the chairman of the board or the
president as to matters within the scope of the authority of the chairman of the
board or the president. He shall have the authority to sign certificates for
shares, as well as any deeds, mortgages, contracts, or other instruments which
the board of directors has authorized to be executed, except in cases where the
signing and execution of such contracts or instruments shall be expressly
delegated by the board of directors or by these bylaws to some other officer or
agent of the Corporation, or shall be required by the Delaware General
Corporation Law to be otherwise signed or executed.
Section 7. President.
The President shall, subject to the control and direction of the Board of
Directors, have and perform such powers and duties as may be prescribed by these
By-Laws or from time to time be determined by the Board of Directors.
Section 8. Vice Presidents.
The Vice Presidents, if any, in the order of their election, or in such
other order as the Board of Directors may determine, shall have and perform the
powers and duties of the President (or such of the powers and duties as the
Board of Directors may determine) whenever the President is absent or unable to
act. The Vice Presidents, if any, shall also have such other powers and duties
as may from time to time be determined by the Board of Directors.
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Section 9. Treasurer and Assistant Treasurers.
The Treasurer shall, subject to the control and direction of the Board of
Directors, have and perform such powers and duties as may be prescribed in these
By-Laws or be determined from time to time by the Board of Directors. All
property of the Corporation in the custody of the Treasurer shall be subject at
all times to the inspection and control of the Board of Directors. Unless
otherwise voted by the Board of Directors, each Assistant Treasurer, if any,
shall have and perform the powers and duties of the Treasurer whenever the
Treasurer is absent or unable to act, and may at any time exercise such of the
powers of the Treasurer, and such other powers and duties, as may from time to
time be determined by the Board of Directors.
Section 10. Secretary and Assistant Secretaries.
The Board of Directors shall appoint a Secretary and, in his or her absence,
an Assistant Secretary. The Secretary or, in his or her absence, any Assistant
Secretary, shall attend all meetings of the directors and shall record all votes
of the Board of Directors and minutes of the proceedings at such meetings. The
Secretary or, in his or her absence, any Assistant Secretary, shall notify the
directors of their meetings, and shall have and perform such other powers and
duties as may from time to time be determined by the Board of Directors. If the
Secretary or an Assistant Secretary is elected but is absent from any meeting of
directors, a temporary secretary may be appointed by the directors at the
meeting
Section 11. Bond.
If required by the Board of Directors, any officer shall give the
Corporation a bond in such sum and with such surety or sureties and upon such
terms and conditions as shall be satisfactory to the Board of Directors,
including without limitation a bond for the faithful performance of the duties
of his office and for the restoration to the Corporation of all books, papers,
vouchers, money and other property of whatever kind in his or her possession or
under his control and belonging to the Corporation.
Section 12. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President, the
Treasurer or any officer of the Corporation authorized by the President shall
have power to vote and otherwise act on behalf of the Corporation, in person or
by proxy, at any meeting of stockholders of or with respect to any action of
stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this
Corporation may possess by reason of its ownership of securities in such other
corporation.
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ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, certifying the number of shares
owned by him or her. Any or all of the signatures on the certificate may be by
facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of this Article of these By-
Laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or 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 a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a 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.
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Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
Section 6. Interpretation.
The Board of Directors shall have the power to interpret all of the terms
and provisions of these By-Laws, which interpretation shall be conclusive.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mail,
postage paid, or by sending such notice by courier service, prepaid telegram or
mailgram, or telecopy, cable, or telex. Any such notice shall be addressed to
such stockholder, director, officer, employee or agent at his or her last known
address as the same appears on the books of the Corporation. The time when such
notice is received, if hand delivered, or dispatched, if delivered through the
mail or by courier, telegram, mailgram, telecopy, cable, or telex shall be the
time of the giving of the notice.
Section 2. Waiver of Notice.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
Attendance of a director or stockholder at a meeting without protesting prior
thereto or at its commencement the lack of notice shall also constitute a waiver
of notice by such director or stockholder.
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ARTICLE VII - INDEMNIFICATION
Section 1. Actions other than by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceedings, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
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Section 3. Success on the Merits.
To the extent that any person described in Section 1 or Section 2 of this
Article has been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in said Sections, or in defense of any claim,
issue or matter therein, he or she shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
Section 4. Specific Authorization.
Any indemnification under Section 1 or Section 2 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of any person described
in said Sections is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in said Sections. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders of the Corporation.
Section 5. Advance Payment.
Expenses incurred in defending any civil, criminal, administrative, or
investigative action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of any person described in said Section to
repay such amount if it shall ultimately be determined that he or she is not
entitled to indemnification by the Corporation as authorized in this Article.
Section 6. Non-Exclusivity.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other Sections of this Article shall not be deemed exclusive of
any other rights to which those provided indemnification or advancement of
expenses may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
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Section 7. Insurance.
The Board of Directors may authorize, by a vote of the majority of the full
board, the Corporation to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him 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 this Article.
Section 8. Continuation of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9. Severability.
If any word, clause or provision of this Article or any award made hereunder
shall for any reason be determined to be invalid, the provisions hereof shall
not otherwise be affected thereby but shall remain in full force and effect.
Section 10. Intent of Article.
The intent of this Article is to provide for indemnification and advancement
of expenses to the fullest extent permitted by Section 145 of the General
Corporation Law of Delaware. To the extent that such Section or any successor
section may be amended or supplemented from time to time, this Article shall be
amended automatically and construed so as to permit indemnification and
advancement of expenses to the fullest extent from time to time permitted by
law.
ARTICLE VIII - CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties.
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction or solely because
the votes of such director or officer are counted for such purpose, if:
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(a) The material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(b) The material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Quorum.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IX - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-Laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
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Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
Except as otherwise determined by the Board of Directors from time to time,
the fiscal year of the Corporation shall end on the last day of December of each
year.
Section 5. Time Periods.
In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE X - AMENDMENTS
These By-Laws may be amended, added to, rescinded or repealed by the
stockholders or by the Board of Directors, when such power is conferred upon the
Board of Directors by the Certificate of Incorporation, at any meeting of the
stockholders or of the Board of Directors, provided notice of the proposed
change was given in the notice of the meeting or, in the case of a meeting of
the Board of Directors, in a notice given not less than two (2) days prior to
the meeting.
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EXHIBIT 3.4
PARADIGM GENEDITS, INC.
RESTATED BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors to
succeed those whose terms expire and for the transaction of such other business
as may properly come before the meeting, shall be held at such place, on such
date, and at such time as the Board of Directors shall fix each year.
Section 2. Special Meetings.
Subject to the rights of the holders of any series of preferred stock of the
Corporation, special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a majority of
the total number of directors authorized. Special meetings of the stockholders
may be held at such place within or without the State of Delaware as may be
stated in such resolution.
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten (10) nor more than sixty (60)
days before the date on which the meeting is to be held, to each stockholder
entitled to vote at such meeting, except as otherwise provided herein or
required by law (meaning, here and hereinafter, as required from time to time by
the Delaware General Corporation Law or the Certificate of Incorporation of the
Corporation, as amended and restated from time to time).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
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Section 4. Quorum.
At any meeting of the stockholders, the holders of a majority of all of the
shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a majority of the shares of
such class or classes present in person or represented by proxy shall constitute
a quorum entitled to take action with respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting or
the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
Section 5. Organization and Conduct of Business.
The Chairman of the Board of Directors or, in his or her absence, the Chief
Executive Officer of the Corporation or, in his or her absence, the President
or, in his or her absence, such person as the Board of Directors may have
designated, shall call to order any meeting of the stockholders and shall
preside at and act as chairman of the meeting. In the absence of the Secretary
of the Corporation, the secretary of the meeting shall be such person as the
chairman of the meeting appoints. The chairman of any meeting of stockholders
shall determine the order of business and the procedures at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as he or she deems to be appropriate. The chairman of any meeting of
stockholders shall have the power to adjourn the meeting to another place and
time.
Section 6. Intentionally Omitted.
Section 7. Notice of Stockholder Business and Nominations.
A. Annual Meetings of Stockholders.
Nominations of persons for election to the Board of Directors and the proposal
of business to be considered by the stockholders may be made at an annual
meeting of stockholders (a) pursuant to the Corporation's notice of meeting, (b)
by or at the direction of the Board of Directors or (c) by any stockholder of
the Corporation who was a stockholder of record at the time of giving of notice
provided for in this Section, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section.
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B. Special Meetings of Stockholders.
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 pursuant to Section 2 above. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected (a) by or at the direction of the Board of Directors
or (b) provided that the Board of Directors has determined that directors shall
be elected at such meeting, by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice of the special meeting,
who shall be entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section.
C. Certain Matters Pertaining to Stockholder Business and Nominations.
(1) For nominations or other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (c) of paragraph A of this
Section or a special meeting pursuant to paragraph B of this Section, the
stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice
pertaining to an annual meeting shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than forty-five
(45) or more than seventy-five (75) days prior to the first anniversary
(the "Anniversary") of the date on which the Corporation first mailed its
proxy materials for the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than thirty
(30) days before or more than thirty (30) days after the anniversary date
of the preceding year's annual meeting, notice by the stockholder to be
timely must be so delivered not earlier than the close of business on the
ninetieth (90) day prior to such annual meeting and not later than the
close of business on the later of the sixtieth (60th) day prior to such
annual meeting or the close of business on the tenth (10th) day following
the day on which public announcement of the date of such meeting is first
made by the Corporation. Such stockholder's notice for an annual meeting
or a special meeting shall set forth: (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required, in each case, pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director if elected); (b) as to any other business that
the stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as they
appear on the Corporation's books, and of such beneficial owner, (ii) the
class and number of shares of the Corporation that are owned beneficially
and held of record by such stockholder and such beneficial owner, and (iii)
whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of, in the case of a proposal,
at least the percentage of the Corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the Corporation's voting
shares to elect such nominee or nominees. A stockholder shall also comply
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with all applicable requirements of the Exchange Act (or any successor
provision), and the rules and regulations thereunder with respect to the
matters set forth in these By-Laws.
(2) Notwithstanding anything in the second sentence of paragraph C (1) of
this Section to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least
fifty-five (55) days prior to the Anniversary (or, if the annual meeting is held
more than thirty (30) days before or sixty (60) days after the first anniversary
of the preceding year's annual meeting, at least seventy (70) days prior to such
annual meeting), a stockholder's notice required by this Section shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive office of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
(3) In the event the Corporation calls a special meeting of stockholders for
the purpose of electing one or more directors to the Board of Directors, any
such stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the Corporation's notice of
meeting, if the stockholder's notice required by paragraph C(1) of this Section
shall be delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the ninetieth (90th) day prior to such special
meeting nor later than the close of business on the later of the sixtieth (60th)
day prior to such special meeting, or the tenth (10th) day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting.
D. General.
(1) Only such persons who are nominated in accordance with the procedures set
forth in this Section shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section. Except as otherwise provided by law or these By-Laws, the chairman of
the meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made or proposed, as
the case may be, in accordance with the procedures set forth in this Section
and, if any proposed nomination or business is not in compliance herewith, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this Section, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
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(3) Notwithstanding the foregoing provisions of this Section, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth herein.
Nothing in this Section shall be deemed to affect any rights (i) of stockholders
to request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of
Preferred Stock to elect directors under specified circumstances.
Section 8. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this Section may
be substituted or used in lieu of the original writing or transmission for any
and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by voice vote. Any vote not taken by voice
shall be taken by ballots, each of which shall state the name of the stockholder
or proxy voting and such other information as may be required under the
procedure established for the meeting. The Corporation may, and to the extent
required by law, shall, in advance of any meeting of stockholders, appoint one
or more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the person presiding at the meeting may, and to the
extent required by law, shall, appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability.
Except as otherwise provided in the terms of any class or series of Preferred
Stock of the Corporation, all elections at any meeting of stockholders shall be
determined by a plurality of the votes cast, and except as otherwise required by
law or as provided herein, all other matters determined by stockholders at a
meeting shall be determined by a majority of the votes cast affirmatively or
negatively.
Section 9. Action Without Meeting.
Any action required or permitted to be taken by the stockholders of the
Corporation may be effected only at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by written consent.
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Section 10. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be made in the manner specified by law.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. Such list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number, Election, Tenure and Qualification.
A. The business and affairs of the Corporation shall be managed by or under
the direction of its Board of Directions.
B. Subject to the rights of the holders of any series of Preferred Stock then
outstanding to elect additional directors under specified circumstances, the
number of directors shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the Board.
C. Subject to the rights of the holders of any series of Preferred Stock then
outstanding to elect additional directors under specified circumstances, the
Board of Directors of the Corporation shall be divided into three classes, with
the term of office of the first class to expire at the annual meeting of
stockholders or any special meeting in lieu thereof in 2001, the term of office
of the second class to expire at the annual meeting of stockholders or any
special meeting in lieu thereof in 2002, and the term of office of the third
class to expire at the annual meeting of stockholders or any special meeting in
lieu thereof in 2003. At each annual meeting of stockholders or special meeting
in lieu thereof, directors elected to succeed those directors whose terms
expire, other than directors elected by the holders of any series of Preferred
Stock, shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders or special meeting in lieu thereof after their
election and until their successors are duly elected and qualified.
Section 2. Vacancies and Newly Created Directorships.
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,
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removal from office or other cause shall 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 and not by stockholders. 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.
Section 3. Resignation and Removal.
Any director may resign at any time upon written notice to the Corporation
at its principal place of business or to the Chairman of the Board, Chief
Executive Officer, President or Secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any director, or the entire Board of
Directors, may be removed from office at any time only for cause. A director
may be removed for cause by the holders of at least eighty percent (80%) of the
voting power of all of the then outstanding shares of the Corporation then
entitled to vote at an election of a director and only after a reasonable notice
and opportunity to be heard before the stockholders.
Section 4. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
written notice of each regular meeting shall not be required.
Section 5. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman of
the Board of Directors or the Chief Executive Officer, and shall be called by
the Secretary if requested by a majority of the Board of Directors, and shall be
held at such place, on such date, and at such time as he or she or they shall
fix. Notice of the place, date, and time of each such special meeting shall be
given to each director by whom it is not waived by mailing written notice not
less than three (3) days before the meeting or orally, by telegraph, telex,
cable or telecopy given not less than twenty-four (24) hours before the meeting.
Unless otherwise indicated in the notice thereof, any and all business may be
transacted at a special meeting.
Section 6. Quorum.
At any meeting of the Board of Directors, a majority of the total number of
members of the Board of Directors shall constitute a quorum for all purposes.
If a quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date, or time, without further notice or
waiver thereof.
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Section 7. Action by Consent.
Unless otherwise restricted by the Certificate of Incorporation or these By-
Laws, any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if all
members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
Section 8. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or 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 shall
constitute presence in person at such meeting.
Section 9. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted in
such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law.
Section 10. Powers.
The Board of Directors may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, including, without limiting the generality of the foregoing,
the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, to borrow funds and
guarantee obligations, and to do all things necessary in
connection therewith;
(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any
officer upon any other person for the time being;
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(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and
agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers,
employees and agents of the Corporation and its subsidiaries as it
may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these By-Laws, for the management of the Corporation's business
and affairs.
Section 11. Compensation of Directors.
Directors, as such, may receive, pursuant to a resolution of the Board of
Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the Board of Directors,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation to the fullest extent
authorized by law. In the absence or disqualification of any member of any
committee and any alternate member in his or her place, the member or members of
the committee present at the meeting and not disqualified from voting, whether
or not he or she or they constitute a quorum, may by unanimous vote appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting
its business and shall act in accordance therewith, except as otherwise provided
herein or required
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by law. Adequate provision shall be made for notice to members of all meetings;
one-third (1/3) of the members of any committee shall constitute a quorum unless
the committee shall consist of one (1) or two (2) members, in which event one
(1) member shall constitute a quorum; and all matters shall be determined by a
majority vote of the members present. Action may be taken by any committee
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
ARTICLE IV - OFFICERS
Section 1. Enumeration.
The officers of the Corporation shall consist of a Chairman of the Board,
Chief Executive Officer, President, Chief Financial Officer, Treasurer,
Secretary and such other officers as the Board of Directors or the Chief
Executive Officer may determine, including, but not limited to, a Chief
Technology Officer, and one or more Vice Presidents, Assistant Treasurers and
Assistant Secretaries.
Section 2. Election.
The Chairman of the Board, Chief Executive Officer, President, Chief
Financial Officer, Treasurer and the Secretary shall be elected annually by the
Board of Directors at their first meeting following the annual meeting of the
stockholders. The Board of Directors or the Chief Executive Officer, may, from
time to time, elect or appoint such other officers as it or he or she may
determine, including, but not limited to, a Chief Technology Officer, and one or
more Vice Presidents, Assistant Treasurers and Assistant Secretaries.
Section 3. Qualification.
The Chairman of the Board, if any, and any Vice Chairman appointed to act in
the absence of the Chairman, if any, shall be elected by and from the Board of
Directors, but no other officer need be a director. Two or more offices may be
held by any one person. If required by vote of the Board of Directors, an
officer shall give bond to the Corporation for the faithful performance of his
or her duties, in such form and amount and with such sureties as the Board of
Directors may determine. The premiums for such bonds shall be paid by the
Corporation.
Section 4. Tenure and Removal.
Each officer elected or appointed by the Board of Directors shall hold
office until the first meeting of the Board of Directors following the next
annual meeting of the stockholders and until his or her successor is elected or
appointed and qualified, or until he or she dies, resigns, is removed or becomes
disqualified, unless a shorter term is specified in the vote electing or
appointing said officer. Each officer appointed by the Chief Executive Officer
shall hold office
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until his or her successor is elected or appointed and qualified, or until he or
she dies, resigns, is removed or becomes disqualified, unless a shorter term is
specified by any agreement or other instrument appointing such officer. Any
officer may resign by giving written notice of his or her resignation to the
Chief Executive Officer, the President, or the Secretary, or to the Board of
Directors at a meeting of the Board, and such resignation shall become effective
at the time specified therein. Any officer elected or appointed by the Board of
Directors may be removed from office with or without cause only by vote of a
majority of the directors. Any officer appointed by the Chief Executive Officer
may be removed with or without cause by the Chief Executive Officer or by vote
of a majority of the directors.
Section 5. Chairman of the Board.
The Chairman of the Board, if any, shall preside at all meetings of the
Board of Directors and stockholders at which he or she is present and shall have
such authority and perform such duties as may be prescribed by these By-Laws or
from time to time be determined by the Board of Directors.
Section 6. Chief Executive Officer.
The Chief Executive Officer shall be the chief executive officer of the
Corporation and shall, subject to the direction of the Board of Directors, have
general supervision and control of its business. Unless otherwise provided by
resolution of the Board of Directors, in the absence of the Chairman of the
Board, the Chief Executive Officer shall preside at all meetings of the
stockholders and, if a director, meetings of the Board of Directors. The Chief
Executive Officer shall have general supervision and direction of all of the
officers, employees and agents of the Corporation. The Chief Executive Officer
shall also have the power and authority to determine the duties of all officers,
employees and agents of the Corporation, shall determine the compensation of any
officers whose compensation is not established by the Board of Directors and
shall have the power and authority to sign all stock certificates, contracts and
other instruments of the Corporation which are authorized.
Section 7. President.
Except for meetings at which the Chief Executive Officer or the Chairman of
the Board, if any, presides, the President shall, if present, preside at all
meetings of stockholders, and if a director, at all meetings of the Board of
Directors. The President shall, subject to the control and direction of the
Chief Executive Officer and the Board of Directors, have and perform such powers
and duties as may be prescribed by these By-Laws or from time to time be
determined by the Chief Executive Officer or the Board of Directors. The
President shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized. In the absence of a Chief
Executive Officer, the President shall be the chief executive officer of the
Corporation and shall, subject to the direction of the Board of
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Directors, have general supervision and control of its business and shall have
general supervision and direction of all of the officers, employees and agents
of the Corporation.
Section 8. Vice Presidents.
The Vice Presidents, if any, in the order of their election, or in such
other order as the Board of Directors or the Chief Executive Officer may
determine, shall have and perform the powers and duties of the President (or
such of the powers and duties as the Board of Directors or the Chief Executive
Officer may determine) whenever the President is absent or unable to act. The
Vice Presidents, if any, shall also have such other powers and duties as may
from time to time be determined by the Board of Directors or the Chief Executive
Officer.
Section 9. Chief Financial Officer, Treasurer and Assistant Treasurers.
The Chief Financial Officer shall also be the Treasurer. The Chief
Financial Officer and/or Treasurer shall, subject to the control and direction
of the Board of Directors and the Chief Executive Officer, have and perform such
powers and duties as may be prescribed in these By-Laws or be determined from
time to time by the Board of Directors and the Chief Executive Officer. All
property of the Corporation in the custody of the Chief Financial Officer and/or
Treasurer shall be subject at all times to the inspection and control of the
Board of Directors and the Chief Executive Officer. The Chief Financial Officer
and/or Treasurer shall have the responsibility for maintaining the financial
records of the Corporation. The Chief Financial Officer and/or Treasurer shall
make such disbursements of the funds of the Corporation as are authorized and
shall render from time to time an account of all such transactions and of the
financial condition of the Corporation. Unless otherwise voted by the Board of
Directors or by the Chief Executive Officer, each Assistant Treasurer, if any,
shall have and perform the powers and duties of the Chief Financial Officer
and/or Treasurer whenever the Chief Financial Officer and/or Treasurer is absent
or unable to act, and may at any time exercise such of the powers of the Chief
Financial Officer and/or Treasurer, and such other powers and duties, as may
from time to time be determined by the Board of Directors or the Chief Executive
Officer.
Section 10. Secretary and Assistant Secretaries.
The Board of Directors or the Chief Executive Officer shall appoint a
Secretary and, in his or her absence, an Assistant Secretary. Unless otherwise
directed by the Board of Directors, the Secretary or, in his or her absence, any
Assistant Secretary, shall attend all meetings of the directors and stockholders
and shall record all votes of the Board of Directors and stockholders and
minutes of the proceedings at such meetings. The Secretary or, in his or her
absence, any Assistant Secretary, shall notify the directors of their meetings,
and shall have and perform such other powers and duties as may from time to time
be determined by the Board of Directors. If the Secretary or an Assistant
Secretary is elected but is not present at any meeting of directors or
stockholders, a temporary Secretary may be appointed by the directors or the
Chief Executive Officer at the meeting
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Section 11. Bond.
If required by the Board of Directors, any officer shall give the
Corporation a bond in such sum and with such surety or sureties and upon such
terms and conditions as shall be satisfactory to the Board of Directors,
including without limitation a bond for the faithful performance of the duties
of his office and for the restoration to the Corporation of all books, papers,
vouchers, money and other property of whatever kind in his or her possession or
under his control and belonging to the Corporation.
Section 12. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors or the Chief Executive
Officer, the Chief Financial Officer and/or Treasurer shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by the Chairman of the Board of Directors, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, certifying the number of shares
owned by him or her. Any or all of the signatures on the certificate may be by
facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of this Article of these By-
Laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 3. Record Date.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange
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of stock or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted and which record date shall not be
more than sixty (60) nor less than ten (10) days before the date of any meeting
of stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock or for any
other purpose, the record date shall be at the close of business on the day on
which the Board of Directors adopts a resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock,
another may be issued in its place pursuant to such regulations as the Board of
Directors may establish concerning proof of such loss, theft or destruction and
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of stock
shall be governed by such other regulations as the Board of Directors may
establish.
Section 6. Interpretation.
The Board of Directors shall have the power to interpret all of the terms
and provisions of these By-Laws, which interpretation shall be conclusive.
ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such
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notice in the mail, postage paid, or by sending such notice by courier service,
prepaid telegram or mailgram, or telecopy, cable, or telex. Any such notice
shall be addressed to such stockholder, director, officer, employee or agent at
his or her last known address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mail or by courier, telegram, mailgram,
telecopy, cable, or telex shall be the time of the giving of the notice.
Section 2. Waiver of Notice.
A written waiver of any notice, signed by a stockholder, director, officer,
employee or agent, whether before or after the time of the event for which
notice is to be given, shall be deemed equivalent to the notice required to be
given to such stockholder, director, officer, employee or agent. Neither the
business nor the purpose of any meeting need be specified in such a waiver.
Attendance of a director or stockholder at a meeting without protesting prior
thereto or at its commencement the lack of notice shall also constitute a waiver
of notice by such director or stockholder.
ARTICLE VII -INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to
or is otherwise involved (including, without limitation, as a witness) in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or an officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, or of a
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "Indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such Indemnitee in connection therewith; provided, however, that,
except as provided in Section 3 of this Article with respect to proceedings to
enforce rights to indemnification or as otherwise required by law, the
Corporation shall not be required to indemnify or advance expenses to any such
Indemnitee in connection with a proceeding (or part thereof) initiated by such
Indemnitee unless such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation.
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Section 2. Right to Advancement of Expenses.
The right to indemnification conferred in Section 1 of this Article shall
include the right to be paid by the Corporation the expenses (including
attorney's fees) incurred in defending any such proceeding in advance of its
final disposition; provided, however, that, if the Delaware General Corporation
Law requires, an advancement of expenses incurred by an Indemnitee in his
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such Indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such Indemnitee is
not entitled to be indemnified for such expenses under this Section 2 or
otherwise. The rights to indemnification and to the advancement of expenses
conferred in Sections 1 and 2 of this Article shall be contract rights and such
rights shall continue as to an Indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the Indemnitee's
heirs, executors and administrators. Any repeal or modification of any of the
provisions of this Article shall not adversely affect any right or protection of
an Indemnitee existing at the time of such repeal or modification.
Section 3. Right of Indemnitees to Bring Suit.
If a claim under Section 1 or 2 of this Article is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be twenty (20) days, the Indemnitee
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any such suit,
or in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the Indemnitee shall also be entitled
to be paid the expenses of prosecuting or defending such suit. In (i) any suit
brought by the Indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the Indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the Indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General Corporation Law. Neither the
failure of the Corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is proper in
the circumstances because the Indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its board of directors, independent
legal counsel, or its stockholders) that the Indemnitee has not met such
applicable standard of conduct, shall create a presumption that the Indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit. In any suit brought by
the Indemnitee to enforce a right to
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indemnification or to an advancement of expenses hereunder, or brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the Indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article or otherwise
shall be on the Corporation.
Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred in
this Article shall not be exclusive of any other right which any person may have
or hereafter acquire under any statute, the Corporation's Certificate of
Incorporation as amended from time to time, these By-Laws, any agreement, any
vote of stockholders or disinterested directors or otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, grant rights to indemnification and to the advancement of expenses
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article with respect to the indemnification and advancement
of expenses of directors and officers of the Corporation.
ARTICLE VIII - CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties.
No contract or transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction or solely because
the votes of such director or officer are counted for such purpose, if:
(a) The material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction
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by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or
(b) The material facts as to his or her relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Quorum.
Common or interested directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
ARTICLE IX - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these By-Laws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of
the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
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Section 4. Fiscal Year.
Except as otherwise determined by the Board of Directors from time to time,
the fiscal year of the Corporation shall end on the last day of December of each
year.
Section 5. Time Periods.
In applying any provision of these By-Laws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
Section 6. Pronouns.
Whenever the context may require, any pronouns used in these By-Laws shall
include the corresponding masculine, feminine or neuter forms.
ARTICLE X - AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a majority
of the whole Board or by the stockholders by the affirmative vote of eighty
percent (80%) of the outstanding voting power of the then-outstanding shares of
capital stock of the Corporation, entitled to vote generally in the election of
directors, at any meeting at which a proposal to amend or repeal these By-Laws
is properly presented.
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EXHIBIT 10.9
FOUNDER EMPLOYMENT AGREEMENT
----------------------------
This Founder Employment Agreement ("Agreement") is made and entered into as
of February 12, 1998 by Paradigm Genetics Inc., a North Carolina corporation
(hereinafter the "Company"), and Jorn Gorlach (hereinafter "Founder"). The
Company desires to employ Founder as its Director of Plant Research and Founder
desires to accept such employment on the terms set forth below.
In consideration of the mutual promises set forth below and other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the Company and Founder agree as follows:
1. EMPLOYMENT. The Company employs Founder and Founder accepts
----------
employment on the terms and conditions set forth in this Agreement.
2. NATURE OF EMPLOYMENT. Founder shall serve as Director of Plant
--------------------
Research and have such responsibilities and authority as the Company may
reasonably assign from time to time. Additionally, Founder agrees to perform
such other duties as the Company may reasonably assign from time to time.
2.1 Founder shall perform all duties and exercise all authority in
accordance with, and otherwise comply with, all Company policies, procedures,
practices and directions.
2.2 Founder shall devote all working time, best efforts, knowledge
and experience to successfully perform his duties and advance the Company's
interests. During his employment, Founder shall not engage in any other business
activities of any nature whatsoever (including board memberships) for which he
receives compensation without the Company's prior written consent; provided,
however, this provision does not prohibit him from personally owning and trading
in stocks, bonds, securities, real estate, commodities or other investment
properties for his own benefit which do not create actual or potential conflicts
of interest with the Company.
2.3 Founder's base of operation shall be at the Company's principal
executive office, subject to business travel as may be necessary in the
performance of his duties.
3. COMPENSATION.
------------
3.1 Base Salary. Founder's annual salary for all services rendered
-----------
shall be Eighty-Five Thousand Dollars ($85,000) (less applicable withholdings)
payable in accordance with the Company's policies, procedures and practices as
they may exist from time to time. Founder's salary shall be reviewed in
accordance with the Company's policies, procedures and practices as they may
exist from time to time.
3.2 Bonus. Founder shall be eligible to receive bonus compensation,
-----
in addition to base salary, of twenty-five percent (25%) of Founder's annual
base salary calculated at the end of each calendar year. Such bonus shall be
awarded on the basis of mutually
<PAGE>
agreed upon objectives and criteria between Founder and the Company, and paid to
Founder within thirty (30) days of the end of each calendar year.
3.3 Stock Options. Founder shall be eligible to receive stock
-------------
options in accordance with a written stock option agreement; provided, however,
that the grant of any options is subject to the applicable terms, conditions and
requirements of any applicable stock option plan, some of which are within the
plan administrator's discretion, as they may exist from time to time.
3.4 Tax Returns. Founder shall be entitled to tax return preparation
-----------
and reasonable financial planning, consultation and advice by the Company's
accounting firm and/or legal counsel and/or financial consultants as the Company
may provide from time to time to Company Founders at Founder's compensation
level.
3.5 Other Benefits. Founder may participate in all medical, dental,
--------------
disability, insurance, retirement, pension, personal leave, car allowance and
other employee benefit plans and programs which may be made available from time
to time to employees of the Company generally and to Company Founders at
Founder's compensation level; provided, however, that Founder's participation is
subject to the applicable terms, conditions and eligibility requirements of
these plans and programs, some of which are within the plan administrator's
discretion, as they may exist from time to time.
3.6 Business Expenses. Founder shall be reimbursed for reasonable
-----------------
and necessary expenses actually incurred by him in performing services under
this Agreement in accordance with and subject to the terms and conditions of the
applicable Company reimbursement policies, procedures and practices as they may
exist from time to time. Expenses covered by this provision include but are not
limited to travel, entertainment, professional dues, subscriptions and dues,
fees and expenses associated with membership in various professional, business
and civic associations of which Founder's participation is in the Company's best
interest.
3.7 Benefit Plans Subject to Amendment. Nothing in this Agreement
----------------------------------
shall require the Company to create, continue or refrain from amending,
modifying, revising or revoking any of the plans, programs or benefits set forth
in Sections 3.3 through 3.6. Any amendments, modifications, revisions and
revocations of these plans, programs and benefits shall apply to Founder.
3.8 Life Insurance. The Founder may obtain and maintain a term life
--------------
insurance policy, reasonably satisfactory to the Company, on the life of the
Founder in the amount of $500,000 and payable to the designee of Founder, for a
period of three (3) years from the date of this Agreement, and the Company shall
on an annual basis pay to the Founder additional compensation in an amount equal
to the annual premium for such policy (the "Insurance Bonus") plus an amount
equal to the applicable federal and state tax payable by the Founder in respect
of the Insurance Bonus; provided that the Company shall pay such amounts only so
long as the annual premium for such policy shall not increase by more than
fifteen percent (15%) over the initial annual premium; but if the premium does
exceed such percentage, then Founder shall have the option of continuing to
maintain such life insurance and the Company
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shall be responsible for paying such additional compensation except with respect
to the amount of such excess.
4. TERM OF EMPLOYMENT. Either party may terminate the employment
------------------
relationship with or without cause at any time.
If Founder terminates the employment relationship for any reason or
the Company terminates it for Cause (as defined below), then the Company's
obligation to compensate Founder ceases upon the date of termination except as
to amounts due at that time, and Founder shall be subject to the provisions set
forth in Section 5.2 for a period of twelve (12) months following the date of
termination (the "Non-Competition Period").
If the Company terminates Founder's employment without Cause, then its
obligation to compensate Founder ceases upon the date of termination except as
to amounts due at that time, and Founder shall be subject to the provisions set
forth in Section 5.2 for a period of three (3) months following the date of
termination, so long as the Company shall pay to Founder an amount equal to his
then current monthly salary (less applicable withholdings) payable on a monthly
basis during such three (3) month period following the date of termination;
provided, however, that within ten (10) business days after the date of
termination of employment, the Company may give to Founder written notice that
such three (3) month period shall be extended for up to twelve (12) months (in
the aggregate) following the date of termination and such period shall be so
extended, so long as the Company shall pay to Founder an amount equal to his
then current monthly salary (less applicable withholdings) on a monthly basis
during each such month so extended (such three (3) month period or such period
as so extended being referred to as the "Alternative Non-Competitive Period").
During the period in which Founder receives post-termination payments pursuant
to this Section 4, he may continue to participate in all employee welfare
benefit plans in which Founder participated on the date of termination of
employment; provided, that Founder's participation is subject to the applicable
terms, conditions and eligibility requirements of these plans and this is not a
guarantee of coverage.
For the purpose of this Agreement, "Cause" shall mean: (i) to the
extent permitted by law, Founder's attaining age 65; (ii) Founder's death; (iii)
Founder's physical or mental inability to perform his duties for a period of
three (3) months or more; (iv) Founder's acts constituting fraud, deceit or
unlawful or illegal conduct involving the Company or any felony affecting the
Company; (v) Founder's engaging in "Competitive Business Activities" as
described in Section 5; (vi) Founder's neglect of duty, or failure to follow
reasonable written directions of the Board of Directors, and the failure to cure
same within thirty (30) days after receipt of written notice thereof from the
Company; or (vii) Founder's material breach of this Agreement, or the Founder
Proprietary Information and Inventions Agreement between Founder and the
Company, and the failure to cure same within thirty (30) days after written
notice thereof from the Company.
This Agreement shall terminate upon the termination of the employment
relationship with the exception of Section 5 (Company Property and Competitive
Business Activities) and Section 3.8 (Life Insurance) which shall survive the
termination of Founder's
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employment and/or the termination of this Agreement regardless of the reasons
for such termination.
Founder is not entitled to receive any compensation or benefits upon
his termination except as: (i) set forth in this Agreement; (ii) otherwise
required by law; or (iii) otherwise required by any employee benefit plan in
which he participates with the following exception. Nothing in this Agreement,
however, is intended to waive or supplant any death, disability, retirement or
pension benefits to which he may be entitled under employee benefit plans in
which he participates.
5. COMPANY PROPERTY AND COMPETITIVE BUSINESS ACTIVITIES. Founder
----------------------------------------------------
acknowledges and agrees that: (i) by virtue of his employment by and position
with the Company, he has or will have access to trade secrets and confidential
information of the Company, including valuable information about its business
operations and methods and entities with whom it does business in various
locations throughout the world, and he has developed or will develop
relationships with the Company's clients and customers and others with whom it
does business in various locations throughout the world; (ii) the market for the
Company's services is highly competitive and the Company competes on a worldwide
basis with other biotechnology and genomics companies; the Company's business is
worldwide, and the Company competes within the biotechnology and genomics
industry which is characterized by a global, worldwide marketplace; (iii) the
Founder has highly specialized scientific knowledge in the biotechnology and
genomics industry which is essential to the Company's ability to offer highly
specialized, global biotechnology and genomics services and to compete within
that industry; (iv) this Agreement is being executed contemporaneously with the
Stock Purchase Agreement dated on or about the date hereof among the Company and
certain investors, and this Agreement constitutes part of the consideration for
the parties entering into such Stock Purchase Agreement, and the Company is
relying on this Agreement in connection with entering into such Stock Purchase
Agreement and the transactions contemplated thereby; and (v) the "Competitive
Business Activities" provisions set forth in this Section 5 are reasonably
necessary to protect the Company's legitimate business interests, are reasonable
as to the time, territory and scope of activities which are restricted, do not
interfere with public policy or public interest and are described with
sufficient accuracy and definiteness to enable him to understand the scope of
the restrictions imposed upon him.
5.1 Company Property. Upon termination of his employment, Founder shall:
----------------
(i) deliver to the Company all Company property (including, but not limited to,
keys, credit cards, client or customer files, contracts, proposals, work in
process, manuals, forms, computer stored work in process and other computer
data, research materials, other items of business information concerning any
Company client or customer, or Company business or business methods, including
all copies thereof) which is in his possession, custody or control; (ii) bring
all such records, files and other materials up to date before returning them;
and (iii) fully cooperate with the Company in winding up his work and
transferring that work to other individuals designated by the Company.
5.2 Competitive Business Activities. During his employment and during the
-------------------------------
Non-Competition Period or Alternative Non-Competition Period set forth in
Section 4, as
4
<PAGE>
applicable, Founder will not engage in the activities set forth below in this
Section 5.2 (except that in any event the activities set forth on Schedule A
----------
attached hereto shall be permitted):
(a) on Founder's own or another's behalf, whether as an officer,
director, stockholder, partner, associate, owner, employee, consultant, advisor
or otherwise, directly or indirectly:
(i) compete with the Company within the geographical
areas set forth in Section 5.2.1;
(ii) solicit or do business which is the same as, similar
to or otherwise in competition with the business engaged in by the Company from
or with persons or entities: (a) who are customers of the Company; (b) who
Founder, or someone for whom he had management responsibility or supervision,
solicited, negotiated, contracted, serviced or had contact with on the Company's
behalf; (c) who were customers of the Company at any time during the last year
of Founder's employment with the Company; or (d) to whom the Company had made
proposals to do business at any time during the last year of Founder's
employment with the Company; or
(iii) offer employment to or otherwise solicit for
employment or engagement (as a consultant, advisor, independent contractor or
otherwise) any employee or other person who had been employed or engaged by the
Company during the last year of Founder's employment with the Company; or
(b) within the geographical areas set forth in Section 5.2.1, be
employed (or otherwise engaged) by any person or entity that competes with the
Company in the field of agricultural biotechnology and genomics, in (i) a
management capacity, (ii) other capacity providing the same or similar services
which Founder provided to the Company, or (iii) any capacity connected with
competitive business activities; or
(c) take any action which is materially detrimental or otherwise
intended to be adverse to the Company's goodwill, name, business relations,
prospects and operations.
5.2.1 The restrictions set forth in Section 5.2 apply to the
following geographical areas: (i) the Raleigh/Durham/Research Triangle Park,
North Carolina metropolitan area; (ii) any city, metropolitan area, county (or
similar political subdivisions in foreign countries) in which the Company is
located or does or, during Founder's employment with Company did business; (iii)
any city, metropolitan area, county (or similar political subdivision in foreign
countries) in which Founder's services were provided (in person or otherwise),
or for which Founder had responsibility, or in which Founder worked on Company
projects, while employed by the Company; (iv) the State of North Carolina; (v)
the Los Angeles, California metropolitan area; (vi) the San Francisco,
California/San Francisco Bay metropolitan area; and (vii) the State of
California.
5.2.2 Notwithstanding the foregoing, Founder's ownership,
directly or indirectly, of not more than one percent of the issued and
outstanding stock of a corporation the
5
<PAGE>
shares of which are regularly traded on a national securities exchange or in the
over-the-counter market shall not violate Section 5.2.
5.3 Remedies. Founder acknowledges that his failure to abide by the
--------
"Company Property" or "Competitive Business Activities" provisions of this
Section 5 would cause irreparable harm to the Company for which legal remedies
would be inadequate. Therefore, in addition to any other relief to which the
Company may be entitled by virtue of Founder's failure to abide by these
provisions, the Company may seek legal and equitable relief, including but not
limited to preliminary and permanent injunctive relief, for Founder's actual or
threatened failure to abide by these provisions.
5.4 Other Agreements. Nothing in this Agreement shall terminate,
----------------
revoke or diminish Founder's obligations or the Company's rights and remedies
under law or any agreements relating to trade secrets, confidential information,
non-competition and intellectual property which Founder has executed in the past
or may execute in the future or contemporaneously with this Agreement, including
without limitation agreements related to intellectual property rights previously
executed by and between Founder and Founder's previous employer, Novartis Crop
Protection, Inc. and its affiliates ("Novartis").
6. EMPLOYEE REPRESENTATION. Founder represents and warrants to the
-----------------------
Company that, to the best of his knowledge, his employment and obligations under
this Agreement will not (i) breach any legal duty or obligation he owes to
another or (ii) violate any law, recognized ethics standard or recognized
business custom. The Founder has not and will not use any trade secrets of
Novartis in the course of his employment with the Company that may expose the
Company or any employees of the Company to any liability under any agreement,
rule, regulation or statute. No patent, discovery, invention, improvement,
process or device made, discovered or developed by Founder while employed with
Novartis or within six months subsequent to such employment has or will be used
in any business of the Company in any manner that violates or infringes the
intellectual property rights of Novartis or violates any agreement between
Founder and Novartis.
7. CONFIDENTIALITY, TRADE SECRETS AND INTELLECTUAL PROPERTY AGREEMENT.
------------------------------------------------------------------
Founder's employment and continued employment shall be contingent upon his
execution of confidentiality, trade secrets and intellectual property agreements
as the Company may require Company Founders at his compensation level to execute
from time to time.
8. WAIVER OF BREACH. The Company's or Founder's waiver of any breach of a
----------------
provision of this Agreement shall not waive any subsequent breach by the other
party.
9. ENTIRE AGREEMENT. Except as expressly provided in this Agreement, this
----------------
Agreement: (i) supersedes all other understandings and agreements, oral or
written, between the parties with respect to the subject matter of this
Agreement; and (ii) constitutes the sole agreement between the parties with
respect to this subject matter. Each party acknowledges that: (i) no
representations, inducements, promises or agreements, oral or written, have been
made by any party or by anyone acting on behalf of any party, which are not
embodied in this Agreement; and (ii) no agreement, statement or promise not
contained in this Agreement shall
6
<PAGE>
be valid. No change or modification of this Agreement shall be valid or binding
upon the parties unless such change or modification is in writing and is signed
by the parties.
10. SEVERABILITY. If a court of competent jurisdiction holds that any
------------
provision or sub-part thereof contained in this Agreement is invalid, illegal or
unenforceable, that invalidity, illegality or unenforceability shall not affect
any other provision in this Agreement. Additionally, if any of the provision,
clauses or phrases in the Competitive Business Activities provisions set forth
in this Agreement are held unenforceable by a court of competent jurisdiction,
then the parties desire that they be "blue-penciled' or rewritten by the court
to the extent necessary to render them enforceable.
11. PARTIES BOUND. The terms, provisions, covenants and agreements
-------------
contained in this Agreement shall apply to, be binding upon and inure to the
benefit of the Company's successors and assigns. Founder may not assign this
Agreement without the Company's prior written consent.
12. GOVERNING LAW. This Agreement and the employment relationship created
-------------
by it shall be governed by North Carolina law without giving effect to North
Carolina choice of law provisions. The parties hereby consent to jurisdiction
in North Carolina for the purpose of any litigation relating to this Agreement
and agree that any litigation by or involving them relating to this Agreement
shall be conducted in the courts of Wake County, North Carolina or the federal
courts of the United States for the Eastern District of North Carolina.
[Signatures appear on next page]
7
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the day
and year first written above.
/s/ Jorn Gorlach
---------------------------------------
Jorn Gorlach
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
------------------------------------
Name: John A. Ryals
Title: CEO/President
8
<PAGE>
SCHEDULE A
----------
PERMITTED BUSINESS ACTIVITIES
In addition to those activities permitted by Section 5 of the attached Founder
Employment Agreement, Founder is permitted to work on all activities within
biotechnology and genomics. Notwithstanding the foregoing sentence, Founder
shall be prohibited, during the period set forth in Section 4, from engaging in
activities pertaining to agricultural seeds and chemical research, including
without limitation agricultural herbicide discovery.
9
<PAGE>
EXHIBIT 10.10
-------------
FOUNDER EMPLOYMENT AGREEMENT
----------------------------
This Founder Employment Agreement ("Agreement") is made and entered into as
of February 12, 1998 by Paradigm Genetics Inc., a North Carolina corporation
(hereinafter the "Company"), and Sandy J. Stewart (hereinafter "Founder"). The
Company desires to employ Founder as its Director of Biochemistry and Founder
desires to accept such employment on the terms set forth below.
In consideration of the mutual promises set forth below and other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the Company and Founder agree as follows:
1. EMPLOYMENT. The Company employs Founder and Founder accepts employment
----------
on the terms and conditions set forth in this Agreement.
2. NATURE OF EMPLOYMENT. Founder shall serve as Director of Biochemistry
--------------------
and have such responsibilities and authority as the Company may reasonably
assign from time to time. Additionally, Founder agrees to perform such other
duties as the Company may reasonably assign from time to time, which are
reasonably consistent with the position of Director of Biochemistry.
2.1 Founder shall perform all duties and exercise all authority in
accordance with, and otherwise comply with, all Company policies, procedures,
practices and directions.
2.2 Founder shall devote at least eighty percent (80%) of his working
time to the Company and shall use his best efforts, knowledge and experience to
successfully perform his duties and advance the Company's interests. The Company
acknowledges and agrees that Founder may devote up to twenty percent (20%) of
his working time to the affairs of Immunovation, Inc., a North Carolina
corporation, and to providing consulting services to Novartis Crop Protection,
Inc. and its affiliates in connection with this Consultancy Agreement with
Novartis Crop Protection, Inc. dated as of January 9, 1998.
2.3 Founder's base of operation shall be at the Company's principal
executive office, subject to business travel as may be necessary in the
performance of his duties.
3. COMPENSATION.
------------
3.1 Base Salary. Founder's annual salary for all services rendered
-----------
shall be Eighty-Five Thousand Dollars ($85,000) (less applicable withholdings)
payable in accordance with the Company's policies, procedures and practices as
they may exist from time to time. Founder's salary shall be reviewed in
accordance with the Company's policies, procedures and practices as they may
exist from time to time.
3.2 Bonus. Founder shall be eligible to receive bonus compensation,
-----
in addition to base salary, of twenty-five percent (25%) of Founder's annual
base salary calculated
<PAGE>
at the end of each calendar year. Such bonus shall be awarded on the basis of
mutually agreed upon objectives and criteria between Founder and the Company,
and paid to Founder within thirty (30) days of the end of each calendar year.
3.3 Stock Options. Founder shall be eligible to receive stock
-------------
options in accordance with a written stock option agreement; provided, however,
that the grant of any options is subject to the applicable terms, conditions and
requirements of any applicable stock option plan, some of which are within the
plan administrator's discretion, as they may exist from time to time.
3.4 Tax Returns. Founder shall be entitled to tax return preparation
-----------
and reasonable financial planning, consultation and advice by the Company's
accounting firm and/or legal counsel and/or financial consultants as the Company
may provide from time to time to Company Founders at Founder's compensation
level.
3.5 Other Benefits. Founder may participate in all medical, dental,
--------------
disability, insurance, retirement, pension, personal leave, car allowance and
other employee benefit plans and programs which may be made available from time
to time to employees of the Company generally and to Company Founders at
Founder's compensation level; provided, however, that Founder's participation is
subject to the applicable terms, conditions and eligibility requirements of
these plans and programs, some of which are within the plan administrator's
discretion, as they may exist from time to time.
3.6 Business Expenses. Founder shall be reimbursed for reasonable and
-----------------
necessary expenses actually incurred by him in performing services under this
Agreement in accordance with and subject to the terms and conditions of the
applicable Company reimbursement policies, procedures and practices as they may
exist from time to time. Expenses covered by this provision include but are not
limited to travel, entertainment, professional dues, subscriptions and dues,
fees and expenses associated with membership in various professional, business
and civic associations of which Founder's participation is in the Company's best
interest.
3.7 Benefit Plans Subject to Amendment. Nothing in this Agreement
----------------------------------
shall require the Company to create, continue or refrain from amending,
modifying, revising or revoking any of the plans, programs or benefits set forth
in Sections 3.3 through 3.6. Any amendments, modifications, revisions and
revocations of these plans, programs and benefits shall apply to Founder.
3.8 Life Insurance. The Founder may obtain and maintain a term life
--------------
insurance policy, reasonably satisfactory to the Company, on the life of the
Founder in the amount of $500,000 and payable to the designee of Founder, for a
period of three (3) years from the date of this Agreement, and the Company shall
on an annual basis pay to the Founder additional compensation in an amount equal
to the annual premium for such policy (the "Insurance Bonus") plus an amount
equal to the applicable federal and state tax payable by the Founder in respect
of the Insurance Bonus; provided that the Company shall pay such amounts only so
long as the annual premium for such policy shall not increase by more than
fifteen percent (15%) over the initial annual premium; but if the premium does
exceed such
2
<PAGE>
percentage, then Founder shall have the option of continuing to maintain such
life insurance and the Company shall be responsible for paying such additional
compensation except with respect to the amount of such excess.
4. TERM OF EMPLOYMENT. Either party may terminate the employment
------------------
relationship with or without cause at any time.
If Founder terminates the employment relationship for any reason or
the Company terminates it for Cause (as defined below), then the Company's
obligation to compensate Founder ceases upon the date of termination except as
to amounts due at that time, and Founder shall be subject to the provisions set
forth in Section 5.2 for a period of twelve (12) months following the date of
termination (the "Non-Competition Period").
If the Company terminates Founder's employment without Cause, then its
obligation to compensate Founder ceases upon the date of termination except as
to amounts due at that time, and Founder shall be subject to the provisions set
forth in Section 5.2 for a period of three (3) months following the date of
termination, so long as the Company shall pay to Founder an amount equal to his
then current monthly salary (less applicable withholdings) payable on a monthly
basis during such three (3) month period following the date of termination;
provided, however, that within ten (10) business days after the date of
termination of employment, the Company may give to Founder written notice that
such three (3) month period shall be extended for up to twelve (12) months (in
the aggregate) following the date of termination and such period shall be so
extended, so long as the Company shall pay to Founder an amount equal to his
then current monthly salary (less applicable withholdings) on a monthly basis
during each such month so extended (such three (3) month period or such period
as so extended being referred to as the "Alternative Non-Competitive Period").
During the period in which Founder receives post-termination payments pursuant
to this Section 4, he may continue to participate in all employee welfare
benefit plans in which Founder participated on the date of termination of
employment; provided, that Founder's participation is subject to the applicable
terms, conditions and eligibility requirements of these plans and this is not a
guarantee of coverage.
For the purpose of this Agreement, "Cause" shall mean: (i) to the
extent permitted by law, Founder's attaining age 65; (ii) Founder's death; (iii)
Founder's physical or mental inability to perform his duties for a period of
three (3) months or more; (iv) Founder's acts constituting fraud, deceit or
unlawful or illegal conduct involving the Company or any felony affecting the
Company; (v) Founder's engaging in "Competitive Business Activities" as
described in Section 5.2; (vi) Founder's neglect of duty, or failure to follow
reasonable written instructions of the Board of Directors, and the failure to
cure same within thirty (30) days after receipt of written notice thereof from
the Company; or (vii) Founder's material breach of this Agreement, or the
Founder Proprietary Information and Inventions Agreement between Founder and the
Company, and the failure to cure same within thirty (30) days of written notice
thereof from the Company.
This Agreement shall terminate upon the termination of the employment
relationship with the exception of Section 5 (Company Property and Competitive
Business Activities) and Section 3.8 (Life Insurance) which shall survive the
termination of Founder's
3
<PAGE>
employment and/or the termination of this Agreement regardless of the reasons
for such termination. Founder is not entitled to receive any compensation or
benefits upon his termination except as: (i) set forth in this Agreement; (ii)
otherwise required by law; and (iii) otherwise required by any employee benefit
plan in which he participates with the following exception. Nothing in this
Agreement, however, is intended to waive or supplant any death, disability,
retirement or pension benefits to which he may be entitled under employee
benefit plans in which he participates.
5. COMPANY PROPERTY AND COMPETITIVE BUSINESS ACTIVITIES. Founder
----------------------------------------------------
acknowledges and agrees that: (i) by virtue of his employment by and position
with the Company, he has or will have access to trade secrets and confidential
information of the Company, including valuable information about its business
operations and methods and entities with whom it does business in various
locations throughout the world, and he has developed or will develop
relationships with the Company's clients and customers and others with whom it
does business in various locations throughout the world; (ii) the market for the
Company's services is highly competitive and the Company competes on a worldwide
basis with other biotechnology and genomics companies; the Company's business is
worldwide, and the Company competes within the biotechnology and genomics
industry which is characterized by a global, worldwide marketplace; (iii) the
Founder has highly specialized scientific knowledge in the biotechnology and
genomics industry which is essential to the Company's ability to offer highly
specialized, global biotechnology and genomics services and to compete within
that industry; (iv) this Agreement is being executed contemporaneously with the
Stock Purchase Agreement dated on or about the date hereof among the Company and
certain investors, and this Agreement constitutes part of the consideration for
the parties entering into such Stock Purchase Agreement, and the Company is
relying on this Agreement in connection with entering into such Stock Purchase
Agreement and the transactions contemplated thereby; and (v) the "Competitive
Business Activities" provisions set forth in this Section 5 are reasonably
necessary to protect the Company's legitimate business interests, are reasonable
as to the time, territory and scope of activities which are restricted, do not
interfere with public policy or public interest and are described with
sufficient accuracy and definiteness to enable him to understand the scope of
the restrictions imposed upon him.
5.1 Company Property. Upon termination of his employment, Founder
----------------
shall: (i) deliver to the Company all Company property (including, but not
limited to, keys, credit cards, client or customer files, contracts, proposals,
work in process, manuals, forms, computer stored work in process and other
computer data, research materials, other items of business information
concerning any Company client or customer, or Company business or business
methods, including all copies thereof) which is in his possession, custody or
control; (ii) bring all such records, files and other materials up to date
before returning them; and (iii) fully cooperate with the Company in winding up
his work and transferring that work to other individuals designated by the
Company.
5.2 Competitive Business Activities. During his employment and
-------------------------------
during the Non-Competition Period or Alternative Non-Competition Period set
forth in Section 4, as applicable, Founder will not engage in the activities set
forth below in this Section 5.2 (except that in any event the activities set
forth on Schedule A attached hereto shall be permitted):
----------
4
<PAGE>
(a) on Founder's own or another's behalf, whether as an
officer, director, stockholder, partner, associate, owner, employee, consultant,
advisor or otherwise, directly or indirectly:
(i) compete with the Company in the fields of
agricultural genomics and agricultural biotechnology, within the geographical
areas set forth in Section 5.2.1;
(ii) solicit or do business which is the same as,
similar to or otherwise in competition with the business engaged in by the
Company from or with persons or entities: (a) who are customers of the Company;
(b) who Founder, or someone for whom he had management responsibility or
supervision, solicited, negotiated, contracted, serviced or had contact with on
the Company's behalf; (c) who were customers of the Company at any time during
the last year of Founder's employment with the Company; or (d) to whom the
Company had made proposals to do business at any time during the last year of
Founder's employment with the Company; or
(iii) offer employment to or otherwise solicit for
employment or engagement (as a consultant, advisor, independent contractor or
otherwise) any employee or other person who had been employed or engaged by the
Company during the last year of Founder's employment with the Company; or
(b) within the geographical areas set forth in Section 5.2.1,
be employed (or otherwise engaged) by any person or entity that competes with
the Company in the field of agricultural biotechnology and agricultural
genomics, in (i) a management capacity, (ii) other capacity providing the same
or similar services which Founder provided to the Company, or (iii) any capacity
connected with competitive business activities; or
(c) take any action which is materially detrimental or
otherwise intended to be adverse to the Company's goodwill, name, business
relations, prospects and operations.
5.2.1 The restrictions set forth in Section 5.2 apply to the
following geographical areas: (i) the Raleigh/Durham/Research Triangle Park,
North Carolina metropolitan area; (ii) any city, metropolitan area, county (or
similar political subdivisions in foreign countries) in which the Company is
located or does or, during Founder's employment with Company did business; (iii)
any city, metropolitan area, county (or similar political subdivision in foreign
countries) in which Founder's services were provided (in person or otherwise),
or for which Founder had responsibility, or in which Founder worked on Company
projects, while employed by the Company; (iv) the State of North Carolina; (v)
the Los Angeles, California metropolitan area; (vi) the San Francisco,
California/San Francisco Bay metropolitan area; and (vii) the State of
California.
5.2.2 Notwithstanding the foregoing, the following shall not
violate Section 5.2: (i) Founder's ownership, directly or indirectly, of not
more than one percent of the issued and outstanding stock of a corporation the
shares of which are regularly traded on a national securities exchange or in the
over-the-counter market, (ii) any and all activities
5
<PAGE>
undertaken by Founder in connection with his Consultancy Agreement with Novartis
Crop Protection, Inc. dated as of January 9, 1998, or (iii) any and all
activities undertaken by Founder in connection with his work for Immunovation,
Inc. (it being acknowledged that such work will include work in the areas of (1)
assay development, (2) high throughput screening system design and manufacture,
and (3) diagnostics (i.e., the development of assays to detect and quantify
molecules).
5.3 Remedies. Founder acknowledges that his failure to abide by the
--------
"Company Property" or "Competitive Business Activities" provisions of this
Section 5 would cause irreparable harm to the Company for which legal remedies
would be inadequate. Therefore, in addition to any other relief to which the
Company may be entitled by virtue of Founder's failure to abide by these
provisions, the Company may seek legal and equitable relief, including but not
limited to preliminary and permanent injunctive relief, for Founder's actual or
threatened failure to abide by these provisions.
5.4 Other Agreements. Nothing in this Agreement shall terminate,
----------------
revoke or diminish Founder's obligations or the Company's rights and remedies
under law or any agreements relating to trade secrets, confidential information,
non-competition and intellectual property which Founder has executed in the past
or may execute in the future or contemporaneously with this Agreement, including
without limitation agreements related to intellectual property rights previously
executed by and between Founder and Founder's previous employer, Novartis Crop
Protection, Inc. and its affiliates ("Novartis").
6. EMPLOYEE REPRESENTATION. Founder represents and warrants to the
-----------------------
Company that, to the best of his knowledge, his employment and obligations under
this Agreement will not (i) breach any legal duty or obligation he owes to
another or (ii) violate any law, recognized ethics standard or recognized
business custom. The Founder has not and will not use any trade secrets of
Novartis in the course of his employment with the Company that may expose the
Company or any employees of the Company to any liability under any agreement,
rule, regulation or statute. No patent, discovery, invention, improvement,
process or device made, discovered or developed by Founder while employed with
Novartis or within six months subsequent to such employment has or will be used
in any business of the Company in any manner that violates or infringes the
intellectual property rights of Novartis or violates any agreement between
Founder and Novartis.
7. CONFIDENTIALITY, TRADE SECRETS AND INTELLECTUAL PROPERTY AGREEMENT.
------------------------------------------------------------------
Founder's employment and continued employment shall be contingent upon his
execution of confidentiality, trade secrets and intellectual property agreements
as the Company may require Company Founders at his compensation level to execute
from time to time.
8. WAIVER OF BREACH. The Company's or Founder's waiver of any breach of a
----------------
provision of this Agreement shall not waive any subsequent breach by the other
party.
9. ENTIRE AGREEMENT. Except as expressly provided in this Agreement, this
----------------
Agreement: (i) supersedes all other understandings and agreements, oral or
written, between the parties with respect to the subject matter of this
Agreement; and (ii) constitutes the sole agreement between the parties with
respect to this subject matter. Each party acknowledges
6
<PAGE>
that: (i) no representations, inducements, promises or agreements, oral or
written, have been made by any party or by anyone acting on behalf of any party,
which are not embodied in this Agreement; and (ii) no agreement, statement or
promise not contained in this Agreement shall be valid. No change or
modification of this Agreement shall be valid or binding upon the parties unless
such change or modification is in writing and is signed by the parties.
10. SEVERABILITY. If a court of competent jurisdiction holds that any
------------
provision or sub-part thereof contained in this Agreement is invalid, illegal or
unenforceable, that invalidity, illegality or unenforceability shall not affect
any other provision in this Agreement. Additionally, if any of the provision,
clauses or phrases in the Competitive Business Activities provisions set forth
in this Agreement are held unenforceable by a court of competent jurisdiction,
then the parties desire that they be "blue-penciled' or rewritten by the court
to the extent necessary to render them enforceable.
11. PARTIES BOUND. The terms, provisions, covenants and agreements
-------------
contained in this Agreement shall apply to, be binding upon and inure to the
benefit of the Company's successors and assigns. Founder may not assign this
Agreement without the Company's prior written consent.
12. GOVERNING LAW. This Agreement and the employment relationship created
-------------
by it shall be governed by North Carolina law without giving effect to North
Carolina choice of law provisions. The parties hereby consent to jurisdiction
in North Carolina for the purpose of any litigation relating to this Agreement
and agree that any litigation by or involving them relating to this Agreement
shall be conducted in the courts of Wake County, North Carolina or the federal
courts of the United States for the Eastern District of North Carolina.
[Signatures appear on next page]
7
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on the day
and year first written above.
/s/ Sandy J. Stewart
---------------------------------------
Sandy J. Stewart
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
-----------------------------------
Name: John A. Ryals
Title: CEO/President
8
<PAGE>
SCHEDULE A
----------
PERMITTED BUSINESS ACTIVITIES
Upon termination of his employment and during the Non-Competition Period or
Alternative Non-Competition Period set forth in Section 4, Founder will be
allowed to engage in any and all activities as a consultant, employee, or
otherwise engaged, including, without limitation, assay development and
manufacture, diagnostic development and manufacture, and high throughput screen
system design, development and manufacture. Notwithstanding the foregoing
sentence, Founder shall be prohibited, during the period set forth in Section 4,
from engaging in: (i) assay development for the discovery of agrochemicals; and
(ii) high throughput screen system design and development for the discovery of
agrochemicals.
9
<PAGE>
EXHIBIT 10.11
-------------
PARADIGM GENETICS INC.
FOUNDER PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Paradigm
Genetics Inc., a North Carolina corporation (the "Company"), and the
compensation now and hereafter paid to me, I hereby agree as follows:
1. PROPRIETARY INFORMATION AND CONFIDENTIALITY
1.1 RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. I acknowledge and
agree that during and by reason of my employment with the Company, I may have
had access to or received, or may have access to or receive, Proprietary
Information (defined below). At all times during my employment and thereafter,
I will hold in strictest confidence, and in a fiduciary capacity for the benefit
of the Company, and will not disclose, use, lecture upon or publish any
Proprietary Information, except as such disclosure, use or publication may be
required in connection with my work for the Company, or unless an executive
officer of the Company expressly authorizes in writing such disclosure, use or
publication. I agree that all Proprietary Information shall be the sole and
exclusive property of the Company and its successors and assigns. I agree that
my obligations under this Agreement shall continue as to each item of
Proprietary Information until such item has become public knowledge through no
fault of mine and by proper means without breach of this Agreement.
1.2 PROPRIETARY INFORMATION. The term "Proprietary Information" shall
mean any and all confidential, private, secret or proprietary knowledge, data or
information of or concerning the Company and/or its affiliates, including, but
not limited to, information relating to products, processes, know-how, trade
secrets, designs, formulae, patterns, methods, techniques, developmental or
experimental work, improvements, discoveries, inventions, devices, ideas, source
and object codes, data, programs, other works of authorship, specifications,
plans for research and development, marketing and selling, business plans,
projections, budgets and unpublished financial statements, licenses, prices and
costs, suppliers and customers, training techniques and materials, and the
skills and compensation of other employees of the Company.
1.3 THIRD PARTY INFORMATION. I understand, in addition, that the Company
ahs received and in the future will receive from third parties confidential or
proprietary information ("Third Party Information") subject to a duty on the
Company's part to maintain the confidentiality of such information and to use it
only for certain limited purposes. During the term of my employment and
thereafter, I will hold Third Party Information in the strictest confidence and
will not disclose to anyone (other than the Company's employees and agents who
need to know such information in connection with their work for the Company) or
use, except as required in my work for the Company, Third Party Information
unless expressly authorized in writing by an executive officer of the Company.
<PAGE>
2. ASSIGNMENT OF INVENTIONS AND OTHER DEVELOPMENTS.
2.1 DISCLOSURE OF INVENTIONS AND OTHER DEVELOPMENTS. I agree to hold in a
fiduciary capacity for the benefit of the Company and to make full and prompt
disclosure to the Company of all inventions, discoveries, developments, devices,
processes, designs, methods, software, works of authorship, and improvements,
whether or not patentable or copyrightable, which are made, conceived, created,
discovered, developed or reduced to practice by me, alone or jointly with
others, or otherwise, during the term of my employment by the Company and during
the period of six (6) months after the termination of such employment, that
relate in any way to the Company's business or actual or anticipated research or
development, or result in any way from any work performed by me for or on behalf
of the Company (all of which inventions and other such items described above are
collectively referred to as "Developments"). I acknowledge that all original
works of authorship which are made by me (solely or jointly with others) within
the scope of my employment and which are protectable by copyright are "works
made for hire," pursuant to the United States Copyright Act.
2.2 ASSIGNMENT OF INVENTIONS AND OTHER DEVELOPMENTS; RECORDS. I hereby
assign and agree to assign to the Company (or any entity or person designated by
the Company) all of my right, title and interest in and to all Developments and
all intellectual property or other proprietary information or rights with
respect thereto (the "Proprietary Rights"), including, without limitation, all
related patents, patent applications, copyrights and copyright applications and
trade secrets. I agree to keep and maintain complete, accurate and current
accounts and records (including notes, sketches, and drawings and in any other
form that may be required by the Company from time to time) of all Developments
and Proprietary Information, made, conceived, created, discovered or developed
by me, which records shall be available to and shall be and remain the sole and
exclusive property of the Company at all times.
2.3 ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in every
proper way to obtain, and from time to time enforce, United States and foreign
Proprietary Rights relating to all Developments in nay and all countries. To
that end I will execute, verify and deliver such documents and perform such
other acts (including appearances as a witness) as the Company may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining
and enforcing such Proprietary Rights and the assignment thereof. In addition,
I will execute, verify and deliver assignments of such Proprietary Rights
relating to all Developments in any and all countries shall continue beyond the
termination of my employment, but the Company shall compensate me at a
reasonable rate after my termination for the time actually spent by me at the
Company's request on such assistance.
2.4 PRIOR INVENTIONS. Except as I have notified the Company in writing
prior to the date of this Agreement, there are no inventions, discoveries or the
like which I have made prior to the commencement of my employment with the
Company and which are excluded form the scope of this Agreement. The Company
acknowledges and agrees that I have notified the Company of my agreements with
my former employer, Novartis Corp. Protection, Inc. and its affiliates
("Novartis") under which Novartis has certain rights with respect to inventions,
discoveries or the like made by me in connection with my employment with
Novartis. I have not and will not use any trade secrets of Novartis in the
course of my employment with the Company
<PAGE>
that may expose the Company or any employees of the Company to any liability
under any agreement, rule, regulation or statute. No patent, discovery,
invention, improvement, process or device made, discovered or developed by me
while employed with Novartis or within six months subsequent to such employment
has or will be used in any business of the Company in any manner that violates
or infringes the intellectual property rights of Novartis or violates or
infringes the intellectual property rights of Novartis or violates any agreement
between me and Novartis.
3. ADDITIONAL ACTIVITIES. I agree that during the period of my employment
by the Company I will not, without the Company's express written consent, engage
in any employment or business activity that is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company, and for twelve (12) months after the
date of termination of my employment by the Company, I will induce any employee
of the Company to leave the employ of the Company.
4. RETURN OF THE COMPANY POLICY. When I leave the Company, I will deliver
promptly to the Company any and all records, drawings, sketches, notes,
memoranda, reports, specification, devices, formulae, and documents, together
with all copies thereof, any other material containing or disclosing any
Developments, Third Party Information or Proprietary Information of the Company,
and other property that I shall have received in connection with or otherwise
possess by virtue of my employment with the Company.
5. REMEDIES. I agree that any breach of this Agreement by me is likely to
cause the Company substantial and irrevocable damage and, therefore, I agree
that the Company shall have the right to enforce this Agreement by injunction,
specific performance or other equitable relief, without bond and without
prejudice to any other rights and remedies that the Company may have for breach
of this Agreement.
6. GENERAL PROVISIONS.
6.1 GOVERNING LAW; CONSENT OF JURISDICTION. This Agreement will be
governed by and construed according to the laws of the State of North Carolina,
without regard to conflicts of laws principles. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in North
Carolina for any lawsuit filed there against me be the Company arising from or
related to this Agreement.
6.2 SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the other provisions of this Agreement, and this Agreement
shall for any reason be held to be excessively broad as to duration, scope,
activity or subject, it shall be construed by limiting and reducing it, so as to
be enforceable to the extent compatible with the applicable law as it shall then
appear.
6.3 EMPLOYMENT. I understand that this Agreement does not constitute a
contract of employment and does not imply that my employment will continue for
any period of time.
<PAGE>
6.4. OTHER PROVISIONS. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and assigns. The provisions of this
Agreement shall survive the termination of my employment and the assignment of
this Agreement by the Company to any successor in interest or other assignee.
No waiver by the Company of any breach of this Agreement shall be a waiver of
any preceding or succeeding breach. No waiver by the Company of any right under
this Agreement shall be construed as a waiver of any other right. The
obligations pursuant to this Agreement shall apply to any time during which I
was previously employed, or am in the future employed, by the Company as a
consultant if no other agreement governs nondisclosure and assignment of
inventions during such period. This Agreement is the final, complete and
exclusive agreement of the parties with respect to the subject matter hereof and
supersedes and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing and signed by the party to be charged.
[Signatures appear on next page]
<PAGE>
This Agreement shall be effective as of the first day of my employment with
the Company, namely: __________________.
PARADIGM GENETICS, INC.
By: /s/ John A. Ryals
--------------------
Name: John A. Ryals
Title: CEO/President
Address:
/s/ Jorn Gorlach
______________________________
Jorn Gorlach
______________________________
(Printed Name)
Dated as of February 12, 1998.
<PAGE>
EXHIBIT 10.12
PARADIGM GENETICS INC.
FOUNDER PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Paradigm
Genetics Inc., a North Carolina corporation (the "Company"), and the
compensation now and hereafter paid to me, I hereby agree as follows:
1. Proprietary Information and Confidentiality
1.1 Recognition of Company's Rights; Nondisclosure. I acknowledge
and agree that during and by reason of my employment with the Company, I may
have had access to or received, or may have access to or receive, Proprietary
Information (defined below). At all times during my employment and thereafter,
I will hold in strictest confidence, and in a fiduciary capacity for the benefit
of the Company, and will not disclose, use, lecture upon or publish any
Proprietary Information, except as such disclosure, use or publication may be
required in connection with my work for the Company, or unless an executive
officer of the Company expressly authorizes in writing such disclosure, use or
publication. I agree that all Proprietary Information shall be the sole and
exclusive property of the Company and its successors and assigns. I agree that
my obligations under this Agreement shall continue as to each item of
Proprietary Information until such item has become public knowledge through no
fault of mine and by proper means without breach of this Agreement.
1.2 Proprietary Information. The term "Proprietary Information"
shall mean any and all confidential, private, secret or proprietary knowledge,
data or information of or concerning the Company and/or its affiliates,
including, but not limited to, information relating to products, processes,
know-how, trade secrets, designs, formulae, patterns, methods, techniques,
developmental or experimental work, improvements, discoveries, inventions,
devices, ideas, source and object codes, data, programs, other works of
authorship, specifications, plans for research and development, marketing and
selling, business plans, projections, budgets and unpublished financial
statements, licenses, prices and costs, suppliers and customers, training
techniques and materials, and the skills and compensation of other employees of
the Company.
1.3 Third Party Information. I understand, in addition, that the
Company has received and in the future will receive from third parties
confidential or proprietary information ("Third Party Information") subject to a
duty on the Company's part to maintain the confidentiality of such information
and to use it only for certain limited purposes. During the term of my
employment and thereafter, I will hold Third Party Information in the strictest
confidence and will not disclose to anyone (other than the Company's employees
and agents who need to know such information in connection with their work for
the Company) or use, except as required in my work for the Company, Third Party
Information unless expressly authorized in writing by an executive officer of
the Company.
<PAGE>
2. Assignment of Inventions and Other Developments.
2.1 Disclosure of Inventions and Other Developments. I agree to hold
in a fiduciary capacity for the benefit of the Company and to make full and
prompt disclosure to the Company of all inventions, discoveries, developments,
devices, processes, designs, methods, software, works of authorship, and
improvements, whether or not patentable or copyrightable, which are made,
conceived, created, discovered, developed, or reduced to practice by me, alone
or jointly with others, or otherwise, during the term of my employment by the
Company and during the period of six (6) months after the termination of such
employment, that relate in any way to the Company's business or actual or
anticipated research or development, or result in any way from any work
performed by me as an employee for or on behalf of the Company (all of which
inventions and other such items described above are collectively referred to as
"Developments"). "Developments" shall not include (i) technology and all
improvements and enhancements thereto licensed to the Company by Immunovation,
Inc. pursuant to any applicable license agreement between the Company and
Immunovation, Inc., (ii) any inventions resulting from work done by
Immunovation, Inc. under any applicable license agreement between the Company
and Immunovation, Inc., and (iii) any work done in connection with my
Consultancy Agreement with Novartis Crop Protection, Inc. dated as of January 9,
1998, and the ownership of and obligation to maintain the confidentiality of
matters relating to the foregoing agreements shall be governed by such
agreements. I acknowledge that all original works of authorship which are made
by me (solely or jointly with others) within the scope of my employment and
which are protectable by copyright are "works made for hire," pursuant to the
United States Copyright Act.
2.2 Assignment of Inventions and Other Developments; Records. I
hereby assign and agree to assign to the Company (or any entity or person
designated by the Company) all of my right, title and interest in and to all
Developments and all intellectual property or other proprietary information or
rights with respect thereto (the "Proprietary Rights"), including without
limitation all related patents, patent applications, copyrights and copyright
applications, and trade secrets. I agree to keep and maintain complete, accurate
and current accounts and records (including notes, sketches, and drawings and in
any other form that may be required by the Company from time to time) of all
Developments and Proprietary Information made, conceived, created, discovered or
developed by me, which records shall be available to and shall be and remain the
sole and exclusive property of the Company at all times.
2.3 Enforcement of Proprietary Rights. I will assist the Company in
every proper way to obtain, and from time to time enforce, United States and
foreign Proprietary Rights relating to all Developments in any and all
countries. To that end I will execute, verify and deliver such documents and
perform such other acts (including appearances as a witness) as the Company may
reasonably request for use in applying for, obtaining, perfecting, evidencing,
sustaining and enforcing such Proprietary Rights and the assignment thereof. In
addition, I will execute, verify and deliver assignments of such Proprietary
Rights to the Company or its designee. My obligation to assist the Company with
respect to Proprietary Rights relating to all Developments in any and all
countries shall continue beyond the termination of my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company's request on such assistance.
2
<PAGE>
2.4 Prior Inventions. Except as I have notified the Company in
writing prior to the date of this Agreement, there are no inventions,
discoveries or the like which I have made prior to the commencement of my
employment with the Company and which are excluded from the scope of this
Agreement. The Company acknowledges and agrees that I have notified it of the
following patents, which are excluded from the scope of this Agreement: U.S.
Patent No. 60071474 (provisional) , hand held maceration device, filed January
12, 1998; and Patent Application No. 60/014,710, multi-layered membrame
diagnostic test, filed December 15,1995. The Company acknowledges and agrees
that I have notified the Company of my agreements with my former employer,
Novartis Crop Protection, Inc., and its affiliates ("Novartis") under which
Novartis has certain rights with respect to inventions, discoveries or the like
made by me in connection with my employment with Novartis. I have not and will
not use any trade secrets of Novartis in the course of my employment with the
Company that may expose the Company or any employees of the Company to any
liability under any agreement, rule, regulation or statute. No patent,
discovery, invention, improvement, process or device made, discovered or
developed by me while employed with Novartis or within six months subsequent to
such employment has or will be used in any business of the Company in any manner
that violates or infringes the intellectual property rights of Novartis or
violates any agreement between me and Novartis.
3. Additional Activities. I agree that during the period of my employment
by the Company I will not, without the Company's express written consent, engage
in any employment or business activity that is competitive with, or would
otherwise conflict with, my employment by the Company. I agree further that for
the period of my employment by the Company, and for twelve (12) months after the
date of termination of my employment by the Company, I will not induce any
employee of the Company to leave the employ of the Company. Notwithstanding the
foregoing, the Company acknowledges and agrees that I may engage in the
activities contemplated by the agreements referred to in Section 2.1.
4. Return of Company Property. When I leave the employ of the Company, I
will deliver promptly to the Company any and all records, drawings, sketches,
notes, memoranda, reports, specifications, devices, formulae, and documents,
together with all copies thereof, any other material containing or disclosing
any Developments, Third Party Information or Proprietary Information of the
Company, and other property that I shall have received in connection with or
otherwise possess by virtue of my employment with the Company.
5. Remedies. I agree that any breach of this Agreement by me is likely to
cause the Company substantial and irrevocable damage and, therefore, I agree
that the Company shall have the right to enforce this Agreement by injunction,
specific performance or other equitable relief, without bond and without
prejudice to any other rights and remedies that the Company may have for breach
of this Agreement.
6. General Provisions.
6.1 Governing Law; Consent to Jurisdiction. This Agreement will be
governed by and construed according to the laws of the State of North Carolina,
without regard to conflicts of laws principles. I hereby expressly consent to
the personal jurisdiction of the state and federal courts located in North
Carolina for any lawsuit filed there against me by the Company arising from or
related to this Agreement.
3
<PAGE>
6.2 Severability. In case any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. If moreover, any one or more of the
provisions contained in this Agreement shall for any reason be held to be
excessively broad as to duration, scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to the extent
compatible with the applicable law as it shall then appear.
6.3 Employment. I understand that this Agreement does not constitute
a contract of employment and does not imply that my employment will continue for
any period of time.
6.4 Other Provisions. This Agreement will be binding upon my heirs,
executors, administrators and other legal representatives and will be for the
benefit of the Company, its successors, and its assigns. The provisions of this
Agreement shall survive the termination of my employment and the assignment of
this Agreement by the Company to any successor in interest or other assignee.
No waiver by the Company of any breach of this Agreement shall be a waiver of
any preceding or succeeding breach. No waiver by the Company of any right under
this Agreement shall be construed as a waiver of any other right. The
obligations pursuant to this Agreement shall apply to any time during which I
was previously employed, or am in the future employed, by the Company as a
consultant if no other agreement governs nondisclosure and assignment of
inventions during such period. This Agreement is the final, complete and
exclusive agreement of the parties with respect to the subject matter hereof and
supersedes and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in writing and signed by the party to be charged.
4
<PAGE>
This Agreement shall be effective as of the first day of my employment with
the Company, namely: .
--------------------------------
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
--------------------------------
Name: John A. Ryals
Title: CEO/President
Address:
/s/ Sandy J. Stewart
--------------------------------
Sandy J. Stewart
5
<PAGE>
EXHIBIT 10.13
FOUNDER STOCK REPURCHASE AND VESTING AGREEMENT
AGREEMENT, dated February 12, 1998, between PARADIGM GENETICS INC., a North
Carolina corporation (the "Company"), and John A. Ryals (the "Founder").
BACKGROUND
Founder is the a founder of the Company and a holder of 1,193,181 shares of
the Common Stock, par value $0.01 per share, of the Company (after giving effect
to a stock dividend referred to in Section 1.1 below). On the date hereof,
certain investors are purchasing shares of the Company's Series A Preferred
Stock in exchange for financial considerations. As a condition to such
purchase, the investors require certain personnel of the Company, including
Founder, to enter into this Agreement, pursuant to which, among other things,
Founder will agree to sell his shares of the Company's Common Stock to the
Company upon the occurrence of certain events.
SECTION 1. PURCHASE OF SHARES.
1.1 Purchase. On September 9, 1997 and October 13, 1997, Founder
purchased from the Company, and the Company sold to the Founder, 1,400 shares in
the aggregate of the Company's Common Stock at a purchase price of $1.00 per
share. On or about the date of this Agreement the Company is effecting a stock
dividend on the Common Stock (of 851.2727 shares for each outstanding share of
Common Stock) with the effect that the Founder will hold 1,193,181 shares of
Common Stock (collectively, the "Purchased Stock") and will, in effect, have
paid a purchase price of $0.001 per share (the "Purchase Price").
1.2 Payment. The Founder paid the Purchase Price for the Purchased Shares
in cash. Concurrently with the execution of this Agreement, Founder shall
deliver to the Secretary of the Company additional documents, if any, that may
be required by the Company as a condition to Founder's obligations under this
Agreement.
SECTION 2. SECURITIES LAW COMPLIANCE.
2.1 Exemption from Registration. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act" or
"Act"), and were issued to Founder in reliance upon an exemption from such
registration.
2.2 Restricted Securities. Founder hereby confirms that Founder has been
informed that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are first
registered under such Act or unless an exemption from such registration is
available. Accordingly, Founder hereby acknowledges that Founder is prepared to
hold the Purchased Shares for an indefinite period and that Founder is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act. Founder is aware of the adoption
of Rule 144 by the Commission which permits limited public resales of securities
acquired in a nonpublic
<PAGE>
offering, subject to the satisfaction of certain conditions. Founder understands
that under Rule 144, the conditions include, among other things: the
availability of certain current public information about the issuer; the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; the sale being through a broker in an unsolicited
"broker's transaction"; and the amount of securities being sold during any
three-month period not exceeding specified limitations. Founder acknowledges and
understands that the Company may not satisfy the current public information
requirement of Rule 144 at the time Founder wishes to sell the Purchased Shares
or other conditions under Rule 144 that are required of the Company. If so,
Founder understands that Founder may be precluded from selling the securities
under Rule 144 even if the holding period of the Rule has been satisfied. Prior
to Founder's acquisition of the Purchased Shares, Founder acquired sufficient
information about the Company to reach an informed, knowledgeable decision to
acquire the Purchased Shares. Founder has such knowledge and experience in
financial and business matters so as to make Founder capable of utilizing such
information to evaluate the risks of the prospective investment and to make an
informed investment decision. Founder is able to bear the economic risk of
Founder's investment in the Purchased Shares.
SECTION 3. SPECIAL PROVISIONS.
3.1 Stockholder Rights. Until such time as the Company actually exercises
its repurchase rights under this Agreement, Founder shall have all the rights of
a stockholder (including voting and dividend rights) with respect to the
Purchased Shares, including any Purchased Shares held in escrow under Section 6,
subject, however, to the transfer restrictions of Section 4 and any restrictions
contained in the Company's Articles of Incorporation.
3.2 Section 83(b) Election. Founder understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price paid for the Purchased Shares and their fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Purchased Shares pursuant to its Repurchase Right under Section 5 of this
Agreement. Founder understands that, assuming the Purchased Shares were subject
to forfeiture restrictions when acquired, Founder may elect to be taxed at the
time the Purchased Shares were acquired (to the extent the fair market value of
the Purchased Shares differs from the Purchase Price rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions), by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service (the "I.R.S.") within 30 days after such date, such filing to be made by
registered or certified mail, return receipt requested. Founder understands
that Founder must retain two copies of the completed form for filing with
Founder's state and federal tax returns for the current tax year and one
additional copy for Founder's records. If the fair market value of the
Purchased Shares at the date of purchase equals the Purchase Price paid (and
thus no tax is payable), the election can be made to avoid potential adverse tax
consequences in the future, assuming again that the Purchased Shares were
subject to forfeiture restrictions when acquired. The form for making this
election may be obtained from I.R.S. or the Company. Founder understands that
failure to make a permitted filing within the 30 day period results in the
recognition of ordinary income by the Founder (in the event the fair market
value of the Purchased Shares increases after the date of purchase) as the
forfeiture restrictions lapse.
2
<PAGE>
Founder acknowledges that it is Founder's sole responsibility, and not the
Company's, to file a timely election under Section 83(b), even if Founder
requests the Company or its representatives to make this filing on Founder's
behalf. Founder is relying solely on Founder's advisors with respect to the
decision as to whether or not to file an 83(b) election, recognizing that the
Purchased Shares did not become subject to forfeiture provisions until the date
hereof.
SECTION 4. TRANSFER RESTRICTIONS.
4.1 Restriction on Transfer. Founder shall not transfer, assign,
encumber, or otherwise dispose of any of the Purchased Shares except in
accordance with the terms and conditions of the Investors' Rights Agreement (the
"Investors' Rights Agreement"), dated as of the date hereof, to which Founder is
a party.
4.2 Definition of Owner. For purposes of Sections 5 and 6 of this
Agreement, the term "Owner" shall include the Founder and all subsequent holders
of the Purchased Shares who derive their chain of ownership through a permitted
transfer from the Founder in accordance with Section 4.1.
SECTION 5. REPURCHASE RIGHT.
5.1 Grant. The Company is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the 90 day period (or such longer period
mutually agreed to by the parties) following the date the Founder ceases to be a
"Service Provider" (as defined below) to the Company for any reason (including
death), to repurchase at the Purchase Price all or (at the discretion of the
Company and with the consent of the Founder) any portion of the Purchased Shares
in which the Founder has not acquired a vested interest in accordance with the
vesting provisions of Section 5.3 (such shares called the "Unvested Shares").
For purposes of this Agreement, the Founder shall be deemed to be a "Service
Provider" to the Company for so long as the Founder renders periodic services to
the Company (or one or more of its parent or subsidiary corporations), whether
as an employee, non-employee member of the board of directors, or an
independent, non-employee consultant and whether pursuant to an employment
agreement or otherwise.
5.2 Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable 90 day period specified in Section
5.1. The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be not more
than 45 days after the date of notice. The Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Company the certificates representing the Unvested Shares to be repurchased
(unless already held by the Secretary in escrow under this Agreement), each
certificate to be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such stock certificates (either from escrow in
accordance with Section 6.3 or from Owner as herein provided), pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares that are to be repurchased.
3
<PAGE>
5.3 Termination of the Repurchase Right.
(a) The Repurchase Right shall terminate with respect to any Unvested
Shares for which it is not timely exercised under Section 5.2. In addition, the
Repurchase Right shall terminate, and cease to be exercisable, with respect to
any and all Purchased Shares in which the Founder is vested in accordance with
the schedule below. Accordingly, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Purchased Shares in
accordance with the following provisions:
(i) During the initial 12 month period measured the date of
this Agreement (the "Vesting Measurement Date"), the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, (A)
6.25% of the Purchased Shares three months after the Vesting Measurement Date,
(B) an additional 6.25% of the Purchased Shares six months after the Vesting
Measurement Date, (C) an additional 6.25% of the Purchased Shares nine months
after the Vesting Measurement Date, and (D) an additional 6.25% of the Purchased
Shares twelve months after the Vesting Measurement Date. Accordingly, upon the
expiration of the initial 12 month period measured from the Vesting Measurement
Date, the Founder shall have acquired a vested interest in, and the Repurchase
Right shall have lapsed with respect to, 25% of the Purchased Shares.
(ii) From and after the expiration of the initial 12 month
period measured from the Vesting Measurement Date, the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, the
remaining Purchased Shares in a series of successive monthly installments each
equal to 1/48th of the Purchased Shares. Accordingly, upon the expiration of 48
months after the Vesting Measurement Date, the Founder shall have acquired a
vested interest in, and the Repurchase Right shall have lapsed with respect to
all of the Purchased Shares.
(iii) Upon the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $10.00 (as adjusted for stock splits and the like effected
after the date of this Agreement) and an aggregate offering price to the public
of not less than $20,000,000, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Unvested Shares as of
such closing.
(iv) The Company acknowledges and agrees that, during the
period beginning on the date of this Agreement and ending 48 months thereafter,
the Founder's relationship with the Company as a Service Provider may not be
terminated by the Company without Cause except with the consent of John Ryals
(or, if John Ryals is not the Chief Executive Officer of the Company, the then
current Chief Executive Officer) and at least one of Jorn Gorlach, Sandy
Stewart, or Scott Uknes (excluding any of these three persons that is not then a
Service Provider to the Company). In the event that the Founder's relationship
with the Company as a Service Provider is terminated by the Company without
Cause during such 48-month period, then the Founder shall, upon the date of such
termination, acquire a vested interest in, and the Purchase Right shall lapse
with respect to, 25% of the Purchased Shares, in
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addition to any other Purchased Shares for which the Founder shall have acquired
a vested interest in, and the Repurchase Right shall have lapsed with respect
to, prior to such termination date. For purposes of this Section 5.3, "Cause"
shall have the meaning given such term in the Founder Employment Agreement
between the Company and the Founder, dated on or about the date hereof, or any
successor or replacement agreement between the Company and the Founder, as a
Service Provider.
(b) All Purchased Shares as to which the Repurchase Right lapses
shall, however, continue to be subject to the applicable terms and conditions of
the Investors' Rights Agreement.
5.4 Fractional Shares. No fractional shares shall be repurchased by the
Company. Accordingly, should the Repurchase Right extend to a fractional share
(in accordance with the vesting computation provisions of Section 5.3) at the
time the Founder ceases to be a Service Provider, then such fractional share
shall be added to any fractional share in which the Founder is at such time
vested in order to make one whole vested share no longer subject to the
Repurchase Right.
5.5 Additional Shares or Substituted Securities. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares hereunder and to the price per share to
be paid upon the exercise of the Repurchase Right in order to reflect the effect
of any such transaction upon the Company's capital structure; provided, however,
that the aggregate Purchase Price shall remain the same.
5.6 Corporate Transaction.
(a) In the event of any of the following transactions (a "Corporate
Transaction"), the Repurchase Right shall automatically lapse in its entirety,
and the Founder shall acquire a vested interest in all the Purchased Shares,
upon the consummation of such Corporate Transaction:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which 50% or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock immediately prior
to such merger.
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(b) To the extent the Repurchase Right remains in effect following
such Corporate Transaction in accordance with Section 5.6(a), it shall apply to
the new capital stock or other property received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Company's
capital structure; provided, however, that the aggregate Purchase Price shall
remain the same.
5.7 Legend. All certificates representing Purchased Shares subject to the
Company's Right of Repurchase shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF,
EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT
BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR
THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS
CERTAIN REPURCHASE RIGHTS TO THE COMPANY UPON TERMINATION OF
SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON
WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE."
SECTION 6. ESCROW.
6.1 Deposit. Upon request of the Company (which request the Company may
make at any time and from time to time), the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Secretary of the Company to be held in accordance with the provisions
of this Section 6. Each deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the form of Exhibit A. The
---------
deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 6.4. Upon delivery of the certificates
(or other assets and securities) to the Company, the Owner shall be issued a
receipt acknowledging the number of Purchased Shares (or other assets and
securities) delivered in escrow to the Secretary of the Company.
6.2 Recapitalization. All regular cash dividends on the Purchased Shares
(or other securities at the time held in escrow) shall be paid directly to the
Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration or
in the event of a Corporate Transaction, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately delivered to the
Secretary of the Company to be
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held in escrow under this Section 6, but only to the extent the Purchased Shares
are at the time subject to the escrow requirements of Section 6.1.
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6.3 Release Surrender. The Purchased Shares, to the extent, and together
with any other assets or securities, held in escrow hereunder, shall be subject
to the following terms and conditions relating to their release from escrow or
their surrender to the Company for repurchase and cancellation:
(a) Should the Company elect to exercise a purchase right with
respect to any Unvested Shares, then the escrowed certificates for such Unvested
Shares (together with any other assets or securities issued with respect
thereto) shall be delivered to the Company for cancellation, concurrently with
the payment to the Owner, in cash or cash equivalent (including the cancellation
of any purchase-money indebtedness), of an amount equal to the aggregate
Purchase Price for such Unvested Shares, and the Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities).
(b) Should a stockholder exercise a purchase right under the
Investors' Rights Agreement, then the escrowed certificates for Purchased Shares
subject to such purchase right (together with any other assets or securities
issued with respect thereto) shall be delivered to the Company for cancellation,
concurrently with the payment to the Owner of the purchase price provided for in
the Investors' Rights Agreement, and the Owner shall cease to have any further
rights or claims with respect to such Purchased Shares (or other assets or
securities).
(c) As the interest of the Founder in the Purchased Shares (or any
other assets or securities issued with respect thereto) vests in accordance with
the provisions of Section 5, the certificates for such vested shares (as well as
all other vested assets and securities) held in escrow hereunder shall be
released from escrow and delivered to the Owner in accordance with the following
schedule:
(i) The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected in increments of 6.25% of
the Purchased Shares within 30 days following the expiration of the initial 3,
6, 9 and 12 month periods measured from the Vesting Measurement Date.
(ii) Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at monthly intervals at the
rate of 1/48th of the Purchased Shares each month thereafter, with the first
such monthly release to occur 13 months after the Vesting Measurement Date.
(iii) Upon the Founder's cessation of Service Provider status,
any escrowed Purchased Shares (or other assets or securities) in which the
Founder is at the time vested shall be promptly released from escrow.
(iv) Upon any earlier termination of the Company's Repurchase
Right in accordance with the applicable provisions of Section 5, the Purchased
Shares (or other assets or securities) at the time held in escrow hereunder
shall promptly be released to the Owner as fully vested shares or other
property.
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(d) All Purchased Shares (or other assets or securities) released
from escrow in accordance with the provisions of Section 6.3(c) above shall
nevertheless remain subject to the applicable terms and conditions of the
Investors' Rights Agreement until such provisions terminate in accordance
therewith.
SECTION 7. GENERAL PROVISIONS.
7.1 Assignment. The Company may assign its Repurchase Rights under
Section 5 to any person or entity selected by the Company's Board of Directors,
including (without limitation) one or more stockholders of the Company other
than the Founder.
If the assignee of the Repurchase Right is neither a parent nor a
subsidiary of the Company, then such assignee must make a cash payment to the
Company, upon the assignment of the Repurchase Right, in an amount equal to the
excess (if any) of the fair market value of the Unvested Shares at the time
subject to the Repurchase Right (as determined by the Company's Board of
Directors) and the aggregate Purchase Price payable for such Unvested Shares.
7.2 No Employment or Service Contract. Nothing in this Agreement shall
confer upon the Founder any right to continue in the service of the Company (or
any parent or subsidiary of the Company employing or retaining Founder) for any
period of time or interfere with or otherwise restrict in any way the rights of
the Company (or any parent or subsidiary of the Company employing or retaining
Founder) or the Founder, which rights are hereby expressly reserved by each, to
terminate the Service Provider status of Founder at any time for any reason
whatsoever, with or without cause.
7.3 Notices. Any notice required in connection with (i) the Repurchase
Right or (ii) the disposition of any Purchased Shares covered thereby shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States mail, registered or certified postage prepaid and
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten days' advance written notice under this Section 7.3
to all other parties to this Agreement.
7.4 No Waiver. The failure of the Company (or its assignees) in any
instance to exercise the rights granted under this Agreement shall not
constitute a waiver of any other right that may subsequently arise under the
provisions of this Agreement or any other agreement between the Company and the
Founder. No waiver of any breach or condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like
or different nature.
7.5 Cancellation of Shares. If the Company (or its assignees) shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement), and such shares
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shall be deemed purchased in accordance with the applicable provisions hereof
and the Company (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates have been delivered as required by this
Agreement.
7.6 Founder Undertaking. Founder hereby agrees to take whatever
additional action and execute whatever additional documents the Company may in
its judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Founder or the
Purchased Shares pursuant to the express provisions of this Agreement.
7.7 Agreement Is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
7.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
7.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
7.10 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Founder and the Founder's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the parties have executed this Founder Stock Repurchase
and Vesting Agreement on the day and year first set forth above.
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
-----------------------------------
Name: John A. Ryals
Title: CEO/President
Address: 85 Alexander Drive, Suite 100
Research Triangle Park, NC 27709
FOUNDER
/s/ John A. Ryals
--------------------------------------
John A. Ryals
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Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
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EXHIBIT A
Assignment Separate From Certificate
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto Paradigm Genetics Inc., a North Carolina corporation (the
"Company"), ____________ (_____) shares of the ________________ Capital Stock of
_____________________________standing in _____________________ name on the books
of said corporation represented by Certificate No._____________ herewith and
does hereby irrevocably constitute and appoint the Secretary of the Company
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated: ___________________
Signature_____________________________
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EXHIBIT 10.14
FOUNDER STOCK REPURCHASE AND VESTING AGREEMENT
AGREEMENT, dated February 12, 1998, between PARADIGM GENETICS INC., a North
Carolina corporation (the "Company"), and Jorn Gorlach (the "Founder").
BACKGROUND
Founder is the a founder of the Company and a holder of 852,272 shares of
the Common Stock, par value $0.01 per share, of the Company (after giving effect
to a stock dividend referred to in Section 1.1 below). On the date hereof,
certain investors are purchasing shares of the Company's Series A Preferred
Stock in exchange for financial considerations. As a condition to such
purchase, the investors require certain personnel of the Company, including
Founder, to enter into this Agreement, pursuant to which, among other things,
Founder will agree to sell his shares of the Company's Common Stock to the
Company upon the occurrence of certain events.
SECTION 1. PURCHASE OF SHARES.
1.1 Purchase. On September 9, 1997, Founder purchased from the Company,
and the Company sold to the Founder, 1,000 shares of the Company's Common Stock
at a purchase price of $1.00 per share. On or about the date of this Agreement
the Company is effecting a stock dividend on the Common Stock (of 851.2727
shares for each outstanding share of Common Stock) with the effect that the
Founder will hold 852,272 shares of Common Stock (collectively, the "Purchased
Stock") and will, in effect, have paid a purchase price of $0.001 per share (the
"Purchase Price").
1.2 Payment. The Founder paid the Purchase Price for the Purchased Shares
in cash. Concurrently with the execution of this Agreement, Founder shall
deliver to the Secretary of the Company additional documents, if any, that may
be required by the Company as a condition to Founder's obligations under this
Agreement.
SECTION 2. SECURITIES LAW COMPLIANCE.
2.1 Exemption from Registration. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act" or
"Act"), and were issued to Founder in reliance upon an exemption from such
registration.
2.2 Restricted Securities. Founder hereby confirms that Founder has been
informed that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are first
registered under such Act or unless an exemption from such registration is
available. Accordingly, Founder hereby acknowledges that Founder is prepared to
hold the Purchased Shares for an indefinite period and that Founder is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act. Founder is aware of the adoption
of Rule 144 by the Commission which permits limited public resales of securities
acquired in a nonpublic
<PAGE>
offering, subject to the satisfaction of certain conditions. Founder understands
that under Rule 144, the conditions include, among other things: the
availability of certain current public information about the issuer; the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; the sale being through a broker in an unsolicited
"broker's transaction"; and the amount of securities being sold during any
three-month period not exceeding specified limitations. Founder acknowledges and
understands that the Company may not satisfy the current public information
requirement of Rule 144 at the time Founder wishes to sell the Purchased Shares
or other conditions under Rule 144 that are required of the Company. If so,
Founder understands that Founder may be precluded from selling the securities
under Rule 144 even if the holding period of the Rule has been satisfied. Prior
to Founder's acquisition of the Purchased Shares, Founder acquired sufficient
information about the Company to reach an informed, knowledgeable decision to
acquire the Purchased Shares. Founder has such knowledge and experience in
financial and business matters so as to make Founder capable of utilizing such
information to evaluate the risks of the prospective investment and to make an
informed investment decision. Founder is able to bear the economic risk of
Founder's investment in the Purchased Shares.
SECTION 3. SPECIAL PROVISIONS.
3.1 Stockholder Rights. Until such time as the Company actually exercises
its repurchase rights under this Agreement, Founder shall have all the rights of
a stockholder (including voting and dividend rights) with respect to the
Purchased Shares, including any Purchased Shares held in escrow under Section 6,
subject, however, to the transfer restrictions of Section 4 and any restrictions
contained in the Company's Articles of Incorporation.
3.2 Section 83(b) Election. Founder understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price paid for the Purchased Shares and their fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Purchased Shares pursuant to its Repurchase Right under Section 5 of this
Agreement. Founder understands that, assuming the Purchased Shares were subject
to forfeiture restrictions when acquired, Founder may elect to be taxed at the
time the Purchased Shares were acquired (to the extent the fair market value of
the Purchased Shares differs from the Purchase Price rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions), by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service (the "I.R.S.") within 30 days after such date, such filing to be made by
registered or certified mail, return receipt requested. Founder understands
that Founder must retain two copies of the completed form for filing with
Founder's state and federal tax returns for the current tax year and one
additional copy for Founder's records. If the fair market value of the
Purchased Shares at the date of purchase equals the Purchase Price paid (and
thus no tax is payable), the election can be made to avoid potential adverse tax
consequences in the future, assuming again that the Purchased Shares were
subject to forfeiture restrictions when acquired. The form for making this
election may be obtained from I.R.S. or the Company. Founder understands that
failure to make a permitted filing within the 30 day period results in the
recognition of ordinary income by the Founder (in the event the fair market
value of the Purchased Shares increases after the date of purchase) as the
forfeiture restrictions lapse.
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Founder acknowledges that it is Founder's sole responsibility, and not the
Company's, to file a timely election under Section 83(b), even if Founder
requests the Company or its representatives to make this filing on Founder's
behalf. Founder is relying solely on Founder's advisors with respect to the
decision as to whether or not to file an 83(b) election, recognizing that the
Purchased Shares did not become subject to forfeiture provisions until the date
hereof.
SECTION 4. TRANSFER RESTRICTIONS.
4.1 Restriction on Transfer. Founder shall not transfer, assign,
encumber, or otherwise dispose of any of the Purchased Shares except in
accordance with the terms and conditions of the Investors' Rights Agreement (the
"Investors' Rights Agreement"), dated as of the date hereof, to which Founder is
a party.
4.2 Definition of Owner. For purposes of Sections 5 and 6 of this
Agreement, the term "Owner" shall include the Founder and all subsequent holders
of the Purchased Shares who derive their chain of ownership through a permitted
transfer from the Founder in accordance with Section 4.1.
SECTION 5. REPURCHASE RIGHT.
5.1 Grant. The Company is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the 90 day period (or such longer period
mutually agreed to by the parties) following the date the Founder ceases to be a
"Service Provider" (as defined below) to the Company for any reason (including
death), to repurchase at the Purchase Price all or (at the discretion of the
Company and with the consent of the Founder) any portion of the Purchased Shares
in which the Founder has not acquired a vested interest in accordance with the
vesting provisions of Section 5.3 (such shares called the "Unvested Shares").
For purposes of this Agreement, the Founder shall be deemed to be a "Service
Provider" to the Company for so long as the Founder renders periodic services to
the Company (or one or more of its parent or subsidiary corporations), whether
as an employee, non-employee member of the board of directors, or an
independent, non-employee consultant and whether pursuant to an employment
agreement or otherwise.
5.2 Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable 90 day period specified in Section
5.1. The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be not more
than 45 days after the date of notice. The Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Company the certificates representing the Unvested Shares to be repurchased
(unless already held by the Secretary in escrow under this Agreement), each
certificate to be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such stock certificates (either from escrow in
accordance with Section 6.3 or from Owner as herein provided), pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares that are to be repurchased.
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5.3 Termination of the Repurchase Right.
(a) The Repurchase Right shall terminate with respect to any Unvested
Shares for which it is not timely exercised under Section 5.2. In addition, the
Repurchase Right shall terminate, and cease to be exercisable, with respect to
any and all Purchased Shares in which the Founder is vested in accordance with
the schedule below. Accordingly, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Purchased Shares in
accordance with the following provisions:
(i) During the initial 12 month period measured the date of
this Agreement (the "Vesting Measurement Date"), the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, (A)
6.25% of the Purchased Shares three months after the Vesting Measurement Date,
(B) an additional 6.25% of the Purchased Shares six months after the Vesting
Measurement Date, (C) an additional 6.25% of the Purchased Shares nine months
after the Vesting Measurement Date, and (D) an additional 6.25% of the Purchased
Shares twelve months after the Vesting Measurement Date. Accordingly, upon the
expiration of the initial 12 month period measured from the Vesting Measurement
Date, the Founder shall have acquired a vested interest in, and the Repurchase
Right shall have lapsed with respect to, 25% of the Purchased Shares.
(ii) From and after the expiration of the initial 12 month
period measured from the Vesting Measurement Date, the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, the
remaining Purchased Shares in a series of successive monthly installments each
equal to 1/48th of the Purchased Shares. Accordingly, upon the expiration of 48
months after the Vesting Measurement Date, the Founder shall have acquired a
vested interest in, and the Repurchase Right shall have lapsed with respect to
all of the Purchased Shares.
(iii) Upon the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $10.00 (as adjusted for stock splits and the like effected
after the date of this Agreement) and an aggregate offering price to the public
of not less than $20,000,000, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Unvested Shares as of
such closing.
(iv) The Company acknowledges and agrees that, during the
period beginning on the date of this Agreement and ending 48 months thereafter,
the Founder's relationship with the Company as a Service Provider may not be
terminated by the Company without Cause except with the consent of John Ryals
(or, if John Ryals is not the Chief Executive Officer of the Company, the then
current Chief Executive Officer) and at least one of Jorn Gorlach, Sandy
Stewart, or Scott Uknes (excluding any of these three persons that is not then a
Service Provider to the Company). In the event that the Founder's relationship
with the Company as a Service Provider is terminated by the Company without
Cause during such 48-month period, then the Founder shall, upon the date of such
termination, acquire a vested interest in, and the Purchase Right shall lapse
with respect to, 25% of the Purchased Shares,
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in addition to any other Purchased Shares for which the Founder shall have
acquired a vested interest in, and the Repurchase Right shall have lapsed with
respect to, prior to such termination date. For purposes of this Section 5.3,
"Cause" shall have the meaning given such term in the Founder Employment
Agreement between the Company and the Founder, dated on or about the date
hereof, or any successor or replacement agreement between the Company and the
Founder, as a Service Provider.
(b) All Purchased Shares as to which the Repurchase Right lapses
shall, however, continue to be subject to the applicable terms and conditions of
the Investors' Rights Agreement.
5.4 Fractional Shares. No fractional shares shall be repurchased by the
Company. Accordingly, should the Repurchase Right extend to a fractional share
(in accordance with the vesting computation provisions of Section 5.3) at the
time the Founder ceases to be a Service Provider, then such fractional share
shall be added to any fractional share in which the Founder is at such time
vested in order to make one whole vested share no longer subject to the
Repurchase Right.
5.5 Additional Shares or Substituted Securities. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares hereunder and to the price per share to
be paid upon the exercise of the Repurchase Right in order to reflect the effect
of any such transaction upon the Company's capital structure; provided, however,
that the aggregate Purchase Price shall remain the same.
5.6 Corporate Transaction.
(a) In the event of any of the following transactions (a "Corporate
Transaction"), the Repurchase Right shall automatically lapse in its entirety,
and the Founder shall acquire a vested interest in all the Purchased Shares,
upon the consummation of such Corporate Transaction:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which 50% or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock immediately prior
to such merger.
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(b) To the extent the Repurchase Right remains in effect following
such Corporate Transaction in accordance with Section 5.6(a), it shall apply to
the new capital stock or other property received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Company's
capital structure; provided, however, that the aggregate Purchase Price shall
remain the same.
5.7 Legend. All certificates representing Purchased Shares subject to the
Company's Right of Repurchase shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF,
EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT
BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR
THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS
CERTAIN REPURCHASE RIGHTS TO THE COMPANY UPON TERMINATION OF
SERVICE WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON
WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE."
SECTION 6. ESCROW.
6.1 Deposit. Upon request of the Company (which request the Company may
make at any time and from time to time), the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Secretary of the Company to be held in accordance with the provisions
of this Section 6. Each deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the form of Exhibit A. The
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deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 6.4. Upon delivery of the certificates
(or other assets and securities) to the Company, the Owner shall be issued a
receipt acknowledging the number of Purchased Shares (or other assets and
securities) delivered in escrow to the Secretary of the Company.
6.2 Recapitalization. All regular cash dividends on the Purchased Shares
(or other securities at the time held in escrow) shall be paid directly to the
Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration or
in the event of a Corporate Transaction, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately delivered to the
Secretary of the Company to be
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held in escrow under this Section 6, but only to the extent the Purchased Shares
are at the time subject to the escrow requirements of Section 6.1.
7
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6.3 Release Surrender. The Purchased Shares, to the extent, and together
with any other assets or securities, held in escrow hereunder, shall be subject
to the following terms and conditions relating to their release from escrow or
their surrender to the Company for repurchase and cancellation:
(a) Should the Company elect to exercise a purchase right with
respect to any Unvested Shares, then the escrowed certificates for such Unvested
Shares (together with any other assets or securities issued with respect
thereto) shall be delivered to the Company for cancellation, concurrently with
the payment to the Owner, in cash or cash equivalent (including the cancellation
of any purchase-money indebtedness), of an amount equal to the aggregate
Purchase Price for such Unvested Shares, and the Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities).
(b) Should a stockholder exercise a purchase right under the
Investors' Rights Agreement, then the escrowed certificates for Purchased Shares
subject to such purchase right (together with any other assets or securities
issued with respect thereto) shall be delivered to the Company for cancellation,
concurrently with the payment to the Owner of the purchase price provided for in
the Investors' Rights Agreement, and the Owner shall cease to have any further
rights or claims with respect to such Purchased Shares (or other assets or
securities).
(c) As the interest of the Founder in the Purchased Shares (or any
other assets or securities issued with respect thereto) vests in accordance with
the provisions of Section 5, the certificates for such vested shares (as well as
all other vested assets and securities) held in escrow hereunder shall be
released from escrow and delivered to the Owner in accordance with the following
schedule:
(i) The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected in increments of 6.25% of
the Purchased Shares within 30 days following the expiration of the initial 3,
6, 9 and 12 month periods measured from the Vesting Measurement Date.
(ii) Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at monthly intervals at the
rate of 1/48th of the Purchased Shares each month thereafter, with the first
such monthly release to occur 13 months after the Vesting Measurement Date.
(iii) Upon the Founder's cessation of Service Provider status,
any escrowed Purchased Shares (or other assets or securities) in which the
Founder is at the time vested shall be promptly released from escrow.
(iv) Upon any earlier termination of the Company's Repurchase
Right in accordance with the applicable provisions of Section 5, the Purchased
Shares (or other assets or securities) at the time held in escrow hereunder
shall promptly be released to the Owner as fully vested shares or other
property.
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(d) All Purchased Shares (or other assets or securities) released
from escrow in accordance with the provisions of Section 6.3(c) above shall
nevertheless remain subject to the applicable terms and conditions of the
Investors' Rights Agreement until such provisions terminate in accordance
therewith.
SECTION 7. GENERAL PROVISIONS.
7.1 Assignment. The Company may assign its Repurchase Rights under
Section 5 to any person or entity selected by the Company's Board of Directors,
including (without limitation) one or more stockholders of the Company other
than the Founder.
If the assignee of the Repurchase Right is neither a parent nor a
subsidiary of the Company, then such assignee must make a cash payment to the
Company, upon the assignment of the Repurchase Right, in an amount equal to the
excess (if any) of the fair market value of the Unvested Shares at the time
subject to the Repurchase Right (as determined by the Company's Board of
Directors) and the aggregate Purchase Price payable for such Unvested Shares.
7.2 No Employment or Service Contract. Nothing in this Agreement shall
confer upon the Founder any right to continue in the service of the Company (or
any parent or subsidiary of the Company employing or retaining Founder) for any
period of time or interfere with or otherwise restrict in any way the rights of
the Company (or any parent or subsidiary of the Company employing or retaining
Founder) or the Founder, which rights are hereby expressly reserved by each, to
terminate the Service Provider status of Founder at any time for any reason
whatsoever, with or without cause.
7.3 Notices. Any notice required in connection with (i) the Repurchase
Right or (ii) the disposition of any Purchased Shares covered thereby shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States mail, registered or certified postage prepaid and
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten days' advance written notice under this Section 7.3
to all other parties to this Agreement.
7.4 No Waiver. The failure of the Company (or its assignees) in any
instance to exercise the rights granted under this Agreement shall not
constitute a waiver of any other right that may subsequently arise under the
provisions of this Agreement or any other agreement between the Company and the
Founder. No waiver of any breach or condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like
or different nature.
7.5 Cancellation of Shares. If the Company (or its assignees) shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement), and such shares
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shall be deemed purchased in accordance with the applicable provisions hereof
and the Company (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates have been delivered as required by this
Agreement.
7.6 Founder Undertaking. Founder hereby agrees to take whatever
additional action and execute whatever additional documents the Company may in
its judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Founder or the
Purchased Shares pursuant to the express provisions of this Agreement.
7.7 Agreement Is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
7.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
7.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
7.10 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Founder and the Founder's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the parties have executed this Founder Stock Repurchase
and Vesting Agreement on the day and year first set forth above.
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
__________________________________
Name: John A. Ryals
Title: CEO/President
Address: 85 Alexander Drive, Suite 100
Research Triangle Park, NC 27709
FOUNDER
/s/ Jorn Gorlach
________________________________________
Jorn Gorlach
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Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
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EXHIBIT A
Assignment Separate From Certificate
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto Paradigm Genetics Inc., a North Carolina corporation (the
"Company"), ____________ (_____) shares of the ________________ Capital Stock of
_____________________________standing in _____________________ name on the books
of said corporation represented by Certificate No._____________ herewith and
does hereby irrevocably constitute and appoint the Secretary of the Company
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated: ___________________
Signature_____________________________
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EXHIBIT 10.15
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FOUNDER STOCK REPURCHASE AND VESTING AGREEMENT
AGREEMENT, dated February 12, 1998, between PARADIGM GENETICS INC., a North
Carolina corporation (the "Company"), and Sandy Stewart (the "Founder").
BACKGROUND
Founder is the a founder of the Company and a holder of 852,272 shares of
the Common Stock, par value $0.01 per share, of the Company (after giving effect
to a stock dividend referred to in Section 1.1 below). On the date hereof,
certain investors are purchasing shares of the Company's Series A Preferred
Stock in exchange for financial considerations. As a condition to such
purchase, the investors require certain personnel of the Company, including
Founder, to enter into this Agreement, pursuant to which, among other things,
Founder will agree to sell his shares of the Company's Common Stock to the
Company upon the occurrence of certain events.
SECTION 1. PURCHASE OF SHARES.
1.1 Purchase. On September 9, 1997, Founder purchased from the Company,
and the Company sold to the Founder, 1,000 shares of the Company's Common Stock
at a purchase price of $1.00 per share. On or about the date of this Agreement
the Company is effecting a stock dividend on the Common Stock (of 851.2727
shares for each outstanding share of Common Stock) with the effect that the
Founder will hold 852,272 shares of Common Stock (collectively, the "Purchased
Stock") and will, in effect, have paid a purchase price of $0.001 per share (the
"Purchase Price").
1.2 Payment. The Founder paid the Purchase Price for the Purchased Shares
in cash. Concurrently with the execution of this Agreement, Founder shall
deliver to the Secretary of the Company additional documents, if any, that may
be required by the Company as a condition to Founder's obligations under this
Agreement.
SECTION 2. SECURITIES LAW COMPLIANCE.
2.1 Exemption from Registration. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act" or
"Act"), and were issued to Founder in reliance upon an exemption from such
registration.
2.2 Restricted Securities. Founder hereby confirms that Founder has been
informed that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are first
registered under such Act or unless an exemption from such registration is
available. Accordingly, Founder hereby acknowledges that Founder is prepared to
hold the Purchased Shares for an indefinite period and that Founder is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act. Founder is aware of the adoption
of Rule 144 by the Commission which permits limited public resales of securities
acquired in a nonpublic
<PAGE>
offering, subject to the satisfaction of certain conditions. Founder understands
that under Rule 144, the conditions include, among other things: the
availability of certain current public information about the issuer; the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; the sale being through a broker in an unsolicited
"broker's transaction"; and the amount of securities being sold during any
three-month period not exceeding specified limitations. Founder acknowledges and
understands that the Company may not satisfy the current public information
requirement of Rule 144 at the time Founder wishes to sell the Purchased Shares
or other conditions under Rule 144 that are required of the Company. If so,
Founder understands that Founder may be precluded from selling the securities
under Rule 144 even if the holding period of the Rule has been satisfied. Prior
to Founder's acquisition of the Purchased Shares, Founder acquired sufficient
information about the Company to reach an informed, knowledgeable decision to
acquire the Purchased Shares. Founder has such knowledge and experience in
financial and business matters so as to make Founder capable of utilizing such
information to evaluate the risks of the prospective investment and to make an
informed investment decision. Founder is able to bear the economic risk of
Founder's investment in the Purchased Shares.
SECTION 3. SPECIAL PROVISIONS.
3.1 Stockholder Rights. Until such time as the Company actually exercises
its repurchase rights under this Agreement, Founder shall have all the rights of
a stockholder (including voting and dividend rights) with respect to the
Purchased Shares, including any Purchased Shares held in escrow under Section 6,
subject, however, to the transfer restrictions of Section 4 and any restrictions
contained in the Company's Articles of Incorporation.
3.2 Section 83(b) Election. Founder understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price paid for the Purchased Shares and their fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Purchased Shares pursuant to its Repurchase Right under Section 5 of this
Agreement. Founder understands that, assuming the Purchased Shares were subject
to forfeiture restrictions when acquired, Founder may elect to be taxed at the
time the Purchased Shares were acquired (to the extent the fair market value of
the Purchased Shares differs from the Purchase Price rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions), by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service (the "I.R.S.") within 30 days after such date, such filing to be made by
registered or certified mail, return receipt requested. Founder understands
that Founder must retain two copies of the completed form for filing with
Founder's state and federal tax returns for the current tax year and one
additional copy for Founder's records. If the fair market value of the
Purchased Shares at the date of purchase equals the Purchase Price paid (and
thus no tax is payable), the election can be made to avoid potential adverse tax
consequences in the future, assuming again that the Purchased Shares were
subject to forfeiture restrictions when acquired. The form for making this
election may be obtained from I.R.S. or the Company. Founder understands that
failure to make a permitted filing within the 30 day period results in the
recognition of ordinary income by the Founder (in the event the fair market
value of the Purchased Shares increases after the date of purchase) as the
forfeiture restrictions lapse.
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Founder acknowledges that it is Founder's sole responsibility, and not the
Company's, to file a timely election under Section 83(b), even if Founder
requests the Company or its representatives to make this filing on Founder's
behalf. Founder is relying solely on Founder's advisors with respect to the
decision as to whether or not to file an 83(b) election, recognizing that the
Purchased Shares did not become subject to forfeiture provisions until the date
hereof.
SECTION 4. TRANSFER RESTRICTIONS.
4.1 Restriction on Transfer. Founder shall not transfer, assign,
encumber, or otherwise dispose of any of the Purchased Shares except in
accordance with the terms and conditions of the Investors' Rights Agreement (the
"Investors' Rights Agreement"), dated as of the date hereof, to which Founder is
a party.
4.2 Definition of Owner. For purposes of Sections 5 and 6 of this
Agreement, the term "Owner" shall include the Founder and all subsequent holders
of the Purchased Shares who derive their chain of ownership through a permitted
transfer from the Founder in accordance with Section 4.1.
SECTION 5. REPURCHASE RIGHT.
5.1 Grant. The Company is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the 90 day period (or such longer period
mutually agreed to by the parties) following the date the Founder ceases to be a
"Service Provider" (as defined below) to the Company for any reason (including
death), to repurchase at the Purchase Price all or (at the discretion of the
Company and with the consent of the Founder) any portion of the Purchased Shares
in which the Founder has not acquired a vested interest in accordance with the
vesting provisions of Section 5.3 (such shares called the "Unvested Shares").
For purposes of this Agreement, the Founder shall be deemed to be a "Service
Provider" to the Company for so long as the Founder renders periodic services to
the Company (or one or more of its parent or subsidiary corporations), whether
as an employee, non-employee member of the board of directors, or an
independent, non-employee consultant and whether pursuant to an employment
agreement or otherwise.
5.2 Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable 90 day period specified in Section
5.1. The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be not more
than 45 days after the date of notice. The Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Company the certificates representing the Unvested Shares to be repurchased
(unless already held by the Secretary in escrow under this Agreement), each
certificate to be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such stock certificates (either from escrow in
accordance with Section 6.3 or from Owner as herein provided), pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares that are to be repurchased.
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5.3 Termination of the Repurchase Right.
(a) The Repurchase Right shall terminate with respect to any Unvested
Shares for which it is not timely exercised under Section 5.2. In addition, the
Repurchase Right shall terminate, and cease to be exercisable, with respect to
any and all Purchased Shares in which the Founder is vested in accordance with
the schedule below. Accordingly, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Purchased Shares in
accordance with the following provisions:
(i) During the initial 12 month period measured the date of
this Agreement (the "Vesting Measurement Date"), the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, (A)
6.25% of the Purchased Shares three months after the Vesting Measurement Date,
(B) an additional 6.25% of the Purchased Shares six months after the Vesting
Measurement Date, (C) an additional 6.25% of the Purchased Shares nine months
after the Vesting Measurement Date, and (D) an additional 6.25% of the Purchased
Shares twelve months after the Vesting Measurement Date. Accordingly, upon the
expiration of the initial 12 month period measured from the Vesting Measurement
Date, the Founder shall have acquired a vested interest in, and the Repurchase
Right shall have lapsed with respect to, 25% of the Purchased Shares.
(ii) From and after the expiration of the initial 12 month
period measured from the Vesting Measurement Date, the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, the
remaining Purchased Shares in a series of successive monthly installments each
equal to 1/48th of the Purchased Shares. Accordingly, upon the expiration of 48
months after the Vesting Measurement Date, the Founder shall have acquired a
vested interest in, and the Repurchase Right shall have lapsed with respect to
all of the Purchased Shares.
(iii) Upon the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $10.00 (as adjusted for stock splits and the like effected
after the date of this Agreement) and an aggregate offering price to the public
of not less than $20,000,000, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Unvested Shares as of
such closing.
(iv) The Company acknowledges and agrees that, during the period
beginning on the date of this Agreement and ending 48 months thereafter, the
Founder's relationship with the Company as a Service Provider may not be
terminated by the Company without Cause except with the consent of John Ryals
(or, if John Ryals is not the Chief Executive Officer of the Company, the then
current Chief Executive Officer) and at least one of Jorn Gorlach, Sandy
Stewart, or Scott Uknes (excluding any of these three persons that is not then a
Service Provider to the Company). In the event that the Founder's relationship
with the Company as a Service Provider is terminated by the Company without
Cause during such 48-month period, then the Founder shall, upon the date of such
termination, acquire a vested interest in, and the Purchase Right shall lapse
with respect to, 25% of the Purchased Shares, in
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addition to any other Purchased Shares for which the Founder shall have acquired
a vested interest in, and the Repurchase Right shall have lapsed with respect
to, prior to such termination date. For purposes of this Section 5.3, "Cause"
shall have the meaning given such term in the Founder Employment Agreement
between the Company and the Founder, dated on or about the date hereof, or any
successor or replacement agreement between the Company and the Founder, as a
Service Provider.
(b) All Purchased Shares as to which the Repurchase Right lapses
shall, however, continue to be subject to the applicable terms and conditions of
the Investors' Rights Agreement.
5.4 Fractional Shares. No fractional shares shall be repurchased by the
Company. Accordingly, should the Repurchase Right extend to a fractional share
(in accordance with the vesting computation provisions of Section 5.3) at the
time the Founder ceases to be a Service Provider, then such fractional share
shall be added to any fractional share in which the Founder is at such time
vested in order to make one whole vested share no longer subject to the
Repurchase Right.
5.5 Additional Shares or Substituted Securities. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares hereunder and to the price per share to
be paid upon the exercise of the Repurchase Right in order to reflect the effect
of any such transaction upon the Company's capital structure; provided, however,
that the aggregate Purchase Price shall remain the same.
5.6 Corporate Transaction.
(a) In the event of any of the following transactions (a "Corporate
Transaction"), the Repurchase Right shall automatically lapse in its entirety,
and the Founder shall acquire a vested interest in all the Purchased Shares,
upon the consummation of such Corporate Transaction:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which 50% or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock immediately prior
to such merger.
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(b) To the extent the Repurchase Right remains in effect following
such Corporate Transaction in accordance with Section 5.6(a), it shall apply to
the new capital stock or other property received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Company's
capital structure; provided, however, that the aggregate Purchase Price shall
remain the same.
5.7 Legend. All certificates representing Purchased Shares subject to the
Company's Right of Repurchase shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER
DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A
WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS CERTAIN REPURCHASE RIGHTS TO
THE COMPANY UPON TERMINATION OF SERVICE WITH THE COMPANY.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT
CHARGE."
SECTION 6. ESCROW.
6.1 Deposit. Upon request of the Company (which request the Company may
make at any time and from time to time), the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Secretary of the Company to be held in accordance with the provisions
of this Section 6. Each deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the form of Exhibit A. The
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deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 6.4. Upon delivery of the certificates
(or other assets and securities) to the Company, the Owner shall be issued a
receipt acknowledging the number of Purchased Shares (or other assets and
securities) delivered in escrow to the Secretary of the Company.
6.2 Recapitalization. All regular cash dividends on the Purchased Shares
(or other securities at the time held in escrow) shall be paid directly to the
Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration or
in the event of a Corporate Transaction, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately delivered to the
Secretary of the Company to be
6
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held in escrow under this Section 6, but only to the extent the Purchased Shares
are at the time subject to the escrow requirements of Section 6.1.
7
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6.3 Release Surrender. The Purchased Shares, to the extent, and together
with any other assets or securities, held in escrow hereunder, shall be subject
to the following terms and conditions relating to their release from escrow or
their surrender to the Company for repurchase and cancellation:
(a) Should the Company elect to exercise a purchase right with
respect to any Unvested Shares, then the escrowed certificates for such Unvested
Shares (together with any other assets or securities issued with respect
thereto) shall be delivered to the Company for cancellation, concurrently with
the payment to the Owner, in cash or cash equivalent (including the cancellation
of any purchase-money indebtedness), of an amount equal to the aggregate
Purchase Price for such Unvested Shares, and the Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities).
(b) Should a stockholder exercise a purchase right under the
Investors' Rights Agreement, then the escrowed certificates for Purchased Shares
subject to such purchase right (together with any other assets or securities
issued with respect thereto) shall be delivered to the Company for cancellation,
concurrently with the payment to the Owner of the purchase price provided for in
the Investors' Rights Agreement, and the Owner shall cease to have any further
rights or claims with respect to such Purchased Shares (or other assets or
securities).
(c) As the interest of the Founder in the Purchased Shares (or any
other assets or securities issued with respect thereto) vests in accordance with
the provisions of Section 5, the certificates for such vested shares (as well as
all other vested assets and securities) held in escrow hereunder shall be
released from escrow and delivered to the Owner in accordance with the following
schedule:
(i) The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected in increments of 6.25% of
the Purchased Shares within 30 days following the expiration of the initial 3,
6, 9 and 12 month periods measured from the Vesting Measurement Date.
(ii) Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at monthly intervals at the
rate of 1/48th of the Purchased Shares each month thereafter, with the first
such monthly release to occur 13 months after the Vesting Measurement Date.
(iii) Upon the Founder's cessation of Service Provider status,
any escrowed Purchased Shares (or other assets or securities) in which the
Founder is at the time vested shall be promptly released from escrow.
(iv) Upon any earlier termination of the Company's Repurchase
Right in accordance with the applicable provisions of Section 5, the Purchased
Shares (or other assets or securities) at the time held in escrow hereunder
shall promptly be released to the Owner as fully vested shares or other
property.
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(d) All Purchased Shares (or other assets or securities) released
from escrow in accordance with the provisions of Section 6.3(c) above shall
nevertheless remain subject to the applicable terms and conditions of the
Investors' Rights Agreement until such provisions terminate in accordance
therewith.
SECTION 7. GENERAL PROVISIONS.
7.1 Assignment. The Company may assign its Repurchase Rights under
Section 5 to any person or entity selected by the Company's Board of Directors,
including (without limitation) one or more stockholders of the Company other
than the Founder.
If the assignee of the Repurchase Right is neither a parent nor a
subsidiary of the Company, then such assignee must make a cash payment to the
Company, upon the assignment of the Repurchase Right, in an amount equal to the
excess (if any) of the fair market value of the Unvested Shares at the time
subject to the Repurchase Right (as determined by the Company's Board of
Directors) and the aggregate Purchase Price payable for such Unvested Shares.
7.2 No Employment or Service Contract. Nothing in this Agreement shall
confer upon the Founder any right to continue in the service of the Company (or
any parent or subsidiary of the Company employing or retaining Founder) for any
period of time or interfere with or otherwise restrict in any way the rights of
the Company (or any parent or subsidiary of the Company employing or retaining
Founder) or the Founder, which rights are hereby expressly reserved by each, to
terminate the Service Provider status of Founder at any time for any reason
whatsoever, with or without cause.
7.3 Notices. Any notice required in connection with (i) the Repurchase
Right or (ii) the disposition of any Purchased Shares covered thereby shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States mail, registered or certified postage prepaid and
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten days' advance written notice under this Section 7.3
to all other parties to this Agreement.
7.4 No Waiver. The failure of the Company (or its assignees) in any
instance to exercise the rights granted under this Agreement shall not
constitute a waiver of any other right that may subsequently arise under the
provisions of this Agreement or any other agreement between the Company and the
Founder. No waiver of any breach or condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like
or different nature.
7.5 Cancellation of Shares. If the Company (or its assignees) shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement), and such shares shall
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be deemed purchased in accordance with the applicable provisions hereof and the
Company (or its assignees) shall be deemed the owner and holder of such shares,
whether or not the certificates have been delivered as required by this
Agreement.
7.6 Founder Undertaking. Founder hereby agrees to take whatever
additional action and execute whatever additional documents the Company may in
its judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Founder or the
Purchased Shares pursuant to the express provisions of this Agreement.
7.7 Agreement Is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
7.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
7.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
7.10 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Founder and the Founder's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the parties have executed this Founder Stock Repurchase
and Vesting Agreement on the day and year first set forth above.
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
__________________________________
Name: John A. Ryals
Title: CEO/President
Address: 85 Alexander Drive, Suite 100
Research Triangle Park, NC 27709
FOUNDER
/s/ Sandy Stewart
________________________________________
Sandy Stewart
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Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
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EXHIBIT A
Assignment Separate From Certificate
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto Paradigm Genetics Inc., a North Carolina corporation (the
"Company"), ____________ (_____) shares of the ________________ Capital Stock of
_____________________________standing in _____________________ name on the books
of said corporation represented by Certificate No._____________ herewith and
does hereby irrevocably constitute and appoint the Secretary of the Company
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated: ___________________
Signature_____________________________
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EXHIBIT 10.16
FOUNDER STOCK REPURCHASE AND VESTING AGREEMENT
AGREEMENT, dated February 12, 1998, between PARADIGM GENETICS INC., a North
Carolina corporation (the "Company"), and Scott Uknes (the "Founder").
BACKGROUND
Founder is the a founder of the Company and a holder of 852,272 shares of
the Common Stock, par value $0.01 per share, of the Company (after giving effect
to a stock dividend referred to in Section 1.1 below). On the date hereof,
certain investors are purchasing shares of the Company's Series A Preferred
Stock in exchange for financial considerations. As a condition to such
purchase, the investors require certain personnel of the Company, including
Founder, to enter into this Agreement, pursuant to which, among other things,
Founder will agree to sell his shares of the Company's Common Stock to the
Company upon the occurrence of certain events.
SECTION 1. PURCHASE OF SHARES.
1.1 Purchase. On September 9, 1997, Founder purchased from the Company,
and the Company sold to the Founder, 1,000 shares of the Company's Common Stock
at a purchase price of $1.00 per share. On or about the date of this Agreement
the Company is effecting a stock dividend on the Common Stock (of 851.2727
shares for each outstanding share of Common Stock) with the effect that the
Founder will hold 852,272 shares of Common Stock (collectively, the "Purchased
Stock") and will, in effect, have paid a purchase price of $0.001 per share (the
"Purchase Price").
1.2 Payment. The Founder paid the Purchase Price for the Purchased Shares
in cash. Concurrently with the execution of this Agreement, Founder shall
deliver to the Secretary of the Company additional documents, if any, that may
be required by the Company as a condition to Founder's obligations under this
Agreement.
SECTION 2. SECURITIES LAW COMPLIANCE.
2.1 Exemption from Registration. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act" or
"Act"), and were issued to Founder in reliance upon an exemption from such
registration.
2.2 Restricted Securities. Founder hereby confirms that Founder has been
informed that the Purchased Shares are restricted securities under the 1933 Act
and may not be resold or transferred unless the Purchased Shares are first
registered under such Act or unless an exemption from such registration is
available. Accordingly, Founder hereby acknowledges that Founder is prepared to
hold the Purchased Shares for an indefinite period and that Founder is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act. Founder is aware of the adoption
of Rule 144 by the Commission which permits limited public resales of securities
acquired in a nonpublic
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offering, subject to the satisfaction of certain conditions. Founder understands
that under Rule 144, the conditions include, among other things: the
availability of certain current public information about the issuer; the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; the sale being through a broker in an unsolicited
"broker's transaction"; and the amount of securities being sold during any
three-month period not exceeding specified limitations. Founder acknowledges and
understands that the Company may not satisfy the current public information
requirement of Rule 144 at the time Founder wishes to sell the Purchased Shares
or other conditions under Rule 144 that are required of the Company. If so,
Founder understands that Founder may be precluded from selling the securities
under Rule 144 even if the holding period of the Rule has been satisfied. Prior
to Founder's acquisition of the Purchased Shares, Founder acquired sufficient
information about the Company to reach an informed, knowledgeable decision to
acquire the Purchased Shares. Founder has such knowledge and experience in
financial and business matters so as to make Founder capable of utilizing such
information to evaluate the risks of the prospective investment and to make an
informed investment decision. Founder is able to bear the economic risk of
Founder's investment in the Purchased Shares.
SECTION 3. SPECIAL PROVISIONS.
3.1 Stockholder Rights. Until such time as the Company actually exercises
its repurchase rights under this Agreement, Founder shall have all the rights of
a stockholder (including voting and dividend rights) with respect to the
Purchased Shares, including any Purchased Shares held in escrow under Section 6,
subject, however, to the transfer restrictions of Section 4 and any restrictions
contained in the Company's Articles of Incorporation.
3.2 Section 83(b) Election. Founder understands that under Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code"), the difference
between the Purchase Price paid for the Purchased Shares and their fair market
value on the date any forfeiture restrictions applicable to such shares lapse
will be reportable as ordinary income at that time. For this purpose, the term
"forfeiture restrictions" includes the right of the Company to repurchase the
Purchased Shares pursuant to its Repurchase Right under Section 5 of this
Agreement. Founder understands that, assuming the Purchased Shares were subject
to forfeiture restrictions when acquired, Founder may elect to be taxed at the
time the Purchased Shares were acquired (to the extent the fair market value of
the Purchased Shares differs from the Purchase Price rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions), by
filing an election under Section 83(b) of the Code with the Internal Revenue
Service (the "I.R.S.") within 30 days after such date, such filing to be made by
registered or certified mail, return receipt requested. Founder understands
that Founder must retain two copies of the completed form for filing with
Founder's state and federal tax returns for the current tax year and one
additional copy for Founder's records. If the fair market value of the
Purchased Shares at the date of purchase equals the Purchase Price paid (and
thus no tax is payable), the election can be made to avoid potential adverse tax
consequences in the future, assuming again that the Purchased Shares were
subject to forfeiture restrictions when acquired. The form for making this
election may be obtained from I.R.S. or the Company. Founder understands that
failure to make a permitted filing within the 30 day period results in the
recognition of ordinary income by the Founder (in the event the fair market
value of the Purchased Shares increases after the date of purchase) as the
forfeiture restrictions lapse.
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Founder acknowledges that it is Founder's sole responsibility, and not the
Company's, to file a timely election under Section 83(b), even if Founder
requests the Company or its representatives to make this filing on Founder's
behalf. Founder is relying solely on Founder's advisors with respect to the
decision as to whether or not to file an 83(b) election, recognizing that the
Purchased Shares did not become subject to forfeiture provisions until the date
hereof.
SECTION 4. TRANSFER RESTRICTIONS.
4.1 Restriction on Transfer. Founder shall not transfer, assign,
encumber, or otherwise dispose of any of the Purchased Shares except in
accordance with the terms and conditions of the Investors' Rights Agreement (the
"Investors' Rights Agreement"), dated as of the date hereof, to which Founder is
a party.
4.2 Definition of Owner. For purposes of Sections 5 and 6 of this
Agreement, the term "Owner" shall include the Founder and all subsequent holders
of the Purchased Shares who derive their chain of ownership through a permitted
transfer from the Founder in accordance with Section 4.1.
SECTION 5. REPURCHASE RIGHT.
5.1 Grant. The Company is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the 90 day period (or such longer period
mutually agreed to by the parties) following the date the Founder ceases to be a
"Service Provider" (as defined below) to the Company for any reason (including
death), to repurchase at the Purchase Price all or (at the discretion of the
Company and with the consent of the Founder) any portion of the Purchased Shares
in which the Founder has not acquired a vested interest in accordance with the
vesting provisions of Section 5.3 (such shares called the "Unvested Shares").
For purposes of this Agreement, the Founder shall be deemed to be a "Service
Provider" to the Company for so long as the Founder renders periodic services to
the Company (or one or more of its parent or subsidiary corporations), whether
as an employee, non-employee member of the board of directors, or an
independent, non-employee consultant and whether pursuant to an employment
agreement or otherwise.
5.2 Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable 90 day period specified in Section
5.1. The notice shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such date to be not more
than 45 days after the date of notice. The Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Company the certificates representing the Unvested Shares to be repurchased
(unless already held by the Secretary in escrow under this Agreement), each
certificate to be properly endorsed for transfer. The Company shall,
concurrently with the receipt of such stock certificates (either from escrow in
accordance with Section 6.3 or from Owner as herein provided), pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Purchase Price previously paid for the
Unvested Shares that are to be repurchased.
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5.3 Termination of the Repurchase Right.
(a) The Repurchase Right shall terminate with respect to any Unvested
Shares for which it is not timely exercised under Section 5.2. In addition, the
Repurchase Right shall terminate, and cease to be exercisable, with respect to
any and all Purchased Shares in which the Founder is vested in accordance with
the schedule below. Accordingly, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Purchased Shares in
accordance with the following provisions:
(i) During the initial 12 month period measured the date of
this Agreement (the "Vesting Measurement Date"), the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, (A)
6.25% of the Purchased Shares three months after the Vesting Measurement Date,
(B) an additional 6.25% of the Purchased Shares six months after the Vesting
Measurement Date, (C) an additional 6.25% of the Purchased Shares nine months
after the Vesting Measurement Date, and (D) an additional 6.25% of the Purchased
Shares twelve months after the Vesting Measurement Date. Accordingly, upon the
expiration of the initial 12 month period measured from the Vesting Measurement
Date, the Founder shall have acquired a vested interest in, and the Repurchase
Right shall have lapsed with respect to, 25% of the Purchased Shares.
(ii) From and after the expiration of the initial 12 month
period measured from the Vesting Measurement Date, the Founder shall acquire a
vested interest in, and the Repurchase Right shall lapse with respect to, the
remaining Purchased Shares in a series of successive monthly installments each
equal to 1/48th of the Purchased Shares. Accordingly, upon the expiration of 48
months after the Vesting Measurement Date, the Founder shall have acquired a
vested interest in, and the Repurchase Right shall have lapsed with respect to
all of the Purchased Shares.
(iii) Upon the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $10.00 (as adjusted for stock splits and the like effected
after the date of this Agreement) and an aggregate offering price to the public
of not less than $20,000,000, the Founder shall acquire a vested interest in,
and the Repurchase Right shall lapse with respect to, the Unvested Shares as of
such closing.
(iv) The Company acknowledges and agrees that, during the
period beginning on the date of this Agreement and ending 48 months thereafter,
the Founder's relationship with the Company as a Service Provider may not be
terminated by the Company without Cause except with the consent of John Ryals
(or, if John Ryals is not the Chief Executive Officer of the Company, the then
current Chief Executive Officer) and at least one of Jorn Gorlach, Sandy
Stewart, or Scott Uknes (excluding any of these three persons that is not then a
Service Provider to the Company). In the event that the Founder's relationship
with the Company as a Service Provider is terminated by the Company without
Cause during such 48-month period, then the Founder shall, upon the date of such
termination, acquire a vested interest in, and the Purchase Right shall lapse
with respect to, 25% of the Purchased Shares, in
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addition to any other Purchased Shares for which the Founder shall have acquired
a vested interest in, and the Repurchase Right shall have lapsed with respect
to, prior to such termination date. For purposes of this Section 5.3, "Cause"
shall have the meaning given such term in the Founder Employment Agreement
between the Company and the Founder, dated on or about the date hereof, or any
successor or replacement agreement between the Company and the Founder, as a
Service Provider.
(b) All Purchased Shares as to which the Repurchase Right lapses
shall, however, continue to be subject to the applicable terms and conditions of
the Investors' Rights Agreement.
5.4 Fractional Shares. No fractional shares shall be repurchased by the
Company. Accordingly, should the Repurchase Right extend to a fractional share
(in accordance with the vesting computation provisions of Section 5.3) at the
time the Founder ceases to be a Service Provider, then such fractional share
shall be added to any fractional share in which the Founder is at such time
vested in order to make one whole vested share no longer subject to the
Repurchase Right.
5.5 Additional Shares or Substituted Securities. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Company's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares hereunder and to the price per share to
be paid upon the exercise of the Repurchase Right in order to reflect the effect
of any such transaction upon the Company's capital structure; provided, however,
that the aggregate Purchase Price shall remain the same.
5.6 Corporate Transaction.
(a) In the event of any of the following transactions (a "Corporate
Transaction"), the Repurchase Right shall automatically lapse in its entirety,
and the Founder shall acquire a vested interest in all the Purchased Shares,
upon the consummation of such Corporate Transaction:
(i) a merger or acquisition in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which 50% or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock immediately prior
to such merger.
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(b) To the extent the Repurchase Right remains in effect following
such Corporate Transaction in accordance with Section 5.6(a), it shall apply to
the new capital stock or other property received in exchange for the Purchased
Shares in consummation of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate adjustments
shall be made to the price per share payable upon exercise of the Repurchase
Right to reflect the effect of the Corporate Transaction upon the Company's
capital structure; provided, however, that the aggregate Purchase Price shall
remain the same.
5.7 Legend. All certificates representing Purchased Shares subject to the
Company's Right of Repurchase shall be endorsed with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR IN ANY MANNER
DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A
WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE
SHARES). SUCH AGREEMENT GRANTS CERTAIN REPURCHASE RIGHTS TO
THE COMPANY UPON TERMINATION OF SERVICE WITH THE COMPANY.
THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH
A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
SECTION 6. ESCROW.
6.1 Deposit. Upon request of the Company (which request the Company may
make at any time and from time to time), the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Secretary of the Company to be held in accordance with the provisions
of this Section 6. Each deposited certificate shall be accompanied by a duly
executed Assignment Separate from Certificate in the form of Exhibit A. The
---------
deposited certificates, together with any other assets or securities from time
to time deposited with the Company pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Section 6.4. Upon delivery of the certificates
(or other assets and securities) to the Company, the Owner shall be issued a
receipt acknowledging the number of Purchased Shares (or other assets and
securities) delivered in escrow to the Secretary of the Company.
6.2 Recapitalization. All regular cash dividends on the Purchased Shares
(or other securities at the time held in escrow) shall be paid directly to the
Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the Company's
outstanding Common Stock as a class effected without receipt of consideration or
in the event of a Corporate Transaction, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately delivered to the
Secretary of the Company to be
6
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held in escrow under this Section 6, but only to the extent the Purchased Shares
are at the time subject to the escrow requirements of Section 6.1.
7
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6.3 Release Surrender. The Purchased Shares, to the extent, and together
with any other assets or securities, held in escrow hereunder, shall be subject
to the following terms and conditions relating to their release from escrow or
their surrender to the Company for repurchase and cancellation:
(a) Should the Company elect to exercise a purchase right with
respect to any Unvested Shares, then the escrowed certificates for such Unvested
Shares (together with any other assets or securities issued with respect
thereto) shall be delivered to the Company for cancellation, concurrently with
the payment to the Owner, in cash or cash equivalent (including the cancellation
of any purchase-money indebtedness), of an amount equal to the aggregate
Purchase Price for such Unvested Shares, and the Owner shall cease to have any
further rights or claims with respect to such Unvested Shares (or other assets
or securities).
(b) Should a stockholder exercise a purchase right under the
Investors' Rights Agreement, then the escrowed certificates for Purchased Shares
subject to such purchase right (together with any other assets or securities
issued with respect thereto) shall be delivered to the Company for cancellation,
concurrently with the payment to the Owner of the purchase price provided for in
the Investors' Rights Agreement, and the Owner shall cease to have any further
rights or claims with respect to such Purchased Shares (or other assets or
securities).
(c) As the interest of the Founder in the Purchased Shares (or any
other assets or securities issued with respect thereto) vests in accordance with
the provisions of Section 5, the certificates for such vested shares (as well as
all other vested assets and securities) held in escrow hereunder shall be
released from escrow and delivered to the Owner in accordance with the following
schedule:
(i) The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected in increments of 6.25% of
the Purchased Shares within 30 days following the expiration of the initial 3,
6, 9 and 12 month periods measured from the Vesting Measurement Date.
(ii) Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at monthly intervals at the
rate of 1/48th of the Purchased Shares each month thereafter, with the first
such monthly release to occur 13 months after the Vesting Measurement Date.
(iii) Upon the Founder's cessation of Service Provider status,
any escrowed Purchased Shares (or other assets or securities) in which the
Founder is at the time vested shall be promptly released from escrow.
(iv) Upon any earlier termination of the Company's Repurchase
Right in accordance with the applicable provisions of Section 5, the Purchased
Shares (or other assets or securities) at the time held in escrow hereunder
shall promptly be released to the Owner as fully vested shares or other
property.
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(d) All Purchased Shares (or other assets or securities) released
from escrow in accordance with the provisions of Section 6.3(c) above shall
nevertheless remain subject to the applicable terms and conditions of the
Investors' Rights Agreement until such provisions terminate in accordance
therewith.
SECTION 7. GENERAL PROVISIONS.
7.1 Assignment. The Company may assign its Repurchase Rights under
Section 5 to any person or entity selected by the Company's Board of Directors,
including (without limitation) one or more stockholders of the Company other
than the Founder.
If the assignee of the Repurchase Right is neither a parent nor a
subsidiary of the Company, then such assignee must make a cash payment to the
Company, upon the assignment of the Repurchase Right, in an amount equal to the
excess (if any) of the fair market value of the Unvested Shares at the time
subject to the Repurchase Right (as determined by the Company's Board of
Directors) and the aggregate Purchase Price payable for such Unvested Shares.
7.2 No Employment or Service Contract. Nothing in this Agreement shall
confer upon the Founder any right to continue in the service of the Company (or
any parent or subsidiary of the Company employing or retaining Founder) for any
period of time or interfere with or otherwise restrict in any way the rights of
the Company (or any parent or subsidiary of the Company employing or retaining
Founder) or the Founder, which rights are hereby expressly reserved by each, to
terminate the Service Provider status of Founder at any time for any reason
whatsoever, with or without cause.
7.3 Notices. Any notice required in connection with (i) the Repurchase
Right or (ii) the disposition of any Purchased Shares covered thereby shall be
given in writing and shall be deemed effective upon personal delivery or upon
deposit in the United States mail, registered or certified postage prepaid and
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten days' advance written notice under this Section 7.3
to all other parties to this Agreement.
7.4 No Waiver. The failure of the Company (or its assignees) in any
instance to exercise the rights granted under this Agreement shall not
constitute a waiver of any other right that may subsequently arise under the
provisions of this Agreement or any other agreement between the Company and the
Founder. No waiver of any breach or condition of this Agreement shall be deemed
to be a waiver of any other or subsequent breach or condition, whether of like
or different nature.
7.5 Cancellation of Shares. If the Company (or its assignees) shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement), and such shares
9
<PAGE>
shall be deemed purchased in accordance with the applicable provisions hereof
and the Company (or its assignees) shall be deemed the owner and holder of such
shares, whether or not the certificates have been delivered as required by this
Agreement.
7.6 Founder Undertaking. Founder hereby agrees to take whatever
additional action and execute whatever additional documents the Company may in
its judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Founder or the
Purchased Shares pursuant to the express provisions of this Agreement.
7.7 Agreement Is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
7.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
7.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
7.10 Successors and Assigns. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Company and its successors and
assigns and the Founder and the Founder's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
IN WITNESS WHEREOF, the parties have executed this Founder Stock Repurchase
and Vesting Agreement on the day and year first set forth above.
PARADIGM GENETICS INC.
By: /s/ John A. Ryals
----------------------------------
Name: John A. Ryals
Title: CEO/President
Address: 85 Alexander Drive, Suite 100
Research Triangle Park, NC 27709
FOUNDER
/s/ Scott Uknes
---------------------------------------
Scott Uknes
10
<PAGE>
Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
11
<PAGE>
EXHIBIT A
Assignment Separate From Certificate
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto Paradigm Genetics Inc., a North Carolina corporation (the
"Company"), ____________ (_____) shares of the ________________ Capital Stock of
_____________________________standing in _____________________ name on the books
of said corporation represented by Certificate No._____________ herewith and
does hereby irrevocably constitute and appoint the Secretary of the Company
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated: ___________________
Signature_____________________________
12
<PAGE>
EXHIBIT 10.20
-------------
AGREEMENT OF SUBLEASE
This AGREEMENT OF SUBLEASE ("Sublease"), made this 18th day of
September 1998, between Integrated Energy Services, LC a limited
corporation with offices at Building No. 3, 104 TW Alexander Drive Research
Triangle Park, North Carolina 27709-3757 (hereinafter called the "Sublessor"),
and Paradigm Genetics, Inc., a North Carolina Corporation, having offices at
Building 6, 104 TW Alexander Drive, Research Triangle Park North Carolina 27709
(hereinafter referred to as the "Subtenant").
WITNESSETH:
1. Term; Premises. Sublessor hereby Subleases to Subtenant, and Subtenant
--------------
hereby hires from Sublessor, approximately 1426 square feet of useable (2194
square feet of rentable) office space (the "Subleased Premises") in Building
Number 3, formerly the NIEHS North Campus, Park Research Center (hereinafter the
"Center"), located in the Research Triangle Park, State of North Carolina, and
which Subleased Premises is more particularly shown outlined in red on Exhibit
"A" annexed hereto and made a part hereof, for a term of six months targeted to
commence on August 11, 1998 and (subject to the further provisions hereof,
including, without limitation, Section 5(p) relating to early termination)
ending at 11:59 p.m. February 10, 1999 and, but in all events, at the close of
business one (1) day prior to the expiration of the term of the "Underlying
Lease" (as such term is hereinafter defined). Commencement of the sublease Term
is contingent upon (1) the Premises being delivered to the Subtenant in "broom-
clean" condition, and (2) Lessor having obtained the consent of Lessor to this
Sublease.
2. Underlying Lease. The parties agree that this Sublease shall be
----------------
subject and subordinate to all of the terms, covenants, conditions and
provisions of the lease dated April 29, 1998 between Triangle Service Center,
Inc., as Sublessor, and Sublessor as Subtenant, which lease has or may be
modified by Agreement (such lease as amended is hereinafter referred to as the
"Underlying Lease"), and which Underlying Lease covers certain premises (the
"Entire Premises"), which is more particularly described in Exhibit "B" annexed
hereto as to which the Subleased Premises are a part, and to all of the title
and other matters to which the Underlying Lease is subject or subordinate,
including, without limitation, each of the instruments and matters listed in
Exhibit "C" annexed hereto. A copy of the Underlying Lease and each of the
instruments listed in Exhibit "C" have been delivered to and examined by
Subtenant.
3. Incorporation and Terms. The terms, covenants, conditions and
-----------------------
provisions contained in the Underlying Lease (including, but not limited to, the
remedies provided thereunder) are incorporated herein by reference, and shall,
as between Sublessor and Subtenant constitute the terms, covenants, conditions,
and provisions of this Sublease, except to the extent that they are inapplicable
to, inconsistent with, or modified by the provisions of this instrument. The
parties agree to observe and perform the terms, covenants, conditions, and
provisions on their respective parts to be observed and performed hereunder,
including, but not limited to, those terms, covenants, conditions, and
provisions of the Underlying Lease that are incorporated herein and which
obligations are hereby expressly assumed by the parties hereto.
<PAGE>
4. No Privity. Nothing contained in this Sublease shall be construed to
----------
create privity of estate or of contract between Subtenant and Sublessor's
Sublessor. Subtenant shall not do or permit to be done any act or thing that
will constitute a breach or violation of any of the terms, covenants,
conditions, or provisions of the Underlying Lease. Subtenant will indemnify and
hold Sublessor harmless from and against all loss, cost, damages, expenses, and
liability, including, but not limited to, reasonable attorney fees, which
Sublessor may incur or pay out by reason of any injuries to personal property
occurring in, on, or about the Subleased Premises, or by reason of any breach or
default hereunder on Subtenant's part, or by reason of any work done in the
Subleased Premises any act or negligence on the part of Subtenant. Subtenant
shall in no case have any rights in respect of the Subleased Premises greater
than Sublessor's rights under the Underlying Lease, and Sublessor shall have no
liability to Subtenant for any matter whatsoever for which Sublessor does not
have at least coextensive rights, as Subtenant, against the Sublessor under the
Underlying Lease.
5. Specific Terms. Notwithstanding anything to the contrary contained
--------------
herein or in the Underlying Lease, the parties agree as follows:
(a) Rental:
------
(i) Base Rent. Subtenant shall pay to Sublessor as base rental ("Base
---------
Rent") for the Subleased Premises during the term of this Sublease, the sum
per month set opposite the month of the term of this Sublease set forth
below, which shall be paid in the amount set forth below:
Months Monthly Base Rent Annualized Base Rent
1-6 $2,395.12 $28,741.40
Each installment of Base Rent shall be due and payable in advance on the
first day of each and every calendar month of the term of this Sublease,
and shall be payable without demand or offset.
(ii) Proration of Rent. In the event that this Sublease shall
-----------------
commence on a day other than the first day of a calendar month, or in the
event that this Sublease shall terminate on a day other than the last day
of a calendar month, Base Rent (as well as all additional rents and charges
reserved hereunder) for the portion of such partial month that this
Sublease is in effect shall be prorated, based upon a thirty (30) day
month.
(iii) Cost of Living Increase. If this Sublease shall be extended
-----------------------
pursuant to the option to extend contained in the Rider to this Sublease,
if any, commencing at the end of the first calendar year of the renewal
term hereof, and for each calendar year of the renewal term thereafter, the
monthly Base Rent to be paid to Sublessor by Subtenant for the upcoming
calendar year will increase in accordance with the cost of living as
follows: The percentage increase of the cost of living will be made by
calculating the percentage of variation of the current year from the
previous calendar year, as indicated by the Consumer Price Index -
Seasonally Adjusted U.S. City Average - All Items and Major Group Figures -
All Urban Consumers (1982-84=100) ("CPI-U"), published by the
2
<PAGE>
Bureau of Labor Statistics of the United States Department of Labor from
September to September. Said percentage will be multiplied by the existing
monthly Base Rent (excluding increases in operating expenses provided for
herein) as illustrated in the sample formula below:
[(August 1999 CPI-U - August 1998 CPI-U) (divided by) August 1998 CPI-U] x
monthly Base Rent = adjustment in 1999 monthly Base Rent
The resulting product will be the amount of increase in the upcoming year's
monthly Base Rent. In no event shall the Base Rent ever be reduced by
reason of this subsection (c). In the event that (i) the CPI-U ceases to
use the 1982-84 base of 100, or (ii) a substantial change is made in the
number of items used in determining the CPI-U such that Sublessor and
Subtenant agree that the CPI-U does not accurately reflect the purchasing
power of the dollar, or (iii) the CPI-U shall be discontinued for any
reason, Sublessor shall designate upon notice to Subtenant, a new index or
base that measures the cost of living, with appropriate adjustment in such
base or index to make the same comparable to the CPI-U.
(iv) Interest on Past-Due Rent and Late Charges. If any Base Rent,
------------------------------------------
additional rent, or any other sum due Sublessor in accordance with any
provisions of this Sublease shall not be paid immediately when due, the
same shall bear interest at the lesser of eighteen percent (18%) per annum
or the highest contract rate allowed by law from ten (10) days after such
due date until such sum and all such interest accrued thereon shall have
been paid unless Sublessor shall waive the same. Interest accrued as
aforesaid shall be deemed to be additional rent hereunder due on demand.
In addition to such remedies as may be provided under the default
provisions of this Sublease, Sublessor shall be entitled to a late charge
of five percent (5%) of the monthly Base Rent and any additional rent or
other sum payable hereunder if not received within ten (10) days of the due
date therefor, and a charge of five percent (5%) of the amount of any check
given by Subtenant not honored by the drawee bank when first presented for
payment.
(b) Adjustment for Operating Expenses:
---------------------------------
(i) Definitions. For the purposes of this Sublease, the following
-----------
defined terms shall have the meanings set forth below:
(a) Rent Adjustment Year shall mean the twelve (12) month period
--------------------
ending on the last day of August of each calendar year.
(b) Subtenant's Proportionate Share of Sublessor's Increased
--------------------------------------------------------
Operating Expenses shall mean the fraction of such Operating Expenses,
------------------
the numerator of which is the rentable area of the Subleased Premises
the same is set forth in Section 1 of this Sublease, and the
denominator of which is the rentable area of the Building 3.
(c) Sublessor's Operating Expenses shall mean and include all
------------------------------
expenses including assessments for public betterments or improvements;
ad
3
<PAGE>
valorem real estate taxes and any other tax on real estate as such; ad
valorem taxes on furniture, fixtures, equipment or other property used
in connection with the operation or maintenance of the Building; the
costs, including legal and consulting fees, of contesting or
attempting to reduce any of the aforesaid assessments or taxes;
amortization of capital improvements which will improve the operating
efficiency of the Building or which will reduce Sublessor's Operating
Expenses; the cost of labor, materials, insurance, utilities
(including sewer and water) and services; and such other expenses with
respect to the operation, maintenance and management of the Building
which shall be incurred or paid by or on behalf of Sublessor and which
shall be properly chargeable to such operation, maintenance and
management in accordance with generally accepted accounting principles
as applied to the operation, maintenance or management of an office
Building.
(ii) Payments During Term. With respect to each Rent Adjustment Year
--------------------
or portion thereof during the term of this Sublease, Subtenant shall pay
Sublessor as additional rent in the manner hereinafter provided,
Subtenant's Proportionate Share of Sublessor's Increased Operating Expenses
in the amount by which Sublessor's Operating Expenses paid or incurred by
Sublessor during such period exceeded and Eight and 89/100 Dollars ($8.89)
per rentable foot of the building within the Project. It is acknowledged
and agreed that with respect to any Rent Adjustment Year or portion thereof
it will not be possible to determine the actual amount of such excess, if
any, until after the end of such Rent Adjustment Year. Therefore, until
Subtenant's liability for Subtenant's Proportionate Share of Sublessor's
Increased Operating Expenses shall have been determined, Subtenant shall
pay Subtenant's Proportionate Share of Sublessor's Increased Operating
Expenses as follows:
(a) Commencing as of the commencement date, and until Sublessor
shall deliver a statement to Subtenant as provided in the following
subsection (b), Subtenant shall pay to Sublessor as additional rent
with each monthly installment of Base Rent an amount equal to one-
twelfth (1/12) of Subtenant's Proportionate Share of Sublessor's
Increased Operating Expenses in the amount by which Sublessor's
Operating Expenses for the most recent Rent Adjustment Year for which
Sublessor shall have determined the same exceeded Sublessor's
Operating Expenses and Eight and 89/100 Dollars ($8.89) per square
foot.
(b) On or before December 31st of each calendar year during the
term of this Sublease, Sublessor shall furnish Subtenant with a
statement setting forth the total amount of Subtenant's Proportionate
Share of Sublessor's Increased Operating Expenses in the amount by
which Sublessor's Operating Expenses for the preceding Rent Adjustment
Year exceeded Sublessor's Operating Expenses of Eight and 89/100
dollars ($8.89) per foot provided, however, that Sublessor shall not
be obligated to furnish any such statement to Subtenant unless and
until Sublessor shall determine that Subtenant's Proportionate Share
of Sublessor's Increased Operating Expenses in excess of those
currently being paid by Subtenant are to be paid by Subtenant pursuant
to the terms of this subsection (b).
4
<PAGE>
From the beginning of each such Rent Adjustment Year and until
Sublessor shall furnish Subtenant with a statement as aforesaid,
Subtenant shall continue to pay Sublessor with each monthly
installment of Base Rent the amount of the monthly payment for
Subtenant's Proportionate Share of Sublessor's Increased Operating
Expenses it shall have been obligated to pay during the preceding Rent
Adjustment Year. Beginning with the first day of the calendar month
following the date upon which Sublessor shall have delivered to
Subtenant each such statement, Subtenant shall pay to Sublessor that
amount equal to: the product of one-twelfth (1/12) of Subtenant's
Proportionate Share of Sublessor's Increased Operating Expenses as set
forth on such statement multiplied by the number of calendar months in
the Rent Adjustment Year which shall have begun as of said first day,
minus the aggregate amount of the monthly payments for Subtenant's
Proportionate Share of Sublessor's Increased Operating Expenses
theretofore paid by Subtenant during such Rent Adjustment Year. The
remainder of Subtenant's Proportionate Share of Sublessor's Increased
Operating Expenses shown on each such statement shall be paid by
Subtenant to Sublessor with each succeeding monthly installment of
Base Rent in equal consecutive monthly installments of one-twelfth
(1/12) of the total amount of Subtenant's Proportionate Share of
Sublessor's Increased Operating Expenses shown on such statement.
(iii) Payments at Conclusion of Sublease. Compliance with the
----------------------------------
foregoing subsections (b)(i)(a) and (b)(ii)(b) will effect only a partial
payment by Subtenant of its obligations with respect to Sublessor's
Operating Expenses. Accordingly, it is agreed that at the end of the term
of this Sublease or upon any earlier termination of this Sublease or of
Subtenant's right to possession of the Premises, Subtenant shall be
obligated to pay Sublessor the difference, if any, between the aggregate
amount actually paid by Subtenant with respect to Subtenant's Proportionate
Share of Sublessor's Increased Operating Expenses and that which it is
obligated to pay under the foregoing subsection (b). On or before ninety
(90) days following the end of the term of this SubLease or any earlier
termination of this Sublease and until Subtenant's obligations with respect
to Subtenant's Proportionate Share of Sublessor's Increased Operating
Expenses shall have been determined, Sublessor shall furnish Subtenant
statements in the manner and subject to the conditions stated in the first
sentence of the foregoing subsection (b)(ii)(b) and upon the furnishing of
each such statement, Subtenant shall be obligated to pay and shall pay
Sublessor immediately the amount or portion thereof, if any, due as
aforesaid. Subtenant's obligation to pay Subtenant's Proportionate Share of
Sublessor's Increased Operating Expenses shall survive any expiration or
other termination of this Sublease.
(iv) Inspection of Books and Records. In the event that Subtenant is
-------------------------------
required to pay a share of Sublessor's Operating Expenses pursuant to this
Section 6, Subtenant shall have the right, at Subtenant's expense, to
inspect Sublessor's books and records showing Sublessor's Operating
Expenses for the Rent Adjustment Year in question. Sublessor's statement
setting forth the total amount of Subtenant's Proportionate Share of
Sublessor's Increased Operating Expenses furnished to Subtenant in
accordance with the provisions of this Section 6 shall be deemed to have
been approved by Subtenant unless
5
<PAGE>
protested by Subtenant in writing within fifteen (15) days after delivery
of such statement to Subtenant.
(v) Rent Tax. In addition to Subtenant's Proportionate Share of
--------
Sublessor's Increased Operating Expenses herein provided to be paid by
Subtenant, Subtenant shall reimburse Sublessor upon demand for any and all
taxes payable or paid by Sublessor whether or not now customary or within
the contemplation of the parties hereto which are levied upon or measured
by the rental or any other sum payable hereunder as such, including without
limitation, any gross income tax or excise tax levied by any governmental
body with respect to the receipt of such rental or such other sum
(excluding, however, any federal, state or local net income taxes which
Sublessor may be obligated to pay). In the event that it shall not be
lawful for Subtenant to so reimburse Sublessor, the rental, as adjusted,
payable to Sublessor under this Sublease shall be revised to net Sublessor
the same net rental after imposition of any such tax upon Sublessor as
would have been payable to Sublessor prior to the imposition of any such
tax.
(vi) Additional Rent. Subtenant's Proportionate Share of Sublessor's
---------------
Increased Operating Expenses, for the purposes of the default provisions
hereof, shall be deemed to be additional rent due from Subtenant and any
default in the payment thereof shall entitle Sublessor to all remedies
provided for herein or at law or in equity on account of Subtenant's
failure to pay rent. The other provisions hereof to the contrary
notwithstanding, Subtenant's payments pursuant to this Section 5 of a
portion of the increased expense of operating the Building shall not be
deemed payments of rent as that term is construed relative to governmental
wage and price controls or analogous governmental actions affecting the
amount of rent which Sublessor may charge Subtenant.
(c) Use. Subtenant shall use and occupy the Subleased Premises only for
---
such uses and purposes as are permitted by the Underlying Lease;
(d) Condition of Premises. Subtenant represents that Subtenant is leasing
---------------------
the Subleased Premises "as is." Sublessor agrees that the personalty
located at the Subleased Premises as listed on Exhibit "D" annexed hereto
shall be included in this Sublease in the condition in which the same shall
be on the commencement date hereof. No other furniture, fixtures, or other
personal property are included in this Sublease, and the same may be
removed from the Subleased Premises by the Sublessor within five (5) days
subsequent to the commencement date hereof. In making and executing this
Sublease, Subtenant has not relied upon or been induced by any statements
or representations of any persons, other than those, if any, set forth
expressly in this instrument in respect of the physical condition of the
Subleased Premises or of any other matter affecting such Premises or this
transaction that might be pertinent in considering the leasing of the same
or the execution of this Sublease. Subtenant has, on the contrary, relied
solely on such representations, if any, as are expressly made in written
instruments signed by Sublessor and pertaining to this Sublease and on such
investigations, examinations, and inspections as Subtenant has chosen to
make or to have made. Subtenant acknowledges that
6
<PAGE>
Sublessor has afforded Subtenant the opportunity for full and complete
investigation, examinations, and inspections.
(e) Sublessor's Reasonable Approval. Sublessor's refusal to consent to
-------------------------------
approve any matter or thing, whenever Sublessor's consent or approval is
required under this Sublease or under the Underlying Lease, shall be deemed
reasonable if, inter alia, Sublessor's landlord has refused to give such
consent or approval and whether or not such action on the part of such
Sublessor shall be arbitrary, capricious, or without apparent cause or
justification.
(f) Notices. Notices and other communications hereunder shall be in
-------
writing and shall be given or made by certified mail addressed to the
parties at their respective addresses as set forth above or at any other
address that either party may hereafter designate for such purpose by
written notice; provided, however, in the case of notices to be given to
Sublessor the same shall be sent to the attention of Integrated Energy
Services, LC, Building 3, 104 TW Alexander Drive, Research Center Park,
Research Triangle Park, North Carolina 27709, in the case of notices to be
given to Subtenant the same shall be sent to the attention of Paradigm
Genetics, Inc., Building 6, 104 TW Alexander Drive, Research Triangle Park,
North Carolina 27709.
(g) Time Limits. The time limits provided in the Underlying Lease for the
-----------
giving of notices, paying of rent or other sums, making demands,
performance of any act, condition, or covenant, or the exercise of any
right, remedy, or option are hereby changed for the purposes of this
Sublease by lengthening or shortening the same in each instance by ten (10)
days, as appropriate, so that notices may be given, demands may be made, or
any act, condition, or covenant may be performed, or any right, remedy, or
option hereunder may be exercised by Sublessor or by Subtenant, as the case
may be (and each party covenants that it will do so), within the time limit
relating thereto contained in the Underlying Lease. Sublessor shall, not
later than five(5) business days after receipt thereof, give to Subtenant a
copy of each notice and demand received from its Sublessor that pertains to
the Subleased Premises.
(h) Termination of Underlying Lease. If, for any reason, the term of the
-------------------------------
Underlying Lease is terminated prior to the expiration date of this
Sublease, this Sublease shall thereupon be terminated, and Sublessor shall
not be liable to Subtenant by reason thereof, unless such termination shall
have been effected because of the breach or default of Sublessor under the
Underlying Lease.
(i) Services and Utilities.
----------------------
(1) Services. Sublessor shall provide in consideration of the Base
--------
Rent the following:
(a) Heating, ventilation, and air conditioning ("HVAC") for
the Subleased Premises during business hours to maintain
temperatures for comfortable use and occupancy;
7
<PAGE>
(b) Janitorial services to the office and common areas of
the Subleased Premises;
(c) Hot and cold water sufficient for drinking, lavatory,
toilet, and ordinary cleaning purposes;
(d) Electricity to the Subleased Premises at all times and
in reasonable amounts necessary for normal office use and
lighting;
(e) Replacement of lighting tubes, lamp ballasts, and bulbs
damaged or stained ceiling tiles;
(f) Extermination and pest control when necessary; and
(g) Maintenance of Common Areas.
(2) Business Hours. "Business Hours" means: Monday through Friday,
--------------
8:00 a.m. through 6:00 p.m., but excludes the following holidays or
the days on which the holidays are designated for observance: New
Year's Day, Easter (Good Friday), Memorial Day, July Fourth, Labor
Day, Thanksgiving Day, and Christmas Day.
(3) 24 Hour Access. Subtenant, its employees, agents, and invitees
--------------
shall have access to the Premises, twenty-four (24) hours a day, seven
(7) days a week. If, however, the Building must be closed during
business hours, then the Base Rent and Additional Rent shall abate
during any closing that lasts more than twenty-four (24) hours.
(4) Extra Services. Sublessor, shall have the right to monitor the
--------------
Subtenant's use of electrical and gas consumption which shall include
heating, and air conditioning within the Premises. Whenever Sublessor
knows that any Subtenant (including Subtenant) is using extra services
because of either non business-hours use or high electricity
consumption installations, Sublessor may directly charge that
Subtenant for the extra use and exclude those charges from Operating
Expenses. Extra services include:
(a) Non Business-Hours Use. Electricity required by Subtenant
----------------------
during non-business hours for lighting, electrical, service to the
Subleased Premises shall be provided by Sublessor. Subtenant shall be
responsible for additional electrical consumption anticipated in
connection with Subtenants' non-business hours use of the Premises. In
lieu of separate metering and accounting for non-business hours
electrical consumption, Building electrical expenses in excess of $.85
per square foot, as determined by Sublessor, shall be paid by
Subtenant per year as Additional Rent in the next succeeding month
following notice by Sublessor.
8
<PAGE>
Building electrical expenses shall be determined by Sublessor by
monitoring of electrical usage of the Building and shall be pro rated.
(b) Excess Utility Use. Subtenant shall not place or operate in
------------------
the Subleased Premises, any electrically operated equipment or other
machinery, other than typewriters, personal computers, adding
machines, reproduction machines, and other machinery and equipment
normally used in offices, unless Subtenant receives Sublessor's
advance written consent. Sublessor shall not unreasonably withhold or
delay its consent, but Sublessor may require payment for the extra use
of electricity caused by operating this equipment or machinery.
Sublessor may require that special, high electricity consumption
installations of Subtenant such as computer or reproduction facilities
(except personal computers or normal office photocopy machines) be
separately sub-metered for electrical consumption at Subtenant's cost.
(c) Payment. Subtenant's charges for the utilities provided in
-------
(a) and (b) above shall be one hundred percent (100%) of Sublessor's
actual cost of labor and utilities and shall be Additional Rent.
Subtenant's failure to pay the charges in (a) and (b) above
within thirty (30) days of receiving a proper and correct invoice
shall entitle Sublessor to the same remedies it has upon Subtenant's
failure to pay Base Rent.
(6) Interruption of Services. Sublessor does not warrant that any services
------------------------
Sublessor supplies will not be temporarily interrupted. Services may be
temporarily interrupted because of accidents, repairs, alterations,
improvements, or any reason beyond the reasonable control of Sublessor. Any
temporary interruption shall not:
(i) be considered an eviction or disturbance of Subtenant's use and
possession of the Premises;
(ii) make Sublessor liable to Subtenant for damages;
(iii) abate Base Rent or Additional Rent; or
(iv) relieve Subtenant from performing Subtenant's Lease obligations.
(7) Utilities. Sublessor shall pay for gas, electricity and water,
---------
Subtenant shall pay for telephone and telecommunication service and other
utility services desired supplied to the Subleased Premises.
(j) Additional Rent. Subtenant shall pay as additional rent hereunder to
---------------
Sublessor, without deduction or setoff, the Subtenant's "Proportionate Share,"
as hereinafter defined, of any charges or additional rent, however designated,
due and payable by Sublessor to its landlord under the Underlying Lease and
attributable to the Entire Premises, promptly but in no event later than ten(10)
days after written demand from Sublessor. Charges shall include, without
limitation, all
9
<PAGE>
taxes, insurance, assessments, utilities not separately metered, maintenance,
repair, replacement, security, supervision, and all costs associated with any
common areas of the Entire Premises. Subtenant's "Proportionate Share" shall be
deemed to be forty-five percent (45%) of the amount due and payable by Sublessor
to its landlord. Subtenant's obligation to make the foregoing payments shall
survive the expiration or sooner termination of the term of this Sublease.
(k) Use Restrictions. Sublessor agrees that during the term of this Sublease,
----------------
but subject to the terms and provisions of the Underlying Lease and any
preexisting rights of any other Subtenants or occupants of the Entire Premises,
that it will not use or permit any other person or party within its control to
use any part of the Entire Premises for any use in conflict with any of the "use
restrictions" if any annexed hereto and made a part hereof as Exhibit "D" and
the Covenants and Restrictions of the Research Triangle Park.
(l) Right of Access. Subtenant shall permit Sublessor or Sublessor's agents to
---------------
inspect or examine the Subleased Premises at any reasonable time and shall
permit Sublessor to make such repairs, alterations, improvements, or additions
in the Subleased Premises, the Entire Premises or to the building of which the
Subleased Premises is a part, that Sublessor may deem desirable or necessary or
which Subtenant has covenanted to perform pursuant to the provisions hereof and
has failed so to do, without the same being construed as an eviction of
Subtenant in whole or in part; and the rent shall in no manner abate while such
repairs, alterations, improvements, or additions are being made by reason of
loss or interruption of business of Subtenant because of the prosecution of such
work; provided, however, that in the exercise of its rights under this Section,
the Sublessor shall not unreasonably interfere with the conduct of Subtenant's
business.
(m) Security Deposit. The Subtenant has deposited with the Sublessor the sum of
----------------
$2,395.12 as security for performance by the Subtenant of the terms of this
Sublease. The Sublessor may use, apply, or return the whole or any part of the
security to the extent required for the payment of any rent, additional rent, or
other sum or debt as to which the Subtenant is in default, or for any sum that
the Sublessor may expend or incur by reason of the Subtenant's default in any of
the terms of this Sublease, including, but not limited to, any damages or
deficiency in the relating of the Subleased Premises, regardless of whether such
damages or deficiency accrued before or after summary proceedings or other
reentry by the Sublessor. The security, when returned to Subtenant, shall be
returned without interest thereon, it being the intention of the parties hereto
that any interest earned upon the security deposit hereunder shall be the sole
and exclusive property of Sublessor. Furthermore, to the extent permitted by
law, Sublessor may commingle the security with other funds of Sublessor. In the
event that the Subtenant shall comply with all of the terms of this Sublease,
the security shall be returned to the Subtenant after the date fixed as the end
of the Sublease and after delivery of possession of the Subleased Premises to
the Sublessor. In the event of a sale or lease of the Entire Premises of which
the Subleased Premises forms a part, the Sublessor shall have the right to
transfer the security to the purchaser or lessee, and the Sublessor shall
thereupon be released from all liability for the return of such security. The
Subtenant shall look solely to the new lessor for the return of such security.
The Subtenant shall not assign or encumber the money deposited as security, and
neither the Sublessor nor its successors or assigns shall be bound by any such
assignment or encumbrance.
10
<PAGE>
(n) Liability and Fire Insurance. Subtenant shall maintain, with respect to the
----------------------------
Subleased Premises, public liability insurance with limits as reasonably
determined by Sublessor, but in any event not less than One Million
($1,000,000.00) per occurrence and Two Million ($2,000,000.00) in aggregate in
companies qualified to do business in the State of North Carolina, insuring
Sublessor as well as Subtenant against bodily injury or death to persons and
against damage to property as herein provided. Subtenant shall deliver a
certificate of such insurance to Sublessor prior to the commencement of the term
of this Sublease. Such insurance policy shall be in form reasonably satisfactory
to Sublessor and shall provide that it cannot be canceled without at least
thirty (30) days' prior written notice to Sublessor. Subtenant shall, at
Subtenant's expense, carry adequate fire and extended coverage insurance on the
fixtures, equipment and furnishings installed in the Building. Subtenant shall
not do, suffer or permit to be done anything in or about the Subleased Premises
that will affect, impair or contravene the terms of any policy or policies of
insurance against loss or damage by fire, casualty or otherwise, which may be
issued with respect to the Premises.
(o) Underlying Lease Changes. Sublessor covenants that, during the term of this
------------------------
Sublease, it will not make any changes, modifications, or additions to the
Underlying Lease that will negatively affect Subtenant in any material manner,
nor shall it voluntarily terminate the same without first having obtained the
written consent of Subtenant, which consent Subtenant agrees shall not be
unreasonably withheld or unduly delayed.
(p) Casualty Loss. In case of damage by fire or other casualty to the building
-------------
in which the Subleased Premises are located, Sublessor shall, subject to the
time that elapses due to adjustment and receipt of fire insurance, repair and/or
restore the same to substantially the condition it was in immediately prior to
such damage or destruction. Sublessor's obligation under this Section 5(t) shall
in no event exceed the scope of the work required to be done in the original
construction of the Building. Sublessor shall not be required to, but Subtenant
shall with due dispatch, replace or restore forthwith any trade fixtures, signs,
or other installations previously installed by Subtenant. Notwithstanding any
such damage or destruction, the Sublet Rent shall continue to be paid unabated
during the period of such repair and/or restoration. The Sublet Rent all, to the
extent that the Sublessor shall receive an abatement of rent pursuant to the
Underlying Lease, be similarly abated hereunder.
Except to the extent provided for herein, neither the rent payable by the
Subtenant nor any of the Subtenant's other obligations under any provision of
this Sublease shall be affected by any damage to or destruction of the Subleased
Premises or the Building of which the same is a part, by any cause whatsoever,
and the Subtenant hereby expressly waives any and all additional rights it may
otherwise have under any laws or statute.
(q) Eminent Domain. If, at any time during the term of the Sublease, the whole
--------------
or any part of the Subleased Premises or the Entire Premises shall be taken for
any public or quasi-public purpose by any lawful power or authority by the
exercise of the right of condemnation or eminent domain, the Sublet Rent shall
continue to be paid without abatement or diminution. The Sublet Rent, to the
extent that the Sublessor's rent shall be abated pursuant to the Underlying
Lease, shall similarly be abated hereunder. If, notwithstanding the fact that
the Underlying Lease (and, on account thereof, the Sublease) shall terminate by
reason of a taking as described
11
<PAGE>
herein, the Sublet Rent for the balance of the remaining term of this Sublease
through the date of termination of the Sublease shall immediately become due and
payable by Subtenant to Sublessor, and payment thereof (through the date of
abatement) shall be made at the time that Subtenant shall be required to vacate
the Subleased Premises.
(r) Maintenance of Common Areas and Subtenant's Contribution.
--------------------------------------------------------
(i) Sublessor agrees to properly maintain all common areas in and for the
building (the term "common areas" being hereby defined to mean the
hallways, bathrooms, lobby, sidewalks, and landscaped areas of Building
19),
(ii) Sublessor agrees that Subtenant shall have the nonexclusive right (in
common with all other occupants of Building 3 from time to time) to use the
parking facilities and all other common areas of Building 3, for the
accommodation and parking of automobiles of Subtenant, and those claiming
under Subtenant, including Subtenant's employees and customers.
(s) Alterations. Anything herein to the contrary notwithstanding, if, as the
-----------
result of any alterations made or to be made by Subtenant or of any applications
with respect thereto, any governmental authority shall require that Sublessor
make any additions or modifications to Building 3, then Subtenant shall be
required to reimburse Sublessor for the cost of any such additions or
modifications as well as the cost of maintaining the same. Such reimbursement
shall be made within thirty (30) days following the submission therefor of a
written invoice by Sublessor to Subtenant.
(t) Waiver of Subrogation. The Sublessor and the Subtenant and all parties
---------------------
claiming under them hereby mutually release and discharge each other from all
claims and liabilities arising from or caused by any hazard covered by insurance
on the Subleased Premises, or covered by insurance in connection with property
on, or activities conducted on, the Subleased Premises, regardless of the cause
of the damage or loss.
(u) Quiet Enjoyment. The Subtenant, upon paying the rent and all additional rent
---------------
and other charges and in performing all the other terms of this Sublease, shall
quietly have and enjoy the Subleased Premises during the term of this Sublease,
without hindrance or interference by anyone claiming by or through the
Sublessor; subject, however, to the reservations and conditions of this Sublease
and the instruments to which this Sublease is subordinate.
6. Indemnity. The Subtenant shall indemnify the Sublessor against all
---------
liabilities, expenses, and losses, including, without limitation, reasonable
attorney fees incurred by the Sublessor as a result of (a) failure by the
Subtenant to perform any covenant required to be performed by the Subtenant
hereunder; (b) any accident, injury, or damage that shall happen in or about the
Subleased Premises or appurtenances; (c) failure to comply with any requirements
of any governmental authorities; and (d) any mechanic's lien, or security
agreement, filed against the Subleased Premises, any equipment therein, or any
materials used in the construction or alteration of any building or improvement
thereon.
12
<PAGE>
7. Broker. Subtenant and Sublessor each represent to the other that they
------
have not entered into any agreement or incurred any obligation in connection
with this transaction that might result in the obligation to pay a brokerage
commission to any broker. Each party agrees to indemnify and hold the other
party harmless from and against any claim or demand by any broker or other
person for bringing about this Sublease who claims to have dealt with such
indemnifying party, including any expenses incurred in defending any such claim
or demand (including reasonable attorney fees).
8. Entire Agreement. This Sublease contains the entire agreement and
----------------
understanding between the parties. There are no oral understandings, terms, or
other conditions, and neither party has relied upon any representation, express
or implied, that is not contained in this Sublease or in any other written
instrument between the parties hereto. This Sublease cannot be changed or
supplemented orally, but only by an agreement in writing signed by both parties
hereto.
9. Binding Effect. The covenants, terms, conditions, provisions, and
--------------
undertakings in this Sublease shall extend to, and be binding upon, the
successors and permitted assigns of the respective parties hereto.
13
<PAGE>
IN WITNESS WHEREOF, Sublessor and Subtenant have respectively signed this
Sublease as of the day and year first above written.
SUBLESSOR: INTEGRATED ENERGY SERVICES, LC
By:
----------------------------------
Date
--------------------------------
SUBTENANT: PARADIGM GENETICS, INC.
By:
----------------------------------
Date
--------------------------------
14
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF________________
I, _________________________, certify that __________________________
personally came before me this day and acknowledged that he (or she) is
________________________ of Integrated Energy Services, LC, a corporation, and
that by authority duly given and as the act of the corporation, the foregoing
instrument was signed in its name by its _____________________ sealed with its
corporate seal, and attested by himself (or herself) as its __________________.
WITNESS my hand and notarial seal, this _____ day of ___________, 1998.
--------------------------
Notary Public
STATE OF NORTH CAROLINA
COUNTY OF _______________
I, _____________________, certify that ____________________ personally came
before me this day and acknowledged that he (or she) is _________________ of
Paradigm Genetics, Inc., a corporation, and that by authority duly given and as
the act of the corporation, the foregoing instrument was signed in its name by
its ______________ sealed with its corporate seal, and attested by himself (or
herself) as its ________________.
WITNESS my hand and notarial seal, this _____ day of ___________, 1998.
--------------------------
Notary Public
15
<PAGE>
EXHIBIT A
SUBLEASED PREMISES
<PAGE>
EXHIBIT B
ENTIRE PREMISES
<PAGE>
EXHIBIT 10.21
November 19, 1999
Steven Rideout
Integrated Energy Services
P.O. Box 14008
Research Triangle Park, North Carolina 27709
Dear Steven:
Pursuant to our recent discussions and to further document our intent
concerning the future subleasing of Building 3 by Paradigm Genetics ("Paradigm")
from integrated Energy Services ("Integrated"), we would propose the following:
WHEREAS, Paradigm presently subleases a portion of Building 3 at Research
Triangle Center, Research Triangle Park, North Carolina from Integrated.
WHEREAS, such sublease is scheduled to expire on November 15, 1999 and
WHEREAS, Paradigm wishes to continue to occupy its portion of Building 3 and to
additionally occupy the remainder of Building 3 currently occupied by Integrated
after November 15, 1999,
THE PARTIES HEREBY AGREE TO THE FOLLOWING:
1. Beginning on December 15, 1999, Paradigm shall have the right to occupy all
of Building
2. Paradigm shall pay One Hundred percent (100%) of the rent in the amount of
Five Thousand Three Hundred and Seventeen Dollars and 37 Cents ($5,317.37) for
Building 3 for the remaining period of the Underlying Lease, such period to be
precisely determined prior to December 15, 1999, but in no case shall be earlier
than March 31, 2000.
3. As additional compensation, Paradigm shall make a one time, lump sum
payment to Integrated in the amount of Forth Thousand Dollars ($0,000) to assist
Integrated in finding the relocating to other facilities.
4. Paradigm and Integrated shall undertake negotiations to complete and
agreement to implement the terms of this understanding prior to December 15,
1999.
If these terms are agreeable to you, please indicate your acceptance by signing
below and retaining one copy of this document to me.
Sincerely yours,
Athanasios Maroglou
<PAGE>
ACKNOWLEDGED AND ACCEPTED BY ACKNOWLEDGED AND ACCEPTED BY
Paradigm Genetics: Integrated Energy Services:
/s/ John Ryals /s/ Steven M. Rideout
- ----------------------- -----------------------
Signature Signature
John Ryals Steven M. Rideout
- ----------------------- -----------------------
Printed Name Printed Name
CEO Managing Director
- ----------------------- -----------------------
Title Title
19 Nov 1999 11/23/99
- ----------------------- -----------------------
Date Date
2
<PAGE>
ASSIGNMENT OF LEASE
THIS ASSIGNMENT OF LEASE is made as of the 15th of December, 1999 by
and between INTEGRATED ENERGY SERVICES, LLC ("Assignor") and PARADIGM GENETICS,
INC. ("Assignee").
W I T N E S S E T H:
--------------------
WHEREAS, Assignor, as Tenant, entered into a Lease Agreement dated May
1, 1998 ("Lease") with TRIANGLE SERVICE CENTER, INC. ("Landlord") for Building
No. 3 containing approximately 4,870.87 rentable square feet located in the Park
Research Center, Research Triangle Park, Durham County, North Carolina
("Premises"); and
WHEREAS, Assignor has agreed to assign to Assignee all of its rights,
duties and obligations under the Lease and Assignee has agreed to assume all of
the rights, obligations and duties of Assignor under the Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree
as follows:
1. Assignor does hereby assign to Assignee all of its rights, obligations
and interest in the Lease effective as of December 15, 1999. Assignee does
hereby assume all rights, obligations and interest of Assignor in the Lease
effective as of December 15, 1999.
2. Assignor shall be liable for any amounts owed under the Lease
or any default under the Lease occurring prior to December 15, 1999, except
for the payment of rent for the month of December, 1999. Assignee shall be
responsible for the payment of all amounts owed subsequent to December 15,
1999. and for all obligations, duties and liabilities as Tenant under the
Lease from and after December 15, 1999. Assignee shall pay all rent due for
the month of December, 1999.
3. Assignee agrees to pay to Assignor, simultaneously with the execution
of this Agreement, the sum of Five Thousand Three Hundred Seventeen and 37/100
Dollars ($5,317.37) representing the amount of security deposit held by Landlord
under the Lease. Assignor does hereby transfer and assign to Assignee all rights
to said security deposit as held by said Landlord under the Lease.
4. Assignor does hereby confirm that the commencement date of the Lease
was May 1, 1998 and the expiration date of the Lease will be April 30, 2000.
5. Assignee agrees to provide to Landlord, prior to December 15, 1999,
evidence of all insurance required of the Tenant pursuant to the Lease.
3
<PAGE>
IN WITNESS WHEREOF, Assignor has caused this instrument to be executed by its
duly authorized Manager and Assignee has caused this instrument to be executed
by its duly authorized corporate officer, all as of the day and year first above
written.
INTEGRATED ENERGY SERVICES, LLC
By: /s/ Steven M. Rideout
-------------------------------
Steven M. Rideout, Managing Director
PARADIGM GENETICS, INC.
By: /s/ John Ryals
--------------------------------
President
--------------------
4
<PAGE>
Exhibit 10.22
STANDARD LEASE
SUITES 122, 123, 124 AND 125 LINCOLN PARK WEST #102
- ---------------------------- ----------------------
This Lease is made by and between the Landlord and Tenant named below.
ARTICLE 1. - BASIC LEASE TERMS
For purposes of this
Lease, the following terms shall have the meanings set forth below:
1.1 Landlord. Parker-Raleigh Development XXXII, Limited Partnership
--------
1.2 Tenant. Paradigm Genetics, Inc., a North Carolina corporation, whose
------
Trade Name, if any, is n/a
1.3 Manager. Parker Lincoln Developers, Inc.
-------
1.4 Building. The Building (including the Premises) known as 2933 S.
--------
MIAMI BOULEVARD, DURHAM, NC, 27703, located on that tract of land (the "Land")
described on EXHIBIT A hereto, together with all other buildings, structures,
fixtures and other improvements (the "Buildings") located thereon from time to
time, being presently as depicted on the drawing (the "Site Plan") attached
hereto as EXHIBIT B. The Building, Buildings and the Land are collectively
referred to herein as the "Property."
1.5 Premises. The floor space and interior wall and ceiling space of
--------
that portion of the Building outlined in red or highlighted on Exhibit C
attached hereto, resulting in an aggregate of approximately 20,372 square feet
of gross leasable area known as SUITES 122, 123, 124 AND 125.
1.6 Lease Term. 3 years, 0 months and 0 days beginning on the Rental
----------
Commencement Date.
1.7 Commencement Date. The "Commencement Date" shall be the earlier of
-----------------
the date Tenant takes possession of the Premises or ten (10) days after Landlord
notifies Tenant that the Premises are, or will be by a date certain, ready for
Tenant to take possession. The Commencement Date shall constitute the
commencement of the term of this Lease for all purposes, whether or not Tenant
has actually taken possession. By mutual agreement of the parties, the
Commencement Date may be changed. Within thirty (30) days after the Commencement
Date, Landlord and Tenant will execute an acknowledgment of the Commencement and
Expiration Dates in the form attached hereto as EXHIBIT D. Notwithstanding
anything herein to the contrary, the Lease Term shall extend through and end on
the last day of the last month of the Term. If Tenant is permitted access to the
Premises prior to the Commencement Date, such early entry will be subject to all
the terms and provisions of this Lease as though the Commencement Date had
occurred, unless otherwise agreed to in writing by Landlord.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1.8 Base Rent. Base Rent is:
- ---------------------------------------------------------------------------------------------------------------------
MONTHS PER SQUARE FOOT ANNUALLY MONTHLY
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 through 12 $5.90 per square foot $120,194.80 $10,016.23
- ---------------------------------------------------------------------------------------------------------------------
13 through 24 $6.11 per square foot $124,472.92 $10,372.74
- ---------------------------------------------------------------------------------------------------------------------
25 through 36 $6.32 per square foot $128,751.04 $10,729.25
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
1.9 Security Deposit. Security Deposit is $11,527.15.
----------------
1.10 Addresses.
---------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LANDLORD'S ADDRESS: TENANT'S BUSINESS ADDRESS &: TENANT'S ADDRESS: MANAGER'S ADDRESS:
TENANT'S ADDRESS FOR NOTICE:
Attn: Larry Daquioag & Henry Nowak
104 Alexander Drive Bld. #2
P.O. Box 14528 2933-122 S. Miami Blvd.
Post Office Box 58036 Durham, NC 27709-4528 Durham, NC 27703 Post Office Box 58036
Raleigh, NC 27658 Raleigh, NC 27658
</TABLE>
Landlord, Tenant and Manager, by written notice to the others may change from
time to time the foregoing addresses, and Landlord, by written notice to Tenant,
may notify Tenant from time to time of the appointment of a new Manager and such
new Manager's address.
1.11 Permitted Use: biogenetics laboratory, plant growth rooms and
-------------
offices.
1.12 Common Areas. Such parking areas, streets, driveways, aisles,
------------
sidewalks, curbs, delivery passages, loading areas, lighting facilities, and all
other areas situated on or in the Property which are designated by Landlord,
from time to time, for use by all tenants of the Property in common.
1.13 Proportionate Share. The proportion, expressed as a percentage,
-------------------
that the gross leasable area in square feet in the Premises bears to the total
number of constructed gross leasable area in square feet in the Building or
Buildings as of the date that the computation is made. The computation shall be
adjusted by Landlord if additional square footage is added to the Building or
Buildings or to the Premises.
1.14 Estimated Initial Common Area Costs Payment (Includes Common Area
-------------------------------------------
Maintenance, Taxes and Insurance):
PSF $.89 Annual $ 18,131.08 Monthly $ 1,510.92
--- --- ------ --------- ------- --------
1.15 Total Rental:
------------
(The total of the Base Rent for Year One and the Estimated Initial Common Area
Costs Payments for the balance of the calendar year in which the lease
commences.)
Annual $ 138,325.88 Monthly $ 11,527.15
------ ---------- ------- ---------
1.16 Guarantor(s). The guarantor(s) of Tenant's obligations under this
------------
Lease is (are)
N/A
---
2
<PAGE>
ARTICLE 2.- GRANTING CLAUSE AND RENT PROVISIONS
2.1 Grant of Premises. In consideration of the obligation of Tenant
-----------------
to pay the Base Rent and other charges as provided in this Lease and in
consideration of the other terms and provisions of this Lease, Landlord hereby
leases the Premises to Tenant during the Lease Term, subject to the terms and
provisions of this Lease.
2.2 Base Rent. Tenant agrees to pay monthly as Base Rent during the
---------
term of this Lease the sum of money set forth in Section 1.8 of this Lease,
which amount shall be payable to Landlord at the address shown above or at such
other address that Landlord in writing shall notify Tenant. Tenant shall begin
paving Base Rent and Common Area Costs (as defined below) on November 1, 1999
(the "Rental Commencement Date"). One (1) monthly installment of Base Rent shall
be due and payable on the Rental Commencement Date by Tenant for the first
month's rent and a like monthly installment shall be due and payable on or
before the first day of each calendar month succeeding the Rental Commencement
Date during the term of this Lease, without demand, offset or deduction;
provided, if the Rental Commencement Date should be a date other than the first
day of a calendar month, the monthly rental set forth above shall be prorated to
the end of that calendar month, and all succeeding installments of rent shall be
payable on or before the first day of each succeeding calendar month during the
term of this Lease. Tenant shall pay, as "Additional Rent," all other sums due
under this Lease. Base Rent and Additional Rent are sometimes collectively
referred to herein as "Rent."
2.3 Common Area Costs. As used in this Lease, the term "Common Area
-----------------
Costs" shall mean all expenses of Landlord with respect to the maintenance,
servicing, repairing and operation of the Property, including, but not limited
to the following: maintenance, repair, and replacement costs; electricity, fuel,
water, sewer, gas and other utility charges; security, window washing and
janitorial services; trash and snow and ice removal; landscaping and pest
control; management fees payable to Landlord, Landlord's affiliates or third
parties; wages and benefits payable to employees of Landlord whose duties are
directly connected with the operation and maintenance of the Property; all
services, supplies, repairs, replacement or other expenses for maintaining and
operating the Property; the cost, including interest, amortized over its useful
life, of any capital improvement made to the Property by Landlord; after the
date of this Lease which is required under any governmental law or regulation
that was not applicable to the Property at the time it was constructed; the
cost, including interest, amortized over its useful life, of installation of any
device or other equipment which improves the operating efficiency of any system
within the Premises and thereby reduces operating expenses; all other expenses
which generally would be regarded as operating and maintenance expenses which
would reasonably be amortized over a period not to exceed five (5) years; all
real property taxes and installments of special assessments, including dues and
assessments by means of deed restrictions and/or owner's association which
accrue against the Property during the term of this Lease; governmental levies
or charges of any kind or nature assessed or imposed on the Property, whether by
state, county, city or any political subdivision thereof; and all insurance
premiums Landlord is required to pay or deems necessary to pay, including public
liability insurance, with respect to the Property. The term operating expenses
does not include the following: expenses for repairs, restoration or other work
occasioned by fire, wind, the elements or other casualty that are covered by
insurance; income and franchise taxes of Landlord; expenses incurred in leasing
to or procuring of tenants, leasing commissions, advertising expenses and
expenses for the renovating of space for new tenants; interest or principal
payments on any mortgage or other indebtedness of Landlord; compensation paid to
any employee of Landlord above the grade of property manager; any depreciation
allowance or expenses; or operating expenses which are the responsibility of
Tenant. Prior to the Commencement Date, and from time to time thereafter,
Landlord shall deliver to Tenant its estimate of the Common Area Costs to be
incurred during the then-current calendar year. Landlord may adjust the estimate
from time to time during the year to which it relates. All costs shall be
consistent with the Raleigh Durham market.
2.4 Common Area Costs Payments. Tenant, on the first day of each
--------------------------
month during the Lease Term shall pay to Landlord, as Additional Rent, without
offset or deduction, an amount equal to one-twelfth (1/12) of Tenant's
Proportionate Share of the estimated Common Area Costs as calculated by Landlord
(prorated for any partial month). The Estimated Initial Common Area Costs
Payment due from Tenant for the balance of the calendar year in which the Lease
commences shall be the sum set forth in Section 1.14 above. All sums payable as
Additional Rent under the terms of this Section shall be subject to adjustment
as provided in Section 2.5.
2.5 Adjustments to Common Area Costs. Within one hundred twenty (120)
--------------------------------
days following the end of each calendar year, Landlord shall furnish to Tenant a
statement showing the total actual Common Area Costs for
3
<PAGE>
the calendar year just expired, the amount of Tenant's Proportionate Share of
the Common Area Costs, and payments made by Tenant during such calendar year
under Section 2.4. If Tenant's Proportionate Share of the actual Common Area
Costs for such calendar year exceeds the aggregate of Tenant's monthly payments
made during the calendar year just expired, Tenant shall pay to Landlord the
deficiency within thirty (30) days after receipt of said statement. If Tenant's
payments exceed Tenant's Proportionate Share of the actual Common Area Costs as
shown on such statement, Tenant shall be entitled to a refund. No portion of the
Common Area Costs paid by Tenant under this Article 2 shall be credited against
Base Rent or any other rental obligations hereunder. Notwithstanding anything
herein to the contrary. Common Area Costs shall be fixed at $.89 per square foot
for the calendar year 1999.
2.6 Late Payment. Other remedies for nonpayment of Rent
------------
notwithstanding, if any payment of Base Rent or additional rent is not received
by Landlord on or before the fifth (5th) day of the month for which the Rent is
due, or if any other payment hereunder due Landlord by Tenant is not received by
Landlord on or before the fifth (5th) day of the month next following the month
in which Tenant was invoiced, Tenant shall also pay (a) a late payment charge of
five percent (5%), but not less than $100.00, of such past due amount and (b)
interest of eighteen percent (18%) per annum or the maximum then allowed by
applicable law, whichever is less, on the remaining unpaid balance, retroactive
to the date originally due until paid.
2.7 Increase in Insurance Premiums. If an increase in any insurance
------------------------------
premiums paid by Landlord for the Property is caused by Tenant's use of the
Premises, or if Tenant vacated the Premises and caused an increase in such
premiums, then Tenant shall pay as Additional Rent the amount of such increase
to Landlord. Tenant agrees to pay any amounts due under this Section within ten
(10) days following receipt of the invoice showing the Additional Rent due.
2.8 Security Deposit. The Security Deposit set forth in Section 1.9
----------------
(if any) shall be held by Landlord for the performance of Tenant's covenants and
obligations under this Lease, it being expressly understood that the Security
Deposit shall not be considered an advance payment of Rent or a measure of
Landlord's damage in case of default hereunder by Tenant, and shall be held by
Landlord without payment of any interest thereon. Upon the occurrence of any
event of default by Tenant under this Lease, Landlord may, from time to time,
without prejudice to any other remedy, use the Security Deposit to the extent
necessary to make good any arrears of Rent, or to repair any damage or injury,
or pay any expense or liability incurred by Landlord as a result of the event of
default or breach of covenant, and any remaining balance of the security deposit
shall be returned by Landlord to Tenant upon the termination of this Lease. If
any portion of the security deposit is so used or applied, Tenant shall upon ten
(10) days written notice from Landlord, deposit with Landlord by cash or
cashier's check an amount sufficient to restore the security deposit to its
original amount. The Security Deposit may be assigned and transferred by
Landlord to the successor in interest of Landlord and, upon acknowledgment by
such successor of receipt of such security and its assumption of the obligation
to account to Tenant for such security in accordance with the terms of this
Lease, Landlord shall thereby be discharged of any further obligation relating
thereto.
2.9 Notice to Vacate. Tenant shall give written notice to Landlord
----------------
one hundred and eighty (180) days prior to the expiration o the Lease Term to
vacate upon expiration of the Lease, to negotiate a renewal or to exercise an
option to renew, if available. Failure to provide such written notice will
indicate that Tenant intends to vacate and Landlord shall have the right to
place signs, for the purpose of marketing, in the windows of the Premises and to
begin showing the Premises to potential new tenants. Landlord shall have the
right to show Premises to prospective Tenants after giving Tenant reasonable
notice. Negotiations of renewal options must be completed within thirty (30)
days from the date Tenant gives written notice to exercise its option to renew.
Notwithstanding the above, Landlord may decide not to renew Tenant's lease at
its sole discretion.
2.10 Holding Over. If Tenant does not vacate the Premises upon the
------------
expiration or earlier termination of this Lease, Tenant shall be a tenant at
sufferance for the holdover period and all of the terms and provisions of this
Lease shall be applicable during that period, except that Tenant shall pay
Landlord (in addition to Additional Rent payable under Section 2.3 and any other
sums payable under this Lease) as Base Rent for the period of such holdover an
amount equal to one and one-half times the Base Rent which would have been
payable by Tenant had the holdover period been a part of the original term of
this Lease (without waiver of Landlord's right to recover damages as permitted
by law). The rental payable during the holdover period shall be payable to
Landlord on demand. No holding over by Tenant, whether with or without the
consent of Landlord shall operate to extend the
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term of this Lease. Tenant shall indemnify Landlord against valid, substantive
claims made by any tenant or prospective tenant against Landlord resulting from
delay by Landlord in delivering possession of the Premises to such other tenant
or prospective tenant.
ARTICLE 3.- OCCUPANCY, USE AND OPERATIONS
3.1 Use and Operation of Tenant's Business. Tenant warrants and
--------------------------------------
represents to Landlord that the Premises shall be used and occupied only for the
purpose as set forth in Section 1.11. Tenant shall occupy the Premises, conduct
its business and control its agents, employees, invitees and visitors in such a
manner as is lawful, reputable and will not create a nuisance to other tenants
in the Property. Tenant shall continuously throughout the Lease Term occupy the
Premises under the Trade Name. Tenant shall at all times operate its business in
a first class manner. Tenant shall not conduct any auction or fire or bankruptcy
sale in the Premises. Tenant shall not solicit business, distribute handbills or
display merchandise within the Common Areas, or take any action which would
interfere with the rights of other persons to use the Common Areas. Tenant shall
not permit any operation which emits any odor or matter which intrudes into
other portions of the Property, use any apparatus or machine which makes undue
noise or causes vibration in any portion of the Property or otherwise interfere
with, annoy or disturb any other tenant in its normal business operations or
Landlord in its management of the Property. Tenant shall neither permit any
waste on the Premises nor allow the Premises to be used in any way which would,
in the opinion of Landlord, be extra hazardous on account of fire or which would
in any way increase or render void the fire insurance on the Property.
3.2 Signs. Tenant shall be responsible for the installation of a sign
-----
within thirty (30) days of occupancy in accordance with the sign criteria
attached hereto as EXHIBIT G. No other sign of any type or description shall be
erected, placed or painted in or about the Premises or the Property without
Landlord's prior written consent, which consent shall not be unreasonably
withheld, and Landlord reserves the right to remove, at Tenant's expense, all
signs other than signs approved in writing by Landlord under this Section 3.2,
without notice to Tenant and without liability to Tenant for any damages
sustained by Tenant as a result thereof. Tenant shall be liable to Landlord for
any cost or expense incurred by Landlord in removing such sign and for any
damage caused by the removal of such sign. Landlord reserves the right, in
Landlord's discretion, to permit a sign or signs which deviate from the
Landlord's then-established sign criteria, and such permission by Landlord to
any tenant or tenants shall not give rise to any rights in any other tenants to
object thereto or to require Landlord to permit such other tenant to deviate
from the criteria. Nothing contained herein shall limit Landlord's right to
modify or amend such criteria from time to time.
3.3 Compliance with Laws, Rules and Regulations.
-------------------------------------------
(a) Tenant, at Tenant's sole cost and expense, shall comply with all
laws, ordinances, orders, rules and regulations of state, federal, municipal or
other agencies or bodies having jurisdiction over the use, condition or
occupancy of the Premises. Tenant shall procure at its own expense all permits
and licenses required for the transaction of its business in the Premises.
(b) The "Americans with Disabilities Act of 1990" (ADA) is a federal
law that prohibits discrimination on the basis of disability. The requirements
of this act vary with the type of business the Tenant is engaged in and the
number of employees the Tenant has both at this, and other locations. The
Landlord is not qualified to determine which provisions of the ADA apply to
Tenant. Therefore, the Tenant shall determine if the Premises complies with the
accessibility guidelines under ADA and advise the Landlord if any physical
modifications to this facility are required to meet the Tenant's needs under
this law, or any other law, code or regulations. Modifications requested by
Tenant to the Premises shall be made by the Landlord, and the Tenant shall pay
Landlord the full cost of the modifications requested. The Tenant shall
indemnify and hold harmless the Landlord and its agents and employees from and
against valid, substantive claims, damages, losses and expenses, including but
not limited to Attorney's fees, arising out of or resulting from the Tenants
compliance or failure to comply with the ADA or other laws, codes or
regulations.
(c) Tenant will comply with the rules and regulations of the Property
adopted by Landlord attached hereto as EXHIBIT E. If Tenant is not complying
with such rules and regulations, or if Tenant is in any way not complying with
this Article 3, then, notwithstanding anything to the contrary contained herein,
Landlord may, at
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its election, and within 24 hours written notice to Tenant, enter the Premises
without liability therefor and fulfill Tenant's obligations. Tenant shall
reimburse Landlord on demand, as Additional Rent, for any expenses which
Landlord may incur in effecting compliance with Tenant's obligations and agrees
that Landlord shall not be liable for any damages resulting to Tenant from such
action. Landlord shall have the right at all times to change and amend the rules
and regulations in any reasonable manner as it may deem advisable for the
safety, care, cleanliness, preservation of good order and operation or use of
the Property or the Premises. All changes and amendments to the rules and
regulations of the Property will be forwarded by Landlord to Tenant in writing
and shall thereafter be carried out and observed by Tenant.
3.4 Warranty of Possession. Landlord and Tenant each warrants that it
----------------------
has the right and authority to execute this Lease, and Landlord warrants to
Tenant, that upon payment of the required rents by Tenant and subject to the
terms, conditions, covenants and agreements contained in this Lease, Tenant
shall have possession of the Premises during the full term of this Lease, as
well as any extension or renewal thereof, without hindrance from Landlord or any
person or persons lawfully claiming the Premises by, through or under Landlord
(but not otherwise); subject, however, to all mortgages, deeds of trust, leases
and agreements to which this Lease is subordinate and to all laws, ordinances,
orders, rules and regulations of any governmental authority. Landlord shall not
be responsible for the acts or omissions of any other lessee or third party that
may interfere with Tenant's use and enjoyment of the Premises.
3.5 Inspection. After giving Tenant reasonable notice (except in an
----------
event of emergency), Landlord or its authorized agents shall at any and all
reasonable times have the right to enter the Premises to inspect the same, to
supply janitorial service or any other service to be provided by Landlord, to
show the Premises to prospective mortgagees, purchasers or prospective tenants,
and to alter, improve or repair the Premises or any other portion of the
Property. Tenant hereby waives any claim for abatement or reduction of rent ,or
for any damages for injury, or inconvenience to, or interference with, Tenant's
business, for any loss or occupancy or use of the Premises, and for any other
loss occasioned thereby. Landlord shall at all times have and retain a key with
which to unlock all of the doors in, upon and about the Premises. Tenant shall
not change Landlord's lock system or in any other manner prohibit Landlord from
entering the Premises. Landlord shall have the right at all times to enter the
Premises by any means in the event of an emergency without liability therefor,
provided Landlord notifies Tenant immediately of the emergency event.
3.6 Personal Property Taxes. Tenant shall be liable for all taxes
-----------------------
levied against leasehold improvements, merchandise, personal property, trade
fixtures and all other taxable property located in the Premises. If any such
taxes for which Tenant is liable are levied against Landlord or Landlord's
property and if Landlord elects to pay the same or if the assessed value of
Landlord's property is increased by inclusion of personal property and trade
fixtures placed by Tenant in the Premises and Landlord elects to pay the taxes
based on such increase, Tenant shall pay to Landlord, upon demand, that part of
such taxes for which the Tenant is primarily liable pursuant to the terms of
this Section. Tenant shall pay when due any and all taxes related to Tenant's
use and operation of its business in the Premises.
3.7 Garbage. All garbage and refuse shall be kept in an area
-------
designated by Landlord and in the kind of container specified by Landlord and
shall be placed outside of the Premises daily, prepared for collection in the
manner and at the times and places specified by Landlord. If Landlord provides
or designates a service for collection of refuse and garbage, Tenant shall use
it, at Tenant's expense, provided the cost thereof is competitive with any
substantially identical service available to Tenant.
ARTICLE 4.- UTILITIES AND SERVICE
4.1 Utility Services. Landlord shall provide or cause to be provided
----------------
the mains, conduits and other facilities necessary to supply water, gas,
electricity, telephone service and sewage service to the Premises. Tenant shall,
however, be responsible, at its expense, to make provisions for connecting or
hooking up to such utilities, directly with the appropriate utility company
furnishing same.
4.2 Tenant Responsible for Charges. Tenant shall promptly pay all
------------------------------
charges and deposits for electricity, water, gas, telephone service and sewage
service and other utilities furnished to the Premises. Landlord may, if it so
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elects, furnish one or more utility services to Tenant, and in such event,
Tenant shall purchase the use of such services as are tendered by Landlord, and
shall pay on demand the rates established therefor by Landlord which shall not
exceed the rate which would be charged for the same services if furnished to
Tenant directly by the local public utility furnishing the same to the public at
large. Landlord may at any time discontinue furnishing any such service without
obligation to Tenant other than to connect the Premises to the public utility,
if any, furnishing such service. Tenant, at its sole expense, will install an
emergency electrical generator which shall be connected to Tenant's electrical
service ("Tenant Improvements"). Prior to construction of the Tenant
Improvements, Tenant shall submit the proposed plans to Landlord for approval.
Within 30 days of completion of the Tenant Improvements. Tenant shall provide to
Landlord proof of payment in full to and a lien waiver from all contractors
providing labor or materials for the Tenant Improvements.
4.3 Landlord's Services. Landlord shall provide routine maintenance,
-------------------
painting and electrical lighting service for all Common Areas and special
service areas of the Property in the manner and to the extent deemed by Landlord
to be standard. Landlord may, in its sole discretion, provide additional
services not enumerated herein.
4.4 No Liability. Landlord shall not be liable for any interruption
------------
whatsoever in utility services not furnished by it, nor for interruption in
utility service furnished by it which are due to fire, accident, strikes, acts
of God, riot, civil commotion, terrorist act, national emergency, shortage of
labor or materials or other causes beyond the control of Landlord or in order to
make alterations, repairs or improvements. Moreover, Landlord shall not be
liable for any interruption of such utility services which continues during any
reasonable period necessary to restore such service upon the occurrence of any
of the foregoing conditions. Failure by Landlord to any extent to provide any
services of Landlord specified herein or any other services not specified, or
any cessation thereof, shall not render Landlord liable in any respect for
damages to either person or property, be construed as an eviction of Tenant,
work an abatement of rent or relieve Tenant from fulfillment of any covenant in
this Lease. If any of the equipment or machinery necessary or useful for
provision of any utility services, and for which Landlord is responsible, breaks
down, or for any cause ceases to function properly, Landlord shall use
reasonable diligence to repair the same promptly, but Tenant shall have no claim
for rebate of rent or damages on account of any interruption in service
occasioned from the repairs.
4.5 Theft or Burglary. Landlord shall not be liable to Tenant for
-----------------
losses to Tenant's property or personal injury caused by criminal acts or entry
by unauthorized persons into the Premises or the Property.
ARTICLE 5. - REPAIRS AND MAINTENANCE
5.1 Landlord Repairs. Landlord shall not be required to make any
----------------
improvements, replacements or repairs of any kind or character to the Premises
during the term of this Lease except as are set forth in this Section. Landlord
shall maintain only the roof, foundation, parking and Common Areas, the
structural soundness of the exterior walls. Landlord's cost of maintaining and
repairing the items set forth in this Section are subject to the additional rent
provisions in Section 2.3 and 2.4. Landlord shall not be liable to Tenant,
except as expressly provided in this Lease, for any damage or inconvenience, and
Tenant shall not be entitled to any damages nor to any abatement or reduction of
rent by reason of any repairs, alterations or additions made by Landlord under
this Lease.
5.2 Tenant Repairs. Tenant shall maintain, at its sole and direct
--------------
cost, the Premises in a first-class condition (except for those items listed
under Section 5.1). Without limiting the generality of the foregoing, Tenant
shall maintain and keep in good repair (including replacement when necessary):
(a) the interior of the Premises, including walls, floors and
ceilings;
(b) all windows and doors, including frames, glass, molding and
hardware;
(c) all wires and plumbing within the Premises which serve the
Premises (as distinguished from those serving the Building generally);
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(d) all signs, air conditioning and heating equipment (see
attached Rules and Regulations for service requirements), mechanical doors and
other mechanical equipment situated on or in the Premises or serving the
Premises (as distinguished from those serving the Building generally); and
(e) those utility facilities that are not maintained by Landlord
hereunder. Tenant shall further make all other repairs to the Premises made
necessary by Tenant's failure to comply with its obligations under this Section.
All fixtures installed by Tenant shall be new or shall have been completely and
recently reconditioned.
5.3 Request for Repairs. All requests for repairs or maintenance to
-------------------
Landlord pursuant to Section 5.1 of this Lease must be made in writing to
Landlord at the address in Section 1.10.
5.4 Tenant Damages. Tenant shall not allow any damage to be committed
--------------
on any portion of the Premises or Property, and at the termination of this
Lease, by lapse of time or otherwise, Tenant shall deliver the Premises to
Landlord in as good condition as existed at the Commencement Date of this Lease,
ordinary wear and tear excepted. The cost and expense of any repairs necessary
to restore the condition of the Premises shall be borne by Tenant.
ARTICLE 6.- ALTERATIONS AND IMPROVEMENTS
6.1 Construction. If any construction of tenant improvements is
------------
necessary for the initial occupancy of the Premises, such construction shall be
accomplished and the cost of such construction shall be borne by Landlord and/or
Tenant in accordance with EXHIBIT F and / or the Addendum (if any) attached
hereto. Except as expressly provided in this Lease, Tenant acknowledges and
agrees that Landlord has not undertaken to perform any modification, alteration
or improvements to the Premises, and Tenant further waives any defects in the
Premises and acknowledges and accepts (1) the Premises as suitable for the
purpose for which they are leased and (2) the Property and every part and
appurtenance thereof as being in good and satisfactory condition. If any
improvements, modifications or alterations, beyond those specified on Exhibit F,
are required for Tenant's initial occupancy of the Premises, due solely to
Tenant's use of the Premises, by any governmental or municipal body or agency or
are required by any law, rule, regulation, ordinance, code or order, Tenant
shall be solely responsible for all associated costs. After the Commencement
Date, if any improvements, modifications or alterations are required by any
governmental or municipal body or agency or due to any law, rule, regulation,
code, ordinance or order, as a result of Tenant's use of the Premises, Tenant
shall be solely responsible for all associated costs. Upon the request of
Landlord, Tenant shall deliver to Landlord a completed Acceptance of Premises
Memorandum in Landlord's prescribed form.
6.2 Tenant Improvements. Tenant shall not make or allow to be made
-------------------
any alterations, physical additions or improvements in or to the Premises
without first obtaining the written consent of Landlord, which consent, not to
be unreasonably withheld, may in the sole and absolute discretion of Landlord be
denied. Any alterations, physical additions or improvements to the Premises made
by or installed by either party hereto shall remain upon and be surrendered with
the Premises and become the property of Landlord upon the expiration or earlier
termination of this Lease without credit to Tenant; provided, however, Landlord,
at its option, may require Tenant to remove any physical improvements or
additions and/or repair any alterations in order to restore the Premises to the
condition existing at the time Tenant took possession, all costs of removal
and/or alterations to be borne by Tenant. This clause shall not apply to
moveable equipment, furniture or moveable trade fixtures owned by Tenant, which
may be removed by Tenant at the end of the term of this Lease if Tenant is not
then in default and if such equipment and furniture are not then subject to any
other rights, liens and interests of Landlord. Tenant shall have no authority or
power, express or implied, to create or cause any mechanic's or materialmen's
lien, charge or encumbrance of any kind against the Premises, the Property or
any portion thereof. Tenant shall promptly cause any such liens that have arisen
by reason of any work claimed to have been undertaken by or through Tenant to be
released by payment, bonding or otherwise within thirty (30) days after request
by Landlord, and shall indemnify Landlord against losses arising out of any such
claim (including, without limitation, legal fees and court costs).
6.3 Common and Service Area Alterations. Landlord shall have the
-----------------------------------
right to decorate and to make repairs, alterations, additions, changes or
improvements, whether structural or otherwise, in, about or on the exterior of
the Property, or any part thereof exclusive of the Premises, and to change,
alter, relocate, remove or replace service areas and/or Common Areas, and to
otherwise alter or modify the Property exclusive of the Premises, and
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for such purposes, to take such measures for safety or for the expediting of
such work as may be required, in Landlord's judgment, all without affecting any
of Tenant's obligations hereunder.
ARTICLE 7. - CASUALTY AND INSURANCE
7.1 Substantial Destruction. If in the determination of Landlord the
-----------------------
Premises should be totally destroyed by fire or other casualty, or if in the
determination of Landlord the Premises should be damaged so that rebuilding
cannot reasonably be completed substantially within one hundred and eighty (180)
working days after Landlord's receipt of written notification by Tenant of the
destruction, or if the Premises are damaged or destroyed by casualty not covered
by the standard broad form of fire and extended coverage insurance then in
common use in the State of North Carolina, then, at Landlord's sole option, this
Lease shall terminate and, in such case, the rent shall be abated for the
unexpired portion of the Lease, effective as of the date of the written
notification.
7.2 Partial Destruction. If following damage or destruction to the
-------------------
Premises by fire or other casualty, this Lease is not terminated pursuant to
Section 7.1 hereof, this Lease shall not terminate, and Landlord shall proceed,
to the extent of insurance proceeds actually received by Landlord after the
exercise by any mortgage of the Property of an option to apply proceeds against
Landlord's debt to such mortgagee, with reasonable diligence to rebuild or
repair the Building or other improvements to substantially the same conditions
in which they existed prior to the damage. If the Premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and the
damage or destruction was not caused or contributed to by act or negligence of
Tenant, its agents, employees, invitees or those for whom Tenant is responsible,
the Base Rent payable under this Lease during the period for which the Premises
are untenantable shall be reduced to an amount determined by multiplying the
Base Rent that would otherwise be payable but for this provision by the ratio
that the portion of the Premises not rendered untenantable bears to the total
net rentable area of the Premises prior to the casualty. Landlord's obligation
to rebuild or restore under this Section shall be limited to restoring the
Premises to substantially the condition in which the same existed prior to the
casualty, exclusive of improvements for which Tenant is responsible under
Section 6.1 and EXHIBIT F, and Tenant shall, promptly after the completion of
such work by Landlord, proceed with reasonable diligence and at Tenant's sole
cost and expense to restore those improvements for which Tenant is responsible
to substantially the condition in which the same existed prior to the casualty
and to otherwise make the Premises suitable for Tenant's use. If Landlord fails
to substantially complete the necessary repairs or rebuilding within one hundred
and eighty (180) working days from the date of Landlord's receipt of written
notification by Tenant of the destruction, Tenant may at its own option
terminate this Lease by delivering written notice of termination to Landlord,
whereupon all rights and obligations under this Lease shall cease to exist.
7.3 Property Insurance. Landlord shall at all times during the term
------------------
of this Lease insure the Property against all risk of direct physical loss in an
amount and with such deductibles as Landlord considers appropriate; provided,
Landlord shall not be obligated in any way or manner to insure any personal
property (including, but not limited to, any furniture, machinery, goods or
supplies) of Tenant upon or within the Premises, any fixtures installed or paid
for by Tenant upon or within the Premises, or any improvements which Tenant may
construct on the Premises. Tenant shall have no right in or claim to the
proceeds of any policy of insurance maintained by Landlord even if the cost of
such insurance is borne by Tenant as set forth in Article 2. Landlord shall have
the right to self-insure against the above-described risk. Tenant at all times
during the term of this Lease shall, at its own expense, keep in full force and
effect insurance against fire and such other risks as are from time to time
included in standard all-risk insurance policy (including coverage against
vandalism, theft, burglary, and malicious mischief) for the premises and the
full replacement cost of Tenant's trade fixtures, furniture, supplies and all
items of personal property of Tenant located on or within the Premises. Tenant's
policy shall also include business interruption/extra expense coverage in
sufficient amounts. Landlord shall be a named insured on said policy.
7.4 Waiver of Subrogation. Anything in this Lease to the contrary
---------------------
notwithstanding, Landlord and Tenant hereby waive and release each other of and
from any and all right of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur to the Premises, improvements to the Property, or personal property
within the Property, by reason of fire or the elements, regardless of cause or
origin, including negligence of Landlord or Tenant and their agents, officers
and employees. Landlord and Tenant agree immediately to give their respective
insurance companies which have issued policies of insurance covering all risk of
direct physical loss, written notice of the terms of the mutual waivers
contained in this
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Section, and to have the insurance policies properly endorsed, if necessary, to
prevent the invalidation of the insurance coverages by reason of the mutual
waivers.
7.5 Hold Harmless. Landlord shall not be liable to Tenant or to
-------------
Tenant's customers, employees, agents, guests or invitees, or to any other
person whomever, for any injury to persons or damage to property on or about the
Premises, including but not limited to, consequential damage, (1) caused by any
act or omission of Tenant, its employees, subtenants, licensees and
concessionaires or of any other person entering the Property or the Premises by
express or implied invitation of Tenant, or (2) arising out of the use of the
Premises or the Property by Tenant, its employees, subtenants, licensees,
concessionaires or invitees, or (3) arising out of any breach or default by
Tenant in the performance of its obligations hereunder, or (4) caused by the
improvements located in the Premises becoming out of repair or by defect in or
failure of equipment, pipes, or wiring, or by broken glass, or by the backing up
of drains, or by gas, water, steam, electricity or oil leaking, escaping or
flowing into the Premises or Property, or (5) arising out of the failure or
cessation of any service provided by Landlord (including security service and
devices), and Tenant hereby agrees to indemnify Landlord and hold Landlord
harmless from any liability, loss, expense or claim (including, but not limited
to reasonable attorneys' fees) arising out of such damage or injury. Nor shall
Landlord be liable to Tenant for any loss or damage that may be occasioned by or
through the acts or omissions of other tenants of the Property or of any other
persons whomsoever, excepting only duly authorized employees and agents of
Landlord acting within the scope of their authority. Further, Tenant
specifically agrees to be responsible for and indemnify and hold Landlord
harmless from any and all damages or expenses of whatever kind arising out of or
caused by a burglary, theft, vandalism, malicious mischief or other illegal acts
performed in, at or from the Premises.
7.6 Liability insurance.
-------------------
(a) Tenant at all times during the Lease shall, at its own
expense, keep in full force and effect commercial general liability insurance
with "personal injury" coverage and contractual liability coverage, with minimum
combined bodily injury and property damage limit of $1,000,000 per occurrence
per location subject to no deductible. Landlord shall be an additional insured
on said policy. Definition of additional insured shall include all partners,
officers, directors, employees, agents and representatives of the named entities
including its managing agent. Further, coverage for additional insured shall
apply on a primary basis irrespective of any other insurance, whether
collectible or not. All insurance policies or duly executed certificates for the
same required to be carried by Tenant under this Lease, together with
satisfactory evidence of the payment of the premium thereof, shall be deposited
with Landlord on the date Tenant first occupies the Premises and upon renewals
of such policies not less than fifteen (15) days prior to the expiration of the
term of such coverage. All insurance required to be carried by Tenant under this
Lease shall be in form and content, and written by insurers acceptable to
Landlord, in its sole discretion. If Tenant shall fail to comply with any of the
requirements contained relating to insurance, Landlord may obtain such insurance
and Tenant shall pay to Landlord, on demand as additional rent hereunder, the
premium cost thereof.
(b) Affording coverage under the Workers Compensation laws of the
State of North Carolina and Employers Liability coverage subject to a limit of
no less than $100,000 each employee, $100,000 each accident, $500,000 policy
limit.
(c) Tenant shall maintain umbrella liability insurance at not
less than a $1,000,000 limit providing excess coverage over all limits and
coverages noted in 7.6.a and 7.6.b above.
(d) This policy shall be written on an occurrence basis. All
policies noted above shall be written with insurance companies licensed to do
business in the State of North Carolina and rated no lower than A:10 in the most
current edition of A.M. Best's Casualty Key Rating Guide. All policies shall be
endorsed to provide that in the event of cancellation, non-renewal or material
modification, Landlord shall receive thirty (30) days written notice thereof.
7.7 Boiler Insurance. At all times when a "boiler," as that term is
----------------
defined for the purposes of boiler insurance, is located within the Premises,
Tenant shall carry, at its expense, boiler insurance with policy limits of not
less than One Hundred Thousand Dollars ($100,000.00) insuring both Landlord and
Tenant against loss or liability caused by the operation or malfunction of such
boiler.
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7.8 Hazardous Material. Throughout the term of this Lease, Tenant
------------------
shall prevent the presence, use, generation, release, discharge, storage,
disposal, or transportation of any Hazardous Materials (as hereinafter defined)
on, under, in, above, to, or from the Premises other than in strict compliance
with all applicable federal, state, and local laws, rules, regulations and
orders. For purposes of this provision, the term "Hazardous Materials" shall
mean and refer to any wastes, materials, or other substances of any kind or
character that are or become regulated as hazardous or toxic waste or
substances, or which require special handling or treatment, under any applicable
local, state or federal law, rule, regulation or order. Tenant shall indemnify,
defend, and hold Landlord harmless from and against
(a) any loss, cost, expense, claim, or liability arising out of
any investigation, monitoring, clean-up, containment, removal, storage, or
restoration work (herein referred to as "Remedial Work") required by, or
incurred by Landlord or any other person or party in a reasonable belief that
such Remedial Work is required by any applicable federal, state or local law,
rule, regulation or order, or by any governmental agency, authority, or
political subdivision having jurisdiction over the Premises, and
(b) any claims of third parties for loss, injury, expense, or
damage arising out of the presence, release, or discharge of any Hazardous
Materials on, under, in, above, to, or from the Premises. In the event any
Remedial Work is so required under any applicable federal, state, or local law,
rule, regulation or order, Tenant shall promptly perform or cause to be
performed such Remedial Work in compliance with such law, rule, regulation, or
order. In the event Tenant shall fail to commence the Remedial Work in a timely
fashion, or shall fail to prosecute diligently the Remedial Work to completion,
such failure shall constitute an event of default on the part of Tenant under
the terms of this Lease, and Landlord, in addition to any other rights or
remedies afforded it hereunder, may, but shall not be obligated to, cause the
Remedial Work to be performed, and Tenant shall promptly reimburse Landlord for
the cost and expense thereof upon demand.
ARTICLE 8.- CONDEMNATION
8.1 Substantial Taking. If in the determination of Landlord all or a
------------------
substantial part of the Premises are taken for any public or quasi-public use
under any governmental law, ordinance or regulation, or by right of eminent
domain or by purchase in lieu thereof, and in the determination of Landlord the
taking would prevent or materially interfere with the use of the Premises for
the purpose for which it is then being used, this Lease shall, at the option of
either Landlord or Tenant, terminate and the Rent shall be abated during the
unexpired portion of this Lease effective on the date physical possession is
taken by the condemning authority.
8.2 Partial Taking. If in the determination of Landlord a portion of
--------------
the Premises shall be taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain or by
purchase in lieu thereof, and this Lease is not terminated as provided in
Section 8.1 above, Landlord shall restore and reconstruct, to the extent of
condemnation proceeds (excluding any proceeds for land) actually received after
the exercise by any mortgagee of the Property of an option to apply such
proceeds against Landlord's debt to such mortgagee, the Property and other
improvements on the Premises to the extent necessary to make it reasonably
tenantable. The Base Rent payable under this Lease during the unexpired portion
of the term shall be reduced to an amount determined by multiplying the Base
Rent that would otherwise be payable but for this provision by the ratio that
the portion of the Premises not rendered untenantable bears to the total net
rentable area of the Premises prior to the casualty. If Landlord fails to
substantially complete such restoration and reconstruction within one hundred
and eighty (180) working days of the date of the physical possession by the
condemning authority, Tenant may at its option terminate this Lease by
delivering written notice of termination to Landlord, whereupon all rights and
obligations of this Lease shall cease to exist.
8.3 Condemnation Proceeds. All compensation awarded for any taking
---------------------
(or the proceeds of private sale in lieu thereof), whether for the whole or a
part of the Premises, shall be the property of Landlord (whether such award is
compensation for damages to Landlord's or Tenant's interest in the Premises) and
Tenant hereby assigns all of its interest in any such award to Landlord;
provided, however, Landlord shall have no interest in any award made to Tenant
for loss of business or for taking of Tenant's fixtures and other property
within the Premises if a separate award for such items is made to Tenant.
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ARTICLE 9. - ASSIGNMENT OR SUBLEASE
9.1 Tenant Assignment. Tenant shall not assign, in whole or in part,
-----------------
this Lease, or allow it to be assigned, in whole or in part, by operation of law
or otherwise (including without limitation by merger, dissolution or transfer of
a controlling interest in any partnership or corporate Tenant, which merger,
dissolution or transfer shall be deemed an assignment) or mortgage or pledge the
same, or sublet the Premises, in whole or in part, without the prior written
consent, which consent shall not be unreasonably withheld, of Landlord, and in
no event shall any such assignment or sublease ever release Tenant or any
guarantor from any obligation or liability hereunder. No assignee or sublessee
of the Premises or any portion thereof may assign or sublet the Premises or any
portion thereof.
9.2 Conditions of Tenant Assignment. If Tenant desires to assign or
-------------------------------
sublet all or any part of the Premises, it shall so notify Landlord in writing
at least thirty (30) days in advance of the date on which Tenant desires to make
such assignment or sublease. Tenant shall provide Landlord with a copy of the
proposed assignment or sublease and such information as Landlord might request
concerning the proposed sublessee or assignee to allow Landlord to make informed
judgments as to the financial condition, reputation, operations and general
desirability of the proposed sublessee or assignee. Within fifteen (15) days
after Landlord's receipt of Tenant's proposed assignment or sublease and all
required information concerning the proposed sublessee or assignee, Landlord
shall have the following options:
(1) cancel this Lease as to the Premises or portion thereof
proposed to be assigned or sublet with Tenant's written consent;
(2) consent to the proposed assignment or sublease or Tenant
shall pay to Landlord one-half such excess rent and other excess consideration
within ten (10) days following receipt thereof by Tenant;
(3) refuse, to which refusal shall not be unreasonably withheld,
to consent to the proposed assignment or sublease and shall provide Tenant
written notice with the reasons for such refusal; or
(4) upon the occurrence of an event of default by Tenant under
this Lease, if all or any part of the Premises are then assigned or sublet,
Landlord, in addition to any other remedies provided by this Lease or provided
by law, may, at its option, collect directly from the assignee or sublessee all
rents becoming due to Tenant by reason of the assignment or sublease, and
Landlord shall have a security interest in all properties belonging to Tenant on
the Premises to secure payment of such sums. No collection directly by Landlord
from the assignee or sublessee shall be construed to constitute a novation or a
release of Tenant or any guarantor from the further performance of its
obligations under this Lease. All legal fees and expenses incurred by Landlord
in connection with the review by Landlord of Tenant's requested assignment or
sublease pursuant to this Section, together with any legal fees and
disbursements incurred in the preparation and/or review of any documentation,
shall be the responsibility of Tenant and shall be paid by Tenant within five
(5) days of demand for payment thereof, as rental hereunder. If the rent due and
payable by any assignee or sublessee under any such permitted assignment or
sublease (or a combination of the rent payable under such assignment or sublease
plus any bonus or any other consideration or any payment incident thereto)
exceeds the Rent payable under this Lease for such space, Tenant shall pay to
Landlord all such excess rent and other excess consideration within ten (10)
days, following receipt thereof by Tenant.
9.3 Landlord Assignment. Landlord shall have the right to sell,
-------------------
transfer or assign, in whole or in part, its rights and obligations under this
Lease and in the Property. Any such sale, transfer or assignment shall operate
to release Landlord from any and all liabilities under this Lease arising after
the date of such sale, assignment or transfer subject to the provisions for the
Security Deposit in Section 2.8.
9.4 Rights of Mortgagee. Tenant accepts this Lease subject and
-------------------
subordinate to any recorded lease, mortgage or deed of trust lien presently
existing, if any, or hereafter encumbering the Property and to all existing
ordinances and recorded restrictions, covenants easements, and agreements with
respect to the Property. Landlord hereby is irrevocably vested with full power
and authority to subordinate Tenant's interest under this Lease to any mortgage
or deed of trust lien hereafter placed on the Property. Upon any foreclosure,
judicially or non-judicially, of any such mortgage, or the sale of the Property
in lieu of foreclosure, or any other transfer of Landlord's interest in the
Property, whether or not in connection with a mortgage, Tenant hereby does, and
hereafter agrees to attorn to the
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purchaser at such foreclosure sale or to the grantee under any deed in lieu of
foreclosure or to any other transferee of Landlord's interest, and shall
recognize such purchaser, grantee, or other transferee as Landlord under this
Lease, and no further attornment or other agreement shall be required to effect
or evidence Tenant's attornment to and recognition of such purchaser or grantee
as Landlord hereunder. Such agreement of Tenant to attorn shall survive any such
foreclosure sale, trustee's sale, conveyance in lieu thereof, or any other
transfer of Landlord's interest in the Property. Tenant, upon demand, at any
time, before or after any such foreclosure sale, trustee's sale, conveyance in
lieu thereof, or other transfer shall execute, acknowledge, and deliver to the
prospective transferee and/or mortgage a Lease Subordination, Non-Disturbance
and Attornment Agreement and any additional written instruments and certificates
evidencing such attornment as the mortgagee or other prospective transferee may
reasonably require, and Tenant hereby irrevocably appoints Landlord as Tenant's
agent and attorney-in-fact for the purpose of executing, acknowledging, and
delivering any such instruments and certificates. Notwithstanding anything to
the contrary implied in this Section, any mortgagee under any mortgage shall
have the right at any time to subordinate any such mortgage to this Lease on
such terms and subject to such conditions as the mortgagee in its discretion may
consider appropriate.
9.5 Estoppel Certificates. Tenant agrees to furnish, from time to
---------------------
time, within ten (10) days after receipt of a request from Landlord or
Landlord's mortgagee, a statement certifying, if applicable, all or some of the
following: Tenant is in possession of the Premises; the Lease is in full force
and effect; the Lease is unmodified (except as disclosed in such statement);
Tenant claims no present charge, lien, or claim of offset against Rent; the Rent
is paid for the current month, but it is not prepaid for more than one (1) month
and will not be prepaid for more than one (1) month in advance; there is no
existing default by reason of some act or omission by Landlord; that Landlord
has performed all inducements required of Landlord in connection with this
Lease, including construction obligations, and Tenant accepts the Premises as
constructed; an acknowledgment of the assignment of rentals and other sums due
hereunder to the mortgagee and agreement to be bound thereby, an agreement
requiring Tenant to advise the mortgagee of damage to or destruction of the
Premises by fire or other casualty requiring reconstruction; an agreement by
Tenant to give the mortgagee written notice of Landlord's default hereunder and
to permit the mortgagee to cure such default within a reasonable time after such
notice before exercising any remedy Tenant might possess as a result of such
default; and such other matters as may be reasonably required by Landlord's
mortgagee. Tenant's failure to deliver such statement, in addition to being a
default under this Lease, shall be deemed to establish conclusively that this
Lease is in full force and effect except as declared by Landlord, that Landlord
is not in default of any of its obligations under this Lease, and that Landlord
has not received more than one (1) month's Rent in advance.
ARTICLE 10.- LIENS
10.1 Uniform Commercial Code. This Lease is intended as and
-----------------------
constitutes a security agreement within the meaning of the Uniform Commercial
Code of the state in which the Premises are situated. Landlord, in addition to
the rights prescribed in this Lease, shall have all of the rights, titles, liens
and interests in and to Tenant's property, now or hereafter located upon the
Premises, which may be granted a secured party, (as that term is defined under
such Uniform Commercial Code), under this Lease. Tenant will on request execute
and deliver to Landlord a financing statement (or continuation statement) for
the purpose of perfecting Landlord's security interest under this Lease. The
security interest created by this Lease shall be subordinate to all other
documented, valid security interests in Tenant's personal property.
Notwithstanding neither Tenant nor any other secured party shall have the right
to remove any property from the Premises if such removal would cause damage to
the Premises. Further, no party other than Tenant shall have the right to occupy
the Premises for any purpose.
ARTICLE 11.- DEFAULT AND REMEDIES
11.1 Default by Tenant. The following shall be deemed to be events of
-----------------
default by Tenant under this Lease:
(1) Tenant shall, after five days written notice by Landlord,
fail to pay when due any installment of Rent or any other payment required
pursuant to this Lease;
(2) Tenant or any guarantor of Tenant's obligations hereunder
shall file a petition or be adjudged bankrupt or insolvent under any applicable
federal or state bankruptcy or insolvency law or admit that it
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cannot meet its financial obligations as they become due, or a receiver or
trustee shall be appointed for all or substantially all of the assets of Tenant
or any guarantor of Tenant's obligations hereunder;
(3) Tenant or any guarantor of Tenant's obligations hereunder
shall make a transfer in fraud of creditors or shall make an assignment for the
benefit of creditors;
(4) Tenant shall do or permit to be done any act which results in
a lien being filed against the Premises or the Property;
(5) the liquidation, termination, dissolution or (if the Tenant
is a natural person) the death of Tenant or any guarantor of Tenant's obligation
thereunder;
(6) Tenant shall be in default of any other term, provision or
covenant of this Lease, and such default is not cured within ten (10) days after
written notice thereof to Tenant, provided the default Is curable ordinarily
within ten (10) days.
11.2 Remedies for Tenant's Default. Upon the occurrence of any event
-----------------------------
of default set forth in this Lease, Landlord shall have the option to pursue any
one or more of the remedies set forth in this Section 11.2 without any
additional notice or demand:
(1) Without declaring the Lease terminated, Landlord may enter
upon and take possession of the Premises, by picking or changing locks if
necessary, and lock out, expel or remove Tenant and any other person who may be
occupying all or any part of the Premises without being liable for any claim for
damages, and relet the Premises on behalf of Tenant and receive the rent
directly by reason of the reletting. Tenant agrees to pay Landlord on demand any
deficiency that may arise by reason of any reletting of the Premises; further,
Tenant agrees to reimburse Landlord for any reasonable expenditure made by it in
order to relet the Premises, including, but not limited to, remodeling and
repair costs, brokerage commissions and attorneys' fees.
(2) Without declaring the Lease terminated, Landlord may enter
upon the Premises, by picking or changing locks if necessary, without being
liable for any claim for damages, and do whatever Tenant is obligated to do
under the terms of this Lease. Tenant agrees to reimburse Landlord on demand for
any reasonable expenses which Landlord may incur in effecting compliance with
Tenant's obligations under this Lease; further, Tenant agrees that Landlord
shall not be liable for any damages resulting to Tenant from effecting
compliance with Tenant's obligations under this Lease caused by the negligence
of Landlord or otherwise.
(3) Landlord may terminate this Lease, in which event Tenant
shall immediately surrender the Premises to Landlord, and if Tenant fails to
surrender the Premises, Landlord may, without prejudice to any other remedy
which it may have for possession or arrearages in rent, enter upon and take
possession of the Premises, by picking or changing locks if necessary, and lock
out, expel or remove Tenant and any other person who may be occupying all or any
part of the Premises without being liable for any claim for damages. Tenant
agrees to pay on demand the amount of all loss and damage which Landlord may
suffer for any reason due to the termination of this Lease under this Section
11.2, including (without limitation) loss and damage due to the failure of
Tenant to maintain and/or repair the Premises as required hereunder and/or due
to the inability of Landlord to relet the Premises on satisfactory terms or
otherwise.
Landlord's exercise, following a default by Tenant under this Lease, of any
right granted hereunder or under any applicable law to lock out or change the
locks securing the Premises shall not impose upon Landlord any duty to notify
Tenant of the name and address or telephone number of the individual or company
from whom a new key may be obtained, nor shall Landlord have any duty to provide
Tenant with a new key or any other means of access to the Premises. To the
maximum extent permitted by law, Landlord and Tenant agree that the parties
hereto intend that all rights and remedies of Landlord under this Lease shall
supersede any conflicting provisions of the General Statutes of North Carolina,
and any amendments, modifications, recodification or other changes thereto.
Notwithstanding any other remedy set forth in this Lease, if Landlord has
made rent concessions of any type or character, or waived any Base Rent, and
Tenant fails to take possession of the Premises on the Commencement Date or
otherwise defaults at any time during the term of this Lease, the rent
concessions, including
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any waived Base Rent, shall be canceled and the amount of the Base Rent or other
rent concessions shall be due and payable immediately as if no rent concessions
or waiver of any Base Rent had ever been granted. A rent concession or waiver of
the Base Rent shall not relieve Tenant of any obligation to pay any other charge
due and payable under this Lease. Notwithstanding anything contained in this
Lease to the contrary, this Lease may be terminated by Landlord only by written
notice of such termination to Tenant given in accordance with Section 13.7
below, and no other act or omission of Landlord shall be construed as a
termination of this Lease.
11.3 Remedies Cumulative. All rights and remedies of Landlord herein
-------------------
or existing at law or in equity are cumulative and the exercise of one or more
rights or remedies shall not be taken to exclude or waive the rights to the
exercise of any other.
ARTICLE 12.- DEFINITIONS
12.1 Abandon. "Abandon" means the vacating of all or a substantial
-------
portion of the Premises by Tenant, whether or not Tenant is in default of the
rental or other payments due under this Lease.
12.2 Act of God or Force Majeure. An "act of God" or "force majeure"
---------------------------
is defined for purposes of this Lease as strikes, lockouts, sitdowns, material
or labor restrictions by any governmental authority, unusual transportation
delays, riots, floods, washouts, explosions, earthquakes, fire storms, weather
(including wet grounds or inclement weather which prevents construction), acts
of the public enemy, wars, insurrections, and/or any other cause not reasonably
within the control of Landlord or which by the exercise of due diligence
Landlord is unable wholly or in part, to prevent or overcome.
ARTICLE 13.- MISCELLANEOUS
13.1 Waiver. Failure of Landlord to declare an event of default
------
immediately upon its occurrence, or delay in taking any action in connection
with an event of default, shall not constitute a waiver of the default, but
Landlord shall have the right to declare the default at any time and take such
action as is lawful or authorized under this Lease. Pursuit of any one or more
of the remedies set forth in Article 11 above shall not preclude pursuit or any
one or more of the other remedies provided elsewhere in this Lease or provided
by law, nor shall pursuit of any remedy hereunder or at law constitute
forfeiture or waiver of any rent or damages accruing to Landlord by reason of
the violation of any of the terms, provisions or covenants of this Lease.
Failure by Landlord to enforce one or more of the remedies provided hereunder or
at law upon any event of default shall not be deemed or construed to constitute
a waiver of the default or of any other violation or breach of any of the terms
provisions and covenants contained in this Lease. Waiver by Landlord of any
default by Tenant hereunder shall in no event be deemed or construed to be a
waiver of identical or similar future defaults. Landlord may collect and receive
rent due from Tenant without waiving or affecting any rights or remedies that
Landlord may have at law or in equity or by virtue of this Lease at the time of
such payment. To the maximum extent allowable pursuant to applicable law,
institution of a summary ejectment action to re-enter the Premises shall not be
construed to be an election by Landlord to terminate this Lease.
13.2 Act of God. Landlord shall not be required to perform any
----------
covenant or obligation in this Lease, or be liable in damages to Tenant, so long
as the performance or non-performance of the covenant or obligation is delayed,
caused or prevented by an act of God, force majeure or by Tenant.
13.3 Attorney's Fees. If Tenant defaults in the performance of any of
---------------
the terms, covenants agreements or conditions contained in this Lease and
Landlord places in the hands of any attorney the enforcement of all or any part
of this Lease, the collection of any rent or other sums due or to become due or
recovery of the possession of the Premises, Tenant agrees to pay Landlord's cost
of collection, including reasonable attorneys' fees, whether suit is actually
filed or not.
13.4 Successors. This Lease shall be binding upon and inure to the
----------
benefit of Landlord and Tenant and their respective heirs, personal
representations, successors and assigns.
13.5 Rent Tax. If applicable in the jurisdiction where the Premises
--------
are situated, Tenant shall pay and be liable for all rental, sales and use taxes
or other similar taxes, if any, levied or imposed by any city, state, county or
15
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other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Landlord by Tenant under the terms of this
Lease. Any such payment shall be paid concurrently with the payment of the Base
Rent, Additional Rent, Common Area Costs, or other charge upon which the tax is
based as set forth above.
13.6 Interpretation. The captions appearing in this Lease are for
--------------
convenience only and in no way define, limit, construe or describe the scope or
intent of any Section. Grammatical changes required to make the provisions of
this Lease apply (1) in the plural sense where there is more than one tenant
arid (2) to either corporations, associations, partnerships or individuals,
males or females, shall in all instances be assumed as though in each case fully
expressed. The laws of the State of North Carolina shall govern the validity,
performance and enforcement of this Lease. This Lease shall not be construed
more or less favorably with respect to either party as a consequence of the
Lease or various provisions hereof having been drafted by one of the parties
hereto.
13.7 Notices. All rent and other payments required to be made by
-------
Tenant shall be payable to Landlord, in care of Manager, at Managers address set
forth on page 1 (or if no address be set forth for Manager, to Landlord at
Landlord's address set forth on page 1). All payments required to be made by
Landlord to Tenant shall be payable to Tenant at Tenant's Business address set
forth on page 1. Any notice or document (other than rent) required or permitted
to be delivered by the terms of this Lease shall be deemed to be delivered
(whether or not actually received) when deposited in the United States Mail,
postage prepaid, certified mail, return receipt required, addressed to the
parties at the respective addresses set forth on page 1 (or, in the case of
Tenant, at the-Premises (Business Address), or to such other addresses as the
parties may have designated by written notice to each other, with copies of
notices to Landlord being sent to Landlord's address as shown on page 1. Manager
shall be a co-addressee with Landlord on all notices sent to Landlord by Tenant
hereunder, and any notice sent to Landlord and not to Manager, also, in
accordance with this section shall be deemed ineffective.
13.8 Submission of Lease. SUBMISSION OF THIS LEASE TO TENANT FOR
-------------------
SIGNATURE DOES NOT CONSTITUTE A RESERVATION OF SPACE OR AN OPTION TO LEASE. THIS
LEASE IS NOT EFFECTIVE UNTIL EXECUTION BY AND DELIVERY TO BOTH LANDLORD AND
TENANT.
13.9 Corporate Authority. If Tenant executes this Lease as a
-------------------
corporation or a partnership (general or limited), each person executing this
Lease on behalf of Tenant personally represents and warrants that: Tenant is a
duly authorized and existing corporation or partnership (general or limited),
Tenant is qualified to do business in the state in which the Premises are
located, the corporation or partnership (general or limited) has full right and
authority to enter into this Lease, each person signing on behalf of the
corporation or partnership (general or limited) is authorized to do so, and the
execution and delivery of the Lease by Tenant will not result in any breach of,
or constitute a default under any mortgage, deed of trust, lease, loan, credit
agreement, partnership agreement, or other contract or instrument to which
Tenant is a party or by which Tenant may be bound. If any representation or
warranty contained in this Section is false, each person who executes this Lease
shall be liable, individually, as Tenant hereunder.
13.10 Multiple Tenants. If this Lease is executed by more than one
----------------
person or entity as "Tenant," each such person or entity shall be jointly and
severally liable hereunder. It is expressly understood that any one of the named
Tenants shall be empowered to execute any modification, amendment, exhibit,
floor plan, or other document herein referred to and bind all of the named
Tenants thereto; and Landlord shall be entitled to rely on same to the extent as
if all of the named Tenants had executed same.
13.11 Tenant's Financial Statements. Tenant represents and warrants
----------------------------
to Landlord that, as of the date of execution of this Lease by Tenant, the
financial statements, if any, of Tenant provided to Landlord prior to or
simultaneously with the execution of this Lease accurately represent the
financial condition of Tenant as of the dates and for the periods indicated
therein, such financial statements are true and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein not misleading and there has been
no material adverse change in the financial condition or business prospects of
Tenant since the respective dates of such financial statements. If there is a
material adverse change in Tenant's financial condition, Tenant will give
immediate notice of such material adverse change to Landlord. If Tenant fails to
give such immediate notice to Landlord, such failure shall be deemed an event of
default under this Lease.
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13.12 Severability. If any provision of this Lease or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Lease and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law. Each covenant and agreement
contained in this Lease shall be construed to be a separate and independent
covenant and agreement, and the breach of any such covenant or agreement by
Landlord shall riot discharge or relieve Tenant from Tenant's obligation to
perform each and every covenant and agreement of this Lease to be performed by
Tenant.
13.13 Landlord's Liability. If Landlord shall be in default under
--------------------
this Lease and, if as a consequence of such default, Tenant shall recover a
money judgment against Landlord, such judgment shall be satisfied only out of
the right, title and interest of Landlord in the Property as the same may then
be encumbered and neither Landlord nor any other person or entity comprising
Landlord shall be liable for any deficiency. In no event shall Tenant have the
right to levy execution against any property of Landlord other than the
Property, nor any person or entity comprising Landlord other than its interest
in the Property as herein expressly provided.
13.14 Sale of Property. Upon any conveyance, sale or exchange of the
----------------
Premises or assignment of this Lease, Landlord shall be and is hereby entirely
free and relieved of all liability under any and all of its covenants and
obligations contained in or derived from this Lease arising out of any act,
occurrence, or omission relating to the Premises or this Lease occurring after
the consummation of such sale or exchange and assignment.
13.15 Time is of the Essence. The time of the performance of all of
----------------------
the covenants, conditions and agreements of this Lease is of the essence.
13.16 Subtenancies. At Landlord's option, the voluntary or other
------------
surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not
work a merger of estates and shall operate as an assignment of any or all
permitted subleases or subtenancies.
13.17 Common Areas. Landlord reserves the right to change, from time
------------
to time, the dimensions and location, identity and type of any buildings
comprising the Building, and to construct additional buildings or additional
stories on existing buildings or other improvements on the Property, provided
that such changes and additional construction do not materially or adversely
affect parking and signage for the Premises. Landlord reserves the right to
change, from time to time, the dimensions and location of the Common Area and to
allow the Common Area to be put to such uses as Landlord shall, from time to
time, deem desirable. Tenant and its employees and customers shall have the
nonexclusive right to use the Common Area in common with Landlord, other tenants
of the Property and other persons designated by Landlord, subject to reasonable
rules and regulations governing use that Landlord from time to time prescribes.
Tenant shall not solicit business, distribute handbills or display merchandise
within the Common Area, or take any action which would interfere with the rights
of other persons to use the Common Area. Landlord may temporarily close any part
of the Common Area to make repairs or alterations. Tenant acknowledges that
Landlord may be required to grant to major tenants of the Property the right to
display and sell merchandise and services on portions of the Common Area, and
the rights herein granted to Tenant shall be inferior to any such rights granted
to major tenants. The Common Area shall be under Landlord's sole operation and
control. Tenant shall be responsible for and shall indemnify and hold Landlord
harmless from any liability, loss or damage arising out of or caused by Tenant,
its employees, subtenants, licensees, concessionaires, agents, suppliers,
vendors, or service contractors, to any part of the Common Area, or to the
Property whether such damages be structural or nonstructural.
13.18 Employee Parking. Landlord may, from time to time, designate
----------------
specific areas adjacent to the leased space in which vehicles owned by Tenant
and its employees shall be parked, and Tenant shall use best efforts to see that
such vehicles are parked in such areas. Upon written request, Tenant shall
furnish to Landlord a complete list of the license numbers of all vehicles
operated by Tenant and its employees.
ARTICLE 14. - AMENDMENT AND LIMITATION OF WARRANTIES
14.1 Entire Agreement. IT IS EXPRESSLY AGREED BY TENANT, AS A MATERIAL
----------------
CONSIDERATION FOR THE EXECUTION OF THIS LEASE, THAT THIS LEASE, WITH THE
SPECIFIC REFERENCES TO EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT OF THE
PARTIES; THAT
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THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS,
STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THE SUBJECT MATTER OF THIS
LEASE OR OF ANY EXPRESSLY MENTIONED EXTRINSIC DOCUMENTS THAT ARE NOT
INCORPORATED IN WRITING IN THIS LEASE OR IN SUCH DOCUMENTS.
14.2 Amendment. THIS LEASE MAY NOT BE ALTERED, WAIVED, AMENDED OR
---------
EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LANDLORD AND TENANT.
14.3 Limitation of Warranties. LANDLORD AND TENANT EXPRESSLY AGREE
------------------------
THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY,
HABITABILITY, SUITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND
ARISING OUT OF THIS LEASE, AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE
EXPRESSLY SET FORTH IN THIS LEASE. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, TENANT EXPRESSLY ACKNOWLEDGES THAT LANDLORD HAS MADE NO WARRANTIES OR
REPRESENTATIONS CONCERNING ANY HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL
MATTERS AFFECTING ANY PART OF THE PROPERTY, AND LANDLORD HEREBY EXPRESSLY
DISCLAIMS AND TENANT WAIVES ANY EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO
ANY SUCH MATTERS.
14.4 Waiver and Releases. TENANT SHALL NOT HAVE THE RIGHT TO WITHHOLD
-------------------
OR TO OFFSET RENT OR TO TERMINATE THIS LEASE EXCEPT AS EXPRESSLY PROVIDED
HEREIN. TENANT WAIVES AND RELEASES ANY AND ALL STATUTORY LIENS AND OFFSET
RIGHTS.
14.5 Non-Disclosure of Lease Terms. NOTWITHSTANDING ANYTHING CONTAINED
-----------------------------
WITHIN THIS LEASE TO THE CONTRARY, IF TENANT DISCLOSES ANY OF THE MATERIAL TERMS
AND/OR PROVISIONS OF THIS LEASE, INCLUDING BUT NOT LIMITED TO THE BASE RENT,
TENANT'S COMMON AREA COSTS OR ANY CAPS ON SUCH COSTS, THE TENANT FINISH OUT
ALLOWANCE, TENANT'S PROPORTIONATE SHARE OF GENERAL TAXES OR ANY CAP ON SUCH
EXPENSE, TENANT'S PROPORTIONATE SHARE OF INSURANCE PREMIUMS OR ANY CAP ON SUCH
EXPENSE, OR THE LEASE TERM TO ANY PERSON OR ENTITY NOT A PARTY TO THIS LEASE,
EXCEPT TENANT'S ATTORNEY, THEN TENANT SHALL BE LIABLE FOR ALL DAMAGE OR INJURY
TO LANDLORD RESULTING FROM TENANTS FAILURE TO KEEP ALL SUCH INFORMATION
CONFIDENTIAL AND TENANT SHALL INDEMNIFY AND HOLD LANDLORD HARMLESS FROM ANY
DAMAGE, LOSS OR INJURY OCCASIONED THEREBY. IN THE ALTERNATIVE, AND AT LANDLORD'S
SOLE OPTION, IF DAMAGES ARE DIFFICULT TO CALCULATE, TENANT SHALL PAY LIQUIDATED
DAMAGES EQUAL TO ONE (1) MONTH'S BASE RENT AS DEFINED IN ARTICLE 1 HEREOF.
15.1 Addendum. The Addendum attached hereto is incorporated herein by
--------
reference as if set forth verbatim. In the event of a conflict between the terms
and conditions of the Addendum and the Lease, the Addendum shall govern and
control. All terms defined herein have the same meaning in the Addendum as
herein.
SIGNATURE PAGE TO FOLLOW
18
<PAGE>
EXECUTED by Tenant on August 31, 1999 , 199 , and by Landlord on
-------------------------- --
September 7, 1999, to be effective upon full execution by Landlord and Tenant.
- -----------------
LANDLORD:
PARKER RALEIGH DEVELOPMENT XXXII,
LIMITED PARTNERSHIP
BY: Parker Lincoln Developers, Inc., its Managing
Agent
ATTEST:
/s/ Vickie B. Poor By: /s/ David L. Brady
- ------------------ --------------------------------------
Asst. Secretary Name: David L. Brady
- ------------------ --------------------------------------
Print or Type
(SEAL) Title: Vice President
--------------------------------------
TENANT:
PARADIGM GENETICS, INC., a North Carolina corporation
ATTEST:
/s/ Henry Nowak By: /s/ John Ryals
- ------------------ --------------------------------------
Secretary Name: John Ryals
- ------------------ --------------------------------------
Print or Type
(SEAL) Title: CEO/President
--------------------------------------
19
<PAGE>
A D D E N D U M
This Addendum is attached and incorporated by reference in the lease
by and between PARKER-RALEIGH DEVELOPMENT XXXII, LLC ("Landlord") and PARADIGM
GENETICS, INC., a North Carolina corporation ("Tenant") dated 9-7-99 (the
"Lease"). In the event of a conflict between the terms and conditions of this
Addendum and the Lease, this Addendum shall govern and control. All terms
defined in the Lease shall have the same meaning herein.
The following shall constitute additional provisions or conditions to the Lease:
1. Tenant accepts the Premises "as is" and "where is" and Landlord shall
not be required to make any improvements to the Premises except for
the construction of a demising wall to partition Tenant's property
from that of other adjoining tenants.
2. Tenant shall make all improvements required to obtain a Certificate of
Occupancy and for Tenant's specific operations (the "Tenant
Improvements"). Tenant must install two (2) bathrooms (one Men's and
one Women's); 200 amp or greater electrical service; and all lighting
and heating. At the completion of construction of the foregoing items,
provided Landlord has inspected and approved the construction and a
Certificate of Occupancy has been issued, Landlord will pay to Tenant
$12,000.00 toward the cost of such improvements. All remaining costs
shall be the sole responsibility of Tenant. In connection with the
construction of the Tenant Improvements, Tenant shall be permitted to
make roof penetrations in connection with the installation of
ventilation equipment. Prior to the installation of such equipment,
Tenant shall pay to Landlord a non-refundable amount of $350.00 for
each roof penetration. In order for the appropriate warranties to
remain in effect on the Building, including, but not limited to, the
warranty on the roof, Tenant must use Landlord's roofing contractor to
perform the roof penetrations.
Tenant is responsible for maintaining the Premises and the surrounding
areas in a neat and orderly fashion during the construction and
removing all construction debris during and at completion of the
construction. Tenant must perform the construction in accordance with
all applicable laws, rules and regulations. Tenant shall perform the
construction in a manner which will not disturb or interfere with the
business operations of the adjoining tenants.
All Tenant Improvements must be performed in accordance with the
Tenant Improvement(s) Specifications attached hereto as Exhibit F-I
(along with all exhibits FIA - FIM). Tenant shall immediately repair
all damage caused to the Premises and/or Property caused by the
construction of the Tenant Improvements. Tenant must maintain and keep
in good condition all improvements throughout the Term of the Lease.
At the termination or expiration of the Lease, Tenant must return the
Premises to the original condition and repair all damage caused by the
removal of the Tenant Improvements. Tenant shall not be permitted to
remove any Tenant Improvements when the removal would cause
irreparable damage to the Premises.
Within 30 days of execution of the Lease, Tenant must submit to
Landlord plans and specifications for all Tenant Improvements
including permit-ready, architectural and engineered drawings.
Landlord will notify Tenant of its approval of the plans within 10
days of submission.
Within 60 days of execution of the Lease, Tenant must submit to
Landlord a copy of all contracts and purchase agreements with all
contractors and sub-contractors who will be performing construction of
the Tenant Improvements. Such contracts must include specific prices
and construction costs.
All construction of Tenant improvements must be complete within 150
days of turnover of the Premises and Rent shall commence upon turnover
of the Premises. Within this time period, Tenant must submit a
Certificate of Occupancy along with executed lien waivers from all
contractors and all warranties, if applicable, for the Tenant
improvements. Tenant may not occupy the Premises
20
<PAGE>
for any reason other than the construction of the Tenant Improvements
prior to the satisfaction of these conditions.
SIGNATURE PAGE TO FOLLOW
21
<PAGE>
Prior to the commencement of the Tenant Improvements, Tenant must
obtain insurance coverage in accordance with all requirements as set
forth in Section 7.6 of the Lease, which insurance must, in addition
to providing all other coverages, provide coverage for army loss or
damage to personal property arising from Tenant's, its contractors and
agents and their performance of the work hereunder, and submit to
Landlord proof thereof.
3. On condition that Tenant has fully complied with all the terms and
conditions of the Lease, and on the further condition that Tenant
gives Landlord 180 days' advance written notice to exercise the option
to extend (failure to give notice being an absolute bar to any right
on the part of the Tenant to so extend), Landlord hereby gives to
Tenant the right to extend this Lease for three terms of one year
each. The annual rent shall be $6.83 per square foot for year one,
$7.38 per square foot for year two and $7.97 per square foot for year
three. The same terms and conditions, except as to annual rent, as set
forth in the Lease shall govern the parties' rights and obligations
during Renewal Term and the additional extended term.
Except as modified herein, all provisions of the Lease shall be in
full force and effect.
LANDLORD:
PARKER RALEIGH DEVELOPMENT XXXII, LLC
BY: Parker Lincoln Developers, Inc.
its Managing Agent
By: /s/ David L. Brady
------------------
Name: /s/ David L. Brady
------------------
ATTEST: Title: Vice President
-----------------
/s/ Vickie B. Poor
- ------------------
Assistant Secretary
[CORPORATE SEAL]
TENANT:
PARADIGM GENETICS, INC.
a North Carolina corporation
By: /s/ John Ryals
---------------
Name: /s/ John Ryals
-----------------
ATTEST: Title: CEO/President
--------------
/s/ Henry Nowak
- ---------------
Assistant Secretary
[CORPORATE SEAL]
22
<PAGE>
STATE OF NORTH CAROLINA
LEASE AMENDMENT NO.1
COUNTY OF WAKE
This Amendment is made this 28th day of October 1999, by and between
PARKER RALEIGH DEVELOPMENT XXXII, LIMITED PARTNERSHIP ("Landlord") and PARADIGM
GENETICS, INC., a North Carolina corporation ("Tenant"). In the event of a
conflict between the terms and conditions of the Lease and this Amendment, this
Amendment shall govern and control. All terms defined in the Lease shall have
the same meaning herein. Except as modified herein all terms and conditions of
the Lease are ratified and confirmed in all other respects.
WHEREAS, Landlord and Tenant entered into a written agreement of lease
dated September 7, 1999 (the "Lease") whereby the Landlord leased to Tenant
approximately 20,372 square feet of space located at 2933 5. Miami Boulevard,
Suites 122, 123, 124 and 125, Durham, North Carolina, 27703 (the "Premises"), as
amended; and
WHEREAS, Landlord's name on the Lease is incorrectly stated as Parker-
Raleigh Development XXXII, Limited Partnership. Landlord's name is Parker-
Raleigh Development XXXII, LLC.
Now, therefore, by mutual agreement of the parties and in
consideration of the mutual premises and obligations hereinafter set forth, the
Lease is hereby amended and modified as follows:
1. In Section 1.1 of the Lease, delete "Parker-Raleigh Development XXXII,
Limited Partnership" and substitute "Parker-Raleigh Development XXXII,
LLC."
IN WITNESS WHEREOF, the parties hereto have hereunto executed this Lease
Amendment No. 1 in triplicate causing their respective seals to be affixed
hereto the day and year first above written.
LANDLORD:
PARKER RALEIGH DEVELOPMENT XXXII, LLC
BY: Parker Lincoln Developers, Inc.
as managing agent
By: /s/ David L. Brady
------------------
Vice President
ATTEST:
/s/ Vickie Poor
- ---------------
Assistant Secretary
[CORPORATE SEAL]
TENANT:
PARADIGM GENETICS, INC.
a North Carolina corporation
By: /s/ John Ryals
--------------
President
ATTEST:
/s/ Henry Nowak
- ---------------
Assistant Secretary
[CORPORATE SEAL]
23
<PAGE>
Exhibit A
---------
Legal Description
Lincoln Park West
<PAGE>
Exhibit B
---------
Site Plan
Lincoln Park West
25
<PAGE>
Exhibit C
---------
Building Plan
26
<PAGE>
EXHIBIT D
Landlord and Tenant hereby acknowledge and mutually agree that the Commencement
Date is 09/27/99, the Rental Commencement Date is 11/1/99 and the Expiration
Date is 09/30/02.
LANDLORD
Parker-Raleigh Development XXXII, LLC
By: Parker Lincoln Developers, Inc.
its Managing Agent
By: /s/ David L. Brady
---------------------
Name:
Title:
Date:
TENANT
Paradigm Genetics, Inc.
By: /s/ John Ryals
--------------
Name: John A. Ryals
-------------
Title: CEO, President
--------------
Date: Oct. 28, 1999
-------------
27
<PAGE>
Exhibit E
---------
Rules & Regulations
28
<PAGE>
Exhibit F
---------
Floor Plan
29
<PAGE>
Exhibit F-1A-F-1M
-----------------
Tenant Improvement(s) Specifications
30
<PAGE>
Exhibit G
---------
Sign Criteria
31
<PAGE>
Exhibit 10.23
AGREEMENT OF LEASE
BETWEEN
TRIANGLE SERVICE CENTER, INC., LANDLORD
AND
PARADIGM GENETICS, INC., TENANT
BUILDING 6
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section
Number Description Page
- ------ ----------- ----
<C> <S> <C>
1 Premises 2
2 Parking and Common Areas 2
3 Term 2
4 Compliance with Laws and Use 3
5 Rental 4
6 Adjustment for Operating Expenses 5
7 Security Deposit 8
8 Services and Utilities 9
9 improvements: Commencement Date 11
10 Interior Alterations and Fixtures 12
11 Signs 13
12 Repairs and Maintenance 13
13 Parking and Repairs 14
14 Indemnification and Liability Insurance 15
15 Exoneration of Landlord 15
16 Insurance 15
17 Release by Tenant 16
16 Increase in Property Insurance 16
19 Fire 16
20 Condemnation 16
21 Assignment or Subleasing 16.
22 End of Tenancy 17
23 Quiet Enjoyment 17
24 Subordinate 17
25 Default 17
26 Inspection 18
27 Memorandum 18
28 Estoppel Certificate 19
29 Notices 19
30 Nature and Extent of Agreement 20
31 Benefit 20
Exhibit A Description of Premises 22
Exhibit B Site Plan 23
Exhibit B1 Restrictive Covenants 24
Exhibit C Plans and Specifications 25
Exhibit D ADA Compliance 26
Exhibit E Option Rider 27
</TABLE>
<PAGE>
STATE OF NORTH CAROLINA
LEASE AGREEMENT
COUNTY OF DURHAM
THIS LEASE AGREEMENT ("Lease"), made this day of ___________ 1998. between
TRIANGLE SERVICE CENTER, INC., a North Carolina Corporation hereinafter called
"Landlord", and PARADIGM GENETICS, INC., a North Carolina corporation,
hereinafter called "Tenant", which terms "Landlord" and `Tenant' shall include,
wherever the context admits or requires, singular or plural, and the heirs,
legal representatives, successors and assigns of the respective parties:
W I T N E S S E T H:
--------------------
1. PREMISES. Landlord, in consideration of the covenants of Tenant, does
--------
hereby lease and demise unto Tenant, and Tenant does hereby agree to take and
lease from Landlord upon the following terms, covenants, conditions and
stipulations, for the term hereinafter specified in the following described
premises:
Building Number 6 containing approximately nine thousand eighty-eight
(9,088.75) rentable square feet but excluding area B containing
approximately one thousand eight hundred sixty-four and 43/100(1864.43)
square feet for a net rentable area of approximately seven thousand two
hundred twenty-four and 32/100 (7,224.32) square feet being more
particularly shown on Exhibit A attached hereto and incorporated herein
(the "Premises"), located in the Research Triangle Park, Durham, County,
North Carolina, the project being known as Park Research Center, more
particularly shown on Exhibit B attached hereto and incorporated herein
(`Project").
2. PARKING AND COMMON AREAS. Landlord grants to Tenant, its employees and
------------------------
invitees, a nonexclusive right to use, free of charge, during the term of this
Lease, but subject to the weight limitation set forth in Section 13, the parking
areas shown on Exhibit B, which are acknowledged to be for the use of such
persons along with others similarly entitled, for parking and for ingress and
egress between the Premises and other portions of the Project and the adjoining
streets, sidewalks, and highways. Tenant's employees shall park in areas
designated by Landlord and shall not park in any of the parking areas other than
those designated by Landlord. The Premises are leased to Tenant based upon the
exterior dimensions of the buildings local within the Project The Common Areas
include all covered space, if any, outside the enclosed area of the Premises.
Such covered space, if any, shall be for the non-exclusive use of Tenant and for
ingress and egress between all other portions of the Project and the adjoining
streets and sidewalks. Tenant shall not use such covered space for any purpose
other than ingress and egress to the Premises.
3. TERM. This Lease shall be for a term of one (1) year, commencing on
----
the commencement date (as defined in Section 9 hereof) and shall expire at 11:59
p.m. on the last day of the twelfth (12th) complete month thereafter.
4. COMPLIANCE WITH LAWS AND USE.
----------------------------
(a) Compliance with Laws. Tenant, at its expense, shall comply with all
--------------------
laws, ordinances, orders, rules and regulations of state, federal, municipal or
other agencies or bodies having jurisdiction relating to the use, condition
(excluding conditions which existed with respect to the Premises prior to
occupancy by Tenant and unrelated to the use or occupancy of the Premises by
Tenant) and occupancy of the Premises, and with recorded covenants conditions
and restrictions applicable for the Project, provided, however, that Tenant
shall not be required by reason of this covenant to make structural changes to
the Premises.
<PAGE>
(b) Use. The Premises may be used as for general office, bio technology an
---
pharmaceutical development and scientific research and laboratory uses and for
no other purpose without Landlord's written consent first being obtained which
consent shall not be unreasonably withheld, subject however, to the Covenants
and Restrictions affecting the Research Triangle Park. A copy of said covenants
is attached hereto as Exhibit B1 and incorporated herein by reference. Tenant
shall not use or occupy or permit the Premises to be used or occupied, do or
permit anything to be done in or on the Premises, in a manner which would be
deemed disreputable or extra hazardous, or make void or voidable any insurance
then in force with respect thereto, or which will cause or be likely to cause
structural damage to the buildings within the Project or any part thereof, or
which will constitute a public or private nuisance.
(c) Hazardous Material.
------------------
(i) Tenant shall not (either with or without negligence) cause or permit
escape, disposal or release of any biologically active or other hazardous
substances, or materials on the Premises except and unless such biologically
active or other hazardous substances have been pretreated prior to disposal or
release into the air or sewer in full compliance with all local, state, federal
and regulatory laws, rules, regulations and orders but in all events no less
than compliance with the highest standards prevailing in the industry for such
release or disposal. Tenant shall not allow the storage or use of such
substances or materials in any manner not sanctioned by law or by the highest
standards prevailing in the industry for the storage and use of such substances
or materials, nor allow to be brought into the Building in which the Premises
any such materials or substances except to use in the ordinary course of Tenants
business and then only after written notice to Landlord of the identity of such
substance or materials. At the discretion of Landlord, written notice to
Landlord of the identity of such hazardous materials or substances may be
provided by delivery by Tenant to landlord copies of written records prepared by
or for Tenant which adequately describe and identify such substance and
material. Tenant shall not cause or permit any Hazardous Material (as
hereinafter defined) to be brought upon, kept or used in or about the Premises
by Tenant, its agents, employees, contractors or invitees except the ordinary
course of Tenants business and in compliance with all applicable, rules and
regulations, ordinances and orders. Tenant shall indemnify, defend and hold
Landlord harmless from any and all claims, judgments, damages, penalties, fines,
costs, liabilities or losses (including without limitation, diminution in value
of the Premises, damages for the loss or restriction on use in rentable or
usable space or of any amenity of the Premises, damages arising from any adverse
impact on marketing of space, any sums paid in settlement of claims, attorneys'
fees, consultant fees and expert fees) which arise during or after the lease
term as a result of the presence or use of biologically active or Hazardous
Materials on the Premises during the lease term. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in connection
with any investigation of site conditions or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision because of Hazardous Material present in the soil or
ground water on or under the Premises to the extent Tenant is responsible
therefor. Without limiting the foregoing, if the presence of any Hazardous
Material the Premises caused by Tenant results in any contamination of the
Premises, Tenant shall promptly take all actions at its sole expense as are
necessary to return the Premises to the conditions existing prior to the
introduction of any such Hazardous Material to the Premises; provided that
Landlord's approval of such actions shall first be obtained, which approval
shall not be unreasonably withheld so long as such actions would not potentially
have any material adverse long-term or short-term effect on the Premises. The
foregoing indemnity shall survive the expiration or earlier termination of this
Lease.
(ii) As used herein, the term "Hazardous Material" means any hazardous or
to substance, material or waste, including, but not limited to, those
substances, materials, and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.01) or by the Environmental
Protection Agency as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. (S) 9601, et seq.), and any regulations promulgated pursuant thereto and
amendments thereto, or such substances, materials and wastes that are or become
regulated under any applicable local, state or federal law
<PAGE>
5. RENTAL
------
(a) Base Rent. Tenant shall pay to Landlord as gross base rental
---------
("Base Rent") for the Premises during the term of this Lease, the sum per
month set opposite the term of this Lease set forth below, which shall be
paid in the amount set forth below:
<TABLE>
<CAPTION>
Months Rate Monthly Base Rent Annualized Base Rent
------ ---- ----------------- --------------------
<S> <C> <C> <C>
1-12 $17.85 S.F. $10,745.70 $128,948.40
</TABLE>
Each installment of Gross Base Rent shall be due and payable in advance on
the first of each and every calendar month of the term of this Lease, and
shall be payable without demand or offset. Landlord will exercise
commercially reasonable efforts to cause the Landlord Improvements to be
completed on schedule but makes no representations to Tenant that
Landlord's agents and contractors will complete said work within the
schedule.
(b) Pro ration of Rent. In the event that this Lease shall commence on
-------------------
a day other than the first day of a calendar month, or in the event that
this Lease shall terminate on a day other than the last day of a calendar
month, Base Rent (as well as all additional rents and charges reserved
hereunder) for the portion of such partial month that this Lease is in
effect shall be prorated, based upon a thirty (30) day month.
(c) Cost of Increase. At the end of each lease year of the term
----------------
hereof, monthly Base Rent to be paid to Landlord by Tenant for the upcoming
lease year (less that portion of the Base Rent attributable to (i)
Landlord's Operating Expenses which are to be annually adjusted as provided
by Section 6 hereof and to (ii) the cost of Landlord Improvements provided
for herein) (hereinafter Adjusted Base Rent") will increase in accordance
with the cost of living (but in no event less than three percent (3%) per
annum nor more than five percent (5%) per annum) as follows: The percentage
increase of the cost of living will be made by calculating the percentage
of variation of the current year the previous lease year, as indicated by
the Consumer Price Index - Seasonally Adjusted U.S. City Average - All
Items and Major Group Figures - All Urban Consumers (1982 - 84 - 100)
("CPI-U"), published by the Bureau of Labor Statistics of the United States
Department of Labor from September to September. Said percentage will be
multiplied by the existing monthly ease Rent, as illustrated in the sample
formula below:
[(March, 1999 CPI-U - March, 1998 CPI-U) + March 1998 CPI-UI] x monthly
Adjusted Rent = adjustment in 1999 monthly Base Rent
The resulting product will be the amount of increase in the upcoming year's
monthly ~ Rent. In no event shall the Base Rent ever be reduced by reason
of this subsection (c). In the event that (i) the CPI-U ceases to use the
1982-84 base of 100, or (ii) a substantial change is made in the number of
items used in determining the CPI-U such that Landlord and Tenant agree
that the CPI-U does not accurately reflect the purchasing power of the
dollar, or (iii) the CPI-U shall be discontinued for any reason, Landlord
shall designate notice to Tenant, a new index or base that measures the
cost of living, with appropriate adjustment in such base or index to make
the same comparable to the CPI-U.
(d) Interest on Past-Due Rent and Late Charges. It any Base Rent,
------------------------------------------
additional rent or any other sum due Landlord in accordance with any
provisions of this Lease shall be paid within ten (10) days
<PAGE>
after same is immediately when due, the same shall bear interest at the
lesser of eighteen percent (18%) per annum or the highest contract rate
allowed by law from ten (10) days after such due date until such sum and
all such interest accrued thereon shall have been paid unless Landlord
shall waive the same. Interest accrued as aforesaid shall be deemed to be
additional rent hereunder due on demand. In addition to such remedies as
may be provided under the default provisions of this Lease, Landlord shall
be entitled to a late charge of five percent (5%) of the monthly Base Rent
and any additional rent or other sum payable hereunder if not received
within ten (10) days of the due date therefor, and a charge of five percent
(5%) of the amount of any check given by Tenant not honored by the drawee
bank when first presented for payment.
6. ADJUSTMENT FOR OPERATING EXPENSES.
---------------------------------
(a) Definitions. For the purposes of this Lease, the following
-----------
defined t shall have the meanings set forth below:
(i) Rent Adjustment Year shall mean the twelve (12) month period
--------------------
ending on the last day of February of each calendar year.
(ii) Tenant's Proportionate Share of Landlord's Increased
----------------------------------------------------
Operating Expense shall mean the fraction of such Operating Expenses,
-----------------
the numerator of which is the rentable area of the Premises as the
same forth in Section 1 of this Lease, and the denominator of which is
the greater of (A) the arithmetic mean or average of the rentable
areas of the building located within the Project actually leased and
producing rentals on this day of each calendar quarter during the
preceding Rent Adjustment Year, or (B) ninety five percent (95%) of
the rentable areas of the buildings located within the Project.
(iii) Landlord's Operating Expenses shall mean and include all
-----------------------------
expenses including assessments for public betterments or improvements;
ad valorem real estate taxes and any other tax on real estate as such:
ad valorem taxes on furniture, fixtures, equipment or other property
used in connection with the operation or maintenance of the Project;
the costs, including legal and consulting fees, of contesting or
attempting to reduce any of the aforesaid assessments or taxes;
amortization of capital improvements which will improve the operating
efficiency of the Project which will reduce Landlord's Operating
Expenses; the cost of labor, materials insurance, utilities (including
sewer and water) and services; such other reasonable expenses with
respect to the operation, maintenance and management of the Project
which shall be incurred or paid by or on behalf of Landlord and which
shall be properly chargeable to such operation, maintenance and
management in accordance with generally accepted accounting principles
as applied to the operation, maintenance or management of an office
and laboratory project.
(b) Payments During Term. With respect to each Rent Adjustment Year or
--------------------
portion thereof during the term of this Lease, Tenant shall pay Landlord as
additional rent in the manner hereinafter provided, Tenant's Proportionate
Share of Landlord's Increased Operating Expenses in the amount by which
Landlord's Operating Expenses paid or incurred by Landlord during such
period exceeded Nine and 77/100 Dollars ($9.77) per square foot of the
buildings within the Project. It is acknowledged and agreed that with
respect to any Rent Adjustment Year or portion thereof it will not be
possible to determine the actual amount of such excess, if any, until after
the end of such Rent Adjustment year. Therefore, until Tenant's liability
for Tenant's Proportionate Share of Landlord's Increased Operating Expenses
have been determined, Tenant shall pay Tenant's Proportionate Share of
Landlord's Increased Operating Expenses as follows:
(i) On or before December 31st of each calendar year beginning
with calendar year 1999 during the term of this Lease, Landlord shall
furnish Tenant with a statement setting forth the
<PAGE>
total amount of Tenant's Proportionate Share of Landlord's Increased
Operating Expenses and the amount by which Landlord's Operating
Expenses for the preceding Rent Adjustment Year exceeded Landlord's
Operating Expenses of Nine and 77/100 dollars ($9.77) per square foot
provided, however, that Landlord not be obligated to furnish any such
statement to Tenant unless and until Landlord shall determine that
Tenant's Proportionate Share of Landlord Increased Operating Expenses
in excess of those currently being paid by the Tenant are to be paid
by Tenant pursuant to the terms of this subsection (i). From the
beginning of each such Rent Adjustment Year and until Landlord shall
furnish Tenant with a statement as aforesaid, Tenant shall continue to
pay Landlord with each monthly installment of Base Rent the amount of
the monthly payment for Tenant's Proportionate Share of Landlord's
Increased Operating Expenses it shall have been obligated to pay
during the preceding Rent Adjustment Year. Beginning with the first
day of the calendar month following the date upon which Landlord shall
have delivered to Tenant such statement, Tenant shall pay to Landlord
that amount equal to the product of one-twelfth (1/12) of Tenant's
Proportionate Share of Landlord Increased Operating Expenses as set
forth on such statement multiply the number of calendar months in the
Rent Adjustment Year which shall have begun as of said first day,
minus the aggregate amount of the monthly payments for Tenant's
Proportionate Share of Landlord's Increased Operating Expenses
theretofore paid by Tenant during such Rent Adjustment Year. The
remainder of Tenant's Proportionate Share of Landlord's Increased
Operating Expenses shown on each such statement be paid by Tenant to
Landlord with each succeeding monthly installment of Base Rent in
equal consecutive monthly installments of one-twelfth (1/12) of the
total amount of Tenant's Proportionate Share of Landlord's Increased
Operating Expenses shown on such statement.
(c) Payments at Conclusion of Lease. Compliance with the foregoing
-------------------------------
subsections (b)(i) will effect only a partial payment by Tenant of its
obligations respect to Landlord's Operating Expenses. Accordingly, it is
agreed that at the end of the term of this Lease or upon any earlier
termination of this Lease or of Tenant's right to possession of the
Premises, Tenant shall be obligated to pay Landlord the difference, if any,
between the aggregate amount actually paid by Tenant with respect to
Tenant's Proportionate Share of Landlord's Increased Operating Expenses and
that which it is obligated to pay under the foregoing subsection on or
before ninety (90) days following the end of the term of this Lease or an
earlier termination of this Lease and until Tenant's obligations with
respect to Tenant's Proportionate Share of Landlord's Increased Operating
Expenses shall have been determined. Landlord shall furnish Tenant
statements in the manner subject to the conditions stated in the first
sentence of the foregoing subsection (b)(i) and upon the furnishing of each
such statement, Tenant shall be obligated to and shall pay Landlord
immediately the amount or portion thereof, if any, due aforesaid. Tenant's
obligation to pay Tenant's Proportionate Share of Landlord's Increased
Operating Expenses shall survive any expiration or other termination of
this Lease.
(d) Inspection of Books and Records. In the event that Tenant is
-------------------------------
required to pay a share of Landlord's Operating Expenses pursuant to this
Section 6, Tenant shall have the right, at Tenant's expense, to inspect
Landlord's books and records showing Landlord's Operating Expenses for the
Rent Adjustment Year in question. Landlord's statement setting forth the
total amount of Tenant's Proportionate Share of Landlord's Increased
Operating Expenses furnished to Tenant in accordance with the provisions of
this Section 8 shall be deemed to have been approved by Tenant unless
protested by Tenant in writing within ninety (90) days after delivery of
such statement to Tenant.
(e) Rent Tax. In addition to Tenant's Proportionate Share of Landlord
--------
Increased Operating Expenses hereinbefore provided to be paid by Tenant,
Tenant shall reimburse Landlord upon demand for any and all taxes payable
or paid by Landlord whether or not now customary or within the
contemplation of the parties hereto which are levied upon or measured by
the rental or any other sum payable hereunder as such, including without
limitation, any gross income tax or excise leveled by any
<PAGE>
governmental body with respect to the receipt of such rental or such other
sum (excluding, however, any federal, state or local net income taxes which
Landlord may be obligated to pay). In the event that it shall not be lawful
for Tenant to so reimburse Landlord, the rental, as adjusted, payable to
Landlord under the Lease shall be revised to net Landlord the same net
rental after imposition of a such tax upon Landlord as would have been
payable to Landlord prior to the imposition of any such tax.
(f) Additional Rent. Tenant's Proportionate Share of Landlord's
---------------
Increased Operating Expenses, for the purposes of the default provisions
hereof, shall be deemed to be additional rent due from Tenant and any
default in the payment thereof shall entitle Landlord to all remedies
provided for herein or at law or in equity on account of Tenant's failure
to pay rent. The other provisions hereof to the contrary notwithstanding,
Tenant's payments pursuant to this Section 6 of a portion of the increased
expense of operating the Project shall not be deemed payments of rent as
that term is construed relative to governmental wage and price controls
analogous governmental actions affecting the amount of rent which Landlord
may charge Tenant.
7. SECURITY DEPOSIT:
----------------
(a) Amount of Deposit. Tenant, contemporaneously with the execution
-----------------
this Lease, has deposited with Landlord the sum of ten thousand seven
hundred forty-five and 70/100 Dollars ($10,745.70). the receipt of which is
hereby acknowledged by Landlord. Said deposit shall be held by Landlord,
without liability for interest, as security for the faithful performance by
Tenant of all of the terms, covenants, and conditions of this Lease by said
Tenant to be kept and performed during the term hereof.
(b) Use and Return of Deposit. If at any time during the term of this
-------------------------
Lease any of rent herein reserved shall be overdue and unpaid, or any other
sum payable to Landlord by Tenant hereunder shall be overdue and unpaid,
then Landlord may at the option of Landlord (but Landlord shall not be
required to), appropriate and apply any portion of said deposit to the
payment of any such overdue rent or other sum. In the event of the failure
of Tenant to keep and perform any of the terms, covenants and conditions of
this Lease, then Landlord at its option may appropriate and apply said
entire deposit, or so much thereof as may be necessary, to compensate
Landlord for all loss or damage sustained or suffered by Landlord to such
breach on the part of Tenant. Should the entire deposit, or any portion
thereof, be appropriated and applied by Landlord for payment of overdue
rent other sums due and payable to Landlord by Tenant hereunder, then
Tenant shall upon the written demand of Landlord, forthwith remit to
Landlord a sufficient amount in cash to restore said security to the
original sum deposited, and Tenant's failure do so within ten (10) days
after receipt of such demand shall constitute a breach of this Lease.
Should Tenant comply with all of said terms, covenants and conditions and
promptly pay all of the rental herein provided for as it becomes due, and
all other sums payable to Landlord by Tenant hereunder, the said deposit
shall be promptly returned in full to Tenant at the end of the term of this
Lease, or upon the earlier termination of this Lease.
(c) Transfer of Deposit. Upon notice to Tenant in writing Landlord may
-------------------
deliver the funds deposited hereunder by Tenant to the transferee of
Landlord's interest in the Premises, in the event that such interest be
transferred and thereupon Landlord shall be discharged from any further
liability with respect to such deposit.
(d) No Liability of Mortgagee. Tenant shall not be entitled to look
-------------------------
to the mortgagee, as mortgagee, mortgagee in possession, or successor in
title to the Premises, for accountability for any security deposit required
by Landlord hereunder unless said sums have actually been received by said
mortgagee as security of Tenant's performance of this Lease.
<PAGE>
8. SERVICES AND UTILITIES.
----------------------
(a) Services. Landlord shall provide in consideration of the Base Rent
--------
following:
(i) Heating, ventilation, and air conditioning ("HVAC") for the
Premises during Business Hours to maintain temperatures for
comfortable use and occupancy;
(ii) Janitorial services to the office and common areas of the
Premises (all Business Days, Monday through Friday);
(iii) Hot and cold water sufficient for drinking, lavatory, toilet,
and ordinary cleaning purposes;
(iv) Electricity to the Premises at all times and in reasonable
amounts necessary for normal office and laboratory use and
lighting;
(v) Replacement of lighting tubes, lamp ballasts, and bulbs and
damaged or stained ceiling tiles;
(vi) Extermination on and pest control when necessary; and
(vii) Maintenance of Common Areas and core areas and exterior
walls, glass plumbing, electrical and HVAC.
(viii) Drive through security; and
(ix) Parking Lot illumination
(x) Snow and ice removal.
(b) Business Hours. "Business Hours" means: Monday through Friday,
--------------
8:00 through 5:00 p.m., but excludes the following holidays or
the days on which the holidays are designated for observance:
New Year's Day, Easter (Good Friday), Memorial Day, July Fourth,
Labor Day, Thanksgiving Day, and Christmas Day.
(c) 24 Hour Access. Tenant, its employees, agents, and invitees shall
--------------
have access to the Premises, twenty-four (24) hours a day, seven
(7) days a week, If, however, the Building must be closed during
Business Hours, then the Base Rent and Additional Rent shall
abate during any closing that lasts more than twenty-four (24)
hours.
(d) Extra Services. Landlord, shall have the right to monitor the
--------------
Tenant's use of electrical and gas consumption which shall
include heating, and air conditioning within the Premises.
Whenever Landlord knows that any tenant (including Tenant) is
using extra services because of either non Business-Hours use or
high electricity consumption installations, Landlord may directly
charge that tenant for the extra use and those charges shall be
excluded from Operating Expenses. Extra services include:
(i) Non Business-Hours Use. Electricity required by Tenant
----------------------
during non-Business Hours for lighting, or electrical
service to the Premises shall be provided by Landlord.
Tenant shall be responsible for additional electrical
consumption anticipated in connection with Tenants' Non-
business Hours use of the Premises. In lieu of separate
metering and accounting for Non-business Hours electrical
<PAGE>
consumption, Building electrical expenses in excess of $.79
per square foot, adjusted for rate increases, all as
determined by Landlord shall be paid by Tenant per year as
Additional Rent in the next succeeding month following
notice by Landlord. Building electrical expenses shall be
determined by Landlord by monitoring of electrical usage of
the Building and shall be pro rated.
(ii) Excess Utility Use. Tenant shall not place or operate in
-------------------
the Premises any electrically operated equipment or other
machinery, other than typewriters, personal computers,
adding machines, reproduction machines, and machinery and
equipment normally used in offices and laboratories, unless
Tenant receives Landlord's advance written consent.
Landlord shall unreasonably withhold or delay its consent,
but Landlord may require payment for the extra use of
electricity caused by operating this equipment or
machinery, Landlord may require that special, high
electricity consumption installations of Tenant such as
computer or reproduction facilities (except personal
computers or normal office photocopy machines) may be
separately sub-metered for electrical consumption at
Tenant's cost
(iii) Payment. Tenant's charges for the utilities provided in
-------
(i) and (ii) above be one hundred percent (100%) of
Landlord's actual cost of labor and utilities and shall be
Additional Rent
Tenant's failure to pay the charges in (i) and (ii) above
within thirty (30) of receiving a proper and correct
invoice shall entitle Landlord to the remedies it has upon
Tenant's failure to pay Base Rent.
(e) Interruption of Services. Landlord does not warrant that any
------------------------
services Landlord supplies will not be temporarily interrupted.
Services may be temporarily interrupt because of accidents,
repairs alterations, improvements, or any reason beyond
reasonable control of Landlord. Any temporary interruption shall
not
(i) be considered an eviction or disturbance of Tenant's use
and possession of the Premises;
(ii) make Landlord liable to Tenant for damages;
(iii) abate Base Rent or Additional Rent; or
(iv) relieve Tenant from performing Tenant's Lease obligations.
9. IMPROVEMENTS: COMMENCEMENT DATE.
-------------------------------
Landlord or Landlord's agents have made no representations or promises with
respect to the Project or Premises except as expressly set forth herein.
The taking possession or the Premises by Tenant shall constitute conclusive
evidence, as against Tenant, that Tenant accepts the same "as is" subject
to the Landlord Improvements provided for hereinafter and that the Premises
and the Project were in good condition at the time as such possession was
so taken, subject to completion of Landlord Improvements provided for
hereinafter and subject to any punch list made by Tenant. Any further
additions or changes required by Tenant must be in writing and approved in
writing Landlord and will be at the expense of Tenant. Landlord's approval
or rejection of such improvements shall not be unreasonably delayed.
<PAGE>
Notwithstanding anything to the contrary in this Lease, no rent shall
accrue to Landlord until the Commencement Date (as hereinafter defined)
(a) Substantial Completion. Landlord shall use its best efforts to
----------------------
substantially complete Landlord's Improvements to the Premises within
twenty-one (21) days from the date of Lease execution by the parties
(`Target Date"). Substantially complete means completing Landlord's
Improvements described in Section 9 (e) and Exhibit C incorporated
herein by reference so that Tenant can use the Premises for their into
purposes.
(b) Notice. Landlord shall give Tenant advance notice of the estimated
------
substantial Completion Date if different from the Target Date. If the
estimated substantial Completion Date changes at any time after
Landlord gives notice, then Landlord give advance notice of the new
estimated substantial Completion Date.
(c) Inspection and Punchlist. Within 30 days after the Commencement Date,
------------------------
the parties shall inspect the Premises, have all systems demonstrated,
and prepare a punchlist. The punchlist shall list incomplete, minor,
or insubstantial details of construction; necessary mechanical
adjustments; and needed finishing touches. Tel acceptance of
possession of the Premises after such inspection shall be conclusive
evidence that the Premises were in good order and satisfactory
condition, except for any punchlist items.
(d) Delayed Possession. Tenant may cancel this Lease if Landlord cannot
------------------
deliver a possession of the substantially complete Premises by one
hundred and eighty days (180) after the Target Date. To cancel, Tenant
must give notice to Landlord within (60) days after the expiration of
such one hundred and eighty day period and before Landlord gives
notice to Tenant that the Premises are substantially complete. The one
hundred and eighty (180) day Period above shall be extended in the
time equal to period of delay caused by Tenant. Within thirty (30)
days after cancellation, Landlord shall return to Tenant prepaid
consideration including Rent and deposits, and neither party shall
have any further rights or obligations under this Lease.
(e) Landlord Improvements. Landlord at its expense, shall make
---------------------
improvements to Premises in accordance with Exhibit C ("Landlord
Improvements") incorporated herein by reference. The Landlord
Improvements shall be completed in a good workmanlike manner and
comply with all applicable laws, ordinances, rules, regulations of
governmental authorities, including ADA requirements as provided by
Exhibit D, which is incorporated herein by reference.
(f) HVAC Improvements. Tenant desires to install additional heating,
-----------------
ventilation and air conditioning ("HVAC") equipment in the Premises to
permit twenty-four hour, seven day per week use of the Premises by
Tenant. Subject to the terms of this Section and Section 10 (a),
Landlord agrees that Tenant, at its cost and expense, may install
additional HVAC equipment and systems (the "HVAC Improvements") in the
Premises; subject to the provisions hereof. After execution of this
Lease by Landlord and Tenant, Tenant shall submit to Landlord for its
approval plans and specifications for the HVAC Improvements. The HVAC
Improvements and systems shall be designed to provide for removal from
the Premises without damage to the Premises. Landlord shall not
unreasonably withhold, condition or delay its approval of the plans
and specifications for the HVAC Improvements prepared in accordance
with the provisions hereof, and shall respond reasonably promptly to
such plans and specification. The plans and specifications as approved
by Landlord are hereinafter referred to as the "Plans". Prior to
expiration of termination of this Lease, Tenant may remove the HVAC
Improvements from the Premises, provided Tenant (i) provides adequate
assurance to Landlord that Tenant shall Tenant repair any damage to
the Premises caused by such installation or removal and (ii) provides
<PAGE>
adequate assurances to Landlord Tenant shall make any recurring
repairs or maintenance to the Premises as a result of the installation
or removal of the HVAC Improvements for no less than one year after
removal.
The Lease begins ("Commencement Date") on the earlier of:
(a) The date Tenant takes possession and occupies the Premise
installation of its furniture and equipment or forty-five
(45) days from the date of Lease execution by the parties.
(b) After (i) the Premises are substantially completed according
to Section 9(a), (ii) Landlord gives the notice required by
Section 9 (b), (iii) Landlord is ready, willing and able to
deliver actual possession of the Premises, and (iv) the
Target Date set in Section 9(a) arrived.
The Lease ends ("Expiration Date") at 11:59 p.m. and the last day of the
calendar month twelve months (12) following the Commencement Date, unless
terminated earlier under this Lease. Within thirty (30) days after the
Commencement Date, the parties shall confirm in writing Commencement Date
and Expiration Date.
10. INTERIOR ALTERATIONS AND FIXTURES.
---------------------------------
(a) Interior Alterations. Tenant shall make no structural or interior
--------------------
alterations of the Premises without Landlord's prior written consent which
shall not unreasonably be withheld. If Tenant requires alterations, Tenant
shall provide Landlord's managing agent with a complete set of construction
drawings, and such agent shall then determine the actual cost of the work
to be done (to include a construction supervision fee of 5% to be paid to
landlord's managing agent). Tenant may then either agree to pay Landlord to
have the work done or withdraw its request for alterations. All alterations
and improvements shall be the property of Landlord unless otherwise agreed
in writing by Landlord and Tenant.
(b) Fixtures. Tenant may construct and build or install in the
--------
Premises any and all bins, racks, counters, shelves, mirrors, chairs or
other similar fixtures and/or laboratory equipment of every kind and nature
as may be necessary or desirable for Tenant's office and pharmaceutical
laboratory use of the Premises, which bins, racks, counters, shelve
mirrors, chairs and other fixtures and laboratory equipment shall at all
times be and remain the property of Tenant, and, if not in default
hereunder, Tenant shall have the right to remove all or any part of the
same from the Premises at any time, provided that Tenant shall repair or
reimburse Landlord for the cost of repairing any damages to the Premise
resulting from the installation of or removal of such items unless
otherwise agreed in writing by Landlord and Tenant. Tenant shall be
responsible for whatever expenses are incurred connecting its equipment to
water, sewer, gas or other utilities, lines, and any other charges incurred
in the installation of said equipment.
11. SIGNS: Landlord has established a uniform signage program for the
-----
Project and shall provide a building identification and Tenant identification
sign or signs for the Premises at Tenant's expense and to be installed at
locations designated by Landlord. Other than the foregoing, Tenant shall not
permit, allow or cause to be erected, installed, maintained, painted or
displayed on, in or at the Premises any interior or exterior sign, lettering,
placard, announcement, decoration, advertising media or advertising material of
any kind whatsoever, visible from the exterior of the Premises, without the
prior written approval of Landlord.
<PAGE>
12. REPAIRS AND MAINTENANCE.
-----------------------
(a) Tenant's Care of Premises. Tenant shall:
(i) keep the Premises and fixtures in good order;
(ii) make repairs or replacements to the Premises or Building
because of Tenant's misuse or negligence, except to the
extent that the repairs or replacements are covered by
Landlord's insurance or the insurance Landlord is required
to carry under this Lease, whichever is greater;
(iii) repair and replace special equipment or decorative
treatments installed by or at Tenant's request that serve
the Premises only, except
(1) to the extent the repairs or replacements are needed
because Landlord's misuse or primary negligence, and
are not covered Tenant's insurance or the insurance
Tenant is required to carry under this Lease,
whichever is greater, or
(2) if the Lease is terminated under Article IX (Loss of
Premises); and
(iv) not commit waste.
(b) Landlord's Repairs. Except for repairs and replacements that
Tenant must make under Paragraph 12 (a), Landlord shall pay for and
make all other repairs replacements to the Premises, Common Areas and
Building (including Building fixtures and equipment). Landlord shall
make the repairs and replacements to maintain the building in a
condition consistent with other comparable office buildings in the
Raleigh, North Carolina area. This maintenance shall include the
foundation, exterior walls, interior structural walls, all structural
components, and all systems, such as mechanical, electrical, HVAC, and
plumbing.
(c) Time for Repairs. Repairs or replacements required under
Paragraphs 12(a) or 12(b) shall be made within a reasonable time
(depending on the nature of the ft or replacement needed) after
receiving notice or having actual knowledge of need for a repair or
replacement.
(d) Surrendering the Premises. Upon the Expiration Date or earlier
termination of Lease, Tenant shall surrender the Premises to Landlord
in the same condition that the Premises were in on the Commencement
Date except for:
(i) ordinary wear and tear;
(ii) damage by the elements, fire, and other casualty unless
Tenant would be required to repair under paragraph 12(a);
(iii) condemnation;
(iv) damage arising from any cause not required to be repaired
or replace Tenant; and
(v) alterations as permitted by this Lease unless consent was
conditioned on their removal.
On surrender Tenant shall remove from the Premises its personal property,
trade fixtures and any alterations required to be removed and repair any
damage to the Premises caused by the removal. Any items not removed by
Tenant as required above shall be considered abandoned. Landlord may
dispose of
<PAGE>
abandoned items as Landlord chooses and bill Tenant for the cost of their
disposal, minus any revenues received by Landlord for their disposal.
13. PARKING and REPAIRS. Landlord shall maintain in good condition and
-------------------
repair the parking areas as shown on Exhibit B, providing Tenant shall not
permit its agents, employees or invitees to place excessive loads on said
parking areas, the maximum load for any vehicle not to exceed eight (8) kips per
axle for the parking area in front of the buildings within the Project, or more
than twelve (12) kips per axle for the loading area to the rear of the buildings
within the Project. Except as otherwise provided herein, there shall be no
allowance to Tenant for a diminution rental value and no liability on the part
of Landlord for inconvenience, annoyance or injury to business arising from
Landlord or others making any repairs to the Project or Premises and no
liability upon Landlord for failure of Landlord or others to make any repairs,
alterations, additions improvements in or to any portion of the Project or
Premises if Landlord acted diligently and in a reasonable manner, Landlord, its
agents and employees, shall have access to and the right to enter the Premises
at any reasonable time to examine the condition thereof, to make repairs,
alterations or additions therein, including, but not limited to, the tight of
Landlord to extend through the Premises, in a non-obstructing and workmanlike
manner, all utility lines and sprinkler system lines serving other leased space
within the Project with reasonable notice to Tenant.
14. INDEMNIFICATION AND LIABILITY INSURANCE
---------------------------------------
(a) Obligations of Tenant. Tenant shall indemnify and save harmless
---------------------
Landlord from any claim or loss by reason of any accident or damage to any
person or property happening on or about the Premises or arising out of or
on account of the use or occupancy of the Premises by Tenant, and Tenant
shall maintain and carry at its expense commercial general liability
insurance and property damage insurance with respect to the Premises, the
business operated by Tenant in the Premises, in which the limits of
commercial general liability shall not be less than $2,000,000.00 with
respect to each occurrence, not less than $2,000,000 with respect to
personal injury or death of a single person, not less than $2,000,000
general aggregate. Such policies shall name Landlord and Tenant as insured
parties as their interest may appear, and Tenant shall deliver to Landlord
certificates of insurance certifying that such insurance is in full force
and effect.
(b) Obligations of Landlord. Landlord shall indemnify and save Tenant
-----------------------
harmless from any claim or loss by reason of accident or damage to its
person or property happening on the Premises and arising by reason of the
negligence or willful misconduct Landlord, and Landlord shall maintain and
carry at its expense commercial general liability insurance in which the
limits of commercial general liability shall not be less than $2,000,000.00
with respect to each occurrence, not less than $2,000.000 with respect to
personal injury or death of a single person, not less than $2,000,000
general aggregate, which policies shall protect Tenant to the extent of the
coverage provided in said policies.
15. EXONERATION OF LANDLORD. Landlord shall not be responsible or liable
-----------------------
to Tenant or to Tenant's employees, agents or invitees for any injury or damage
resulting from acts or omissions of Tenant or Tenant's employees, agents or
invitees, or persons occupying property adjoining the Promises or any part of
the Project, or for any Injury or damage resulting from any portion of the
Project becoming out of repair, or caused by the bursting, stoppage or leaking
of water gas, sewer or steam pipes, except where such loss or damage arises by
reason of the willful or negligent misconduct of Landlord, its agents, servants,
or employees, or Landlord's failure to make the repairs which it is obligated to
make hereunder.
16. INSURANCE. Landlord, at its expense, shall keep the Building and
---------
Premise insured against loss or damage by fire with extended coverage
endorsement in an amount sufficient to prevent Landlord from becoming a
co-insurer under the terms of the applicable policies but, in any event, in an
amount not less than ninety percent (90%) of the full replacement cost thereof
as determined from time to time. Tenant, at its
<PAGE>
expense, shall maintain like insurance coverage on such of its own equipment,
furniture, and other property as it may place and use within or on the Premises.
All of such insurance shall be issued by financially responsible insurers duly
authorized to do business in the State of North Carolina.
17. RELEASE BY TENANT. Tenant hereby waives and releases all rights of
-----------------
recovery which it might otherwise have against Landlord, its agents and
employees, for loss or damage to Tenant's contents, furniture, furnishings,
fixtures or other property removable by Tenant under the provisions of this
Lease to the extent that the same are coverable by Tenant's insurance,
notwithstanding that such loss or damage may result from the negligence or fault
of Landlord, its agents or employees. Policies required to be maintained by
Tenant hereunder shall contain waivers of subrogation by the insurers against
Landlord and endorsements authorizing Tenant Landlord to execute mutual releases
as between themselves.
18. INCREASE IN PROPERTY INSURANCE. If, as the result of any act or
------------------------------
negligence of Tenant, its employees, representatives or visitors at the
Premises, or if the manner in which business is conducted at the Premises, the
fire and extended coverage insurance rate of Landlord shall be increased over
the rate existing at the beginning of the term of this Lease, Tenant on demand
shall pay to Landlord as additional rent the amount of such increase
attributable to the actions of Tenant.
19. FIRE. If the Premises are damaged by fire, the elements, or other
----
casualty, but damage is such that restoration within ninety (90) days is
feasible, Landlord shall, at its expense, cause the Premises to be repaired
within a reasonable time, and the rent during the period of repair shall abate
proportionately as to the portion of the Premises rendered untenantable by the
damage. If the Premises are rendered wholly untenantable by reason of such
damage or to such extent restoration is not feasible within ninety (90) days,
Landlord may proceed to cause the damage to be repaired, and in such case rent
shall abate until the Premises have been restored to tenantable condition,
provided, however, that in such case either Tenant or Landlord may within thirty
(30) of the date of the occurrence of such damage notify the other of
termination of this Lease. If each party elects to so terminate, any rent due
shall be adjusted to the date of the damage and after payment of such amounts to
Landlord as may then be due, all rights under this Lease shall terminate.
20. CONDEMNATION. If the whole or as much as twenty (20%) percent of the
------------
Premises is taken by any governmental agency or corporation vested with the
right of exercise eminent domain, whether such taking be effected by court
action or by settlement with the agency exercising or threatening to exercise
such power and if the property so taken renders the remainder of said property
unfit for the use thereof by Tenant then Tenant shall have the option to
terminating this Lease, which option must be exercised within sixty (60) days of
such taking. If Tenant shall not so elect to terminate, or if the taking does
not interfere with Tenant's use of the Premises to the extent Tenant does not
have an option to terminate, there shall be an adjustment of the annual rental
reflecting on a pro rata basis any reduction in Tenant's leased space. All of
the condemnation award except for damage to or the taking of Tenant's personal
property and Tenant's relocation award, if any, shall be Landlord's.
21. ASSIGNMENT OR SUBLEASING. Tenant may not assign this Lease, or
------------------------
sublease the Premises in whole or in part, without first obtaining the written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. Such assignment or sublease consented to by Landlord will not relieve
Tenant of its responsibility for the payment of rent and due performance of all
other terms and covenants and conditions of this Lease. Any rental from assignee
or subtenant to whom Landlord consents which is in excess of the rental due
hereunder shall be payable to Landlord as additional rental hereunder net of
Tenant's expenses to assign sublet.
22. END OF TENANCY. Tenant shall yield up the Premises and all additions
--------------
thereto (except signs, equipment and trade fixtures installed by Tenant at its
expense) at the termination of the tenancy in as good and tentable condition as
the same are at the beginning of Tenant's occupancy, reasonable wear, damage by
fire and
<PAGE>
other casualties and appropriation by eminent domain excepted, and also
excepting any damage, disrepair and other condition that Landlord is obligated
hereunder to repair or correct.
23. QUIET ENJOYMENT. Landlord covenants that Tenant upon paying the rent
---------------
herein reserved and performing the covenants and agreements hereof shall
peaceably and quietly have, hold and enjoy the Premises, and all rights,
privileges, easements and appurtenances in anywise appertaining thereto, during
the full termination of this Lease.
24. SUBORDINATE. This Lease shall at all times be subject and subordinate
-----------
to the lien of any mortgage (which termination shall include all security
instruments) that may be placed on the Premises by Landlord. Tenant shall,
without cost, execute within fifteen (15) days of request any instrument as may
be required to effectuate such subordination, provided, however, Landlord, if
requested, shall use its best efforts to obtain from any such mortgagee an
agreement in writing be delivered to Tenant, providing in substance that, so
long as Tenant shall faithfully discharge obligations on its part to be kept and
performed under the terms of this Lease, its tenancy shall be disturbed. Tenant
shall within ten (10) business days of request therefor sign and deliver to
Landlord's mortgagee a statement acknowledging the facts with respect to
acceptance of the Premises, date of occupancy, date to which rent is paid and
amount payable monthly, and any other matters relevant to the tenancy.
25. DEFAULT.
-------
(a) Events of Default and Remedies. If at any time there shall occur
------------------------------
any of the following events:
(i) If Tenant shall default in the payment of any monthly
installment of rent or any other sum of money becoming due hereunder
and such default shall continue for ten (10) days after written notice
thereof; or
(ii) If Tenant shall default in the performance of any other
material agreement, covenant or stipulation set forth in this Lease,
and such default shall continue for thirty (30) days after written
notice thereof; or
(iii) If Tenant shall abandon all or a portion of the Premises; or
(iv) If Tenant shall file or have filed against it a petition for
the appointment of a receiver or trustee for all or substantially all
of the assets or Tenant, and such appointment shall not be vacated or
set aside within sixty (60) days;
then and in any of such events Landlord, without excluding other
rights or remedies that may have, shall have the immediate right of
re-entry and may remove all persons and property from the Premises and
dispose of such property as it sees fit, all without resort to legal
process and without being deemed guilty of trespass, or becoming
liable for any loss or damage which may be occasioned hereby. If
Landlord should elect to re-enter as then provided, or should it take
possession pursuant to legal proceedings, it may either terminate this
Lease, or it may from time to time without terminating this Lease make
such alteration and repairs as may be necessary in order to relet the
Premises, and relet the Premises for such term and at such rentals and
upon such other terms and conditions as Landlord may deem advisable.
No such re-entry or taking possession of the Premises by Landlord
shall be construed as an election to terminate this Lease unless a
written notice of such intention be given to Tenant by Landlord at the
time of such re-entry; but, notwithstanding any such re-entry and
reletting without termination, Landlord may at any time thereafter
elect to terminate this Lease for such previous breach. In the event
of any termination by Landlord whether before or after re-entry,
Landlord may recover from Tenant damages incurred by reason of such
breach, including the cost of recovering the Premises, removing
Tenant's
<PAGE>
property from the Premises, upfitting the Premises for future tenants
who will occupy the Premises during the term of this Lease, and the
difference in value between the rental which would be payable by
Tenant hereunder for the remainder of the term and the reasonable
rental value of the Premises for the remainder of the term. In
determining the rental which would be payable by Tenant hereunder
subsequent to default, the annual rental for each year of the
unexpired term shall be equal to the average rental paid or payable by
Tenant from the commencement of the term to the date of default.
(b) Exercise of Remedies. No remedy herein or otherwise conferred upon
--------------------
or reserved to Landlord shall be considered exclusive of any other remedy,
but the same shall be distinct, separate and cumulative and shall be in
addition to every other remedy given hereunder, or now or hereafter
existing at law or in equity or by statute, and every power and remedy
given to Landlord by this Lease may be exercised from time to time as often
as occasion may arise, or as may be deemed expedient. No delay or omission
of Landlord exercise any right or power arising from any default on the
part of Tenant shall impair an such right or power, or shall be construed
to be a waiver of any such default or an acquiescence thereto.
(c) Costs and Expenses. Tenant shall pay all costs, expenses and
------------------
reasonable attorneys' fees that may be incurred or paid by Landlord in
enforcing covenants, conditions and agreements of this Lease, whether
incurred as a result of litigation or otherwise.
28. INSPECTION. Landlord, its agents or other representatives shall have
----------
the right upon twenty-four (24) hours notice (except in cases of emergency, when
no notice shall be required) to enter into and upon the Premises, or any part
thereof, for the purpose of examining same but Landlord shall not disturb the
operation of Tenant.
27. MEMORANDUM. This Lease shall not be recorded. On request of Tenant,
----------
Landlord shall execute a memorandum of this Lease suitable for recording which
shall omit the financial terms herein but which shall identify the Premises and
the term. A recorded memorandum of this Lease may be canceled of record by a
document executed solely by Landlord or its successor in interest after the
expiration of the Lease,
28. ESTOPPEL CERTIFICATE. Within no more than ten (10) business days after
--------------------
written request by Landlord, Tenant shall execute, acknowledge, and deliver to
Landlord a certificate stating (a) the Commencement Date of this Lease and the
Expiration Date of this Lease, (b) that this Lease is unmodified and in full
force and effect, or, if the Lease is modified, the way which it is modified
accompanied by a copy of the modification agreement, (c) the date to which
rental and other sums payable under this Lease have been paid, (d) that no
notice has been received by Tenant of any default which has not been cured, or,
if such a default has not been cured, what Tenant intends to do in order to
effect the cure, and when it will do so, (e) that Tenant has accepted and
occupied the Premises, (f) that Tenant has no claim or offset against Landlord
or, if it does, stating the circumstances which gave rise to the claim or
offset, (g) that Tenant is not aware of any prior assignment of this Lease by
Landlord, or if it is, stating the date of the assignment and assignee (if known
to Tenant), and (h) such other matters as may be reasonably requested by
Landlord. Any such certificate may be relied upon by any prospective purchaser
of the Premises and any prospective mortgagee or beneficiary under any deed of
trust or mortgage encumbering the Premises. If Landlord submits a completed
certificate to Tenant, and if Tenant fails to object to its contents within ten
(10) days after its receipt of the completed certificate, the matters stated in
the certificate will conclusively be deemed to be correct. Furthermore, Tenant
irrevocably appoints Landlord as Tenant's attorney-in-fact to execute and
deliver on Tenant's behalf any completed certificate to which Tenant does not
object within ten (10) business days after its receipt
29. NOTICES.
-------
(a) If to Landlord. All notices required to be given to Landlord
--------------
hereunder shall be sent by certified mail to, and all rent payments shall
be made to:
<PAGE>
To Landlord:
Triangle Service Center Inc.
P.O.Box 12255
2 Hanes Drive
Research Triangle Park, NC 27709
Tel. (919)549-8181
Fax. (919) 549-8246
Attn. James O. Roberson, Pres.
With Copy To:
William P. Few
Post Office Box 20288
4200 Six Forks Road
Raleigh, NC 27619-20288
Tel. (919) 782-1175
Fax. (919) 782-2217
or to such other addresses as Landlord may direct from time to time by
written notice forwarded to Tenant by certified mail.
(b) If to Tenant. All notices required to be given to Tenant may be
------------
given in person or if not so given shall be sent by certified mail to
Tenant at:
Paradigm Genetics, Inc.
Building No. 6
104 TW Alexander Drive
Research Triangle Park, North Carolina, 27709
Telephone: (919) 544-5578
Fax: (919) 544-8094
Atten: John A. Ryals, Pres.
With a copy to:
Christopher B. Capel
Smith, Anderson, Blount, Dorset, Mitchell & Jernigan
2500 First Union Capitol Center, 27601
PO. Box 2611
Raleigh, North Carolina 27602
Telephone: (919) 821-6759
Fax: (919) 821-6800
or to such other address as Tenant may direct from time to time by written
notice forward to Landlord by certified mail.
<PAGE>
30. NATURE AND EXTENT OF AGREEMENT. This Lease contains the complete
------------------------------
agreement of the parties regarding the terms and conditions of the Lease of the
Premises, and there are no oral or written conditions, terms, understandings or
other agreements pertaining thereto which have not been incorporated herein.
This instrument creates only the relationship of lessor and lessee between the
parties hereto as to the Premises, and nothing herein shall in any way be
construed to impose upon either party hereto any obligations or restrictions not
herein expressly set forth. The laws of the State of North Carolina shall govern
the validity, interpretation performance and enforcement of this Lease.
31. BENEFIT. This Lease and all of the covenants and provisions thereof
-------
shall inure to the benefit of and be binding upon the heirs, legal
representatives, successors and assigns of the parties hereto, and each
provision hereof shall be deemed both a covenant and condition and shall run
with the land.
BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
IN WITNESS WHEREOF, this Lease has been executed as of the day and year
first above written.
LANDLORD:
TRIANGLE SERVICE CENTER, INC a
North Carolina Corporation
ATTEST:
By: /s/ James O. Roberson
--------------- -------------------------------
Secretary James O. Roberson, President
------
TENANT:
PARADIGM GENETICS, INC.,
ATTEST:
By: /s/ Scott Uknes
--------------- -------------------------------
Secretary Scott J. Uknes, Vice President
------
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
Building Number 6 containing approximately nine thousand eighty-eight
(9,088.75) rentable square feet but excluding area B containing approximately
one thousand eight hundred sixty-four and 43/100 (1864.43) square feet for a net
rentable area of approximately seven thousand two hundred twenty-four and 32/100
(7,224.32) square feet being more particularly shown on the building sketch
attached to Exhibit A and incorporated herein (the "Premises'), located in the
Research Triangle Park, Durham County, North Carolina, the project being known
as Park Research Center, more particularly shown on Exhibit B attached hereto
and incorporated herein ("Project").
<PAGE>
EXHIBIT B
SITE PLAN
<PAGE>
EXHIBIT B1
RESTRICTIVE COVENANTS
<PAGE>
EXHIBIT C
PLANS AND SPECIFICATIONS
<PAGE>
EXHIBIT D
ADA COMPLIANCE
1. Notwithstanding anything contained in the Lease to the contrary,
Landlord warrants and represents that the common areas of the Building
are in compliance with the requirements of Title III of the Americans
With Disabilities Act or 1990 (the "ADA") or shall be brought into
compliance at the expense of Landlord if required by law or
regulation. Landlord further represents and warrants that any
alternation, modifications, upfit or construction performed by
Landlord shall be performed in compliance with the ADA.
2. Tenants represents and covenants that it shall conduct its occupancy
and use of the Premises in accordance with the ADA (including, but not
limited to, modifying its policies, practices and procedures, and
providing auxiliary aids and services to disabled persons).
3. If the Lease provides that the Tenant is to complete certain
alternatives and improvements to the Premises in conjunction with the
Tenant taking occupancy of the Premises. Tenant agrees that all such
work shall comply with the ADA and, upon request of Landlord, Tenant
shall provide Landlord with evidence reasonably satisfactory to
Landlord that such work was performed in compliance with the ADA.
Furthermore, Tenant covenants and agrees that any and all future
alterations improvements made by Tenant to the Premises shall comply
with the ADA.
<PAGE>
EXHIBIT E
OPTION RIDER
THIS RIDER constitutes a part of the Lease to which it attached. In the
event of a conflict between this Rider and the provisions of the Lease, the
Rider will govern and control.
1. Option to Extend
----------------
(a) Option Tenant shall have the option to extend this Lease for two
(2) consecutive periods of six (6) months each (the "First Extension Term" and
"Second Extension Term" respectively) beginning immediately after the Term, or
in the case of the second option to extend, the First Extension Term, upon the
same terms conditions of the Lease, except that:
(i) the Term shall be modified as stated above;
(ii) the Base Rent and Additional Rent shall be calculated as
follows:
The monthly rent shall be the then current rental plus CPI
adjustment as agreed by the parties.
(iii) Landlord shall have no obligation to further improve the
Premises.
(b) Conditions. To exercise the First or Second Option to Extend
----------
Tenant must
(1) not be in default at the time it exercises the Option to
Extend; and
(2) give written notice to Landlord that Tenant is exercising
its Option to Extend at least sixty (60) days but not more than
ninety (90) days before the Term or in the case of the Second
Option to Extend, First Extension Term ends.
<PAGE>
EXHIBIT 10.24
-------------
AMENDMENT OF LEASE
BETWEEN
TRIANGLE SERVICE CENTER, INC., LANDLORD
AND
PARADIGM GENETICS, INC., TENANT
BUILDING 6
<PAGE>
STATE OF NORTH CAROLINA
AMENDMENT OF LEASE
COUNTY OF DURHAM
THIS AMENDMENT OF LEASE ("Amendment"), made this ____ day of
________________, 1998, between TRIANGLE SERVICE CENTER, INC. a North Carolina
Corporation, hereinafter called "Landlord", and PARADIGM GENETICS, INC., a North
Carolina corporation, hereinafter called "Tenant", which terms "Landlord" and
"Tenant" shall include, wherever the context admits or requires, singular or
plural, and the heirs, legal representatives, successors and assigns of the
respective parties;
WHEREAS, Landlord and Tenant have entered into that certain Agreement of
Lease dated February 20, 1998 (the "Lease") of the premises described therein
being a portion of Building No. 6, Park Research Center, Research Triangle Park,
North Carolina containing approximately 7,224.32 of rentable square feet, and
designated as Area A on Exhibit A to the Lease; and
WHEREAS, Landlord and Tenant are desirous of amending the Lease Premises to
include an additional one thousand eight hundred sixty-four and 43/100
(1,864.43) of rentable square feet contained within Building No. 6 designated
Area B on Exhibit A to the Lease Agreement and to increase the monthly base rent
by $17.85 per square foot for the additional rentable square footage of Area B,
the subject of this Amendment of Lease;
NOW, THEREFORE, in consideration of the Premises, the mutual covenants
herein contained and other valuable considerations, the suffiiciency of which is
hereby acknowledged, Landlord and Tenant agree to amend the Lease between the
Parties effective July 1, 1998 as follows:
1. Section 1. "Premises" is deleted in its entirety and the following new
----------
Section 1. is substituted in lieu thereof:
1. PREMISES. Landlord, in consideration of the covenants of Tenant,
--------
does hereby lease and demise unto Tenant, and Tenant does hereby
agree to take and lease from Landlord, upon the following terms,
covenants, conditions and stipulations, for the term hereinafter
specified, the following described premises:
Building Number 6 containing approximately nine thousand
eighty-eight (9,088.75) rentable square feet being more
particularly shown as Area A and Area B on capital Exhibit A
attached hereto and incorporated herein (the "Premises"),
located in the Research Triangle Park, Durham County, North
Carolina, the project being known as Park Research Center,
more particularly shown on Exhibit B attached hereto and
incorporated herein ("Project").
2
<PAGE>
2. Subsection 5(a) "Rental" "Base Rent" is deleted in its entirety and the
following new Section 5(a) is substituted in lieu thereof:
5. Rental.
(a) Base Rent. Tenant shall pay to Landlord as gross base
---------
rental ("Base Rent") for the Premises during the term of this
Lease, the sum per month set opposite the month of the term of
this Lease set forth below, which shall be paid in the amount set
forth below:
Months Rate Monthly Base Rent Annualized Base Rent
------ ---- ----------------- --------------------
7/1/98- $17.85 S.F $13,519.04 $162,228.48
2/28/99
Each installment of Gross Base Rent shall be due and payable in
advance on the first day of each and every calendar month of the
term of this Lease, and shall be payable without demand or
offset. Landlord will exercise commercially reasonable efforts to
cause the Landlord Improvements to be completed on schedule but
makes no representations to Tenant that Landlord's agents and
contractors will complete said work within the schedule.
Except as herein amended and modified, all terms and conditions of the Lease
shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
Amendment effective the day of year of first above written.
LANDLORD:
TRIANGLE SERVICE CENTER, INC. a
North Carolina Corporation
ATTEST:
/s/ James O. Roberson
________________ By:________________________________
Secretary James O. Roberson, President
TENANT:
PARADIGM GENETICS, INC.
ATTEST:
/s/ John A. Ryals
_______________ By:________________________________
Sccretary John A. Ryals, CEO and President
3
<PAGE>
EXHIBIT A
DESCRIPTION OF PREMISES
Building Number 6 containing approximately nine thousand eight-eight
(9,088.75) rentable square feet being more particularly shown as Area A and Area
B on Exhibit A attached to the Lease and incorporated herein by reference (the
---------
"Premises"), located in the Research Triangle Park, Durham County, North
Carolina, the project being known as Park Research Center, more particularly
shown on Exhibit B attached to the Lease and incorporated herein by reference
---------
("Project").
4
<PAGE>
NORTH CAROLINA
WAKE COUNTY
This is to certify that on the ______ day of __________, 1998, before me
personally came James O. Roberson, President, with whom I am personally
acquainted who being by me duly sworn, says that he is the President and
________ is the Assistant Secretary of Triangle Service Center, Inc. which
executed the foregoing instrument; that he knows the common seal of said
corporation; that the seal affixed to the foregoing instrument is said common
seal, and the name of the corporation was subscribed thereto by the said ____
and that the President and Assistant Secretary subscribed their names thereto
and said common seal was affixed, or by order of the Board of Directors of said
corporation, and that the said instrument is the act and deed of said
corporation.
WITNESS my hand and official stamp or seal this ________ day of _________,
1998.
---------------------------
Notary Public
My Commission Expires:
- ------------------------
5
<PAGE>
NORTH CAROLINA
WAKE COUNTY
This is to certify that on the ______ day of __________, 1998, before me
personally came John Ryals, President, with whom I am personally acquainted who
being by me duly sworn, says that he is the President and ________ is the CEO of
Paradigm Genetics, Inc. which executed the foregoing instrument; that he knows
the common seal of said corporation; that the seal affixed to the foregoing
instrument is said common seal, and the name of the corporation was subscribed
thereto by the said ____ and that the President subscribed their names thereto
and said common seal was affixed, or by order of the Board of Directors of said
corporation, and that the said instrument is the act and deed of said
corporation.
WITNESS my hand and official stamp or seal this ________ day of
_________--, 1998.
---------------------------
Notary Public
My Commission Expires:
- ------------------------
6
<PAGE>
Exhibit 10.26
-------------
WORK LETTER
-----------
This WORK LETTER, dated July 27, 1999 (this "WORK LETTER"), is made and
entered into by and between ARE-104 ALEXANDER ROAD, LLC, a Delaware limited
liability company ("LANDLORD"), and PARADIGM GENETICS, INC., a North Carolina
corporation ("TENANT"), and is attached to and made a part of the Lease
Agreement dated July 27, 1999 (the "LEASE"), by and between Landlord and Tenant.
Any initially capitalized terms used but not defined herein shall have the
meanings given them in the Lease.
RECITALS
A. Landlord has entered into or is entering into a Ground Lease Agreement
(the "GROUND LEASE") with Triangle Service Center, Inc., a North Carolina
corporation ("GROUND LESSOR"), pursuant to which Landlord has leased or is
leasing approximately 6.084 acres of land more fully described in Exhibit A-1
attached to the Lease (the "SITE"). Pursuant to the Ground Lease, the Site will
be cleared and graded prior to the commencement of the term of the Ground Lease.
B. Subject to the terms and conditions of the Lease, Landlord has agreed
to cause to be constructed on the Site, or to permit to be constructed on the
Site, certain improvements including, but not limited to, a first-class
scientific research and development building containing approximately 53,750
rentable square feet (the "BUILDING") and a commercial greenhouse, headhouse,
and growth room facility containing approximately 5,000 rentable square feet
(the "GREENHOUSE").
C. This Work Letter contains the agreements of the parties with respect to
the design and construction of the shell and core of the Building, the site
improvements appurtenant to the Building, all fixed and permanent improvements
to the Building (commonly referred to as the "tenant improvements"), and all
components of the Greenhouse.
AGREEMENT
1. General Requirements.
--------------------
1.1. Tenant's Authorized Representative. Tenant designates Larry
----------------------------------
Daquioag and Stanford White & Associates (collectively, "TENANT'S
REPRESENTATIVE") as the only persons authorized to initial or approve plans,
drawings, or change orders or otherwise to act for Tenant pursuant to this Work
Letter. Stanford White & Associates shall act for Tenant during any period that
Mr. Daquioag is not available. Landlord shall not be obligated to respond to or
act upon any request, approval, inquiry, or other communication
("COMMUNICATION") from or on behalf of Tenant in connection with this Work
Letter unless such Communication is in writing and has been initialed or
approved in writing by Tenant's Representative. Tenant may change Tenant's
Representative at any time upon not less than 5 business days advance Notice to
Landlord. No period set forth herein for any approval of any matter by Tenant
shall be extended by reason of any change in Tenant's Representative. Neither
Tenant nor Tenant's Representative shall be
<PAGE>
authorized to direct Landlord's contractors in the performance of "LANDLORD'S
WORK" (as hereinafter defined) except as may be expressly provided otherwise
herein.
1.2. Development Schedule. The schedule for design and development of
--------------------
the "BASE BUILDING WORK" (as defined below), the "TENANT IMPROVEMENTS" (as
defined below), and the Greenhouse, including, without limitation, the time
periods for preparation, delivery, review, and approval of construction
documents and performance pursuant to such documents, shall be in accordance
with the Development Schedule attached hereto as Schedule A, subject to
adjustment as mutually agreed by the parties in writing or as provided in this
Work Letter (the "DEVELOPMENT SCHEDULE").
1.3. Architects, Consultants and Contractors. The architect (the
----------------------------------------
"PROJECT ARCHITECT"), engineers, designers, and general contractor (the "PROJECT
CONTRACTOR") responsible for the design, development, and construction of the
Base Building Work and other components of the Project as a whole (collectively,
the "PROJECT WORK"), the architect (the "TI ARCHITECT"), engineers, designers,
and general contractor (the "TI CONTRACTOR") responsible for the design,
development, and construction of the Tenant Improvements, and the general
contractor (the "GREENHOUSE CONTRACTOR") responsible for the construction of the
Greenhouse, shall be selected by Landlord, subject to Tenant's approval, which
approval shall not be unreasonably withheld, conditioned, or delayed. The
architect (the "GREENHOUSE ARCHITECT"), engineers, and designers responsible for
the design and development of the Greenhouse shall be selected by Tenant,
subject to Landlord's approval, which approval shall not be unreasonably
withheld, conditioned, or delayed. The Project Contractor shall select all
subcontractors to be used for the Project Work, the TI Contractor shall select
all subcontractors to be used for the Tenant Improvements, and the Greenhouse
Contractor shall select all subcontractors to be used for the Greenhouse,
provided that any subcontractors ("MAJOR SUBCONTRACTORS") under subcontracts in
excess of $100,000.00 ("MAJOR SUBCONTRACTS") shall be subject to the mutual
approval of Landlord and Tenant. The TI Architect, the TI Contractor, the
Greenhouse Architect, and the Greenhouse Contractor shall coordinate with the
Project Architect in a manner reasonably satisfactory to Landlord. Landlord and
Tenant hereby acknowledge and agree that: (i) O'Brien Atkins & Associates has
been pre-approved as the Project Architect and the TI Architect; (ii) Miller
Building Corporation has been pre-approved as the Project Contractor, the TI
Contractor, and the Greenhouse Contractor; and (iii) Bartholomew Associates,
Inc. has been pre-approved as the Greenhouse Architect. For purposes of this
Work Letter, the Project Architect and the TI Architect may be referred to
collectively as the "PRIMARY ARCHITECTS", the Project Architect, the TI
Architect, and the Greenhouse Architect may be referred to collectively as the
"ARCHITECTS", the Project Contractor, the TI Contractor, and the Greenhouse
Contractor may be referred to collectively as the "CONTRACTORS", and the
Architects and the Contractors may be referred to generally as "DEVELOPERS".
2. Building Work.
-------------
2.1. Base Building Work Defined. As used herein, "BASE BUILDING WORK"
--------------------------
shall mean all of the work required to design and construct, in their entirety,
the improvements described on Schedule B attached hereto, and shall include on-
site surface parking of not less than 140 spaces (as may be limited by, and
subject to, any changes mandated by Legal
2
<PAGE>
Requirements (including zoning restrictions) that may be enacted or first
effective after the Effective Date and to any changes in the design of the
Building requested or approved by Tenant and made after the Effective Date).
2.2. Tenant Improvements Defined. As used herein, "TENANT
---------------------------
IMPROVEMENTS" shall mean all improvements to the Building desired by Tenant of a
fixed and permanent nature, exclusive of the Base Building Work. Other than the
Base Building Work and the Tenant Improvements (collectively, the "BUILDING
WORK") and the Greenhouse, Landlord shall have no obligation whatsoever with
respect to the finishing, outfitting, equipping, or furnishing of the Premises
for Tenant's use and occupancy.
2.3. Building Design Program. Within 5 business days after the mutual
-----------------------
execution of this Work Letter, Tenant shall prepare and deliver to Landlord and
the Primary Architects outline specifications detailing Tenant's requirements
for the Building Work (the "BUILDING DESIGN PROGRAM"). Within 5 business days
after Landlord's and the Primary Architects' receipt of the Building Design
Program, Landlord shall deliver to Tenant any written objections, questions,
and/or comments (generally, "COMMENTS") that Landlord and/or the Primary
Architects may have regarding such Building Design Program. Within 5 business
days after Tenant's receipt of any such Comments, Tenant shall cause the
Building Design Program to be revised to address such Comments and to be
resubmitted to Landlord and the Primary Architects for approval. Any disputes in
connection with such Comments shall be resolved in accordance with Section 4.
2.4. Building Schematic Plans. Within 15 business days after the
------------------------
Building Design Program has been approved, Landlord shall cause the Primary
Architects to prepare and submit to Tenant for Tenant's review and comment
schematic drawings for the development of the Building Work (the "BUILDING
SCHEMATIC PLANS"). Tenant shall be solely responsible for ensuring that the
Building Schematic Plans reflect Tenant's requirements for the Building Work.
Within 5 business days after Tenant's receipt of the Building Schematic Plans,
Tenant shall deliver to Landlord and the Primary Architects any Comments that
Tenant may have regarding the Building Schematic Plans; provided, however, that
Tenant may not disapprove any matter that is substantially consistent with the
Building Design Program without submitting a "CHANGE REQUEST" (as defined in
Section 6.1). Within 10 business days after Landlord's and the Primary
Architects' receipt of any such Comments, Landlord and the Primary Architects
shall consider all such Comments in good faith and shall notify Tenant how
Landlord proposes to respond to such Comments. Any disputes in connection with
such Comments shall be resolved in accordance with Section 4.
2.5. Building Design Development Plans. Within 15 business days after
---------------------------------
the Building Schematic Plans have been approved, Landlord shall cause the
Primary Architects to prepare and submit to Tenant for Tenant's review and
comment design development plans and specifications for the development of the
Building Work (the "BUILDING DESIGN DEVELOPMENT PLANS"). Tenant shall be solely
responsible for ensuring that the Building Design Development Plans reflect
Tenant's requirements for the Building Work. Within 5 business days after
Tenant's receipt of the Building Design Development Plans, Tenant shall deliver
to Landlord and the Primary Architects any Comments that Tenant may have
regarding the Building Design
3
<PAGE>
Development Plans; provided, however, that Tenant may not disapprove any matter
that is substantially consistent with the Building Schematic Plans without
submitting a Change Request. Within 10 business days after Landlord's and the
Primary Architects' receipt of any such Comments, Landlord and the Primary
Architects shall consider all such Comments in good faith and shall notify
Tenant how Landlord proposes to respond to such Comments. Any disputes in
connection with such Comments shall be resolved in accordance with Section 4.
2.6. Building Construction Drawings. Within 45 business days after
------------------------------
the Building Design Development Plans have been approved, Landlord shall cause
the Primary Architects to prepare and deliver to Tenant for Tenant's review and
comment construction plans, specifications, and drawings for the Building Work
("BUILDING CONSTRUCTION DRAWINGS"), which Building Construction Drawings shall
be prepared substantially in accordance with the Building Design Development
Plans. Tenant shall be solely responsible for ensuring that the Building
Construction Drawings reflect Tenant's requirements for the Building Work.
Within 5 business days after Tenant's receipt of the Building Construction
Drawings, Tenant shall deliver to Landlord and the Primary Architects any
Comments that Tenant may have regarding the Building Construction Drawings;
provided, however, that Tenant may not disapprove any matter that is
substantially consistent with the Building Design Development Plans without
submitting a Change Request. Within 10 business days after Landlord's and the
Primary Architects' receipt of any such Comments, Landlord and the Primary
Architects shall consider all such Comments in good faith and shall notify
Tenant how Landlord proposes to respond to such Comments. Any disputes in
connection with such Comments shall be resolved in accordance with Section 4.
Once approved by Tenant, Landlord shall not materially modify the Building
Construction Drawings except as may be reasonably required in connection with
the issuance of any of the "PERMITS" (as defined in Section 5.2). Landlord will
give Tenant prompt Notice of any such material modifications.
3. Greenhouse.
----------
3.1. Greenhouse Design Program. Within 5 business days after the
-------------------------
mutual execution of this Work Letter, Tenant shall prepare and deliver to
Landlord and the Greenhouse Architect outline specifications detailing Tenant's
requirements for the Greenhouse (the "GREENHOUSE DESIGN PROGRAM"). Within 5
business days after Landlord's and the Greenhouse Architect's receipt of the
Greenhouse Design Program, Landlord shall deliver to Tenant any Comments that
Landlord may have regarding such Greenhouse Design Program. Within 5 business
days after Tenant's receipt of any such Comments, Tenant shall cause the
Greenhouse Design Program to be revised to address such Comments and to be
resubmitted to Landlord and the Greenhouse Architect for approval. Any disputes
in connection with such Comments shall be resolved in accordance with Section 4.
3.2. Greenhouse Schematic Plans. Within 15 business days after the
--------------------------
Greenhouse Design Program has been approved, Tenant shall cause the Greenhouse
Architect to prepare and submit to Landlord for Landlord's review and comment
schematic drawings for the development of the Greenhouse (the "GREENHOUSE
SCHEMATIC PLANS"). Tenant shall be solely responsible for ensuring that the
Greenhouse Schematic Plans reflect Tenant's requirements for the Greenhouse.
Within 5 business days after Landlord's receipt of the Greenhouse Schematic
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Plans, Landlord shall deliver to Tenant and the Greenhouse Architect any
Comments that Landlord may have regarding the Greenhouse Schematic Plans;
provided, however, that Landlord may not disapprove any matter that is
substantially consistent with the Greenhouse Design Program. Within 10 business
days after Tenant's and the Greenhouse Architect's receipt of any such Comments,
Tenant and the Greenhouse Architect shall consider all such Comments in good
faith and shall notify Landlord how Tenant proposes to respond to such Comments.
Any disputes in connection with such Comments shall be resolved in accordance
with Section 4. The cost of any changes to the Building Construction Drawings
that become necessary because of any changes to the Greenhouse Schematic Plans
requested by Landlord shall be payable by Landlord.
3.3. Greenhouse Design Development Plans. Within 15 business days
-----------------------------------
after the Greenhouse Schematic Plans have been approved, Tenant shall cause the
Greenhouse Architect to prepare and submit to Landlord for Landlord's review and
comment design development plans and specifications for the development of the
Greenhouse (the "GREENHOUSE DESIGN DEVELOPMENT PLANS"). Tenant shall be solely
responsible for ensuring that the Greenhouse Design Development Plans reflect
Tenant's requirements for the Greenhouse. Within 5 business days after
Landlord's receipt of the Greenhouse Design Development Plans, Landlord shall
deliver to Tenant and the Greenhouse Architect any Comments that Landlord may
have regarding the Greenhouse Design Development Plans; provided, however, that
Landlord may not disapprove any matter that is substantially consistent with the
Greenhouse Schematic Plans. Within 10 business days after Tenant's and the
Greenhouse Architect's receipt of any such Comments, Tenant and the Greenhouse
Architect shall consider all such Comments in good faith and shall notify
Landlord how Tenant proposes to respond to such Comments. Any disputes in
connection with such Comments shall be resolved in accordance with Section 4.
The cost of any changes to the Building. Construction Drawings that become
necessary because of any changes to the Greenhouse Design Development Plans
requested by Landlord shall be payable by Landlord.
3.4. Greenhouse Construction Drawings. Within 45 business days after
--------------------------------
the Greenhouse Design Development Plans have been approved, Tenant shall cause
the Greenhouse Architect to prepare and deliver to Landlord for Landlord's
review and comment construction plans, specifications, and drawings for the
Greenhouse ("GREENHOUSE CONSTRUCTION DRAWINGS"), which Greenhouse Construction
Drawings shall be prepared substantially in accordance with the Greenhouse
Design Development Plans. Tenant shall be solely responsible for ensuring that
the Greenhouse Construction Drawings reflect Tenant's requirements for the
Greenhouse. Within 10 business days after Landlord's receipt of the Greenhouse
Construction Drawings, Landlord shall deliver to Tenant and the Greenhouse
Architect any Comments that Landlord may have regarding the Greenhouse
Construction Drawings; provided, however, that Landlord may not disapprove any
matter that is substantially consistent with the Greenhouse Design Development
Plans. Within 10 business days after Tenant's and the Greenhouse Architect's
receipt of any such Comments, Tenant and the Greenhouse Architect shall consider
all such Comments in good faith and shall notify Landlord how Tenant proposes to
respond to such Comments. Any disputes in connection with such Comments shall be
resolved in accordance with Section 4. The cost of any changes to the Building
Construction Drawings that become necessary because of any changes to the
Greenhouse Construction Drawings requested
5
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by Landlord shall be payable by Landlord. Once approved by Landlord, Tenant
shall not materially modify the Greenhouse Construction Drawings except as may
be reasonably required in connection with the issuance of any of the Permits.
Tenant will give Landlord prompt Notice of any such material modifications.
4. Approval and Completion. Landlord and Tenant hereby acknowledge that Q)
-----------------------
the Building Construction Drawings must be completed and approved not later than
December 31,1999, in order for the Building Work to be "SUBSTANTIALLY COMPLETE"
(as defined in Section 5.3) by the Target Commencement Date, and (ii) the
Greenhouse Construction Drawings must be completed and approved not later than
December 31, 1999, in order for the Greenhouse to be Substantially Complete by
the Target Commencement Date (the Building Construction Drawings and the
Greenhouse Construction Drawings may be referred to collectively as the
"CONSTRUCTION DRAWINGS"). If there is any dispute regarding the design of the
Building Work or the Greenhouse that is not settled within 5 business days after
Notice of such dispute is delivered by one party to the other, (x) Landlord
shall have the right to make the final decision if the dispute concerns the
design of the Base Building Work, provided Landlord acts reasonably and such
final decision is either consistent with or a reasonable compromise between
Landlord's and Tenant's positions with respect to such dispute, and (y) Tenant
shall have the right to make the final decision if the dispute concerns the
design of the Tenant Improvements or the Greenhouse, provided Tenant acts
reasonably and such final decision is either consistent with or a reasonable
compromise between Landlord's and Tenant's positions with respect to such
dispute. All costs and expenses resulting from any final decision with respect
to the Building Work shall be payable out of the "BUILDING FUND" (as defined in
Section 7.5) and resulting from any final decision with respect to the
Greenhouse shall be payable out of the "GREENHOUSE FUND" (as defined in Section
7.8). Any changes to the Construction Drawings requested by Tenant following
Landlord's and Tenant's approval of same shall be processed as provided in
Section 6 hereof.
5. Performance of Landlord's Work.
------------------------------
5.1. Definition of Landlord's Work. As used herein, "LANDLORD'S WORK"
-----------------------------
shall mean the work of constructing the Building Work and the Greenhouse.
5.2. Permitting and Commencement of Landlord's Work. Once the
----------------------------------------------
Building Construction Drawings have been approved, Landlord shall commence
construction of the Base Building Work upon obtaining a building permit
authorizing the construction of the Base Building Work as contemplated in this
Work Letter (the "BASE BUILDING PERMIT"). Tenant shall cooperate and assist
Landlord in obtaining the Base Building Permit, the cost of which shall be
payable from the Building Fund. Thereafter, Landlord shall commence construction
of the Tenant Improvements upon the later of (a) the date that Landlord obtains
a building permit authorizing the construction of the Tenant Improvements as'
contemplated in this Work Letter (the "TI PERMIT"), and (b) the date that the
Base Building Work has been sufficiently completed such that the work of
constructing the Tenant Improvements can be efficiently performed. Tenant shall
cooperate and assist Landlord in obtaining the TI Permit, the cost of which
shall be payable from the Building Fund. Once the Greenhouse Construction
Drawings have been approved, Landlord shall commence construction of the
Greenhouse upon the later of (x) the date that Landlord obtains a building
permit authorizing the construction of the Greenhouse as
6
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contemplated in this Work Letter (the "GREENHOUSE PERMIT"), and (y) the date
that the Base Building Work has been sufficiently completed such that the work
of constructing the Greenhouse can be efficiently performed. Tenant shall
cooperate and assist Landlord in obtaining the Greenhouse Permit, the cost of
which shall be payable from the Greenhouse Fund. If any governmental or
quasi-governmental authorities having jurisdiction over the performance of any
portion of Landlord's Work (a "GOVERNMENTAL AUTHORITY") or any permit, license,
or approval required in connection therewith shall impose terms or conditions on
the Base Building Permit, the TI Permit, or the Greenhouse Permit (which may be
referred to collectively as the "PERMITS") that: (i) are inconsistent with
Landlord's obligations under this Work Letter; (ii) are substantially
inconsistent with any of the Construction Drawings; (iii) materially increase
the cost of performing Landlord's Work; or (iv) will materially delay the
performance of Landlord's Work, Landlord and Tenant shall reasonably and in good
faith seek means by which to mitigate or eliminate any such adverse terms or
conditions.
5.3. Completion of Landlord's Work. In recognition and consideration
-----------------------------
of the fact that the Building, the Tenant Improvements, and the Greenhouse are
yet to be designed and/or constructed, the parties to this Work Letter hereby
agree that Landlord may make "MINOR VARIATIONS" (as defined below) in the size,
design, engineering, configuration, and placement of any portion of Landlord's
Work, and such Minor Variations shall not render the Lease void or voidable nor
give Tenant the right to any reduction or abatement in Rent, notwithstanding
anything contained in this Work Letter or any rule of law or equity to the
contrary. On or before the Commencement Date (subject only to "TENANT CAUSED
DELAYS" (as defined in Section 5.6) and delays cause by Force Majeure ("FORCE
MAJEURE DELAYS")), Landlord shall substantially complete or cause to be
substantially completed Landlord's Work in accordance with the Permits, and
shall obtain at least a temporary certificate of occupancy for the Building and
the Greenhouse that will allow Tenant to use and occupy such Building and
Greenhouse for substantially the purposes contemplated in the Permitted Use
(collectively, the "TEMPORARY CERTIFICATE"), subject to Minor Variations and
customary "punch list" items of a non-material nature that do not adversely
affect Tenant's use or occupancy of the Building and the Greenhouse for
substantially the purposes contemplated in the Permitted Use or the validity of
the Temporary Certificate ("SUBSTANTIALLY COMPLETE" or "SUBSTANTIAL
COMPLETION"); provided, however, that Landlord shall have no obligation to
obtain or maintain, and shall not obtain or maintain, any permits, licenses,
approvals, certificates, or other entitlements necessary or appropriate to
Tenant's specific use of the Premises or the conduct of Tenant's specific
business operations on the Premises. Upon the Substantial Completion of
Landlord's Work, each Architect shall be required to execute and deliver, for
the benefit of Tenant and Landlord, a Certificate of Substantial Completion in
the form of the American Institute of Architects document G704. For purposes of
this Work Letter, "MINOR VARIATIONS" shall mean any modifications reasonably
required: (i) to comply with all applicable Legal Requirements (including the
North Carolina State Building Code, as adopted by the City of Durham (the
"CODE")) and/or to obtain or to comply with any required permit (including the
Permits); (ii) to comply with any request by the Tenant for modifications to
Landlord's Work; (iii) to make reasonable, but minor, adjustments in order to
comport with good design, engineering, and construction practices; or (iv) to
make reasonable adjustments for field deviations or conditions encountered
during the performance of Landlord's Work.
7
<PAGE>
5.4. Selection of Materials, Etc. Where more than one type of
---------------------------
material or structure is indicated on any of the Construction Drawings approved
by Landlord and Tenant, the option will be within Landlord's reasonable
discretion as to the Building Work and the option will be within Tenant's
reasonable discretion as to the Greenhouse. As to all building materials and
equipment that Landlord is obligated to supply under this Work Letter, Landlord
shall select the manufacturer thereof in Landlord's reasonable discretion.
5.5. Delivery of the Premises. When Landlord's Work is Substantially
------------------------
Complete, subject to the remaining terms and provisions of this Section, Tenant
shall accept the Premises in their then existing condition. Tenant's taking
possession and acceptance of the Premises shall not constitute a waiver of: (i)
any warranty, including those with respect to workmanship (including
installation of equipment) or material (exclusive of equipment provided directly
to Tenant by manufacturers), (ii) any non-compliance of Landlord's Work with
Legal Requirements (including the Code), or (iii) any claim that Landlord's Work
was not completed substantially in accordance with any of the Construction
Drawings (subject to Minor Variations and such other changes as are permitted
hereunder) (collectively, a "CONSTRUCTION DEFECT"). Tenant shall have 1 year
after Substantial Completion within which to notify Landlord of any such
Construction Defect discovered by Tenant, and Landlord shall use reasonable
efforts to remedy or cause the responsible contractor to remedy any such
Construction Defect within 30 days thereafter. Notwithstanding the foregoing,
Landlord shall not be in default under the Lease if:
(a) with respect to Construction Defects that Landlord reasonably
determines, in good faith, involve or may involve structural components of the
Premises or pose or may pose a significant risk of personal injury or
substantial property damage ("SERIOUS CONSTRUCTION DEFECTS"), the applicable
contractor, despite Landlord's reasonable efforts, fails to remedy such
Construction Defect within such 30-day period, but Landlord, within 30 days
thereafter, commences and diligently and continuously pursues such remedial
action to completion, at Landlord's sole cost and expense;
(b) with respect to Construction Defects that Landlord reasonably
determines, in good faith, are not Serious Construction Defects or involve
Tenant's Property, the applicable contractor, despite Landlord's reasonable
efforts, fails to remedy such Construction Defect within such 30-day period, in
which case Landlord shall have no further obligation with respect to such
Construction Defect other than to cooperate, at no cost to Landlord, with Tenant
should Tenant elect to pursue a claim against such contractor, provided that
Tenant indemnifies and holds Landlord harmless from and against any liability,
loss, cost, damage or expense in connection with any such claim; or
(c) with respect to any part of Landlord's Work, any action by Tenant
to the extent such action results in the invalidation of any otherwise
enforceable warranty or bond that would cover the cost of remedying such
Construction Defect.
Any determination made by Landlord pursuant to paragraph (a) or (b) above shall
be deemed reasonable and in good faith if based on advice received by Landlord
from an independent and duly licensed design or construction consultant (a
"DEFECT CONSULTANT"). Tenant may ask a
8
<PAGE>
Defect Consultant to provide written confirmation of the advice given Landlord
in connection with a determination by Landlord that a specific Construction
Defect is not a Serious Construction Defect if, and only if, (i) Tenant gives
Landlord Notice of such desire within 3 business days after receiving Notice of
Landlord's determination, and (ii) Tenant is solely responsible for any fee,
cost, charge, or other assessment imposed by the Defect Consultant for providing
such written confirmation; provided, however, that Tenant understands and agrees
that Landlord's waiver of the potential conflict of interest facing the Defect
Consultant shall be strictly limited to the advice, and only the advice, given
Landlord in the specific instance in question and shall not apply, under any
circumstances, to any other advice or matters that may be the subject of the
services provided to Landlord by the Defect Consultant.
Landlord shall use commercially reasonable efforts to cause the following
to be included in the agreements ("DEVELOPMENT AGREEMENTS") entered into with
each Developer other than the Greenhouse Architect, and Tenant shall use
commercially reasonable efforts to cause the following to be included in the
Development Agreement entered into with the Greenhouse Architect: (i) an express
statement or agreement by each such Developer that Tenant (if Landlord is the
contracting party) or Landlord (if Tenant is the contracting party) is an
"intended third party beneficiary" with respect to all express representations
and warranties contained in such Developer's Development Agreement and with
respect to all warranties implied, at law or in equity, from the relationship
created by such Developer's Development Agreement or from the work performed by
or on behalf of such Developer pursuant to such Developer's Development
Agreement; (ii) express representations and warranties from each Developer that
are "industry standard" for such professionals when providing services to
Similar Facilities in the Sub-Market, which representations and warranties also
shall be expressly assignable to Tenant (if Landlord is the contracting party)
or Landlord (if Tenant is the contracting party) and, as to each Architect,
shall include, but not be limited to, a representation or warranty that the
Construction Drawings prepared by or on behalf of such Architect comply with all
applicable Legal Requirements (including the Code), subject to Minor Variations
and such other changes as are permitted hereunder; (iii) as to the Project
Architect, an express requirement that the Project Architect obtain and/or
maintain errors and omissions insurance with a minimum limit of not less than
$2,000,000.00; (iv) as to each Developer, an express requirement that Tenant (if
Landlord is the contracting party) or Landlord (if Tenant is the contracting
party) be added as an additional insured under any insurance for which the
contracting party is to be named an additional insured; and (v) as to each
Contractor, an express requirement that such Contractor direct all manufacturers
supplying equipment to be installed in the Building or the Greenhouse to name
both Landlord and Tenant as the parties entitled to the benefits of the
manufacturers' equipment warranties. In all events, Tenant shall be entitled to
receive the benefit of all design and construction warranties and all
manufacturers' equipment warranties for equipment installed in the Building or
the Greenhouse, and Landlord, if requested by Tenant, will cooperate with Tenant
in obtaining the benefit of all such warranties (subject to the limitations
described in paragraphs (a), (b), and (c) above). If requested by Tenant,
Landlord shall use commercially reasonable efforts to obtain extended warranties
from the manufacturers and suppliers of any equipment to be installed in the
Building or the Greenhouse, provided that the cost of any such extended
warranties shall be subject to Tenant's approval and, unless paid directly by
Tenant, at Tenant's option, shall be paid solely out of the Building Fund for
equipment installed in the Building and shall be paid solely out of the
Greenhouse Fund for equipment installed in the
9
<PAGE>
Greenhouse. Within 5 days after receiving Notice from Tenant identifying punch
list items, Landlord shall undertake the correction of such punch list items and
shall complete, or cause to be completed, the correction of all punch list items
within 20 days thereafter; provided, however, if the nature of the punch list
items are such that they reasonably require more than 20 days to correct, then
Landlord shall not be deemed to be in default hereunder if Landlord commences
such correction within said 20-day period and thereafter diligently pursues the
same to completion; provided further, however, that such correction shall be
completed no later than 45 days from the date of Tenant's Notice regarding punch
list items (subject to Force Majeure Delays).
5.6. Commencement Date Delay. The Commencement Date shall occur when
-----------------------
Landlord's Work has been Substantially Completed (the "COMPLETION DATE"), except
to the extent that completion of Landlord's Work shall have been actually
delayed by any one or more of the following causes (a "TENANT CAUSED DELAY"):
(a) Tenant's Representative was not available to give or receive
any Communication (in the manner required under the notice provisions contained
in Section 44(a) of the Lease) or to take any other action required to be taken
by Tenant hereunder;
(b) Any Change Request, whether or not the Change that is the
subject of the Change Request is actually performed;
(c) Construction of any Change;
(d) Tenant's request for materials, finishes, or installations
requiring unusually long lead times;
(e) Tenant's delay in reviewing, revising, providing Comments, or
approving specifications, plans, drawings, or other materials beyond the periods
set forth herein;
(f) Tenant's delay in providing information critical to the
normal progression of Landlord's Work (Tenant shall provide such information as
soon as reasonably possible, but in no event longer than 1 week after receipt of
any request for such information from Landlord that is transmitted in the manner
required under the notice provisions contained in Section 44(a) of the Lease);
(g) Tenant's delay in making payments to Landlord for "EXCESS
BUILDING COSTS" (as defined in Section 7.5) or "EXCESS GREENHOUSE COSTS" (as
defined in Section 7.8) or
(h) Any other act or omission by Tenant or its agents,
contractors, or persons employed by any of such persons.
If the Commencement Date is delayed for any of the foregoing reasons, then
Landlord shall cause the Project Architect (with respect to the Base Building
Work), the TI Architect (with respect to the Tenant Improvements), and the
Greenhouse Architect (with respect to the
10
<PAGE>
Greenhouse) to certify the date on which Landlord's Work would have been
Substantially Completed but for such Tenant Caused Delay and such certified date
shall be the Commencement Date under the Lease.
6. Changes. Any changes requested by Tenant to Landlord's Work ("CHANGES")
-------
after the mutual approval of any of the Construction Drawings shall be requested
and instituted in accordance with the provisions of this Section and shall be
subject to the written approval of Landlord and the appropriate Architect, such
approval not to be unreasonably withheld, conditioned, or delayed.
6.1. Tenant's Right to Request Changes. Tenant shall request Changes,
---------------------------------
if any, by giving Notice to Landlord in substantially the same form as the AIA
standard change order form (a "CHANGE REQUEST"), which Change Request shall
detail the nature and extent of any such Change. Tenant's Representative must
sign such Change Request. Landlord, before proceeding with any Change, shall use
commercially reasonable efforts to respond to Tenant as soon as reasonably
possible with an estimate of: (i) the period of time, if any, that the Change
will extend the date on which Landlord's Work will be Substantially Complete;
and (ii) the architectural and engineering fees and costs that will be incurred
to analyze such Change Request. Within 10 business days after Landlord's receipt
of the Change Request (or such longer period of time as is reasonably required
depending on the extent of the Change Request), Landlord shall submit to Tenant
a written analysis of the additional cost or savings involved, including,
without limitation, architectural and engineering costs and the period of time,
if any, that the Change will extend the date on which Landlord's Work will be
Substantially Complete. Any such delay in the completion of Landlord's Work
caused by a Change, including any suspension of Landlord's Work while any such
Change is being evaluated and/or designed, shall be a Tenant Caused Delay.
Notwithstanding the foregoing, Landlord's Work may not be suspended as a result
of any Change Request unless specifically approved by Tenant.
6.2. Implementation of Changes. If Tenant: (i) approves in writing
-------------------------
the cost or savings and the estimated extension in the time for completion of
Landlord's Work, if any, and (ii) deposits with Landlord any Excess Building
Costs required in connection with any Change of the Building Work or any Excess
Greenhouse Costs required in connection with any Change of the Greenhouse,
Landlord shall cause the approved Change to be instituted. Notwithstanding any
approval or disapproval by Tenant of any estimate of the delay caused by such
proposed Change, the appropriate Architect's determination of the amount of
Tenant Caused Delay in connection with such Change shall be final and binding on
Landlord and Tenant.
7. Costs.
-----
7.1. Budget for Landlord's Work. Before commencing Landlord's Work,
--------------------------
Landlord shall obtain a detailed budget (the "BUDGET"), by trade, of the costs
incurred or that will be incurred in connection with the design, permitting, and
construction of the Building Work (the "BUILDING COSTS"), and the design,
permitting, and construction of the Greenhouse (the "GREENHOUSE COSTS"). The
Budget shall be based upon the Construction Drawings and shall include a payment
to Landlord of administrative rent ("ADMINISTRATIVE RENT") equal to 2.50% of the
Building Costs and the Greenhouse Costs (collectively, "PROJECT COSTS") for
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administering, monitoring, and inspecting Landlord's Work, which sum shall be
payable from the Building Fund and/or the Greenhouse Fund. Such Administrative
Rent shall include, without limitation, all out-of-pocket costs, expenses, and
fees incurred by or on behalf of Landlord arising from, out of, or in connection
with, such administration, monitoring, and inspection of Landlord's Work.
Landlord shall have the right (but not the obligation) to engage a project or
development manager to assist in performing such administration, monitoring, and
inspection of Landlord's Work and any payments to any such manager (excluding
payments for any services performed by such manager at Tenant's direct request
or direction) shall be payable from Administrative Rent.
7.2. Excess Line Item Costs. If at any time and from time-to-time
----------------------
Landlord reasonably determines that the actual cost of certain services or
materials required for the Building Work will exceed the line item in the Budget
for such services or materials, Landlord shall give Notice to Tenant of same and
Tenant thereafter either shall approve or disapprove the excess line item cost
within 5 business days after Landlord's Notice. If Tenant approves the excess
line item cost, Landlord shall proceed with the Building Work and the excess
line item cost will be included in "BASE CONSTRUCTION COSTS" (as defined in
Section 3(a) of the Lease). If Tenant disapproves the excess line item cost,
Landlord and Tenant shall reasonably and in good faith seek means by which to
mitigate or eliminate such excess line item cost. Any excess line item cost not
approved by Tenant shall not be included in Base Construction Costs.
7.3. Building Allowance. Landlord shall provide to Tenant a building
------------------
allowance ("BUILDING ALLOWANCE") of not more than $155.00 (in increments of
$10.00) per rentable square foot of the Building, provided that under no
circumstances (including an increase in the rentable square footage of the
Building) shall the aggregate amount of the Building Allowance exceed
$8,331,250.00. Within 10 business days after Tenant's receipt of the Budget from
Landlord, Tenant shall give Landlord Notice of how much of the Building
Allowance Tenant has elected to receive from Landlord. Such election shall be
final and binding on Tenant, and may not thereafter be modified without
Landlord's consent, which may be granted or withheld in Landlord's sole and
absolute discretion. If the Budget for the Building Work is greater than the
Building Allowance, Tenant shall deposit with Landlord the difference, in cash,
prior to the commencement of Landlord's Work, for disbursement by Landlord to
pay Building Costs.
7.4. Costs Includable in Building Allowance. The Building Allowance
--------------------------------------
shall be used solely for the payment of design, permitting, and construction
costs in connection with the construction of the Building Work, including,
without limitation, the cost of preparing the Building Design Program, the
Building Schematic Plans, the Building Design Development Plans, and the
Building Construction Drawings, all costs set forth in the Budget, including
Administrative Rent and Landlord's out-of-pocket expenses and other costs
resulting from Tenant Caused Delays and the cost of Changes, to the extent of
the Building Allowance. The items that may be paid for using the Building
Allowance include, without limitation, the shell and core of the Building, the
site improvements appurtenant to the Building, HVAC systems, utility
distribution systems, laboratory benches and casework, and hazardous waste
containment equipment. Notwithstanding anything to the contrary contained
herein, the Building Allowance shall not be used to pay for trade fixtures,
emergency generators or related emergency power
12
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equipment, furniture, personal property, or other non-building system materials
or equipment, including, but not be limited to, biological safety cabinets and
other scientific equipment not incorporated into the Building.
7.5. Excess Building Costs. It is understood and agreed that Landlord
---------------------
is under no obligation to bear any portion of the cost of any of the Building
Work except to the extent of the Building Allowance. If at any time and from
time-to-time Landlord reasonably determines that the remaining Building Costs
under the Budget exceed the remaining unexpended Building Allowance, Landlord
shall give Notice to Tenant of same and Tenant thereafter shall deposit with
Landlord, as a condition precedent to Landlord's obligation to complete the
Building Work, 100% of the then current Building Costs in excess of the
remaining Building Allowance ("EXCESS BUILDING COSTS"). If Tenant fails to
deposit with Landlord, or deposits with Landlord after the date demanded in
Landlord's Notice (which shall not be less than 5 business days after Landlord's
Notice), the amount of any Excess Building Costs, Landlord may suspend
Landlord's Work until the required deposit has been made and shall have all of
the rights and remedies set forth in the Lease for nonpayment of Rent
(including, but not limited to, the right to interest at the Default Rate and
the right to assess a late charge), and for purposes of any litigation
instituted with regard to such amounts the same will be considered Rent. Such
deposits of Excess Building Costs, together with the proceeds of the Building
Allowance, are herein referred to as the "BUILDING FUND". Funds so deposited by
Tenant shall be the first thereafter disbursed to pay Building Costs.
Notwithstanding anything to the contrary set forth in this Section, Tenant shall
be fully and solely liable for Building Costs and the cost of Minor Variations
in excess of the Building Allowance (except as may be provided otherwise in
Section 7.2 above). If upon Substantial Completion of the Building Work and the
payment of all sums due in connection therewith there remains any undisbursed
Building Allowance, Tenant shall be entitled to such undisbursed Building
Allowance solely to the extent of any deposits of Excess Building Costs that
Tenant has actually made with Landlord.
7.6. Greenhouse Loan. Pursuant to Section 42 of the Lease and in
---------------
accordance with the Greenhouse Loan Documents, Landlord is making a loan to
Tenant in the maximum amount of $1,200,000.00 to be used by Tenant solely for
the construction of the Greenhouse (the "GREENHOUSE LOAN").
7.7. Costs Includable in Greenhouse Loan. The Greenhouse Loan shall
-----------------------------------
be used solely for the payment of design, permitting, and construction costs in
connection with the construction of the Greenhouse, including, without
limitation, the cost of preparing the Greenhouse Design Program, the Greenhouse
Schematic Plans, the Greenhouse Design Development Plans, and the Greenhouse
Construction Drawings, all other costs set forth in the Budget, including
Administrative Rent and Landlord's out-of-pocket expenses and other costs
resulting from Tenant Caused Delays and the cost of Changes. Notwithstanding
anything to the contrary contained herein, the Greenhouse Loan shall not be used
to pay for trade fixtures, emergency generators or related emergency power
equipment, furniture, personal property, or other non-building system materials
or equipment, including, but not be limited to, biological safety cabinets and
other scientific equipment not incorporated into the Greenhouse.
13
<PAGE>
7.8. Excess Greenhouse Costs. It is understood and agreed that
-----------------------
Landlord is under no obligation to bear any portion of the cost of the
Greenhouse, and has only the obligation to disburse proceeds of the Greenhouse
Loan in accordance with the terms and conditions of the Greenhouse Loan
Documents. If at any time and from time-to-time Landlord reasonably determines
that the remaining Greenhouse Costs under the Budget exceed the remaining
undisbursed proceeds of the Greenhouse Loan, Landlord shall give Notice to
Tenant of same and Tenant thereafter shall deposit with Landlord, as a condition
precedent to Landlord's obligation to complete the Greenhouse, 100% of the then
current Greenhouse Costs in excess of the remaining undisbursed proceeds of the
Greenhouse Loan ("EXCESS GREENHOUSE COSTS"). If Tenant fails to deposit with
Landlord, or deposits with Landlord after the date demanded in Landlord's Notice
(which shall not be less than 5 business days after Landlord's Notice), the
amount of any Excess Greenhouse Costs, Landlord may suspend Landlord's Work
until the required deposit has been made and shall have all of the rights and
remedies set forth in the Greenhouse Loan Documents for nonpayment of principal,
interest, and other monies due in connection with the Greenhouse Loan
(including, but not limited to, the right to interest at the "DEFAULT INTEREST
RATE" (as defined in the Greenhouse Loan Documents) and the right to assess a
late charge). Such deposit of Excess Greenhouse Costs, together with the
proceeds of the Greenhouse Loan, are herein referred to as the "GREENHOUSE
FUND". Funds so deposited by Tenant shall be the first thereafter disbursed to
pay Greenhouse Costs. Notwithstanding anything to the contrary set forth in this
Section, Tenant shall be fully and solely liable for Greenhouse Costs and the
cost of Minor Variations in excess of the amount of the Greenhouse Loan. If upon
Substantial Completion of the Greenhouse and the payment of all sums due in
connection therewith there remains any undisbursed proceeds of the Greenhouse
Loan, Tenant shall be entitled to such undisbursed proceeds solely to the extent
of any deposits of Excess Greenhouse Costs that Tenant has actually made with
Landlord.
8. Tenant Access.
-------------
8.1. Tenant's Access Rights. Landlord hereby agrees to permit Tenant
----------------------
access to the Building, at Tenant's sole risk and expense, (i) 30 days prior to
the Commencement Date to perform any work ("TENANT'S WORK") required by Tenant
other than Landlord's Work (including, as examples only, installation of
telephones, cables, and, to the extent reasonably practical, trade fixtures and
furniture), provided that such Tenant's Work is coordinated with the TI
Architect and the TI Contractor and complies with the Lease and all other
reasonable restrictions and conditions Landlord may impose, and (ii) prior to
the completion of Landlord's Work, to inspect and observe work in process; all
such access shall be during normal business hours or at such other times as are
reasonably designated by Landlord. Notwithstanding the foregoing, Tenant shall
have no right to enter onto the Premises or the Building unless and until Tenant
shall deliver to Landlord evidence reasonably satisfactory to Landlord
demonstrating that any insurance reasonably required by Landlord in connection
with such pre-commencement access (including, but not limited to, any insurance
that Landlord may require pursuant to the Lease) is in full force and effect.
8.2. No Interference. Neither Tenant nor its employees, consultants,
agents, contractors, and suppliers shall interfere with the performance of
Landlord's Work, nor with any inspections or issuance of final approvals by
Durham County, North Carolina, or the City of
14
<PAGE>
Durham, and upon any such interference, Landlord shall have the right to exclude
Tenant and Tenant's employees, consultants, agents, contractors, and suppliers
from the Premises and the Building until Substantial Completion of Landlord's
Work.
8.3. No Acceptance of Premises. So long as Tenant engages only in the
-------------------------
activities enumerated in Section 8.1, the fact that Tenant, with Landlord's
consent, may enter the Building prior to the date Landlord's Work is
Substantially Complete shall not be deemed an acceptance by Tenant of possession
of the Premises, but in such event Tenant shall indemnify and hold Landlord
harmless from any loss of or damage to Tenant property, completed work,
fixtures, equipment, materials or merchandise, and from liability for death of,
or injury to, any person, caused by the willful misconduct or negligence of
Tenant or its agents.
9. Notification of Delays. Not less than once each calendar month from the
----------------------
date of this Work Letter through the Commencement Date, Landlord shall deliver
to Tenant written notification of the number of days during the immediately
preceding calendar month Landlord's performance under this Work Letter or the
Lease was delayed as a result of Tenant Caused Delays or Force Majeure Delays,
which written notification shall also include a description of the nature of
such Tenant Caused Delay or Force Majeure Delay.
10. Miscellaneous
-------------
10.1. Consents. Whenever consent or approval of either party is
--------
required under this Work Letter, that party shall not unreasonably withhold,
condition, or delay such consent or approval, except as may be expressly set
forth herein to the contrary. Notwithstanding the foregoing, and regardless of
any standard that may be applicable to any consent or approval rights given to
Landlord hereunder, Landlord shall be justified in withholding, and shall not
incur any liability for so withholding, any consent or approval to any action,
document, or matter that Landlord determines, in its sole and absolute
discretion, will or might adversely affect Landlord's status as a "real estate
investment trust".
10.2. Modification. No modification, waiver, or amendment of this
------------
Work Letter or of any of its conditions or provisions shall be binding upon
Landlord or Tenant unless in writing signed by Landlord and Tenant.
10.3. Counterparts. This Work Letter may be executed in any number of
------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute a single agreement with the same effect as if all
parties had signed the same signature page. Any signature page from any
counterpart of this Work Letter, signed only by one party, may be detached from
such counterpart and re-attached to any other counterpart of this Work Letter
that has a signature page signed only by the other party.
10.4. Governing Law. This Work Letter shall be governed by, construed
-------------
and enforced in accordance with the internal laws of the state in which the
Premises are located, without regard to choice of law principles of such State.
15
<PAGE>
10.5. Time of the Essence. Time is of the essence of this Work Letter
-------------------
and of each and all provisions thereof.
10.6. Severability. If any term or provision of this Work Letter is
------------
declared invalid or unenforceable, the remainder of this Work Letter shall not
be affected by such determination and shall continue to be valid and
enforceable.
10.7. Merger. All understandings and agreements, oral or written,
------
heretofore made between the parties hereto and relating to Landlord's Work are
merged in this Work Letter, which alone (but inclusive of provisions of the
Lease incorporated herein and the final approved constructions drawings and
specifications prepared pursuant hereto) fully and completely expresses the
agreement between Landlord and Tenant with regard to the matters set forth in
this Work Letter.
10.8. Interpretation. The normal rule of construction to the effect
--------------
that any ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Work Letter or any schedules or
amendments hereto. Words of any gender used in this Lease shall be held and
construed to include any other gender, and words in the singular number shall be
held to include the plural, unless the context otherwise requires. The captions
inserted in this Work Letter are for convenience only and in no way define,
limit or otherwise describe the scope or intent of this Work Letter, or any
provision hereof, or in any way affect the interpretation of this Work Letter.
10.9. Attorneys Fees. If either Landlord or Tenant reasonably seeks
--------------
legal services with respect to the proper interpretation or enforcement of this
Work Letter, the party receiving substantially the result it sought or defended
(the "PREVAILING PARTY"), whether by award, judgment, stipulation, settlement,
workout, default, or otherwise and whether or not any legal action may have been
instituted or instituted and then voluntarily dismissed, shall be entitled to
recover from the adverse party all reasonable fees and costs incurred by the
Prevailing Party in connection with such legal services ("LEGAL FEES"). Legal
Fees include, without limitation, (i) fees, costs, and expenses of any
engineers, accountants, appraisers, consultants, brokers, and other
professionals or experts retained or consulted by the Prevailing Party, and
other costs and expenses of investigation or analysis incurred by the Prevailing
Party in support of its position, and (ii) all such fees, costs, and expenses
incurred in any aspect of the legal process, whether out-of-court negotiations,
mediation, arbitration, commencement of suit, discovery, law and motion, trial,
appellate proceedings, or any action or participation in, or in connection with,
any case or proceeding under Chapter 7, 11, or 13 of the Bankruptcy Code, 11
U.S.C. Section 101 et seq., or any successor statutes.
10.10. No Third Party Benefits. Landlord and Tenant do not intend by
-----------------------
any provision of this Work Letter to confer any right, remedy, or benefit upon
any third party, and no third party shall be entitled to enforce, or otherwise
shall acquire any right, remedy, or benefit by reason of, any provision of this
Work Letter.
10.11. No Waiver: Remedies Cumulative. No purported waiver of any
------------------------------
provision of this Work Letter shall be binding unless such waiver is in writing
and signed by the party to
16
<PAGE>
be bound. In addition, no waiver of any provision of this Work Letter shall be
deemed, or shall constitute, a waiver of any other provision of this Work
Letter, whether or not similar, nor shall any waiver constitute a continuing
waiver. Further, no failure to exercise and no delay in exercising any power,
right, remedy, or privilege under this Work Letter shall impair such power,
right, remedy, or privilege or shall be deemed, or shall constitute, a waiver of
any default under this Work Letter or acquiescence therein, nor shall any single
or partial exercise of any such power, right, remedy, or privilege preclude any
other or further exercise thereof or of any other power, right, remedy, or
privilege. Finally, all powers, rights, remedies, and privileges existing under
this Work Letter are cumulative, in addition to, and not exclusive of any other
powers, rights, remedies, or privileges otherwise available to the parties to
this Work Letter.
10.12. Incorporation by Reference. All schedules attached hereto are
--------------------------
hereby incorporated into this Lease and made a part hereof. If there is any
conflict between such schedules and the terms of this Work Letter, such
schedules shall control.
10.13. Entire Agreement. This Work Letter is made as a part of and
----------------
pursuant to the Lease and, together with the Lease, constitutes the entire
agreement of the parties with respect to the subject matter hereof. This Work
Letter is subject to all of the terms and limitation set forth in the Lease, and
neither party shall have any rights or remedies under this Work Letter separate
and apart from their respective remedies pursuant to the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter to
be effective on the date first above written.
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a North Carolina corporation
By: /s/ Ian Howes
--------------------------------
Its: Vice President
-------------------------------
ATTEST: /s/ John Ryals
--------------------
Its Asst. Secretary
-----------------
[CORPORATE SEAL]
17
<PAGE>
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: Joel S. Marcus
--------------------------------
Its: Chief Executive Officer
-------------------------------
ATTEST: /s/ Lynn Anne Shapiro
----------------------
Its Asst. Secretary
-----------------
[CORPORATE SEAL]
18
<PAGE>
SCHEDULE A TO WORK LETTER
Development Schedule
--------------------
Event Date
- ----- ----
Execution of Ground Lease 07/ /99
Execution of Lease 07/ /99
Naming of Tenant's Representative 07/ /99
Delivery of specifications for Building
Design Program pursuant to Section 2.3 07/ /99
Delivery of specifications for Greenhouse
Design Program pursuant to Section 3.1 07/ /99
Delivery of final Building
Construction Drawings to Tenant 12/15/99
Final approval of Building Construction
Drawings pursuant to Section 4(ii) 12/31/99
Final approval of Greenhouse Construction
Drawings pursuant to Section 4(u) 12/31/99
Issuance of Base Building Permit 01/01/00
Commencement of
construction of Base Building Work 01/01/00
Issuance of TI Permit 01/01/00
Issuance of Greenhouse Permit 01/01/00
Commencement of
construction of Tenant Improvements 01/01/00
Commencement of
construction of Greenhouse 01/01/00
Substantial Completion of Landlord's Work 06/01/00
Issuance of Temporary Certificate of Occupancy 06/01/00
i
<PAGE>
SCHEDULE B TO WORK LETTER
Base Building Work
------------------
================================================================================
Description of Base Building Work - Shell and Core*
. Concrete Foundations and Floors
. Structural/Steel Frame
. Exterior Walls/Facade/Windows
. Exterior Doors
. Exterior Painting
. Roofing/Fireproofing /Caulking and Sealant
. Roof Hatch
. Shell and Core Mechanical/Plumbing
(Includes roof drains, hose bibs, main service backflow preventer, garage
exhaust (if req'd by Code))
. Shell and Core Electrical
(Main electrical switchgear req'd by Code to service shell only, incl.
req'd safety improvements)
. Shell and Core Fire Sprinklers
(Fire riser to shell for Ordinary Group 2 fire system)
. Loading Area/Dock Bumpers
. Exit Stairs
(As req'd by Code)
. Related Shell Architectural/Engineering Fees; Building Permit and
Inspection Fees
. Builder's Risk Insurance Premiums
================================================================================
Description of Base Building Work - Site Improvements *
. Finished Grading
. Finished Landscape and Hardscape Features
. Irrigation Systems
. Surface Parking and Striping
(Parking provided at or near a ratio of 3 spaces per 1,000 rentable sq.
ft., or as req'd by Code)
. Exterior Lighting
(Parking and landscaped areas)
. Trash Enclosure
. Utilities Stubbed to the Building
(Sewer, water, natural gas, and electricity)
. Fire Hydrants
ii
<PAGE>
. ADA Access and Other Improvements Required by Code
. Concrete Pad for Tenant's Emergency Generator
. Monument Signage
(Tenant responsible for its lettering and graphics)
* All materials and labor shall comply with Code and be "industry standard" for
the Sub-Market
iii
<PAGE>
Exhibit 10.27
-------------
COST SHARING AGREEMENT
This COST SHARING AGREEMENT (this "Agreement") is made as of July 27 1999,
by and between ARE- 104 ALEXANDER ROAD, LLC, a Delaware limited liability
company ("ARE"), and PARADIGM GENETICS, INC., a North Carolina corporation
("PARADIGM"), with reference to the following Recitals:
RECITALS:
A. Concurrently herewith, ARE and Triangle Service Center, Inc., a North
Carolina corporation ("TSC") have entered into that certain Ground Lease
Agreement of even date herewith (the "GROUND LEASE"), wherein TSC, as ground
lessor, ground leased that certain parcel of land located in Durham County,
North Carolina (the "PROPERTY") to ARE, as ground lessee.
B. Concurrently herewith, ARE and Paradigm have entered into that certain
Lease Agreement of even date herewith (the "Lease"), wherein ARE, as landlord,
leased the Property to TSC, as tenant.
C. ARE plans to construct certain improvements on the Property to be
leased by Paradigm.
D. Pursuant to Sections 19(b) and 19(d) of the Ground Lease, ARE has the
right under certain circumstances set forth therein to be reimbursed by TSC.
E. Pursuant to Section 19(d) of the Ground Lease, ARE has the right to
-------------
terminate the Ground Lease.
F. The parties hereto desire to set forth their understanding with regard
to the exercise of such reimbursement and termination rights and the sharing of
costs in connection with the development of the Property.
NOW, THEREFORE, in consideration of the foregoing Recitals, the mutual
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. DEFINED TERMS. All initially capitalized terms not otherwise defined
herein shall have the meanings set forth in the Ground Lease unless the
context clearly indicates otherwise.
2. ALLOCATION OF DISBURSEMENTS OF THE INCREMENTAL COSTS FUND. Pursuant to
Section 19(b) of the Ground Lease, in the event that the presence of the
Pre-Existing Contamination (as defined in the Ground Lease) or Off-site
Originated Contamination (as defined in the Ground Lease) cause ARE or
Paradigm to incur (a) any and all costs and expenses in connection with the
design, construction or operation of the Improvements at the Demised
Premises that would not have been incurred had such Contamination not
existed (including, without limitation, any costs to relocate any existing
monitoring wells,
<PAGE>
the costs of retaining design professionals and environmental consultants
to evaluate such Contamination, the increased cost for additional or
specialized equipment or contractors necessitated because of the presence
of such Contamination, any increased expense incurred because of delays in
construction of the Initial Improvements due to the presence of such
Contamination), (b) the cost of performing any Compliance Action related to
such Contamination incurred by Tenant or Paradigm, or (c) a liquidated
damages amount equal to $3,000 per day (the "DAILY LIQUIDATED AMOUNT") of
delay in the completion of construction of the Initial Improvements
(collectively, "INCREMENTAL COSTS"), then TSC has agreed to reimburse ARE
for such Incremental Costs initially up to the amount of the Incremental
Costs Fund plus, subject to certain reserves, on and after the completion
of the Phase 2 Land Initial Improvements any amount remaining in the
Remediation Fund. Notwithstanding anything to the contrary contained in the
Ground Lease, except as may be expressly provided for in the Lease
(specifically including any rights of Paradigm to receive an abatement of
Rent under the Lease), Paradigm hereby irrevocably waives and relinquishes
(a) any and all rights Paradigm may otherwise have to claim or receive
damages from ARE as a result of delays in the construction of the
Improvements due to the Pre-Existing Contamination or any Off-Site
Originated Contamination in excess of the lesser of (i) the Liquidated
Daily Amount actually paid to Paradigm, (ii) the Liquidated Daily Amount
actually paid by TSC to ARE, (iii) amounts received by Paradigm in
accordance with this Agreement, or (iv) any other amounts paid by TSC to
ARE on account of such delay in the construction of the Improvements due to
Pre-Existing Contamination or any Off-Site Originated Contamination; and
(b) any and all rights Paradigm may otherwise have to claim or receive
consequential damages from ARE as a result of delays in the completion of
construction of the Improvements due to the Pre-Existing Contamination or
any Off-Site Originated Contamination in excess of $75,000 unless and until
the amount of other Incremental Costs are fully reimbursed to ARE from TSC
and then only to the extent amounts remain in the Incremental Costs Fund.
Notwithstanding the foregoing waivers (the "WAIVERS"), Paradigm expressly
reserves any and all rights it may have against TSC; provided, however,
Paradigm hereby indemnifies and agrees to defend and hold ARE harmless from
and against any and all Claims suffered or incurred by ARE as a result of
Paradigm making a Claim against TSC for any of the items covered by the
Waivers. Paradigm further agrees that Paradigm shall not be entitled to be
paid any amounts as consequential damages from ARE as a result of delays in
the construction of the Improvements due to the Pre-Existing Contamination
or any Off-Site Originated Contamination unless such delays in the
construction of the Improvements result in actual delays in the completion
of such Improvements and only if ARE does not exercise the termination
right provided in Section 19(d) of the Ground Lease. Paradigm also agrees
that no amounts shall be paid as consequential damages unless and until the
Initial Improvements have been completed. The agreements set forth in this
Section 2 shall apply in a similar manner to the respective rights of the
parties with respect to the Phase 2 Land Initial Improvements if the Option
(as defined in the Ground Lease) to ground lease the Phase 2 Land is
exercised and the Amendment is executed. ARE and Paradigm hereby agree to
reasonably cooperate with each in order to allow ARE to timely comply with
its obligations to deliver evidence to TSC of Incremental Costs.
2
<PAGE>
3. EXERCISE OF THE TERMINATION RIGHT PURSUANT TO SECTION 19(d) OF THE GROUND
LEASE. On or before the 44th day after the Commencement of Construction of
the Improvements, ARE and Paradigm shall meet and confer with respect to
their respective preferences regarding the exercise of the termination
right pursuant to Section 19(d) of the Ground Lease. ARE and Paradigm
acknowledge and agree that ARE shall not have the right to unilaterally
exercise such termination right unless: (a) Paradigm is in default under
the Lease beyond any applicable cure period; (b) the Incremental Costs
(other than amounts paid as part of the Liquidated Daily Amount) equals or
exceeds $200,000, unless Paradigm irrevocably agrees to reimburse ARE for
such excess and concurrently therewith provides ARE with reasonably
satisfactory assurances of payment therefor; or (c) Paradigm has delivered
to ARE written notice requesting that ARE exercise such termination right.
In the event that ARE desires to exercise the termination right pursuant to
Section 19(d) of the Ground Lease, and Paradigm does not desire to have
such termination right exercised, then so long as (x) Paradigm irrevocably
agrees to assume ARE's entire leasehold interest under the Ground Lease and
all of ARE's obligations thereunder, and (y) Paradigm irrevocably agrees to
reimburse ARE for all of its costs and expenses incurred to date in
connection with the Ground Lease and the development of the Demised
Premises, and provides ARE with reasonably satisfactory assurance of
payment therefor, then ARE will not exercise such termination right and ARE
shall assign its interest under the Ground Lease to Paradigm concurrently
with the payment of such reimbursement. The agreements set forth in this
Section 2 shall apply in a similar manner to the respective rights of the
parties with respect to the Phase 2 Land Initial Improvements if the Option
to ground lease the Phase 2 Land is exercised and the Amendment is
executed.
4. ALLOCATION OF COSTS AFTER TERMINATION PURSUANT TO SECTION 19(d) OF THE
GROUND LEASE. In the event the Ground Lease is terminated pursuant to
Section 19(d) of the Ground Lease, ARE and Paradigm shall cooperate in
determining all costs and expenses incurred by ARE and Paradigm in
connection with the construction and development of the Improvements (the
"ACCOUNTING") and shall complete the Accounting within 30 days after the
termination of the Ground Lease. Based upon the Accounting, all costs and
expenses incurred by ARE and Paradigm in connection with the construction
and development of the Improvements (including the costs associated with
any restoration required pursuant to Section 19(d)) shall be split equally
between ARE and Paradigm, after applying any reimbursement received from
TSC pursuant Section 19(d). Any amounts owed by ARE or Paradigm to the
other in order to split the costs determined in the Accounting shall be
paid within 15 days after the Accounting is completed.
5. GOVERNING LAW. This Agreement and the legal relations between the parties
hereto shall be governed by and construed and enforced in accordance with
the laws of the State of North Carolina, without regard to its principles
of conflicts of law.
6. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
ARE and Paradigm pertaining to the subject matter hereof and supersedes the
Lease and all prior agreements, understandings, letters of intent,
negotiations and discussions, whether oral or written, of the parties, and
there are no warranties, representations or other agreements,
3
<PAGE>
express or implied, made to either party by the other party in connection
with the subject matter hereof except as specifically set forth herein.
7. MODIFICATIONS; WAIVER. No supplement, modification, waiver or termination
of this Agreement shall be binding unless executed in writing by the party
to be bound thereby. No waiver of any provision of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether
or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
8. NOTICES. All notices, consents, requests, reports, demands or other
communications hereunder (collectively, "Notices") shall be in writing and
may be delivered personally, by reputable overnight delivery service or by
facsimile transmission (with in the case of a facsimile transmission,
confirmation by reputable overnight delivery service) to each of the
parties at the addresses set forth in the Lease, as changed from time to
time in accordance with the notice provision contained therein. Notices
given by facsimile transmission shall be deemed to be delivered when
confirmed; and all other Notices shall have been deemed to have been
delivered on the date of delivery or refusal.
9. SEVERABILITY. Any provision or part of this Agreement which is invalid or
unenforceable in any situation in any jurisdiction shall, as to such
situation and such jurisdiction, be ineffective only to the extent of such
invalidity and shall not affect the enforceability of the remaining
provisions hereof or the validity or enforceability of any such provision
in any other situation or in any other jurisdiction.
10. THIRD PARTIES. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or entity, other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason
of this Agreement.
11. COUNTERPARTS. This Agreement may be executed in as many counterparts as
may be deemed necessary and convenient, and by the different parties hereto
on separate counterparts, each of which, when so executed, shall be deemed
an original, but all such counterparts shall constitute one and the same
instrument.
12. HEADINGS. The section headings of this Agreement are for convenience of
reference only and shall not be deemed to modify, explain, restrict, alter
or affect the meaning or interpretation of any provision hereof.
13. CONSTRUCTION. This Agreement shall not be construed more strictly against
one party hereto than against any other party hereto merely by virtue of
the fact that it may have been prepared by counsel for one of the parties.
14. ATTORNEYS' FEES. If any action is brought by either party against the
other party, relating to or arising out of this Agreement, the transaction
described herein or the enforcement hereof, the prevailing party shall be
entitled to recover from the other party reasonable attorneys' fees, costs
and expenses incurred in connection with the prosecution or defense
4
<PAGE>
of such action. For purposes of this Agreement, the term "ATTORNEYS' FEES"
or "ATTORNEYS' FEES AND COSTS" shall mean the fees and expenses of counsel
to the parties hereto, which may include printing, photostating,
duplicating and other expenses, air freight charges, and fees billed for
law clerks, paralegals and other persons not admitted to the bar but
performing services under the supervision of an attorney, and the costs and
fees incurred in connection with the enforcement or collection of any
judgment obtained in any such proceeding. The provisions of this Section
shall survive the entry of any judgment, and shall not merge, or be deemed
to have merged, into any judgment.
5
<PAGE>
[Signatures on next page ]
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
ARE: ARE-104 ALEXANDER ROAD, LLC
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P.
a Delaware limited partnership,
as Managing Member
by: ARE-QRS CORP.,
a Maryland corporation
as General Partner
By: /s/ Lynn Anne Shapiro
-------------------------
Name: Lynn Anne Shapiro
--------------------
Its: General Counsel
--------------------
PARADIGM: PARADIGM GENETICS, INC.,
a North Carolina corporation
By:
-------------------------
Name:
--------------------
Its:
--------------------
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute this Agreement as of the date first above
written.
ARE: ARE-104 ALEXANDER ROAD, LLC
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P.
a Delaware limited partnership,
as Managing Member
by: ARE-QRS CORP.,
a Maryland corporation
as General Partner
By:
-------------------------
Name:
--------------------
Its:
--------------------
PARADIGM: PARADIGM GENETICS, INC.,
a North Carolina corporation
By: /s/ Ian Howes
-------------------------
Name: Ian Howes
-------------------------
Its: Vice President
-------------------------
7
<PAGE>
Exhibit 10.28
-------------
PREPARED BY AND RETURN TO:
McKay, Meyer and Herbert
1801 Century Park East, 25th Floor
Los Angeles, California 90067-2327
Attention: David S. Meyer, Esq.
MEMORANDUM OF LEASE AGREEMENT
This MEMORANDUM OF LEASE AGREEMENT (this "MEMORANDUM") is made as of July
27, 1999, by ARE-104 ALEXANDER ROAD, LLC, a Delaware limited liability company
("LANDLORD"), and PARADIGM GENETICS, INC., a North Carolina corporation
("TENANT").
1. LEASED PREMISES. Landlord and Tenant have entered into that certain
unrecorded Lease Agreement of even date herewith (the "LEASE"), pursuant to
which and pursuant hereto Landlord is leasing to Tenant, and Tenant is leasing
from Landlord, certain improvements (the "LEASED PREMISES") that Landlord has
agreed to cause to be constructed, or to permit to be constructed, on certain
land located in the County of Durham, State of North Carolina, more particularly
described on Exhibit A attached hereto (the "LAND"). The provisions set forth in
the Lease are hereby incorporated into this Memorandum.
2. INITIAL TERM. The initial term of the Lease (the "INITIAL TERM") shall
commence on the "COMMENCEMENT DATE" (as defined below) and shall continue for a
period of 120 months from the 1st day of the 1st full month following the
month in which the Commencement Date occurs. For purposes of the Lease and this
Memorandum, the "COMMENCEMENT DATE" shall be earliest of the following: (i) the
date Landlord "Delivers" (as such term is defined in the Lease) the Leased
Premises "SUBSTANTIALLY COMPLETED" (as such term is defined in the Lease); (ii)
the date Landlord could have Delivered the Leased Premises Substantially
Completed but for "TENANT CAUSED DELAYS" or "FORCE MAJEURE DELAYS" (as such
terms are defined in the Lease); and (iii) the date Tenant conducts any business
in any part of the Leased Premises.
3. TENANT'S OPTION TO EXTEND INITIAL TERM. Tenant has the option to extend
the Initial Term for two successive extension periods of five years each. The
first extension period shall commence on the day immediately after the
expiration of the Initial Term, and the second extension period shall commence
on the day immediately after the expiration of the first extension period.
4. PURPOSE. The purpose of this Memorandum is to give notice of the
existence of the Lease, the parties to the Lease, the description of the Leased
Premises, the Initial Term of the Lease, and Tenant's option to extend the
Initial Term of the Lease. If there is any conflict between the provisions of
the Lease and the provisions of this Memorandum, the provisions of the Lease
shall control.
<PAGE>
5. COUNTERPARTS. This Memorandum may be executed in any number of
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute a single agreement with the same effect as if all
parties had signed the same signature page of the same counterpart. Any
signature page from any counterpart of this Memorandum, signed only by one
party, may be detached from such counterpart and reattached to any other
counterpart of this Memorandum that has a signature page signed only by the
other party.
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
signatories to execute this Memorandum as of the date first written above.
LANDLORD:
ARE-104 ALEXANDER ROAD, LLC, (SEAL)
a Delaware limited liability company
By: ALEXANDRIA REAL ESTATE EQUITIES, L.P., (SEAL)
a Delaware limited partnership, managing member
By: ARE-QRS CORP., (SEAL)
a Maryland corporation, general partner
By: Joel S. Marcus
-----------------------------
Its: Chief Executive Officer
-----------------------------
ATTEST: Lynn Anne Shapiro
----------------------
Its Asst. Secretary
-----------------
TENANT:
PARADIGM GENETICS, INC., (SEAL)
a North Carolina corporation
By: /s/ Ian Howes
-----------------------------
Its: Vice President
-----------------------------
ATTEST: /s/ John Ryals
----------------------
Its Asst. Secretary
-----------------
<PAGE>
STATE OF CALIFORNIA ) LANDLORD'S ACKNOWLEDGMENT
)
COUNTY OF LOS ANGELES )
I, the undersigned Notary Public, certify that Joel S. Marcus personally
came before me this day and acknowledged that he is the Chief Executive Officer
of ARE-QRS Corp., a Maryland corporation (the "CORPORATION"), the General
Partner of Alexandria Real Estate Equities, LP., a Delaware limited partnership
(the "PARTNERSHIP"), the Partnership being the Managing Member of ARE-104
Alexander Road, LLC, a Delaware limited liability company (the "LLC"), and that
by authority duly given and as the act of the Corporation, the foregoing
instrument was signed in its name by Joel S. Marcus as its Chief Executive
Officer, sealed with its corporate seal and attested by Lynn Anne Shapiro as its
(Assistant) Secretary as an act of, and for and on behalf of, the Partnership,
the Partnership acting as Managing Member of the LLC, as aforesaid.
WITNESS my hand and Notarial Stamp/Seal this 25th of July ,1999.
/s/ Shelly A. Kroll
------------------
Notary Public
My commission expires:
8/10/2002
- ---------
[NOTARY SEAL]
Shelly A. Kroll
Commission # 1193061
My Comm. Expires Aug. 10, 2002
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF ORANGE
I, a notary public of the State and County aforesaid, certify that John
Ryals personally came before me this day and acknowledged that he is the
Assistant Secretary of Paradigm Genetics, Inc., a North Carolina corporation,
and that by authority duly given and as the act of the corporation, the
foregoing instrument was signed in its name by Ian A.W. House, its Vice
President, sealed with its corporate seal, and attested by him/her as its
Assistant Secretary.
Witness my hand and notarial stamp or seal this 26th day of July, 1999
/s/ Hannah J. Chase
--------------------
Hannah J. Chase
Notary Public
My Commission Expires:
12/13/2002
- ----------
[NOTARY SEAL]
Hannah J. Chase
Notary Public
My Comission Expires:
12/13/2002
<PAGE>
EXHIBIT A
Legal Description of Land
-------------------------
Being a particular tract or tracts of land located in Durham County, Triangle
Township, Research Triangle Park, North Carolina and being further described
below:
BEGINNING at a point, said point being located the following courses from NC
Geodetic Monument "Triad", said NC Geodetic Monument bearing NC Grid Coordinates
NAD 83 of N:238,772.801 Meters, E:620,488.448 Meters; Thence from said monument,
South 01(degrees)34'26" West a ground distance of 3,011.37 feet to an existing
R/W Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence
with said right-of-way along a curve to the right having a radius of 2846.41
feet, an arc length of 153.75 feet and being subtended by a chord bearing and
distance of South 02(degrees)43'15" West, 153.73 feet to an existing concrete
R/W Monument set in the westerly right-of-way of T.W. Alexander Drive; Thence
leaving said right-of-way, North 87(degrees)20'44" West a distance of 142.69
feet to a point, said point being the POINT AND PLACE OF BEGINNING.
Thence, from the POINT AND PLACE OF BEGINNING South 02(degrees)44'10" West a
distance of 100.85 feet to a point; Thence, North 89(degrees)49'25" West a
distance of 85.25 feet to a point; Thence, South 02(degrees)33'01" West a
distance of 80.34 feet to a point; Thence, North 89(degrees)49'25" West a
distance of 157.55 feet to a point; Thence, South 02(degrees)26'24" West a
distance of 88.04 feet to a point, Thence, North 89(degrees)49'25" West a
distance of 52.18 feet to a point; Thence, South 02(degrees)26'24" West a
distance of 336.73 feet to a point; Thence, North 88(degrees)43'29" West a
distance of 276.76 feet to an existing concrete monument; Thence, North
01(degrees)16'24" East a distance of 330.28 feet to an existing concrete
monument; Thence, North 88(degrees)03'29" West a distance of 22.85 feet to a new
iron pipe; Thence, North 84(degrees)51'33" West a distance of 150.08 feet to an
existing concrete monument; Thence, North 05(degrees)10'14" East a distance of
235.37 feet to a new iron pipe; Thence, South 87(degrees)36'14" East a distance
of 150.23 feet to a new iron pipe; Thence, North 05(degrees)09'46" East a
distance of 16.45 feet to a new iron pipe; Thence, South 87(degrees)36'14" East
a distance of 105.32 feet to a new iron pipe; Thence, North 02(degrees)39'16"
East a distance of 36.22 feet to a new iron pipe; Thence, South
87(degrees)20'44" East a distance of 483.95 feet to the POINT AND PLACE OF
BEGINNING and containing 265,020.77 sq. ft. (6.084 acres), and being shown on a
particular survey or plat entitled "ALTA/ACSM Property Survey - 104 T.W.
Alexander Drive", project number 98321.01, prepared by Barbara H. Mulkey
Engineering, Inc., dated 04/30/99 and revised 07/21/99.
<PAGE>
EXHIBIT 10.29
-------------
TENANT CERTIFICATE AND AGREEMENT
--------------------------------
TO: ING Investment Management, LLC, a Delaware limited liability company,
having an address c/o ING Investment Management LLC, 5780 Powers Ferry
Road, NW, Suite 300, Atlanta, Georgia 30327-4349, together with its
successors and assigns
THIS IS TO CERTIFY THAT:
The undersigned has been advised that Lender intends to make a loan secured
by a first mortgage, deed of trust or deed to secure debt, security agreement
and assignment of rents and leases (the "Mortgage") on those certain premises
commonly known as LPW, Bldg. #102, Suite 122-125 (the "Premises"), in which the
undersigned currently occupies approximately 20,372 square feet of space under a
Standard Lease dated September 7, 1999 (the "Lease") between the undersigned
("Tenant") and Parker-Raleigh Development XXXII, LLC, a North Carolina limited
liability company ("Landlord"). Incident to Lender's proposed loan and mortgage,
and at Lender's request, Tenant hereby certifies as follows:
1. Tenant is the holder of the lessee's interest under the Lease and is in
sole possession of the Premises. Tenant has not subleased all or any part
of the Premises or assigned the Lease or otherwise transferred its interest
in the Lease.
2. The Lease, is in full force and effect, constitutes the entire agreement
between Landlord and Tenant, and has not been modified, changed, altered,
amended or supplemented in any respect (except as may be indicated at the
end of this Paragraph 2) and is the only lease or agreement between Tenant
and Landlord affecting said Premises. Tenant will not enter into any
material modification of the Lease without the prior written consent of
Lender. If none, state "none"
none
--------------------------------------------------------------------------
--------------------------------------------------------------------------
3. The Tenant has accepted and now occupies the Premises and is and has been
open for business in the Premises since September 27, 1999. The conduct of
such business falls within the uses stipulated in the Lease. The Lease term
commenced on September 27, 1999 and is currently scheduled to expire on
September 30, 2002. If there are any rights of extension or renewal
remaining under the terms of the Lease, the same have not, as of the date
of this Tenant Estoppel Certificate, been exercised.
4. Tenant has made no agreements with Landlord or its agents or employees
concerning, and has no right to, free rent, partial rent, rebate of rental
payments or any other type of rental concession (except as may be indicated
at the end of this Paragraph 4). If none, state "none."
none
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE>
5. Tenant is current in payment of all fixed rent and other charges due to be
paid under the Lease, with minimum rent paid in full for the period ending
_________. The monthly minimum (i.e. fixed) rent is $11,527.15. No rent or
other sum payable under the Lease is being paid in arrears. No rent or
other sum payable under the Lease has been paid in advance of the due date
thereof, and Tenant hereby agrees with Lender that it shall not pay any
minimum rent or any other sum due or to be paid under the Lease more than
thirty (30) days in advance of the due date thereof.
6. All of the obligations on the part of Landlord under the Lease to construct
and deliver the Premises and any common areas including parking have been
satisfactorily performed by Landlord and all obligations for the
performance of any construction, work or installation of any equipment,
have been carried out. Tenant has no claim or knowledge of any claim
against the holder of Landlord's interest on account of any default or
failure of performance under the Lease. As of the date hereof, Tenant is
entitled to no offset or deduction in rent and has no claim or defense to
the payment of any obligation under the Lease.
7. Any and all concessions, payments, credits, allowances or abatements for
tenant improvement work due Tenant under the Lease has been paid by the
Landlord or received by Tenant except as follows: If none, state "none."
none
--------------------------------------------------------------------------
--------------------------------------------------------------------------
8. No notice of default under the Lease has been given by Tenant to Landlord;
no notice of default has been received by Tenant from Landlord; and, to the
best of Tenant's knowledge, information and belief, (a) no condition exists
which might give rise to a default under the Lease, and (b) no claim of any
nature exists by Tenant under the Lease against Landlord or the Premises.
9. Neither Tenant nor, to the best knowledge of Tenant, Landlord is in
violation of any exclusive use, radius or non-competition clause in the
Lease or in any Lease of any space in the Property.
10. The Lease contains and Tenant has no outstanding options or rights of first
refusal to purchase the Premises demised by the Lease or any part thereof
or the real property of which such premises are a part.
11. No actions, whether voluntary or otherwise, are pending against Tenant
under the bankruptcy or other insolvency laws of the United States or of
any state thereof.
12. This Lease is, and at all times shall be, subordinate to the Mortgage (as
the same may be modified, amended, consolidated, supplemented, increased,
renewed, extended and/or replaced).
<PAGE>
13. Tenant agrees that in the event of a default by Landlord under the Lease,
Tenant shall provide Lender with thirty (30) days notice and right (but not
the obligation) to cure provided, however, that if Lender elects to cure
and such cure cannot be completed within said thirty (30) day period and
Lender has diligently commended such cure, Lender shall have a reasonable
time thereafter to cure.
14. This certification is made knowing that Lender shall rely upon the truth of
this certificate in making a loan disbursing funds to Landlord. This
certificate may also be relied upon by Borrower and Borrower's counsel,
Lender's counsel and any title company and/or title agent issuing title
insurance with respect to the Mortgage.
Dated effective as of the __11th__ day of _____January_________, 2000.
---- -------
TENANT:
PARADIGM GENETICS, INC.
-----------------------
By: /s/ John A. Ryals
-----------------
Printed Name: John A. Ryals
-------------
Title: CEO, President
--------------
<PAGE>
Exhibit 10.30
Customer No. 1158
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of May 13, 1998, is made by Paradigm Genetics, Inc.
(the "Borrower"), a North Carolina corporation having its principal place of
business and chief executive office at 104 Alexander Drive, Building 2, P.O. Box
14528, Research Triangle Park, North Carolina, 27709-4528 in favor of
Transamerica Business Credit Corporation, a Delaware corporation (the "Lender"),
having its principal place at Riverway II, West Office Tower, 9399 West Higgins
Road, Rosemont, Illinois 60018.
WHEREAS, the Borrower has requested that the Lender make Loans to it from
time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the Lender
to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
-----------
As used herein, the following terms shall have the following meanings, and
shall be equally applicable to both the singular and plural forms of the terms
defined:
Agreement shall mean this Master Loan and Security Agreement together with all
- ---------
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
- --------------
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public holiday
- ------------
or the equivalent for banks in New York City.
Code shall have the meaning specified in Section 8(d).
- ----
Collateral shall have the meaning specified in Section 2.
- ----------
Effective Day shall mean the date on which all of the conditions specified in
- -------------
Section 3.3 shall have been satisfied.
<PAGE>
Equipment shall have the meaning specified in Section 2.
- ---------
Event of Default shall mean any event specified in Section 7.
- ----------------
Financial Statements shall have the meaning specified in Section 6.1.
- --------------------
GAAP shall mean generally accepted accounting principles in the United States of
- ----
America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the Lender to
- -----
the Borrower in accordance with the terms of this Agreement and the Notes.
Loan Documents shall mean, collectively, this Agreement, the Notes, and all
- --------------
other documents, agreements, certificates instruments, and opinions executed and
delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
- -----------------------
adverse change in the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Material Adverse Effect shall mean, with respect to any Person, a material
- -----------------------
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person taken
as a whole.
Note shall mean each Promissory Note made by the Borrower in favor of the
- ----
Lender, as amended, supplemented, or otherwise modified from time to time.
Obligations shall mean all indebtedness, obligations, and liabilities of the
- -----------
Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees, and all
other professionals' fees), costs, expenses, taxes or, otherwise.
Permitted Liens shall mean such of the following as to which no enforcement,
- ---------------
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demand of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course or business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of
<PAGE>
the Borrower or the value of the Equipment; and (d) attachment or judgment liens
that do not constitute an Event of Default.
Person shall mean any individual, sole proprietorship, partnership, limited
- ------
liability partnership, joint venture, trust, unincorporated, organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.
Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
- --------
the Borrower to the lender from time to time.
Solvent means, with respect to any Person, that as of the date to which such
- -------
Person's insolvency is measured:
(a) the fair saleable value of its assets is in excess of the total amount
of its liabilities (including contingent liabilities as valued in accordance
with GAAP) as they become absolute and matured:
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
- -----
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower hereby
assigns and grants to the Lender a continuing general, first priority lien on,
and security interest in, all the Borrower's right, title and interest in and to
the collateral described in the next sentence (the "Collateral") to secure the
payment and performance of all the Obligations. The Collateral consists of all
equipment set forth on all the Schedules delivered from time to time under the
terms of this Agreement (the "Equipment"), together with all present and future
additions, parts, accessories, attachments, repairs, improvements, and
replacements thereof or thereto, and any and all proceeds thereof, including,
without limitation, proceeds of insurance and all manuals, blueprints know-how,
warranties, and records in connection therewith, all rights against suppliers,
warrantors, manufacturers, sellers, or others in connection therewith, and
together with all substitutes for any of the foregoing.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not less than
$75,000, and in no event shall the sum of the aggregate Loans made exceed the
amount of the Lender's written commitment to the Borrower in effect from time to
time. Notwithstanding anything hereto to the contrary, the Lender shall be
obligated to make the initial Loan and each other Loan only after the Lender, in
its sole discretion, determines that the applicable conditions for borrowing
contained in Section 3.3 and 3.4 are satisfied. The timing and financial scope
of Lender's obligations to make Loans hereunder are limited as set forth in a
commitment letter
<PAGE>
executed by Lender and Borrower, dated as of November 23, 1998 and attached
hereto as Exhibit A (the "Commitment Letter").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not directly or
indirectly use any proceeds of the Loans, or cause, assist, suffer or permit the
use of any proceeds of the Loans, for any purpose other than for the purchase,
acquisition, installation, or upgrading of Equipment or the reimbursement of the
Borrower for its purchase, acquisition, installation, or upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject to the
Lender's receipt of the following, each dated the date of the initial Loan or as
of an earlier date acceptable to the Lender, in form and substance satisfactory
to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing all
effective Uniform Commercial Code financing statements naming the Borrower as
debtor and all tax lien, judgment, and litigation searches for the Borrower as
the Lender shall deem necessary or desirable;
(ii) Uniform Commercial Code financing statements (Form UCC-1) duly
executed by the Borrower (naming the Lender as secured party and the Borrower as
debtor and in form acceptable for filing in all jurisdictions that the Lender
deems necessary or desirable to perfect the security interests granted to it
hereunder) and, if applicable, termination statements or other releases duly
filed in all jurisdictions that the Lender deems necessary or desirable to
perfect and protect the priority of the security interests granted to it
hereunder in the Equipment related such initial Loan;
(iii) a Note duly executed by the Borrower evidencing the amount of
such Loan;
(iv) certificates of insurance required under Section 5.4 of this
Agreement together with loss payee endorsements for all such policies naming the
Lender as lender loss payee and as an additional insured;
(v) a copy of the resolutions of the Board of Directors of the
Borrower (or a unanimous consent of directors in lieu thereof) authorizing the
execution, delivery, and performance of this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, attached to
which is a certificate of the Secretary or an Assistant Secretary of the
Borrower certifying (A) that the copy of the resolutions is true, complete, and
accurate, that such resolutions have not been amended or modified since the date
of such certification and are in full force and effect and (B) the incumbency,
names, and true signatures of the officers of the Borrower authorized to sign
the Loan Documents to which it is a party;
<PAGE>
(vi) the opinion of counsel for the Borrower covering such matters
incident to the transactions contemplated by this Agreement as the Lender may
reasonably require; and
(vii) such other agreements and instruments as the Lender deems
necessary in its sole and absolute discretion in connection with the
transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower, after
due inquiry, threatened litigation, proceeding, inquiry, or other action (i)
seeking an injunction or other restraining order, damages, or other relief with
respect to the transactions contemplated by this Agreement or the other Loan
Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses required to be paid
by it to the Lender as of such date.
(d) The security interests in the Equipment related to the initial Loan
granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The obligation of the
Lender to make each Loan is subject to the satisfaction of the following
conditions precedent:
(a) the Lender shall have received the documents, agreements, and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such Loan,
each in form and substance satisfactory to the Lender and its counsel and each
dated the date of such Loan or as of an earlier date acceptable to the Lender;
(b) the Lender shall have received a Schedule of the Equipment related
to such Loan, in form and substance satisfactory to the Lender and its counsel,
and the security interests in such Equipment related to such Loan granted in
favor of the Lender under this Agreement shall have been duly perfected and
shall constitute first priority liens;
(c) all representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;
(d) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the make of the requested Loan
as of the date of such request; and
<PAGE>
(e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
---------------------------------------------
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The Borrower (a) is
duly organized, validly existing, and in good standing under the laws of the
State of its organization, (b) has the power and authority to own its properties
and assets and to transact the businesses in which it is presently, or purposes
to be, engaged, and (c) is duly qualifed and authorized to do business and is in
good standing in every jurisdiction in which the failure to be so qualified
could have a Material Adverse Effect on (i) the Borrower, (ii) the Borrower's
ability to perform its obligations under the Loan Documents, or (iii) the rights
of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery, and performance
by the Borrower of each of the Loan Documents to which it is a party are within
the powers of the Borrower, do not contravene the organizational documents, if
any, of the Borrower, and do not (a) violate any law or regulation, or any order
or decree of any court or governmental authority, (b) conflict with or result in
a breach of, or constitute a default under, any material indenture, mortgage, or
deed of trust or any material lease, agreement, or other instrument binding on
the Borrower or any of its properties, or (c) require the consent, authorization
by, or approval of or notice to or filing or registration with any governmental
authority or other Person. This Agreement is, and each of the other Loan
Documents to which the Borrower is or will be a party, when delivered hereunder
or thereunder, will be, the legal, valid, and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and will be
Solvent upon the completion of all transactions contemplated to occur hereunder
(including, without limitation, the Loan to be made on the Effective Date); the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral other than Permitted Liens; and the
Borrower is, or will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer, and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are outstanding
against the Borrower nor is there now pending or, to the best of the Borrower's
knowledge after diligent inquiry, threatened any litigation, contested claim, or
governmental proceeding by or against the Borrower except judgments and pending
or threatened litigation, contested claims, and governmental proceedings which
would not, in the aggregate, have a Material Adverse Effect on the Borrower.
<PAGE>
SECTION 4.5. NO DEFAULTS. The Borrower is not in default or has not
received a notice of default under any material contract, lease, or commitment
to which it is a party or by which it is bound. The Borrower knows of no
dispute regarding any contract, lease, or commitment which could have a Material
Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, each item of the
Collateral is located at the place of business specified in the applicable
Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has occurred and
is continuing nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except as permitted
herein, none of the Collateral is subject to contractual obligations that may
restrict or inhibit the Lender's rights or abilities to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST. This Agreement
creates a valid and, upon completion of all required filings of financing
statements, perfected first priority and exclusive security interest in the
Collateral, securing the payment of all the Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set forth the true
and correct model number and serial number of each item of Equipment that
constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION All data, reports,
and information heretofore, contemporaneously, or hereafter furnished by or on
behalf of the Borrower in writing to the Lender or for purposes of or in
connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports, and information are dated
or certified and not incomplete by omitting to state any material fact necessary
to make such data, reports, and information not misleading at such time. There
are no facts now known to the Borrower which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect and which have
not been specified herein, in the Financial Statements, or in any certificate,
opinion, or other written statement previously furnished by the Borrower to the
Lender.
SECTION 4.12. PRICE OF EQUIPMENT. The cost of each item of Equipment
does not exceed the fair and usual price for such type of equipment purchased in
like quantity and reflects all discounts, rebates and allowances for the
Equipment (including, without limitation, discounts for advertising, prompt
payment, testing, or other services) given to the Borrower by the manufacturer,
supplier, or any other person.
<PAGE>
SECTION 5. COVENANTS OF THE BORROWER.
-------------------------
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain its
existence and its current yearly accounting cycle, (b) maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, (c) continue in, and limit its
operations to, the same general lines of business as those presently conducted
by it, and (d) comply with all applicable laws and regulations of any federal,
state, or local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in any
event within five days after the Borrower learns of the following, the Borrower
will give written notice to the Lender of (a) any proceeding instituted or
threatened to be instituted by or against the Borrower in any federal, state,
local, or foreign court or before any commission or other regulatory body
(federal, state, local, or foreign) involving a sum, together with the sum
involved in all other similar proceedings, in excess of $50,000 in the
aggregate, (b) any contract that is terminated or amended and which has had or
could reasonably be expected to have a Material Adverse Effect on the Borrower,
(c) the occurrence of any Material Adverse Change with respect to the Borrower,
and (d) the occurrence of any Event of Default or event or condition which, with
notice or lapse of time or both, would constitute an Event of Default, together
with a statement of the action which the Borrower has taken or proposes to take
with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower will
maintain books and records pertaining to the Collateral, in such detail, form,
and, scope as the Lender shall require in its commercially reasonable judgment.
The Borrower agrees that the Lender or its agents may enter upon the Borrower's
premises at any time and from time to time during normal business hours, and at
any time upon the occurrence and continuance of an Event of Default, for the
purpose of inspecting the Collateral and any and all records pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain insurance on the
Collateral under such policies of insurance, with such insurance companies, in
such amounts, and covering such risks as are at all times satisfactory to the
Lender. All such policies shall be made payable to the Lender, in case of loss,
under a standard non-contributory "lender" or "secured party" clause and are to
contain such other provisions as the Lender may reasonably require to protect
the Lender's interests in the Collateral and to any payments to be made under
such policies. Certificates of insurance policies are to be delivered to the
Lender, premium prepaid, with the loss payable endorsement in the Lender's
favor, and shall provide for not less than thirty days' prior written notice to
the Lender, of any alteration or cancellation of coverage. If the Borrower fails
to maintain such insurance, the Lender may arrange for (at the Borrower's
expense and without any responsibility on the Lender's part for) obtaining the
insurance. Unless the Lender shall otherwise agree with the Borrower in writing,
the Lender shall have the sole right, in the name of the Lender or the Borrower,
to file claims under any insurance policies, to receive and give acquittance for
any payments that may be payable thereunder, and to execute any endorsements,
receipts, releases, assignments, reassignments, or other documents that may
<PAGE>
be necessary to effect the collection, compromise, or settlement of any claims
under any such insurance policies.
SECTION 5.5. Taxes. The Borrower will pay, when due, all taxes,
assessments, claims, and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON
COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR IDENTITY. The
Borrower will not (a) change the location of its chief executive office or
establish any place of business other than those specified herein or (b) move or
permit the movement of any item of Collateral from the location specified in the
applicable Schedule, except that the Borrower may change its chief executive
office and keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The Collateral
shall be operated by competent, qualified personnel in connection with the
Borrower's business purposes, for the purpose for which the Collateral was
designed and in accordance with applicable operating instructions, laws, and
government regulations, and the Borrower shall use every reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family, or household
purposes. The Borrower shall procure and maintain in effect all orders,
licenses, certificates, permits,
<PAGE>
approvals, and consents required by federal, state, or local laws or by any
governmental body, agency, or authority in connection with the delivery,
installation, use, and operation of the Collateral. The Borrower shall keep all
of the Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, and will make all repairs and
replacements when and where necessary and practical. The Borrower will not waste
or destroy the Equipment or any part thereof, and will not be negligent in the
care or use thereof. The Equipment shall not be annexed or affixed to or become
part of any realty without the Lender's prior written consent.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly upon
request by the Lender, execute and deliver or use its best efforts to obtain any
document required by the Lender (including, without limitation, warehouseman or
processor disclaimers, mortgagee waivers, landlord disclaimers, or subordination
agreements with respect to the Obligations and the Collateral), give any
notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs incurred in
connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will not in
any way hypothecate or create or permit to exist any lien, security interest,
charge, or encumbrance on or other interest in any of the Collateral, except for
the lien and security interest granted hereby and Permitted Liens which are
junior to the lien and security interest of the Lender, and the Borrower will
not sell, transfer, assign, pledge, collaterally assign, exchange, or otherwise
dispose of any of the Collateral. In the event the Collateral, or any part
thereof, is sold, transferred, assigned, exchanged, or otherwise disposed of in
violation of these provisions, the security interest of the Lender shall
continue in such Collateral or part thereof notwithstanding such sale, transfer,
assignment, exchange, or other disposition, and the Borrower will hold the
proceeds thereof in a separate account for the benefit of the Lender. Following
such a sale, the Borrower will transfer such proceeds to the Lender in kind.
SECTION 5.11 NO LIMITATION ON LENDER'S RIGHTS. The Borrower will not
enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or any
part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the Borrower,
(provided that if an Event of Default has occurred and is continuing the Lender
need not give any notice), the Lender shall have the right at any time to make
any payments and do any other acts the Lender may deem necessary to protect its
security interests in the Collateral,
<PAGE>
including, without limitation, the rights to satisfy, purchase, contest, or
compromise any encumbrance, charge, or lien which, in the reasonable judgment of
the Lender, appears to be prior to or superior to the security interests granted
hereunder, and appear in, and defend any action or proceeding purporting to
affect its security interests in, or the value of, any of the Collateral. The
Borrower hereby agrees to reimburse the Lender for all payments made and
expenses incurred under this Agreement including fees, expenses, and
disbursements of attorneys and paralegals (including the allocated costs of in-
house counsel) acting for the Lender, including any of the foregoing payments
under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct. The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a) promptly (but
in no event later than one Business Day) after its receipt thereof, deliver to
the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain Solvent at
all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not (a) amend
or modify its name, unless the Borrower delivers to the Lender thirty days prior
to any such proposed amendment or modification written notice of such amendment
or modification and within ten days before such amendment or modification
delivers executed Uniform Commercial Code financing statements (in form and
substance satisfactory to the Lender) or (b) merge or consolidate with any other
entity or make any material change in its capital structure, in each case
without the Lender's prior written consent which shall not be unreasonably
withheld.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall take all
such further actions and execute all such further documents and instruments as
the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and
satisfaction in full of all Obligations, the Borrower shall deliver to the
Lender the following financial information.
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as available, but
not later than 120 days after the end of each fiscal year of the Borrower and
its consolidated subsidiaries, the consolidated balance sheet, income statement,
and statements of cash flows and shareholders equity for the Borrower and its
consolidated subsidiaries (the "Financial
<PAGE>
Statements") for such year, reported on by independent certified public
accountants without an adverse qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as available,
but not later than 60 days after the end of each of the first three fiscal
quarters in any fiscal year of the Borrower and its consolidated subsidiaries,
the Financial Statements for such fiscal quarter, together with a certification
duly executed by a responsible officer of the Borrower that such Financial
Statements have been prepared in accordance with GAAP and are fairly stated in
all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of when due any
amount required to be paid by the Borrower under or in connection with any Note
and this Agreement;
(b) any representation or warranty made or deemed made by the Borrower
under or in connection with any Loan Document or any Financial Statement shall
prove to have been false or incorrect in any material respect when made;
(c) the Borrower shall fail to perform or observe (i) any of the
terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14, or
5.15 hereof or (ii) any other term, covenant, or agreement contained in any Loan
Document (other than the other Events of Default specified in this Section 7)
and such failure remains unremedied for the earlier of fifteen days from (A) the
date on which the Lender has given the Borrower written notice of such failure
and (B) the date on which the Borrower knew or should have known of such
failure;
(d) any provision of any Loan Document to which the Borrower is a
party shall for any reason cease to be valid and binding on the Borrower, or the
Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any bankruptcy,
insolvency, arrangement, reorganization, receivership, or similar proceedings
under any federal or state law and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for forty-five days
following the commencement thereof, or any action by the Borrower is taken
authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in indebtedness in (i) the payment of
principal or
<PAGE>
interest on any indebtedness in excess of $50,000 (other than the Obligations)
beyond the period of grace, if any provided in the instrument or agreement under
which such indebtedness was created; or (ii) the observance or performance of
any agreement or condition relating to any such indebtedness or contained in any
instrument or agreement relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such indebtedness to cause, with
the giving of notice if required, such indebtedness to become due prior to its
stated maturity; or (iii) any loan or other agreement under which the Borrower
has received financing from Transamerica Corporation or any of its affiliates;
(i) the Borrower suffers or sustains a Material Adverse Change;
(j) any tax lien, other than a Permitted Lien, is filed of record
against the Borrower and is not bonded or discharged within five Business Days;
(k) any judgment which has had or could reasonably be expected to have
a Material Adverse Effect on the Borrower and such judgment shall not be stayed,
vacated, bonded, or discharged within sixty days;
(1) any material covenant, agreement, or obligation, as determined in
the sole discretion of the Lender, made by the Borrower and contained in or
evidenced by any of the Loan Documents shall cease to be enforceable, or shall
be determined to be unenforceable, in accordance with its terms; the Borrower
shall deny or disaffirm the Obligations under any of the Loan Documents or any
liens granted in connection therewith; or any liens granted on any of the
Collateral in favor of the Lender shall be determined to be void, voidable, or
invalid, or shall not be given the priority contemplated by this Agreement; or
(m) there is a change in more than 35% of the ownership of any equity
interests of the Borrower on the date hereof or more than 35% of such interests
become subject to any contractual, judicial, or statutory lien, charge, security
interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and
be continuing:
(a) The Lender may, without prejudice to any of its other rights
under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and, for that
purpose may enter, with the aid and assistance of any person or persons, any
premises where the Collateral or any part hereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to make additional Loans or
financial accommodations of any kind to the Borrower shall immediately
terminate.
<PAGE>
(d) The Lender may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein (or in any Loan Document) or
otherwise available to it, all the rights and remedies of a secured party under
the applicable Uniform Commercial Code (the "Code") whether or not the Code
applies to the affected Collateral and also may (i) require the Borrower to, and
the Borrower hereby agrees that it will at its expense and upon request of the
Lender forthwith, assemble all or part of the Collateral as directed by the
Lender and make it available to the Lender at a place to be designated by the
Lender that is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Lender's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such other
terms as the Lender may deem commercially reasonable. The Borrower agrees that,
to the extent notice of sale shall be required by law, at least ten days' notice
to the Borrower of the time and place of any public sale or the time after which
any private sale is to be made shall constitute reasonable notification. The
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Lender may adjourn any public or private
sale from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which it
was so adjoined.
(e) All cash proceeds received by the Lender in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Lender, be held by the Lender as collateral for,
or then or at any time thereafter applied in whole or in part by the Lender
against, all or any part of the Obligations in such order as the Lender shall
elect. Any surplus of such cash or cash proceeds held by the Lender and
remaining after the full and final payment of all the Obligations shall be paid
over to the Borrower or to such other Person to which the Lender may be required
under applicable law, or directed by a court of competent jurisdiction, to make
payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
------------------------
SECTION 9.1. NOTICES. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department, and if to the Borrower, then to Paradigm
Genetics, Inc., P.O. Box 14528, 104 Alexander Drive, Building 2, Research
Triangle Park, North Carolina 27709-4528, Attention: Chief Financial Officer or
such other address as shall be designated by the Borrower or the Lender to the
other party in accordance herewith. All such notices and correspondence shall be
effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.
<PAGE>
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the right to
assign any Note or this Agreement or any interest therein unless the Lender
shall have given the Borrower prior written consent and the Borrower and its
assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment or
waiver of any provision of this Agreement and any consent to any departure by
the Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the essence in
each provision of this Agreement of which time is an element. All terms not
defined herein or in a Note shall have the meaning set forth in the applicable
Code, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with any Note, or any term or provision
thereof, and is not dealt with herein with more specificity, this Agreement
shall control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Agreement shall not be relevant in determining the meaning of this Agreement
even though the accepting or acquiescing party had knowledge of the nature of
the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the indefeasible payment in full of the Obligations,
(ii) be binding upon the Borrower and its successors and assigns and (iii)
inure, together with the rights and remedies of the Lender hereunder, to the
benefit of the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law, this
Agreement and the rights and powers granted to the Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations, warranties,
and covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to indemnify and
hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or
<PAGE>
liability shall be due to willful misconduct or gross negligence on the part of
the Lender or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This Agreement may
be executed in counterparts, each of which when so executed and delivered shall
be an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or obligation
under this Agreement or any Note or any other Loan Document shall be invalid,
illegal, or unenforceable in any jurisdiction, the validity, legality, and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender agree
that this Agreement, the Schedule hereto, and the Commitment Letter are the
complete and exclusive statement and agreement between the parties with respect
to the subject matter hereof, superseding all proposals and prior agreements,
oral or written, and all other communications between the parties with respect
to the subject matter hereof. Should there exist any inconsistency between the
terms of the Commitment Letter and this Agreement, the terms of this Agreement
shall prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of all
rights of offset that the Lender may have under Applicable Law, and whether or
not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND
<PAGE>
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement
to be duly executed and delivered by its proper and duly authorized officer as
of the date first set forth above.
PARADIGM GENETICS, INC.
By: /s/ John Ryals
_____________________________________________
Name: John Ryals
Title: President and Chief Executive Officer
Federal Tax ID: 56-2047837
Accepted as of the
14 day of May, 1999
- ----
TRANSAMERICA BUSINESS CREDIT CORPORATION
By_________________________________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
November 23, 1998
Revised
Mr. Geoffrey Grisharn
Chief Financial Officer
Paradigm Genetics, Inc.
P.O. Box 14528
104 Alexander Drive, Building 2
Research Triangle Park, North Carolina 27709-4528
Dear Jeff:
Transamerica Business Credit Corporation - Technology Finance Division
("Lender") is pleased to offer financing for the Equipment described in this
letter to Paradigm Genetics, Inc. ("Borrower"). This Commitment supersedes all
prior correspondence, proposals, and oral or other communications relating to
financing arrangements between Borrower and Lender.
The outline of this offer is as follows:
LENDER: Transamerica Business Credit Corporation
- ------- Technology Finance Division and/or its affiliates,
successors or assigns.
BORROWER: Paradigm Genetics, Inc.
- --------
LOAN AMOUNT: Not to exceed $3,000,000 in the aggregate, of
- ----------- which up to $ 1,200,000 may be for soft
costs.
EQUIPMENT: Laboratory equipment, computer hardware
- --------- and software and office equipment (all subject to
Lender's approval prior to funding) (the
"Equipment").
LOCATION OF EQUIPMENT: North Carolina
- ---------------------
DRAW-DOWN EXPIRATION: No Loans will be funded after December 31, 1999.
- --------------------
SECURITY: Lender shall receive a perfected first
- -------- priority security interest in the Equipment
described above, including, without limitation,
all additions, improvements, repairs,
appurtenances, substitutions and attachments, and
all cash and non-cash proceeds (including
insurance proceeds) of the foregoing.
LOAN TERM: Each Loan Term will commence upon delivery of the
- --------- equipment or upon each delivery of items of
equipment having an aggregate cost
<PAGE>
of not less than $75,000, and will continue
through 48 months from the first day of the month
next following or coincident with commencement of
that Loan Term.
PAYMENT TERMS: Monthly Payments equal to a percentage of the
- ------------- principal amount of each Loan will be payable
monthly in advance, The first Monthly Payment will
be due and payable on or before the comment of
each Loan .
Monthly Payments will be as follows:
Months 1.12 1.0625%
Months 13-48 3.0903%
ADJUSTMENT TO Lender reserves the right to increase the rate set
- ------------- forth above as of the date each Loan Term
PAYMENTS commences proportionally to the change in the
- -------- weekly average of the interest rates of four-year
U.S. Treasury Securities (as published in the Wall
Street Journal) from the week ending November 13,
1998 to the week preceding the commencement of
such Loan Term. As of the date of each Loan Term
commences, the Monthly Payment will be fixed for
that entire Loan Term. A schedule of actual
Monthly Payment amounts will be provided by the
Lender following commencement of each Loan Term.
BALLOON PAYMENT: At the end of the 48 month term, the Borrower
- ---------------- shall be obligated to make one final balloon
payment equal to 10% of the original principal
amount of the Loan, plus any other amounts due and
owing to Lender.
INTERIM PAYMENT: Interim Payment will accrue from the date each
- --------------- Loan Term commences until the next following first
day of a month (unless the Loan Term commences on
the first day of a month). Interim Payment will be
calculated at the daily equivalent of the
currently adjusted Monthly Payment.
INSURANCE: Prior to any delivery of Equipment, the
- --------- Borrower will furnish confirmation of insurance
acceptable to the Lender covering the Equipment
including primary, all risk, physical damage,
property damage and bodily injury with appropriate
loss payee and additional insured endorsements in
favor of the Lender.
CONDITIONS PRECEDENT Each Loan will be subject to the following:
- -------------------- 1. No material adverse change in the financial
TO LENDING: condition, operations or prospects of the
- ---------- Borrower prior to funding. The Lender reserves
the right to rescind any unused portion
<PAGE>
of its commitment in the event of a material
adverse change in the financial condition,
operation or prospects of the Borrower.
2. Completion of the documentation and final
terms of the proposed financing satisfactory
to Lender and Lender's counsel.
3. Results of all due diligence, including lien,
judgment and tax search and other matters
Lender may request shall be satisfactory to
Lender and Lender's counsel.
4. Receipt by Lender of duly executed loan
documentation in form and substance
satisfactory to Lender and its counsel.
5. Lender shall receive a valid and perfected
first priority lien and security interest in
the Equipment and Lender shall have received
satisfactory evidence that there are no liens
on the Equipment except as expressly permitted
herein.
ADDITIONAL COVENANTS: The Borrower will be required to provide quarterly
- --------------------- financial information to Lender. There shall be no
actual or threatened conflict with, or violation
of, any regulatory statute, standard or rule
relating to the Borrower, its present or future
operations, or the Equipment.
Any information supplied by the Borrower shall be
correct and shall not omit any statement necessary
to make the information supplied not be misleading.
There shall be no material breach of the
representations and warranties of the Borrower in
the Loan. The representations shall include that
the Equipment Cost of each item of the Equipment
does not exceed the fair and usual price for such
type of Equipment purchased in the like quantity
purchased of such item and reflects all discounts,
rebates and allowances for the Equipment given to
Borrower by the manufacturer, supplier or nay other
person including, without limitation, discounts for
advertising, prompt payment, testing or other
services.
FEES AND EXPENSES: All costs and expenses incurred by the Lender in
- ----------------- connection with the underwriting and closing of the
Loans will be paid by the Borrower whether or not
any Loans are consummated and funds are advanced by
the Lender.
LAW: This letter and the proposed Loan are intended to
- --- be governed by and construed in accordance with
Illinois law without regard to its conflict of law
provisions.
INDEMNITY: Borrower agrees to indemnify and hold harmless
- --------- Lender, and its officers, directors and employees
against all claims, damages, liabilities and
expenses which may be incurred by or asserted
<PAGE>
against any such person in connection with or
arising out of this letter and the transactions
contemplated hereby, other than claims, damages,
liability, and expense resulting from such person's
gross negligence or willful misconduct.
CONFIDENTIALITY: This letter is delivered to you with the
- --------------- understanding that neither it nor its substance
shall be disclosed publicly or privately to any
third person except those who are in a confidential
relationship to you (such as your legal counsel and
accountants), or where the same is required by law
and then only on the basis that it not be further
disclosed, which conditions Borrower and its agents
agree to be bound by upon acceptance of this
letter.
Without limiting the generality of the foregoing,
none of such persons shall use or refer to Lender
or to any affiliate name in any disclosures made in
connection with any of the transactions without
Lender's prior written consent.
Upon completion of the initial takedown by
Borrower, the Borrower will no longer be required
to obtain Lender's prior written consent to
disclose the transaction contemplated hereby. In
addition, the Borrower agrees to provide camera-
ready artwork of typestyles and logos of the
Borrower for use in promotional material by the
Lender.
CONDITIONS OF ACCEPTANCE: This Commitment Letter is intended to be a
- ------------------------ summary of the most important elements of the
agreement to enter into a loan transaction with
Borrower, and it is subject to all requirements and
conditions contained in Loan documentation proposed
by the Lender or its counsel in the course of
closing the Loans described herein. Not every
provision that imposes duties, obligations,
burdens, or limitations on Borrower is contained
herein, but shall be contained in the final Loan
documentation satisfactory to Lender and its
counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY SUIT, ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS
LETTER OR THE TRANSACTION DESCRIBED IN THIS LETTER.
APPLICATION FEE: The $30,000 Application Fee previously paid will
- --------------- be first applied to the reasonable costs and
expenses of the Lender in connection with the
transaction, and any remainder shall be applied
pro-rata to the second month's payment under each
Loan.
<PAGE>
COMMITMENT EXPIRATION: This Commitment shall expire on November 30,
- --------------------- 1998, unless prior thereto either extended in
writing by the Lender or accepted by the Borrower.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by November 30, 1998.
Yours truly,
TRANSAMERICA BUSINESS CREDIT
CORP-TECHNOLOGY FINANCE DIVISION
By: /s/ Gerald A. Michaud
---------------------
Gerald A. Michaud
Senior Vice President-Marketing
Accepted this 21 day of November, 1998
----
PARADIGM GENETICS, INC.
By: /s/ John Ryals
--------------------
Title: CEO/President
-----------------
<PAGE>
SECRETARY'S CERTIFICATE
I, Henry P. Nowak, hereby state that I am the duly elected, acting and
qualified Secretary of Paradigm Genetics, Inc., a North Carolina
corporation (the "Company"), and that:
(a) Through a unanimous consent at a Board of Directors meeting of the
Company, proposed in accordance with its bylaws and the laws of said State
on the 25th day of March, 1999, signed by a quorum for the transaction of
business, the following resolutions were duly and regularly adopted:
RESOLVED, that the form, terms, and provisions of all of the documents and
instruments executed by the Company with and/or in favor of Transamerica
Business Credit Corporation (the "Agreements"), and the transactions
contemplated thereby be, and the same are, in all respects approved, and that
the President, each Vice President and each other officer of the Company (the
"Authorized Persons"), or any of them, be, and they hereby are, authorized,
empowered, and directed to execute and deliver the Agreements and any and all
other agreements, documents, instruments and certificates required or desirable
in connection therewith, if necessary or advisable, with such changes as they
may deem the best interest of the Company, and their execution and delivery of
the Agreements, and all such other agreements, documents, instruments, and
certificates, shall be deemed to be conclusive evidence that the same are in all
respects authorized and approved; and be it further.
RESOLVED, that the actions of any Authorized Person heretofore taken in
furtherance of the Agreements be, and hereby are, approved, adopted and ratified
in all respects.
(i) The above resolutions: (a) are not contrary to the Articles or
Certificate of Incorporation or bylaws of the Company and (b) have not been
amended, modified, rescinded or revoked and are in full force and effect on the
date hereof.
(iii) The following persons are duly qualified and acting officers of
the Company, duly elected to the offices set forth opposite their respective
names, and the signature appearing opposite the name of each such officer is his
authentic signature:
<PAGE>
Name Office Signature
- --------------- -------------------- ---------------
John A. Ryals President/CEO /s/ John Ryals
- --------------- -------------------- ---------------
Ian Howes V.P./CFO /s/ Ian Howes
- --------------- -------------------- ---------------
Henry Nowak V.P./General Counsel /s/ Henry Nowak
- --------------- -------------------- ---------------
IN WITNESS WHEREOF, I have executed this Certificate, this 14th day of May,
----- -
1999.
/s/ Henry Nowak
---------------
Secretary
[CORPORATE SEAL]
<PAGE>
EXHIBIT 10.31
-------------
Customer No. 1158
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of July 20, 1999, is made by
Paradigm Genetics, Inc. (the "Borrower"), a North Carolina corporation having
its principal place of business and chief executive office at P.O. Box 14528,
104 Alexander Drive, Building 2, Research Triangle Park, North Carolina, 27709-
4528, in favor of Transamerica Business Credit Corporation, a Delaware
corporation (the "Lender"), having its principal office at 9399 West Higgins
Road, Suite 600, Rosemont, Illinois 60018 and having an office at 76 Batterson
Park Road, Farmington, Connecticut 06032.
WHEREAS, the Borrower has requested that the Lender make a Loan to the
Borrower; and
WHEREAS, the Lender has agreed to make such Loan on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the Lender
to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings, and
shall be equally applicable to both the singular and plural forms of the terms
defined:
Agreement shall mean this Loan and Security Agreement together with all
---------
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any other
--------------
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or public
------------
holiday or the equivalent for banks in New York City.
Cash Equivalents means (i) securities issued, guaranteed or insured by the
----------------
United States or any of its agencies with maturities of not more than three
years from the date acquired; (ii) corporate securities rated AA or higher with
maturities of less than three years; (iii) certificates of deposit with
maturities of not more than one year from the date acquired, issued by any U.S.
federal or state chartered commercial bank of recognized standing which has
capital and unimpaired surplus in excess of $100,000,000; (iv) investments in
money market funds registered under the Investment Company Act of 1940; (v)
mutual funds, at least 90% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) - (iv) of this definition; and (vi) other
instruments, commercial paper or investments acceptable to the Lender in its
sole discretion.
<PAGE>
Closing Date means the date first set forth above.
------------
Code shall have the meaning specified in Section 8(d).
----
Collateral shall have the meaning specified in Section 2.
----------
Collateral Access Agreement shall mean any landlord waiver, mortgagee
---------------------------
waiver, bailee letter, or similar acknowledgement of any warehouseman or
processor in possession of any Collateral.
Contingent Obligation means any direct, indirect, contingent or non-
---------------------
contingent guaranty or obligation for the indebtedness of another Person, except
endorsements in the ordinary course of business.
Effective Date shall mean the date on which all of the conditions specified
--------------
in Section 3.3 shall have been satisfied.
Event of Default shall mean any event specified in Section 7.
----------------
Financial Statements shall have the meaning specified in Section 6.1.
--------------------
GAAP shall mean generally accepted accounting principles in the United
----
States of America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the Lender
-----
to the Borrower in accordance with the terms of this Agreement and any Note
delivered hereunder.
Loan Documents shall mean, collectively, this Agreement, the Notes, and all
--------------
other present and future documents, agreements, certificates, instruments, and
opinions delivered by the Borrower under, in connection with or relating to this
Agreement, or any other present or future instrument or agreement between Lender
and Borrower, as each of the same may be amended, modified, extended, restated
or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a material
-----------------------
adverse change in the business, operations, results of operations, assets,
liabilities, or financial condition of such Person taken as a whole.
Material Adverse Effect shall mean, with respect to any Person, a material
-----------------------
adverse effect on the business, operations, results of operations, assets,
liabilities, or financial condition of such Person taken as a whole.
Note shall mean each Promissory Note, in substantially the form attached
----
hereto, made by the Borrower in favor of the Lender, as amended, supplemented,
or otherwise modified from time to time.
Obligations shall mean and include all loans (including the Loans),
-----------
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by the Note or any note, guaranty or other
2
<PAGE>
instrument, whether or not arising under or in connection with, this Agreement,
any other Loan Document or any other present or future instrument or agreement,
whether or not for the payment of money, whether arising by reason of an
extension of credit, opening, guaranteeing or confirming of a letter of credit,
loan, guaranty, indemnification or in any other manner, whether direct or
indirect (including those acquired by assignment, purchase, discount or
otherwise), whether absolute or contingent, due or to become due, now due or
hereafter arising and however acquired (including without limitation all loans
previously made by Lender to Borrower). The term includes, without limitation,
all interest (including interest accruing on or after any bankruptcy, whether or
not an allowed claim), charges, expenses, commitment, facility, closing and
collateral management fees, letter of credit fees, reasonable attorneys' fees,
taxes and any other sum properly chargeable to Borrower under this Agreement,
the other Loan Documents or any other present or future agreement between Lender
and Borrower.
Permitted Liens shall mean such of the following as to which no
---------------
enforcement, collection, execution, levy, or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments, and other governmental
charges or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen, and other like Persons arising by operation of
law in the ordinary course of business for sums which are not yet overdue for a
period of more than 30 days, or liens which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves are maintained to the extent required by GAAP; (b) deposits or pledges
to secure the payment of worker's compensation, unemployment insurance, or other
social security benefits or obligations, public or statutory obligations, surety
or appeal bonds, bid or performance bonds, or other obligations of a like nature
incurred in the ordinary course of business; (c) licenses, restrictions, or
covenants for or on the use of the Collateral which do not materially impair
either the use of the Collateral in the operation of the business of the
Borrower or the value of the Collateral; (d) attachment or judgment liens that
do not constitute an Event of Default; (e) a lien on any item of equipment or
other capital asset created substantially simultaneously with the acquisition of
such equipment for the purpose of financing such acquisition, provided that such
lien shall attach only to the equipment acquired and provided such lien does not
secure indebtedness in excess of $1,200,000; and (f) easements, rights of way
and other non monetary encumbrances on title to real property that do not render
title to the property encumbered thereby unmarketable or materially affected for
such properties intended purpose.
Person shall mean any individual, sole proprietorship, partnership, limited
------
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.
Receivable shall have the meaning set forth in Section 8(e).
----------
Schedule shall mean Schedule A hereto containing certain information
--------
pertaining to the Borrower.
Solvent means, with respect to any Person, that as of the date as to which
-------
such Person's solvency is measured:
3
<PAGE>
(a) the fair saleable value of its assets is in excess of the total amount
of its liabilities. (including contingent liabilities as valued in accordance
with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
-----
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower hereby
assigns and grants to the Lender a continuing general lien on, and security
interest in, all the Borrower's right, title, and interest in and to the
collateral described in the next sentence (the "Collateral") to secure the
payment and performance of all the Obligations, subject only to Permitted Liens.
Collateral means Receivables, Investment Property, Inventory, Equipment, and
Other Property and all additions and accessions thereto and substitutions and
replacements therefor and improvements thereon, and all proceeds (whether cash
or other property) and products thereof, including, without limitation, all
proceeds of insurance covering the same and all tort claims in connection
therewith, and all records, files, computer programs and files, data and
writings relating to the foregoing, and all equipment containing the foregoing.
Equipment means all machinery, equipment, furniture, fixtures, conveyors,
---------
tools, materials, storage and handling equipment, hydraulic presses, cutting
equipment, computer equipment and hardware, including central processing units,
terminals, drives, memory units, printers, keyboards, screens, peripherals and
input or output devices, molds, dies, stamps, vehicles, and other equipment of
every kind and nature and wherever situated now or hereafter owned by Borrower
or in which Borrower may have any interest as lessee or otherwise (to the extent
of such interest), together with all additions and accessions thereto, all
replacements and all accessories and parts therefor, all manuals, blueprints,
know-how, warranties and records in connection therewith, all rights against
suppliers, warrantors, manufacturers, sellers or others in connection therewith,
and together with all substitutes for any of the foregoing; and
Inventory means all present and future goods intended for sale, lease or
---------
other disposition by Borrower including, without limitation, all raw materials,
work in process, finished goods and other retail inventory, goods in the
possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same; and
Investment Property means any and all investment property of Borrower,
-------------------
including all securities, whether or certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising; and
Other Property means all present and future instruments, documents,
--------------
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to
4
<PAGE>
receive proceeds of letters of credit, deposit accounts, chattel paper,
certificates, insurance policies, insurance proceeds, leases, computer tapes,
causes of action, judgments, claims against third parties, leasehold rights in
any personal property, books, ledgers, files and records, general intangibles
(including without limitation, all contract rights, tax refunds, rights to
receive tax refunds, patents, patent applications, copyrights (registered and
unregistered), royalties, licenses, permits, franchise rights, authorizations,
customer lists, rights of indemnification, contribution and subrogation,
computer programs, discs and software, trade secrets, computer service
contracts, trademarks, trade names, service marks and names, logos, goodwill,
deposits, choices in action, designs, blueprints, plans, know-how, telephone
numbers and rights thereto, credits, reserves, and all forms of obligations
whatsoever now or hereafter owing to Borrower), all property at any time in the
possession or under the control of Lender, and all security given by Borrower to
Lender pursuant to any other loan document or agreement; and
Receivables means all present and future accounts and accounts receivable,
-----------
together with all security therefor and guaranties thereof and all rights and
remedies relating thereto, including any right of stoppage in transit.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. The Lender, subject to the terms and conditions
of this Agreement, agrees to make a Loan to Borrower in a single drawdown, at
Borrower's request, in a principal amount not to exceed $2,000,000. Such Loan
shall be in an amount not less than $2,000,000. Notwithstanding anything herein
to the contrary, the Lender shall be obligated to make such Loan only after the
Lender, in its sole discretion, determines that the applicable conditions for
borrowing contained in Sections 3.3 and 3.4 are satisfied.
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall use the proceeds
of the Loans for its general working capital purposes.
SECTION 3.3. CONDITIONS TO LOAN.
(a) The obligation of the Lender to make the Loan is subject to the
Lender's receipt of the following, on or before the Closing Date, each dated the
date of the Loan or as of an earlier date acceptable to the Lender, in form and
substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-l1) listing all effective
Uniform Commercial Code financing statements naming the Borrower as debtor
and all tax lien, judgment, and litigation searches for the Borrower as the
Lender shall deem necessary or desirable;
(ii) acknowledgment copies of Uniform Commercial Code financing statements
(naming the Lender as secured party and the Borrower as debtor), duly filed
in all jurisdictions that the Lender deems necessary or desirable to
perfect and protect the security interests created hereunder, and evidence
that all other filings, registrations and recordings have been made in the
appropriate governmental offices, and all other action has been taken,
which shall be necessary to create, in favor of the Lender, a perfected
first priority Lien on the Collateral;
5
<PAGE>
(iii) a Note duly executed by the Borrower evidencing the amount of such
Loan;
(iv) an Intellectual Property Security Agreement, in form and substance
satisfactory to the Lender and its counsel, duly executed by the Borrower,
specifically identifying and granting to the Lender a security interest in
all of the Borrower's intellectual property;
(v) if requested by the Lender, a Collateral Access Agreement duly executed
by the lessor or mortgagee, as the case may be, of each premises where the
equipment Collateral is located;
(vi) a Notice of Security Interest, in form and substance satisfactory to
the Lender and its counsel, to each financial institution at which any
deposit accounts of Borrower are maintained;
(vii) the warrants described in the Commitment Letter, if any;
(viii) certificates of insurance required under Section 5.4 of this
Agreement together with loss payee endorsements for all such policies
naming the Lender as lender loss payee and as an additional insured;
(ix) a certificate of the Secretary or an Assistant Secretary of the
Borrower ("Secretary's Certificate") certifying (A) that attached to the
Secretary's Certificate is a tine, complete, and accurate copy of the
resolutions of the Board of Directors of the Borrower (or a unanimous
consent of directors in lieu thereof) authorizing the execution, delivery,
and performance of this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, and that such resolutions
have not been amended or modified since the date of such certification and
are in full force and effect; (B) the incumbency, names, and true
signatures of the officers of the Borrower authorized to sign the Loan
Documents to which it is a party; (C) that attached to the Secretary's
Certificate is a true and correct copy of the Articles or Certificate of
Incorporation of the Company, as amended, which Articles or Certificate of
Incorporation have not been further modified, repealed or rescinded and are
in full force and effect; (D) that attached to the Secretary's Certificate
of the Borrower is a true and correct copy of the Bylaws, as amended, which
Bylaws of the Company have not been further modified, repealed or rescinded
and are in full force and effect, and (F) that attached to the Secretary's
Certificate is a valid Certificate of Existence issued by the Secretary of
the State of the Borrower's state of incorporation;
(xi) the opinion of counsel for the Borrower covering such matters incident
to the transactions contemplated by this Agreement as the Lender may
reasonably require;
(xii) evidence of the consent or authorization of, filing with or other
act by or in respect of any governmental agency or authority or any other
Person required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, or the other Loan Documents
or the consummation of the transactions contemplated hereby or thereby; and
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(xiii) such other documents, agreements and instruments as the Lender
deems necessary in its sole and absolute discretion in connection with the
transactions contemplated hereby.
(b) The security interests in the Collateral granted in favor of the Lender
under this Agreement shall have been duly perfected and shall constitute first
priority liens, except for Permitted Liens.
SECTION 3.4. ADDITIONAL CONDITIONS PRECEDENT. The obligation of the
Lender to make the Loan is subject to the satisfaction of the following
additional conditions precedent:
(a) There shall be no pending or, to the knowledge of the Borrower after
due inquiry, threatened litigation, proceeding, inquiry, or other action (i)
seeking an injunction or other restraining order, damages, or other relief with
respect to the transactions contemplated by this Agreement or the other Loan
Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not reasonably be
expected to have a Material Adverse Effect in the judgment of the Lender;
(b) all representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;
(c) no Event of Default or event which with the giving of notice or the
passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and
(d) the Borrower shall be deemed to have hereby reaffirmed and ratified all
security interests, liens, and other encumbrances heretofore granted by the
Borrower to the Lender.
SECTION 3.5. INTEREST RATE; REPAYMENT. The interest rate applicable to
the Loan made by the Lender hereunder, and the repayment date for such Loan, are
as set forth in the Note evidencing such Loan.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The Borrower (a) is
duly organized, validly existing, and in good standing under the laws of the
State of its organization, (b) has the power and authority to own its properties
and assets and to transact the businesses in which it is presently, or proposes
to be, engaged, and (c) is duly qualified and authorized to do business and is
in good standing in every jurisdiction in which the failure to be so qualified
could have a Material Adverse Effect on (i) the Borrower, (ii) the Borrower's
ability to perform its obligations under the Loan Documents, or (iii) the rights
of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery, and performance
by the Borrower of each of the Loan Documents to which it is a party are within
the powers of the
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Borrower, do not contravene the organizational documents, if any, of the
Borrower, and do not (a) violate any law or regulation, or any order or decree
of any court or governmental authority, (b) conflict with or result in a breach
of, or constitute a default under, any material indenture, mortgage, or deed of
trust or any material lease, agreement, or other instrument binding on the
Borrower or any of its properties, or (c) require the consent, authorization by,
or approval of or notice to or filing or registration with any governmental
authority or other Person, except as may be set forth in the Schedule. This
Agreement is, and each of the other Loan Documents to which the Borrower is or
will be a party, when delivered hereunder or thereunder, will be, the legal,
valid, and binding obligation of the Borrower enforceable against the Borrower
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and will be
Solvent upon the completion of all transactions contemplated to occur hereunder
(including, without limitation, the Loan to be made on the Effective Date); the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral other than Permitted Liens; and the
Borrower is, or will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer, and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are outstanding
against the Borrower nor is there now pending or, to the best of the Borrower's
knowledge, threatened any litigation, contested claim, or governmental
proceeding by or against the Borrower except judgments and pending or threatened
litigation, contested claims, and governmental proceedings which would not, in
the aggregate, have a Material Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default or has not
received a notice of default under any material contract, lease, or commitment
to which it is a party or by which it is bound. The Borrower knows of no
dispute regarding any contract, lease, or commitment which could have a Material
Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. The address of the principal place of
business and chief executive office of Borrower is, and the books and records of
Borrower and all of its chattel paper and records relating to Collateral are
maintained exclusively in the possession of Borrower at, the address of Borrower
specified in the heading of this Agreement. Borrower has places of business,
and Collateral is located, only at such address and at the addresses set forth
in the Schedule and at any additional locations reported to the Lender as
provided in Section 5.7 as to which the Lender has taken all necessary action to
perfect and protect its security interests in the Collateral at any such
locations.
SECTION 4.7. CORPORATE AND TRADE NAMES; FEDERAL TAX ID. During the past
five years, Borrower has not been known by or used any other corporate, trade or
fictitious name except for its name as set forth on the signature page of this
Agreement and the other names specified in the Schedule. The Borrower's Federal
Tax ID number is as set forth in the Schedule.
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SECTION 4.8. NO EVENTS OF DEFAULT. No Event of Default has occurred and
is continuing nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
SECTION 4.9. NO LIMITATION ON LENDER'S RIGHTS. Except as permitted
herein, none of the Collateral is subject to contractual obligations that may
restrict or inhibit the Lender's rights or abilities to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.
SECTION 4.10. PERFECTION AND PRIORITY OF SECURITY INTEREST. This
Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected, and first priority and exclusive, security
interest in the Collateral, except for any Permitted Liens, securing the payment
of all the Obligations.
SECTION 4.11. INTELLECTUAL PROPERTY. Set forth in the Schedule is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights (registered and unregistered), and all applications
therefor and licenses thereof, of Borrower. Borrower owns or licenses all
material patents, trademarks, service marks, logos, tradenames, trade secrets,
know-how, copyrights, or licenses and other rights with respect to any of the
foregoing, which are necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted. To the best of its knowledge,
Borrower has not infringed any patent, trademark, service mark, tradename,
copyright, license or other right owned by any other Person by the sale or use
of any product, process, method, substance, part or other material presently
contemplated to be sold or used, where such sale or use would reasonably be
expected to have a Material Adverse Effect and no claim or litigation is
pending, or to the best of Borrower's knowledge, threatened against or affecting
Borrower that contests its right to sell or use any such product, process,
method, substance, part or other material.
SECTION 4.12. CONSENTS AND FILINGS. No consent, authorization or approval
of, or filing with or other act by, any shareholders of Borrower or any
governmental authority or, to Borrower's knowledge, any other Person is required
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Loan Document, the consummation of
the transactions contemplated hereby or thereby or the continuing operations of
Borrower following such consummation, except (i) those that have been obtained
or made, (ii) the filing of financing statements under the Code (iii) any
necessary filings with U.S. Copyright Office and the U.S. Patent and Trademark
Office and (iv) those the absence of which could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 4.13. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a
review and assessment of all areas within its business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Borrower (or its suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. The Borrower reasonably believes that all
computer applications (including those of its suppliers and vendors) that are
material to its business and operations will on a timely basis
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be able to perform properly date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent
that a failure to do so could not reasonably be expected to have Material
Adverse Effect.
SECTION 4.14. TAXES. Borrower has properly completed and timely filed all
income tax returns it is required to file, and all Taxes, assessments, fees and
other governmental charges for periods beginning prior to the date of this
Agreement have been timely paid (or, if not yet due or being disputed in good
faith, adequate reserves therefor have been established in accordance with GAAP)
and Borrower has no material liability for Taxes in excess of the amounts so
paid or reserves so established. No deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental agency or authority
against Borrower and no notice of any tax lien has been filed. There are no
pending or (to the best knowledge of Borrower) threatened audits, investigations
or claims for or relating to any liability for Taxes and there are no matters
under discussion with any governmental agency or authority which could result in
an additional material liability for Taxes.
SECTION 4.15. FINANCIAL STATEMENTS. Borrower has provided to the Lender
complete and accurate Financial Statements, which have been prepared in
accordance with GAAP (except for the absence of footnotes and subject to normal
year-end adjustments with respect to unaudited financial statements)
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Borrower has no material
Contingent Obligation or liability for Taxes, unrealized losses, unusual forward
or long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto. Since the last date covered by
such Financial Statements, there has been no sale, transfer or other disposition
by Borrower of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the financial condition of Borrower at
said date. Since said date, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of Borrower has been
redeemed, retired, purchased or otherwise acquired for value by Borrower.
SECTION 4.16. ACCURACY AND COMPLETENESS OF INFORMATION. All data,
reports, and information heretofore, contemporaneously, or hereafter furnished
by or on behalf of the Borrower in writing to the Lender or for purposes of or
in connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports, and information are dated
or certified and not incomplete by omitting to state any material fact necessary
to make such data, reports, and information not misleading at such time. There
are no facts now known to the Borrower which individually or in the aggregate
would reasonably be expected to have a Material Adverse Effect and which have
not been specified herein, in the Financial Statements, or in any certificate,
opinion, or other written statement previously furnished by the Borrower to the
Lender.
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SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain its existence
and its current yearly accounting cycle, (b) maintain in full force and effect
all licenses, bonds, franchises, leases, trademarks, patents, contracts, and
other rights necessary or desirable to the profitable conduct of its business
unless the failure to do so could not reasonably be expected to have a Material
Adverse Effect on the Borrower, (c) continue in, and limit its operations to,
the same general lines of business as those presently conducted by it, and (d)
comply with all applicable laws and regulations of any federal, state, or local
governmental authority, except for such laws and regulations the violations of
which would not, in the aggregate, have a Material Adverse Effect on the
Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in any event
within five days after the Borrower learns of the following, the Borrower will
give written notice to the Lender of the following:
(a) any proceeding instituted or threatened to be instituted by or against
the Borrower in any federal, state, local, or foreign court or before any
commission or other regulatory body (federal, state, local, or foreign)
involving a sum, together with the sum involved in all other similar
proceedings, in excess of $50,000 in the aggregate,
(b) any material contract that is terminated or amended and which has had
or could reasonably be expected to have a Material Adverse Effect on the
Borrower,
(c) the occurrence of any Material Adverse Change with respect to the
Borrower;
(d) the occurrence of any Event of Default or event or condition which,
with notice or lapse of time or both, would constitute an Event of Default,
together with a statement of the action which the Borrower has taken or proposes
to take with respect thereto;
(e) any discovery or determination by Borrower that any computer
application (including those of its suppliers and vendors) that is material to
its business and operations will not be Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect;
(f) any material damage to, the destruction of or any other material loss
to any Collateral owned or used by Borrower other than any such Collateral with
a net book value (individually or in the aggregate) less than $10,000 or any
condemnation, confiscation or other taking, in whole or in part, or any event
that otherwise diminishes so as to render impracticable or unreasonable the use
of such Collateral owned or used by Borrower together with the amount of the
damage, destruction, loss or diminution in value;
(g) any material copyright registration made by it, any material rights
Borrower may obtain to any copyrightable works, new trademarks or any new
patentable inventions, and of any renewal or extension of any material trademark
registration, or if it shall otherwise become entitled to the benefit of any
patent or patent application or material trademark or trademark application; and
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(h) the opening of any new bank account or other deposit account, and any
new securities account.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. Borrower shall (i)
maintain books and records (including computer records) pertaining to the
Collateral in such detail, form and scope as is customary for companies in
similar businesses in similar situations and (ii) provide the Lender and its
agents access to the premises of Borrower at any time and from time to time,
during normal business hours and upon reasonable notice under the circumstances,
and at any time on and after the occurrence and during the existence of an Event
of Default, or event or condition which, with notice or lapse of time or both,
would constitute an Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Borrower's expense) any
and all records reasonably pertaining thereto, and (C) discussing the affairs,
finances and business of Borrower with any officer, employee or director of
Borrower or with Borrower's accountants. Borrower shall reimburse the Lender
for the reasonable travel and related expenses of the Lender's employees or, at
the Lender's option, of such outside accountants or examiners as may be retained
by the Lender to verify or inspect Collateral, records or documents of Borrower
on a regular basis or for a special inspection if the Lender deems the same
appropriate. If the Lender's own employees are used, Borrower shall also pay
the reasonable allocated cost for such employee (or such other amount as shall
represent the Lender's then current standard charge for the same), or, if
outside examiners or accountants are used, Borrower shall also pay the Lender
such reasonable sum as the Lender may be obligated to pay as fees therefor.
SECTION 5.4. INSURANCE. Borrower shall maintain public liability
insurance, business interruption insurance, third party property damage
insurance and replacement value insurance on its assets (including the
Collateral) under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times reasonably satisfactory
to the Lender in its commercially reasonable judgment, all of which policies
covering the Collateral shall name the Lender as an additional insured and
lender loss payee in case of loss, and contain other provisions as the Lender
may reasonably require to protect fully the Lender's interest in the Collateral
and any payments to be made under such policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all taxes,
assessments, claims, and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
with notice to the Borrower, and on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON
COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees,
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assessments, charges, permit fees, and taxes (municipal, state, and federal)
which may now or hereafter be imposed upon the ownership, leasing, renting,
possession, sale, or use of the Collateral, other than taxes on or measured by
the Lender's income and fees, assessments, charges, and taxes which are being
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves are maintained to the extent required by
GAAP.
SECTION 5.7. CHANGE OF LOCATION, STRUCTURE, OR IDENTITY. The Borrower
will give Lender at least 30 days prior written notice of any change of
Borrower's chief executive office or of the opening of any additional place of
business. The Borrower will not move or permit the movement of any item of
Collateral from the locations specified in the Schedule, except that the
Borrower may keep Collateral at other locations within the United States
provided that the Borrower has delivered to the Lender (i) prior written notice
thereof and (ii) duly executed financing statements and other agreements and
instruments (all in form and substance satisfactory to the Lender) necessary or,
in the opinion of the Lender, desirable to perfect and maintain in favor of the
Lender a first priority security interest in the Collateral subject only to
Permitted Liens. Notwithstanding anything to the contrary in the immediately
preceding sentence, the Borrower may keep any Collateral consisting of motor
vehicles or rolling stock at any location in the United States provided that the
Lender's security interest in any such Collateral is conspicuously marked on the
certificate of title thereof and the Borrower has complied with the provisions
of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The Collateral shall be
operated by competent, qualified personnel in connection with the Borrower's
business purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every reasonable precaution to prevent
loss or damage to the Collateral from fire and other hazards. The Borrower
shall procure and maintain in effect all orders, licenses, certificates,
permits, approvals, and consents required by federal, state, or local laws or by
any governmental body, agency, or authority in connection with the delivery,
installation, use, and operation of the Collateral, except where the failure.
to do so could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly upon request
by the Lender, execute and deliver or use its best efforts to obtain any
document required by the Lender (including, without limitation, warehouseman or
processor disclaimers, mortgagee waivers, landlord disclaimers, or subordination
agreements with respect to the Obligations and the Collateral), give any
notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the reasonable opinion of the
Lender, desirable to perfect or continue the perfection and the first priority
of the Lender's security interest in the Collateral, to protect the Collateral
against the rights, claims, or interests of any Persons, or to effect the
purposes of this Agreement. The Borrower hereby authorizes the Lender to file
one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Collateral without the signature of the
Borrower where permitted by law. A carbon, photographic, or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be
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sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs reasonably
incurred in connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will not in any
way hypothecate or create or permit to exist any lien, security interest,
charge, or encumbrance on or other interest in any of the Collateral, except for
the lien and security interest granted hereby and Permitted Liens. In the event
the Collateral, or any part thereof, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of this Agreement, the security interest
of the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender. Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower will not
enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or any
part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the Borrower and
Borrower's failure to remedy the subject of such notice within ten (10) Business
Days (provided that if an Event of Default has occurred and is continuing the
Lender need not give any notice or allow Borrower to cure the subject of such
notice), the Lender shall have the right at any time to make any payments and do
any other acts the Lender may deem necessary to protect its security interests
in the Collateral, including, without limitation, the rights to satisfy,
purchase, contest, or compromise any encumbrance, charge, or lien which, in the
reasonable judgment of the Lender, appears to be prior to or superior to the
security interests granted hereunder, and appear in, and defend any action or
proceeding purporting to affect its security interests in, or the value of, any
of the Collateral The Borrower hereby agrees to reimburse the Lender for all
payments made and expenses incurred under this Agreement including fees,
expenses, and disbursements of attorneys and paralegals (including the allocated
costs of in-house counsel) acting for the Lender, including any of the foregoing
payments under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a) promptly (but in
no event later than three Business Days) after its receipt thereof, deliver to
the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain Solvent at all
times.
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SECTION 5.15. INTELLECTUAL PROPERTY. Borrower shall do and cause to be
done all things necessary to preserve, maintain and keep in full force and
effect all of its registrations of trademarks, service marks and other marks,
trade names and other trade rights, patents, copyrights and other intellectual
property in accordance with prudent business practices, except to the extent
that the failure to preserve or maintain any of the foregoing would not
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Borrower agrees promptly, and in any event not
later than 30 days after the date hereof, to submit applications to have any of
its currently unregistered copyrightable software, computer programs and other
materials registered with the U.S. Copyright Office in Washington, D.C. (the
"Copyright Office") and to promptly provide TBCC with evidence of such
registration when available. Borrower will, on an ongoing basis, promptly
submit applications to register any future unregistered copyrightable software,
computer programs and other materials with the Copyright Office.
SECTION 5.16. FUNDAMENTAL CHANGES. The Borrower shall not (a) amend or
modify its name, unless the Borrower delivers to the Lender thirty days prior to
any such proposed amendment or modification written notice of such amendment or
modification and within ten days before such amendment or modification delivers
executed Uniform Commercial Code financing statements (in form and substance
satisfactory to the Lender) or (b) merge or consolidate with any other entity or
make any material change in its capital structure, in each case without the
Lender's prior written consent which shall not be unreasonably withheld.
SECTION 5.17. CONTINGENT OBLIGATIONS. Borrower will not, directly or
indirectly, incur, assume, or suffer to exist any Contingent Obligation,
excluding indemnities given in connection with this Agreement or the other Loan
Documents m favor of the Lender or in connection with the sale of inventory or
other asset dispositions permitted hereunder, except Contingent Obligations and
other similar third party credit support relating to obligations of vendors and
suppliers of Borrower in respect of transactions entered into in `the normal
course of business, provided that the aggregate amount of any such guarantees
and other similar third party credit support shall not exceed $100,000 at any
time outstanding, and provided further that no Default or Event of Default shall
exist either immediately prior to or after giving effect to the making of the
foregoing guarantees or the entering into any third party credit support
transactions.
SECTION 5.18. CHANGE IN NATURE OF BUSINESS. Borrower will not at any time
make any material change in the lines of its business as carried on at the date
of this Agreement or enter into any new line of business; provided that Borrower
may enter businesses reasonably related or incidental to its current lines of
business.
SECTION 5.19. SALES OF ASSETS. Borrower will not, directly or indirectly,
in any fiscal year, sell, transfer or otherwise dispose of any assets, or grant
any option or other right to purchase or otherwise acquire any assets other than
(i) equipment with an aggregate value of less than $25,000 the proceeds of which
shall be paid to the Lender and applied to the Obligations, (ii) sales of
inventory in the ordinary course of business and (iii) licenses or sublicenses
on a non-exclusive basis of intellectual property in the ordinary course of
Borrower's business.
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SECTION 5.20. LOANS TO OTHER PERSONS. Borrower will not at any time make
loans or advance any credit (except to trade debtors in the ordinary course of
business) to any Person in excess of $25,000 in the aggregate at any time for
all such loans, except that Borrower may make cashless advances of credit to
senior members of Borrower's management team to purchase restricted stock of
Borrower.
SECTION 5.21. DIVIDENDS, STOCK REDEMPTIONS. Borrower will not, directly
or indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or rights
to purchase any such capital stock, whether now or hereafter outstanding
("Stock"), or make any payment on account of or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Borrower, except for dividends paid solely in stock of the
Borrower and repurchases of stock owned by employees, directors and consultants
of Borrower pursuant to terms of employment, consulting or other stock
restrictions agreements at such time as any such employee, director or
consultant terminates his or her affiliations with the Borrower, provided that
no Default or Event of Default shall exist either immediately prior to or after
giving effect to such repurchase, and provided further that the total amount
paid in connection therewith by Borrower shall not exceed $50,000 in any
consecutive 12-month period.
SECTION 5.22. INVESTMENTS IN OTHER PERSONS. Borrower will not, directly
or indirectly, at any time make or hold any Investment in any Person (whether in
cash, securities or other property of any kind) other than investments in Cash
Equivalents.
SECTION 5.23. ACQUISITION OF STOCK OR ASSETS. Borrower will not acquire
or commit or agree to acquire all or any stock, securities or assets of any
other Person other than inventory and equipment acquired in the ordinary course
of business.
SECTION 5.24. PARTNERSHIPS; SUBSIDIARIES; JOINT VENTURES; MANAGEMENT
CONTRACTS. Borrower will not at any time create any direct or indirect
Subsidiary, enter into any joint venture or similar arrangement (other than
joint ventures or strategic partnerships consisting of non-exclusive licensing
of technology or the providing of technical support, or extending and supporting
existing lines of business) or become a partner in any general or limited
partnership or enter into any management contract (other than an employment
contract for the employment of an officer or employee entered into in the
regular course of Borrower's business) permitting third party management rights
with respect to Borrower's business.
SECTION 5.25. LIMITATION ON ADDITIONAL INDEBTEDNESS. Borrower shall not
incur additional indebtedness, other than indebtedness secured by Permitted
Liens, without the prior consent of the Lender.
SECTION 5.26. ADDITIONAL REQUIREMENTS. The Borrower shall take all such
further actions and execute all such further documents and instruments as the
Lender may reasonably request.
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<PAGE>
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction in
full of all Obligations, the Borrower shall deliver to the Lender the following
financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than 120 days after the end of each fiscal year of the Borrower and its
consolidated subsidiaries, the consolidated balance sheet, income statement, and
statements of cash flows and shareholders equity for the Borrower and its
consolidated subsidiaries (the "Financial Statements") for such year, reported
on by independent certified public accountants without an adverse qualification;
and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as available, but
not latex than 45 days after the end of each of the first three fiscal quarters
in any fiscal year of the Borrower and its consolidated subsidiaries, the
Financial Statements for such fiscal quarter, together with a certification duly
executed by a responsible officer of the Borrower that such Financial Statements
have been prepared in accordance with GAAP and are fairly stated in all material
respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within two (2) days after notice when
due any principal, interest, fee or other amount required to be paid by the
Borrower under or in connection with any Note and this Agreement;
(b) any representation or warranty made or deemed made by the Borrower
under or in connection with any Loan Document or any Financial Statement shall
prove to have been false or incorrect in any material respect when made or
deemed made;
(c) the Borrower shall fail to perform or observe (i) any of the terms,
covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14 or 5.16
through 5.25 hereof or (ii) any other term, covenant, or agreement contained in
any Loan Document (other than the other Events of Default specified in this
Section 7) and such failure remains unremedied for the earlier of thirty days
from (A) the date on which the Lender has given the Borrower written notice of
such failure and (B) the date on which the Borrower knew or should have known of
such failure;
(d) any defined "Event of Default" shall occur under any other Loan
Document; or Borrower or any Person shall deny or disaffirm in writing its
obligations under any of the Loan Documents or any Liens granted in connection
therewith or shall otherwise challenge any of its obligations under any of the
Loan Documents; or any Liens granted in any of the Collateral shall be
determined to be void, voidable or invalid, are subordinated or are not given
the priority contemplated by this Agreement; or any Loan Document shall for any
reason cease to create a valid and perfected Lien on the Collateral purported to
be covered thereby, of first priority (except for Permitted Liens);
(e) dissolution, liquidation, winding up, or cessation of the Borrower's
business, failure of the Borrower generally to pay its debts as they mature,
admission in writing by the Borrower of its inability generally to pay its debts
as they mature, or calling of a meeting of the Borrower's creditors for purposes
of compromising any of the Borrower's debts;
17
<PAGE>
(f) the commencement by or against the Borrower of any bankruptcy,
insolvency, arrangement, reorganization, receivership, or similar proceedings
under any federal or state law and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for sixty days
following the commencement thereof, or any action by the Borrower is taken
authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the Borrower,
whether voluntary or involuntary, the appointment of a trustee, custodian,
receiver, or similar official for the Borrower or for any substantial property
of the Borrower, or any action by the Borrower authorizing any such proceeding;
(h) the Borrower shall default in (i) the payment of principal or interest
on any indebtedness in excess of $100,000 (other than the Obligations) beyond
the period of grace, if any, provided in the instrument or agreement under which
such indebtedness was created, and such payment default has not been cured
within any applicable grace period unless such default has been waived by such
Person; or (ii) the observance or performance of any other agreement or
condition relating to any such indebtedness or contained in any instrument or
agreement relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such indebtedness to cause, with the giving of
notice if required, such indebtedness to become due prior to its stated
maturity, and such default has not been cured within any applicable grace period
unless such default has been waived by such Person; or (iii) any loan or other
agreement under which the Borrower has received financing from Transamerica
Corporation or any of its affiliates;
(i) the Borrower suffers or sustains a Material Adverse Change;
(j) any tax lien, other than a Permitted Lien, is filed of record against
the Borrower and is not bonded or discharged within five Business Days;
(k) any judgment or order for the payment of money in excess of $100,000
and not otherwise covered by applicable insurance shall be rendered against the
Borrower and such judgment or order shall not be stayed, vacated, bonded, or
discharged within sixty days;
(l) any material covenant, agreement, or obligation, as determined in the
good faith business judgment of the Lender, made by the Borrower and contained
in or evidenced by any of the Loan Documents shall cease to be enforceable, or
shall be determined to be unenforceable, in accordance with its terms; the
Borrower shall deny or disaffirm the Obligations under any of the Loan Documents
or any liens granted in connection therewith; or any liens granted on any of the
Collateral in favor of the Lender shall be determined to be void, voidable, or
invalid, or shall not be given the priority contemplated by this Agreement; or
(m) there is a change, which change results from a single transaction or
series of related transactions, but not from the sale of newly issued securities
to investors, in more than 35% of the ownership of any equity interests of the
Borrower on the date hereof or more than 35% of such interests become subject to
any contractual, judicial, or statutory lien, charge, security interest, or
encumbrance.
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SECTION 8. REMEDIES. If any Event of Default shall have occurred and be
--------
continuing:
(a) The Lender may, without prejudice to any of its other rights under any
Loan Document or Applicable Law, declare all Obligations to be immediately due
and payable (except with respect to any Event of Default set forth in Section
7(f) hereof, in which case all Obligations shall automatically become
immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and, for that purpose
may enter, with the aid and assistance of any person or persons, any premises
where the Collateral or any part hereof is, or may be placed, and remove the
same.
(c) The obligation of the Lender, if any, to make additional Loans or
financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein (or in any Loan Document) or
otherwise available to it, all the rights an remedies of a secured party under
the applicable Uniform Commercial Code (the "Code") whether or not the Code
applies to the affected Collateral and also may (i) require the Borrower to, and
the Borrower hereby agrees that it will at its expense and upon request of the
Lender forthwith, assemble all or part of the Collateral as directed by the
Lender and make it available to the Lender at a place to be designated by the
Lender that is reasonably convenient to both parties and (ii) without notice
except as specified below, sell the Collateral or any part thereof in one or
more parcels at public or private sale, at any of the Lender's offices or
elsewhere, for cash, on credit, or for future delivery, and upon such other
terms as the Lender may deem commercially reasonable.
(e) The Lender may accelerate or extend the time of payment, compromise,
issue credits, or bring suit on all accounts receivable ("Receivables") and
other Collateral (in the name of Borrower or the Lender) and otherwise
administer and collect the Receivables and other Collateral.
(f) The Lender may collect, receive, dispose of and realize upon any
investment property Collateral, including withdrawal of any and all funds from
any securities accounts.
(g) The Lender may (i) settle or adjust disputes or claims directly with
account debtors for amounts and upon terms which it considers advisable, and
(ii) notify account debtors on the Receivables and other Collateral that the
Receivables and Collateral have been assigned to the Lender, and that payments
in respect thereof shall be made directly to the Lender. If an Event of Default
has occurred and is continuing, Borrower hereby irrevocably authorizes and
appoints the Lender, or any Person the Lender may designate, as its attorney-in-
fact, at Borrower's sole cost and expense, to exercise, all of the following
powers, which are coupled with an interest and are irrevocable, until all of the
Obligations have been indefeasibly paid and satisfied in full in cash: (A) to
receive, take, endorse, sign, assign and deliver, all in the name of the Lender
or Borrower, any and all checks, notes, drafts, and other documents or
instruments
19
<PAGE>
relating to the Collateral; (B) to receive, open and dispose of all mail
addressed to Borrower and to notify postal authorities to change the address for
delivery thereof to such address as the Lender may designate; and (C) to take or
bring, in the name of the Lender or Borrower, all steps, actions, suits or
proceedings deemed by the Lender necessary or desirable to enforce or effect
collection of Receivables and other Collateral or file and sign Borrower's name
on a proof of claim in bankruptcy or similar document against any obligor of
Borrower.
(h) The Borrower agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to the Borrower of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Lender shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given. The
Lender may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. Borrower recognizes
that the Lender may be unable to make a public sale of any or all of any
investment property Collateral, by reason of prohibitions contained in
applicable securities laws or otherwise, and expressly agrees that a private
sale to a restricted group of purchasers for investment and not with a view to
any distribution thereof shall be considered a commercially reasonable sale.
(e) Unless expressly prohibited by any licensor thereof, the Lender is
hereby granted a license to use all computer software programs, data bases,
processes, trademarks, tradenames and materials used by Borrower in connection
with its businesses or in connection with the Collateral.
(e) All cash proceeds received by the Lender in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the discretion of the Lender, be held by the Lender as collateral for,
or then or at any time thereafter applied in whole or in part by the Lender
against, all or any part of the Obligations in such order as the Lender shall
elect Any surplus of such cash or cash proceeds held by the Lender and remaining
after the full and final payment of all the Obligations shall be paid over to
the Borrower or to such other Person to which the Lender may be required under
applicable law, or directed by a court of competent jurisdiction, to make
payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. Notices. Except as otherwise provided herein, all notices,
approvals, consents, correspondence, or other communications required or desired
to be given hereunder shall be given in writing and shall be delivered by
overnight courier, hand delivery, or certified or registered mail, postage
prepaid, if to the Lender, then to at 76 Batterson Park Road, Farmington,
Connecticut 06032, with a copy to the Lender at Riverway II, West Office Tower,
9399 West Higgins Road, Rosemont, Illinois 60018, and if to the Borrower, then
to P.O. Box 14528, 104 Alexander Drive, Building 2, Research Triangle Park,
North Carolina, 27709-4528, or such other address as shall be designated by the
Borrower or the Lender to the other party in accordance herewith. All such
notices and correspondence shall be effective when received.
20
<PAGE>
SECTION 9.2. HEADINGS. The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
SECTION 9.3. ASSIGNMENTS AND PARTICIPATIONS. The Borrower shall not have
the right to assign any Note or this Agreement or any interest therein unless
the Lender shall have given the Borrower prior written consent and the Borrower
and its assignee shall have delivered assignment documentation in form and
substance satisfactory to the Lender in its sole discretion. The Lender may
assign (without the consent of Borrower) to one or more Persons all or a portion
of its rights and obligations under this Agreement and the other Loan Documents
(provided that such Person shall not be a direct or indirect competitor of the
Borrower). The Lender may sell participations in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of any Loans); provided, however, that the Lender's obligations
under this Agreement shall remain unchanged. The Lender may, in connection with
any permitted assignment or participation or proposed assignment or
participation pursuant to this Agreement, disclose to the assignee or
participant or proposed assignee or participant any information relating to
Borrower furnished to the Lender by or on behalf of Borrower only for the
purpose of analyzing a potential assignment or participation of the Loan and
provided that Lender requests assignee to hold such information confidential.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment or waiver
of any provision of this Agreement and any consent to any departure by the
Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the essence in each
provision of this Agreement of which time is an element. All terms not defined
herein or in a Note shall have the meaning set forth in the applicable Code,
except where the context otherwise requires. To the extent a term or provision
of this Agreement conflicts with any Note, or any term or provision thereof, and
is not dealt with herein with more specificity, this Agreement shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Agreement shall not
be relevant in determining the meaning of this Agreement even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement shall create a
continuing security interest in the Collateral and shall (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, (ii)
be binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law, this
Agreement and the rights and powers granted to the Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or
21
<PAGE>
upon the appointment of any receiver, intervenor, conservator, trustee, or
similar official for the Borrower or any substantial part of its assets, or
otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations, warranties, and
covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Lender and its directors, officers, agents, employees, and counsel
from and against any and all costs, expenses, claims, or liability incurred by
the Lender or such Person hereunder and under any other Loan Document or in
connection herewith or therewith, unless such claim or liability shall be due to
willful misconduct or gross negligence on the part of the Lender or such Person.
In addition and without limiting the generality of the foregoing, Borrower
shall, upon demand, pay to the Lender all reasonable costs and expenses incurred
by the Lender (including the reasonable fees and disbursements of counsel and
other professionals) in connection with the preparation, execution, delivery,
administration, modification and amendment of the Loan Documents, and pay to the
Lender all reasonable costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by the Lender
in order to enforce or defend any of its rights under or in respect of this
Agreement, any other Loan Document or any other document or instrument now or
hereafter executed and delivered in connection herewith, collect the Obligations
or otherwise administer this Agreement, foreclose or otherwise realize upon the
Collateral or any part thereof, prosecute actions against, or defend actions by,
account debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim, examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of;
or otherwise enforce the Lender's security interest in, the Collateral; and
otherwise represent the Lender in any litigation relating to Borrower.
SECTION 9.10. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may
be executed in counterparts, each of which when so executed and delivered shall
be an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
facsimile transmission all with the same force and effect as if the same was a
fully executed and delivered original manual counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or obligation under
this Agreement or any Note or any other Loan Document shall be invalid, illegal,
or unenforceable in any jurisdiction, the validity, legality, and enforceability
of the remaining provisions or obligations, or of such provision or obligation
in any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay or omission
of the Lender to exercise any right or remedy hereunder, whether before or after
the happening of any Event of Default, shall impair any such right or shall
operate as a waiver thereof or as a
22
<PAGE>
waiver of any such Event of Default. No single or partial exercise by the Lender
of any right or remedy shall preclude any other or further exercise thereof, or
preclude any other right or remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender agree that
this Agreement, the Schedule hereto, and the Commitment Letter are the complete
and exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof. Should there exist any inconsistency between the terms
of the Commitment Letter and this Agreement, the terms of this Agreement shall
prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of all rights
of offset that the Lender may have under Applicable Law, and whether or not the
Lender has made any demand or the Obligations of the Borrower have matured, the
Lender shall have the right to appropriate and apply to the payment of the
Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15 JOINT AND SEVERAL LIABILITY. If Borrower consists of more
than one Person, their liability shall be joint and several, and the compromise
of any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
SECTION 9.16 MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the parties
hereto hereby agree that all agreements between them under this Agreement and
the other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to the Lender for the
use, forbearance, or detention of the money loaned to Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of the
State of Illinois (or the laws of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement and
the other Loan Documents), or under applicable federal laws which may presently
or hereafter be in effect and which allow a higher maximum non-usurious interest
rate than under the laws of the State of Illinois (or such other jurisdiction),
in any case after taking into account, to the extent permitted by applicable
law, any and all relevant payments or charges under this Agreement and the other
Loan Documents executed in connection herewith, and any available exemptions,
exceptions and exclusions (the "Highest Lawful Rate"). If due to any
circumstance whatsoever, fulfillment of any provisions of this Agreement or any
of the other Loan Documents at the time performance of such provision shall be
due shall exceed the Highest Lawful Rate, then, automatically, the obligation to
be fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance the
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount
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<PAGE>
then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to the Lender for the use, forbearance, or
detention of the Obligations and other indebtedness of Borrower to the Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness, until
payment in full thereof; so that the actual rate of interest on account of all
such indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents and
all other agreements between the parties hereto.
SECTION 9.17. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.18. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 9.19. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF THE UNITED STATES
OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED
IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMUTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION,
SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND
REMEDIES.
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<PAGE>
IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement to
be duly executed and delivered by its proper and duly authorized officer as of
the date first set forth above.
PARADIGM GENETICS, INC.
By: /s/ John A. Ryals
------------------------------------
Name: John A. Ryals
Title: President, CEO
Accepted as of the
____ day of July, 1999
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Gary P. Moro
-------------------------------
Name: Gary P. Moro
Title: Senior Vice President
Credit
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<PAGE>
SCHEDULE A
TO
LOAN AND SECURITY AGREEMENT
Consents and Approvals (Section 4.2):
Other Places of Business and Locations of Collateral (Section 4.16):
Prior Names of Obligor (Section 4.7):
Prior Trade Names of Obligor (Section 4.7):
Existing Trade Names of Obligor (Section 4.7):
Federal Tax ID (Section 4.7):
Registered and Unregistered Patents (Section 4.11):
Registered and Unregistered Trademarks (Section 4.11):
Registered Copyrights (Section 4.11):
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CONSENTS AND APPROVALS
(SECTION 4.2)
NONE
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<PAGE>
OTHER PLACES OF BUSINESS
AND
LOCATIONS OF COLLATERAL
(SECTION 4.16)
NONE
28
<PAGE>
PRIOR NAMES OF BORROWER
(SECTION 4.7)
NONE
29
<PAGE>
PRIOR TRADE NAMES OF BORROWER
(SECTION 4.7)
NONE
30
<PAGE>
EXISTING TRADE NAMES OF BORROWER
(SECTION 4.7)
NONE
31
<PAGE>
FEDERAL TAX IDENTIFICATION NUMBER OF BORROWER
(SECTION 4.7)
The federal tax identification number of Borrower is 56-2047837.
32
<PAGE>
REGISTERED AND UNREGISTERED PATENTS OF BORROWER
(SECTION 4.11)
See Schedule A to the Intellectual Property Security Agreement
33
<PAGE>
REGISTERED AND UNREGISTERED TRADEMARKS OF BORROWER
(SECTION 4.11)
See Schedule B to the Intellectual Property Security Agreement
34
<PAGE>
REGISTERED COPYRIGHTS OF BORROWER
(SECTION 4.11)
See Schedule C to the Intellectual Property Security Agreement
35
<PAGE>
Exhibit 10.32
-------------
INTELLECTUAL PROPERTY SECURITY AGREEMENT
THIS INTELLECTUAL PROPERTY SECURITY AGREEMENT is made and entered into as
of this 20th day of July, 1999 (this "Agreement"), between PARADIGM GENETICS,
INC., a North Carolina corporation (the "Grantor"), with and in favor of
TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware corporation (the "Lender").
WHEREAS, the Grantor is entering into a Loan and Security Agreement dated
as of even date herewith (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement"; terms which are capitalized herein and not
otherwise defined shall have the meanings given to them in the Loan Agreement)
with the Lender, pursuant to which the Lender agreed to make loans and advances
to the Grantor, subject to the terms and conditions set forth in the Loan
Agreement; and
WHEREAS, under the Loan Agreement, the Grantor has granted to the Lender a
security interest in and lien on substantially all of its assets; and
WHEREAS, it is a condition precedent to the effectiveness of the Loan
Agreement that the Grantor shall have executed and delivered this Agreement and
granted a security interest in all of the Grantor's right, title and interest in
and to all of the Intellectual Property Collateral (as hereinafter defined) in
favor of the Lender, as contemplated hereby.
NOW, THEREFORE, in consideration of the premises hereof and to induce the
Lender to enter into the Loan Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. Security for Obligations.
------------------------
(a) Security Interest in Patents. To secure the full and prompt
----------------------------
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all of the Obligations, the Grantor hereby grants and conveys to
the Lender a first and valid security interest in, with a power of sale to the
extent permitted by law, all of its right, title and interest in the United
States and throughout the world, in and to all of the now owned and hereafter
acquired United States and foreign patents and all patent and design patent
applications, and all issues, reissues, re-examinations, continuations,
continuations-in-part or divisions thereof, and all proceeds thereof
(hereinafter collectively referred to as the "Patents"). All unexpired patents
and all currently pending patent applications in which the Grantor has an
interest are listed on Schedule A attached hereto and made a part hereof.
Subject to the provisions of Section 2(n), the Grantor hereby further grants and
conveys to the Lender a first and valid security interest, having priority over
all other security interests, in all of the right, title and interest of the
Grantor in and to all products, proceeds, income, royalties, damages and
payments now or hereafter due and payable under or in respect of all Patents
and, subject to the provisions of Section 2(n), in and to all rights during the
term of this Agreement to sue, collect and retain for the Lender's benefit
damages and payments for past or future infringements of the Patents.
(b) Security Interest in Trademarks. To secure the payment and
-------------------------------
performance of all of the Obligations, the Grantor hereby grants and conveys to
the Lender a first and valid security interest in, with a power of sale to the
extent permitted by applicable law, all of its right, title and interest, in the
United States and throughout the world, in and to all of its now owned and
hereafter acquired trademarks, service marks and trade names, and all variants
thereof (whether or not such name is the subject of a registration or an
application therefor), and all registrations and applications to register the
same, and all renewals thereof, and the goodwill of the business relating
thereto, and all proceeds thereof (hereinafter
<PAGE>
collectively referred to as the "Trademarks"). All United States trademark
registrations and all currently pending trademark applications in which the
Grantor has an interest and all foreign trademark registrations and all
currently pending trademark applications in which the Grantor has an interest,
are listed on Schedule B attached hereto and made a part hereof. Subject to the
provisions of Section 2(n), the Grantor hereby further grants to the Lender a
first and valid security interest in all of its right, title and interest in and
to (i) all products, proceeds, income, royalties, damages and payments now and
hereafter due and payable under or in respect of all Trademarks, (ii) subject to
the provisions of Section 2(n), all rights during the term of this Agreement to
sue, collect and retain for the Lender's benefit damages and payments for past
or future infringements of the Trademarks and (iii) all rights under or interest
in any trademark license agreements or service mark license agreements with any
other party, whether the Grantor is a licensee or licensor under any such
license agreement, and the right to prepare for sale and sell any and all assets
now or hereafter owned by the Grantor and now or hereafter covered by such
licenses.
(c) Security Interest in Copyrights. To secure the payment and
-------------------------------
performance of all of the Obligations, the Grantor hereby grants to the Lender a
first and valid security interest in all of its right, title and interest, in
the United States and throughout the world, in and to all of its now owned and
hereafter acquired copyrights, and all registrations and applications to
register the same, all renewals thereof, any written agreement, naming the
Grantor as licensor or licensee, granting any right under any copyright, any
work which is or may be subject to copyright protection pursuant to Title 17 of
the U.S. Code, and all physical things embodying such works (including, without
limitation, copies thereof) created or otherwise used in the business of the
Grantor, and all proceeds thereof (hereinafter collectively referred to as the
"Copyrights"). All copyright registrations and all currently pending copyright
applications in which the Grantor has an interest are listed on Schedule C
attached hereto and made a part hereof. Subject to the provisions of Section
2(n), the Grantor hereby further grants to the Lender a first and valid security
interest in all of its right, title and interest in and to all products,
proceeds, income, royalties, damages and payments now and hereafter due and
payable under or in respect of all Copyrights and, subject to the provisions of
Section 2(n), in and to all rights during the term of this Agreement to sue,
collect and retain for the Lender's benefit damages and payments for past or
future infringements of the Copyrights.
(d) Security Interest in Proprietary Information. To secure the
--------------------------------------------
payment and performance of all of the Obligations, the Grantor hereby grants to
the Lender a first and valid security interest in all of its right, title and
interest, in the United States and throughout the world, in and to all of its
now owned and hereafter acquired inventions, discoveries, trade secrets,
improvements, processes, methods, formulae, applications, ideas, know-how,
customer lists, license rights, advertising materials, operating manuals, sales
literature, drawings, specifications, descriptions, name plates, catalogues,
proprietary information, and goodwill (and all other assets which uniquely
reflect such goodwill), and to all income, royalties, damages and payments now
and hereafter due or payable therefor or in respect thereof (collectively, the
"Proprietary Information" and, together with the Patents, the Trademarks and the
Copyrights, the "Intellectual Property Collateral").
SECTION 2. Representations, Warranties and Covenants of the Grantor.
--------------------------------------------------------
(a) Except as otherwise provided in this Agreement, the Grantor is and
will continue to be the owner of all of the Intellectual Property Collateral,
free from any adverse claim, security interest, lien or encumbrance in favor of
any Person except for the security interest granted to the Lender and except for
Permitted Liens.
(b) None of the Intellectual Property Collateral is or shall become
subject to any Lien in favor of any Person other than the Lender and except for
any Permitted Liens, and the Grantor
2
<PAGE>
agrees that it shall not license, transfer, convey or encumber any interest in
or to the Intellectual Property Collateral, except for: (i) licenses of
Intellectual Property Collateral granted in the ordinary course of the business
of the Grantor; (ii) transfers or conveyances of Intellectual Property
Collateral not otherwise permitted under this Agreement for consideration not to
exceed an amount in any fiscal year of the Grantor in excess of ten percent
(10%) of the Grantor's gross revenues for the prior fiscal year and provided
that (1) adequate consideration is received and (2) the Board of Directors
determines it is in the best interest of the corporation; (iii) licenses,
transfers, conveyances or encumbrances of Intellectual Property Collateral as
described in Schedule E hereto; (iv) licenses for use outside of the United
States; and (v) any other licenses, transfers, conveyances or encumbrances of
Intellectual Property Collateral requested by the Grantor and consented to by
the Lender (any such consent not to be unreasonably withheld). Any license of
the Intellectual Property Collateral granted by the Grantor (each, a "License")
shall be in writing and shall reserve all rights in the Grantor except those
reasonably necessary in the ordinary course of business to fulfill the permitted
purposes herein. The Grantor shall cause a copy of each License to be delivered
to the Lender within thirty (30) days of execution by all parties thereto.
(c) Except as disclosed in Schedule D hereto, the Grantor has made no
previous assignment, transfer or agreement in conflict herewith or constituting
a present or future assignment, transfer, or encumbrance of any of the
Intellectual Property Collateral.
(d) Except as disclosed in Schedule D hereto, there is no financing
statement or other document or instrument now signed or on file in any public
office granting a security interest in or otherwise encumbering any part of the
Intellectual Property Collateral, except those showing the Lender as secured
party. So long as any Obligations remain outstanding, the Grantor will not
execute, and there will not be on file in any public office, any such financing
statement or other document or instruments, except as permitted under Section
2(b) or financing statements filed or to be filed in favor of the Lender.
(e) Subject to any limitation stated therein or in connection
therewith, all information furnished to the Lender concerning the Intellectual
Property Collateral and proceeds thereof is and will be accurate and correct in
all material respects.
(f) All Intellectual Property Collateral consisting of applications
for Patents and for registrations of Trademarks and Copyrights has been duly and
properly filed and all Intellectual Property Collateral consisting of issued or
granted Patents and of registrations of Trademarks and Copyrights (including,
without limitation, any and all renewals, reissues, continuations or divisions
thereof, as the case may be) has been duly and properly maintained.
(g) Not later than forty-five (45) days after the end of each of the
first three fiscal quarters of each fiscal year of the Grantor, and not later
than 120 days after the end of each fiscal quarter ending with a fiscal year of
the Grantor, the Grantor shall provide Lender with a summary report for the
immediately preceding fiscal quarter of all patent applications or applications
for registration of a trademark filed by the Grantor with the U.S. Patent and
Trademark Office during such fiscal quarter, all applications for registration
of copyrights filed by the Grantor with the U.S. Copyright Office during such
fiscal quarter, and of all patents issued to the Grantor, and trademark and
copyright registrations granted to the Grantor, during such fiscal quarter.
Thereafter, at Lender's request, the Grantor shall execute all documents
necessary to perfect a security interest in any patent, trademark or copyright
application or patent or trademark or copyright registration, and the Grantor
shall annually, or more frequently as the Lender shall request, cause an
instrument sufficient to perfect, protect or establish any Lien hereunder to be
recorded in the U.S. Patent and Trademark Office with respect to all United
States patent applications filed by it or patents issued to it during the prior
calendar year and with respect to all trademark applications filed by it or
trademark registrations issued to it during the prior calendar year, and the
Grantor shall annually, or more frequently as the Lender reasonably shall
request, cause an instrument
3
<PAGE>
sufficient to perfect, protect or establish any Lien hereunder to be recorded in
the U.S. Copyright Office with respect to United States copyright applications
filed by it or copyright registrations issued to it during the prior calendar
year.
(h) The Grantor shall not take any action, or permit any action to be
taken by others subject to the Grantor's control, including licensees, or fail
to take any action, or permit others subject to the Grantor's control, including
licensees, to fail to take any action, subject to the provisions of Section
2(g), which would, in the case of any such actions or failures to act taken
singly or together, adversely affect the validity, grant and enforceability of
the security interest granted to the Lender hereunder. Notwithstanding the
foregoing, the Grantor shall be permitted to abandon any of the Intellectual
Property Collateral in accordance with the terms of Section 2(l).
(i) The Grantor shall promptly notify the Lender, in writing, of any
suit, action, proceeding, claim or counterclaim brought against the Grantor that
would reasonably be expected to affect adversely the Intellectual Property
Collateral, and shall, on request, deliver to the Lender a copy of all
pleadings, papers, orders or decrees theretofore and thereafter filed in any
such suit, action or proceeding, and shall keep the Lender duly advised in
writing of the progress of any such suit.
(j) To the best knowledge and belief of the Grantor after due inquiry,
no infringement or unauthorized use presently is being made of any Intellectual
Property Collateral. In the event of any material infringement of the
Intellectual Property Collateral by others or in the event of any other conduct
detrimental to the Intellectual Property Collateral by others known or brought
to the attention of the Grantor, the Grantor shall promptly notify the Lender in
writing at its address set forth in Section 5(a) of such infringement or other
conduct and the full nature, extent, evidence and facts of such infringement or
other conduct known to the Grantor.
(k) If requested by the Lender, the Grantor, upon reasonable notice
and at the Lender's expense, shall provide the Lender with access to the
Intellectual Property Collateral records maintained by the Grantor.
(l) The Grantor shall notify the Lender in writing at the address set
forth in Section 5(a) at least sixty days prior to any proposed voluntary
abandonment of any Intellectual Property Collateral (other than items of
Intellectual Property Collateral that are not useful or beneficial to the
business and operations of the Grantor) and obtain the prior written consent of
the Lender to such abandonment, which consent shall not be unreasonably
withheld.
(m) During the term of this Agreement, the Grantor agrees:
(i) whenever any of the registered Trademarks are used by or on
behalf of the Grantor, if reasonably practicable, to affix or cause to be
affixed a notice that the mark is a registered trademark or service mark,
which notice shall be in a form accepted or required by the trademark
marking laws of each country in which the mark is so used and registered;
and
(ii) whenever any of the underlying works covered by registered
Copyrights are used by or on behalf of the Grantor, if reasonably
practicable, to affix or cause to be affixed a notice that said underlying
works are so covered, which notice shall be in a form accepted or required
by the copyright laws of such country in which said underlying works are so
used and registered.
4
<PAGE>
(n) Subject to the provisions of Section 4(g), during the term of this
Agreement, all income, royalties, payments and damages due and payable to the
Grantor under or in respect of the Intellectual Property Collateral shall be
paid to the Grantor.
(o) The Grantor agrees, upon the reasonable request by the Lender,
during the term of this Agreement:
(i) to execute, acknowledge and deliver all additional
instruments and documents necessary or desirable to effect the
purposes and intents of this Agreement, in a form reasonably
acceptable to counsel for the Lender; and
(ii) to do all such other acts as may be necessary or appropriate
to carry out the purposes and intents of this Agreement, and to
create, evidence, perfect and continue the security interests of the
Lender in the Intellectual Property Collateral.
SECTION 3. Indemnity. The Grantor agrees to indemnify the Lender from and
---------
against any and all claims, losses and liabilities arising out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement and any actions taken pursuant to Section 4 or any failure to act
thereunder), unless such claim or liability shall be due to willful misconduct
or gross negligence on the part of the Lender or such person.
SECTION 4. Rights and Remedies Upon an Event of Default.
--------------------------------------------
(a) If any Event of Default shall have occurred and be continuing,
then and in every such case, subject to any mandatory Requirements of Law, the
Lender, in addition to other rights and remedies provided for herein and any
rights now or hereafter existing under applicable law, shall have all rights and
remedies as a secured creditor under the Uniform Commercial Code in all relevant
jurisdictions and may:
(i) personally, or by agents or attorneys, upon five (5) days'
written notice, take possession of the Intellectual Property
Collateral or any part thereof, from the Grantor or any other Person
who then has possession of any part thereof, with or without notice or
process of law, and for that purpose may enter upon the Grantor's
premises where any of the Intellectual Property Collateral is located
and remove the same and use in connection with such removal any and
all services, supplies, aids and other facilities of the Grantor; and
(ii) sell, assign or otherwise liquidate, or direct the Grantor
to sell, assign or otherwise liquidate, any or all of the Intellectual
Property Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation;
(b) Any collateral repossessed by the Lender under or pursuant to
Section 4(a) and any other Intellectual Property Collateral whether or not so
repossessed by the Lender, may be sold, assigned, leased or otherwise disposed
of under one or more contracts or as an entirety, and without the necessity of
gathering at the place of sale the property to be sold, and in general in such
manner, at such time or times, at such place or places and on such terms as the
Lender may, in compliance with any Requirements of Law, determine to be
commercially reasonable. Any such disposition which shall be a private sale or
other private proceedings permitted by such requirements shall be made upon not
less than 10 days' written notice to the Grantor specifying the time at which
such disposition is to be made and the intended sale price or other
consideration therefor, and shall be subject, for the 10 days after the giving
of such notice, to the right of the Grantor or any nominee of the Grantor to
acquire the Intellectual Property
5
<PAGE>
Collateral involved at a price or for such other consideration at least equal to
the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the Grantor specifying the
time and place of such sale and, in the absence of applicable Requirements of
Law, shall be by public auction (which may, at the option of the Lender, be
subject to reserve), after publication of notice of such auction not less than
10 days prior thereto in two newspapers of general circulation in the
jurisdiction in which such auction is to be held. To the extent permitted by any
such Requirements of Law, the Lender may bid for and become the purchaser of the
Intellectual Property Collateral or any item thereof, offered for sale in
accordance with this Section without accountability to the Grantor (except to
the extent of surplus money received). If, under mandatory Requirements of Law,
the Lender shall be required to make disposition of the Intellectual Property
Collateral within a period of time which does not permit the giving of notice to
the Grantor as hereinabove specified, the Lender need give the Grantor only such
notice of disposition as shall be reasonably practicable in view of such
mandatory Requirements of Law. The Lender shall not be obligated to make any
sale of Intellectual Property Collateral regardless of notice of sale having
been given. The Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Upon the occurrence and continuance of an Event of Default, with
notice to the Grantor, if reasonably practical, the Lender shall have the right
at any time to make any payments and do any other acts the Lender may deem
necessary to protect its security interests in the Intellectual Property
Collateral, including, without limitation, the rights to pay, purchase, contest
or compromise any Lien which, in the reasonable judgment of the Lender, appears
to be prior to or superior to the security interests granted hereunder, and
appear in and defend any action or proceeding purporting to affect its security
interests in, or the value of, the Intellectual Property Collateral. The Grantor
hereby agrees to reimburse the Lender for all payments made and expenses
incurred under this Agreement including reasonable fees based upon standard
hourly rates and without regard to any statutory formula, expenses and
disbursements of attorneys and paralegals acting for the Lender, including any
of the foregoing payments under, or acts taken to protect its security interests
in, the Intellectual Property Collateral, which amounts shall be secured under
this Agreement, and agrees it shall be bound by any payment made or act taken by
the Lender hereunder absent the Lender's gross negligence or willful misconduct.
The Lender shall have no obligation to make any of the foregoing payments or
perform any of the foregoing acts.
(d) The Grantor hereby irrevocably authorizes and appoints the Lender,
or any Person or agent the Lender may designate, as the Grantor's attorney-in-
fact, with full authority in the place and stead of the Grantor and in the name
of the Grantor or otherwise, at the Grantor's cost and expense, in the Lender's
good faith business judgment, to take any action and to execute any instrument
that the Lender may deem necessary or advisable to accomplish the purposes and
intents of this Agreement and to exercise all of the following powers upon and
at any time after the occurrence and during the continuance of an Event of
Default, which powers, being coupled with an interest, shall be irrevocable
until all of the Obligations shall have been paid and satisfied in full:
(i) ask for, demand, collect, bring suit, recover, compromise,
administer, accelerate or extend the time of payment, issue credits,
compromise, receive and give acquittance and receipts for moneys due
and to become due under or in respect of any of the Intellectual
Property Collateral;
(ii) receive, take, endorse, negotiate, sign, assign and deliver
and collect any checks, notes, drafts or other instruments, documents
and chattel paper, in connection with clause (i) above;
6
<PAGE>
(iii) receive, open and dispose of all mail addressed to the
Grantor and notify postal authorities to change the address for
delivery thereof to such address as the Lender may designate;
(iv) give customers indebted on the Intellectual Property
Collateral notice of the Lender's interest therein, or to instruct
such customers to make payment directly to the Lender for the
Grantor's account or to request, at any time from customers indebted
on the Intellectual Property Collateral, verification of information
concerning the Intellectual Property Collateral and the amounts owing
thereon;
(v) convey any item of Intellectual Property Collateral to any
purchaser thereof;
(vi) record any instruments under Section 2(g) hereof;
(vii) make any payments or take any acts under Section 4(c)
hereof; and
(viii) file any claims or take any action or institute any
proceedings that the Lender may reasonably deem necessary or desirable
for the collection of any of the Intellectual Property Collateral or
otherwise to enforce the rights of the Lender with respect to any of
the Intellectual Property Collateral.
The Lender's authority under this Section 4(d) shall include, without
limitation, the authority to execute and give receipt for any certificate of
ownership or any document, transfer title to any item of Intellectual Property
Collateral, sign the Grantor's name on all financing statements or any other
documents deemed necessary or appropriate to preserve, protect or perfect the
security interest in the Intellectual Property Collateral and to file the same,
prepare, file and sign the Grantor's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with any Intellectual
Property Collateral and prepare, file and sign the Grantor's name on a proof of
claim in bankruptcy or similar document against any customer of the Grantor, and
to take any other actions arising from or incident to the rights, powers and
remedies granted to the Lender in this Agreement. This power of attorney is
coupled with an interest and is irrevocable by the Grantor.
(e) All cash proceeds received by the Lender in respect of any sale
of, collection from, or other realization upon all or any part of the
Intellectual Property Collateral shall be applied by the Lender against the
Obligations in such order as the Lender may determine.
(f) The Lender shall have the right of setoff with respect to the
Intellectual Property Collateral as provided Section 9.14 of the Loan Agreement.
(g) Upon the occurrence and during the continuance of an Event of
Default, all income, royalties, payments and damages under or in respect of the
Intellectual Property Collateral, if any, received thereafter shall be held by
the Grantor in trust for the benefit of the Lender, separate from the Grantor's
own property or funds and immediately turned over to the Lender with proper
assignments or endorsements. Upon the occurrence and during the continuance of
an Event of Default, the Lender shall have the right to notify payors of income,
royalties, payments and damages under or in respect of the Intellectual Property
Collateral to make payment directly to the Lender.
(h) Each and every right, power and remedy hereby specifically given
to the Lender shall be in addition to every other right, power and remedy
specifically given under this Agreement or under the other Loan Documents or now
or hereafter existing at law or in equity, or by statute, and each
7
<PAGE>
and every right, power and remedy whether specifically herein given or otherwise
existing may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by the Lender. All such rights, powers
and remedies shall be cumulative and the exercise or the beginning of exercise
of one shall not be deemed a waiver of the right to exercise of any other or
others. No delay or omission of the Lender in the exercise of any such right,
power or remedy and no renewal or extension of any of the Obligations shall
impair any such right, power or remedy or shall be construed to be a waiver of
any Default or Event of Default or any acquiescence therein.
SECTION 5. General Provisions.
------------------
(a) Notices. All notices, approvals, consents or other communications
-------
required or desired to be given hereunder shall be in writing and sent by
certified or registered mail, return receipt requested, by overnight delivery
service, with all charges prepaid, or by telecopier followed by a hard copy sent
by overnight mail, if to the Lender, then to Transamerica Business Credit
Corporation, 76 Batterson Road, Farmington, Connecticut 06032, Telecopy: (860)
677-6766, Attn.: Legal Department, and if to the Grantor, then to P.O. Box
14528, 104 Alexander Drive, Building 2, Research Triangle Park, North Carolina,
27709-4528, Telecopy: (919) 544-8094, Attn.: Chief Financial Officer, with a
copy to Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P., 2500
First Union Capitol Center, Raleigh, North Carolina, 27601, Attention: Gerald F.
Roach, Telecopy: 919-821-6800. All such notices and correspondence shall be
deemed given (i) if sent by certified or registered mail, three Business Days
after being postmarked, (ii) if sent by overnight delivery service, when
received at the above stated addresses or when delivery is refused and (iii) if
sent by telecopier transmission, when receipt of such transmission is
acknowledged.
(b) Headings. The headings in this Agreement are for purposes of reference
--------
only and shall not affect the meaning or construction of any provision of this
Agreement.
(c) Severability. The provisions of this Agreement are severable, and if
------------
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect,
in that jurisdiction only, such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.
(d) Amendments, Waivers and Consents. Any amendment or waiver of any
--------------------------------
provision of this Agreement and any consent to any departure by the Grantor from
any provision of this Agreement shall not be effective unless the same shall be
in writing and signed by the Grantor and the Lender and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
(e) Interpretation. Time is of the essence in each provision of this
--------------
Agreement of which time is an element. All terms not defined herein or in the
Loan Agreement shall have the meaning set forth in the Code, except where the
context otherwise requires. To the extent a term or provision of this Agreement
conflicts with the Loan Agreement and is not dealt with herein with more
specificity, the Loan Agreement shall control with respect to the subject matter
of such term or provision. Acceptance of or acquiescence in a course of
performance rendered under this Agreement shall not be relevant in determining
the meaning of this Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.
(f) Continuing Security Interest. This Agreement shall create a continuing
----------------------------
security interest in the Intellectual Property Collateral and shall (i) remain
in full force and effect until the payment in full in cash of the Obligations
and the termination of the Loan Agreement, (ii) be binding upon the Grantor and
8
<PAGE>
its successors and assigns and (iii) inure, together with the rights and
remedies of the Lender, to the Lender's successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), the Lender may,
in accordance with the terms of the Loan Agreement, assign or otherwise transfer
all or any portion of its rights and obligations under the Loan Documents
(including, without limitation, all or any portion of any Loans or any Notes
held by it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to the Lender herein or
otherwise, in each case as provided in the Loan Agreement.
(g) Reinstatement. To the extent permitted by law, this Agreement shall
-------------
continue to be effective or be reinstated if at any time any amount received by
the Lender in respect of the Obligations is rescinded or must otherwise be
restored or returned by the Lender because the Grantor is the subject of an
Insolvency Event, all as though such payments had not been made.
(h) Survival of Provisions. All representations, warranties and covenants
----------------------
of the Grantor contained herein shall survive the execution and delivery of this
Agreement, and shall terminate only upon the full and final payment and
performance by the Grantor of the Obligations secured hereby and termination of
the Loan Agreement and the other Loan Documents.
(i) Lender May Perform. If the Grantor fails to perform any agreement
------------------
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Lender incurred in connection
therewith shall be payable by the Grantor and shall constitute Obligations
secured by this Agreement
(j) No Duty on Lender. The powers conferred on the Lender hereunder are
-----------------
solely to protect the interest of the Lenders in the Intellectual Property
Collateral and shall not impose any duty upon the Lender to exercise any such
powers. Except for the safe custody of any Intellectual Property Collateral in
its possession and the accounting for money actually received by it hereunder,
the Lender shall have no duty as to any Intellectual Property Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters related to any Intellectual Property
Collateral, whether or not the Lender has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any Person or any other rights pertaining to any Intellectual Property
Collateral. The Lender shall be deemed to have exercised reasonable care in the
custody and preservation of any Intellectual Property Collateral in its
possession if such Intellectual Property Collateral is accorded treatment
substantially equal to that which the Lender accords its own property. To the
extent the Intellectual Property Collateral is held by a custodian, the Lender
shall be deemed to have exercised reasonable care if it has selected the
custodian with reasonable care.
(k) Delays; Partial Exercise of Remedies. No delay or omission of the
------------------------------------
Lender to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Lender of any right or remedy shall preclude any other
or further exercise thereof, or preclude any other right or remedy.
(1) Release; Termination of Agreement. Subject to the provisions of
---------------------------------
subsection (g) hereof, upon the payment in full of the Obligations and the
termination of the Loan Agreement, this Agreement shall terminate and all rights
in the Intellectual Property Collateral shall revert to the Grantor. At such
time, the Lender shall upon the request and at the expense of the Grantor, (A)
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination and (B) reassign and redeliver
to the Grantor all of the Intellectual Property Collateral hereunder which has
not been sold, disposed of, retained or applied by the Lender in accordance with
the terms hereof. Such
9
<PAGE>
reassignment and redelivery shall be without warranty by or recourse to the
Lender, except as to the absence of any prior assignments by the Lender of its
interest in the Intellectual Property Collateral.
(m) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but both of which shall
together constitute one and the same agreement.
(n) GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
-------------
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, WITHOUT GIVING
EFFECT TO CONFLICT OF LAW PRINCIPLES, EXCEPT TO THE EXTENT THAT FEDERAL LAW IS
APPLICABLE.
(o) SUBMISSION TO JURISDICTION. ALL DISPUTES BETWEEN THE GRANTOR AND THE
--------------------------
LENDER, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS AND THE
COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE
LENDER SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE GRANTOR OR ITS PROPERTY IN ANY LOCATION REASONABLY SELECTED
BY THE LENDER IN GOOD FAITH TO ENABLE THE LENDER TO REALIZE ON SUCH PROPERTY, OR
TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE LENDER. THE GRANTOR
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
LENDER HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON FORUM NON CONVENIENS.
(p) JURY TRIAL. THE GRANTOR AND THE LENDER EACH HEREBY WAIVES TO THE
FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
causing this Agreement to be signed by their respective duly authorized officers
on the day and year first above written.
PARADIGM GENETICS, INC.
By: /s/ John A. Ryals
--------------------------------------
Name: John A. Ryals
Title: CEO, President
Accepted and Agreed as of the
date first above written:
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Gary P. Moro
------------------------------
Name: Gary P. Moro
Title: Senior Vice President
Credit
10
<PAGE>
SCHEDULE A
Patents
Paradigm Genetics has filed the following patent applications:
- --------------------------------------------------------------------------------
United States Patent Applications
- --------------------------------------------------------------------------------
INVENTORS FILING DATE TITLE
- --------------------------------------------------------------------------------
Uknes, S 03/17/99 Sequences of Magnaporthe Grisea
Tanzer, M
Woessner, J
Rameaka, J
Miller, B
Haas, D
Garcia, T
- --------------------------------------------------------------------------------
Uknes, 5 03/17/99 Sequences of Magnaporthe Grisea
Tanzer, M
Woessner, J
Rameaka, J
Miller, B
Hans, D
Garcia, T
- --------------------------------------------------------------------------------
Uknes, S 03/17/99 Sequences of Magnaporthe Grisea
Tanzer, M
Woessner, J
Rameaka, J
Miller, B
Haas, D
Garcia, T
- --------------------------------------------------------------------------------
Hamer, J 03/17/99 Methods and Materials for the Rapid
Hamer, L and High Volume Production of a Gene
Knock-Out Library in an Organism
(TAG-KO)
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE B
TRADEMARKS
Paradigm Genetics has filed the following trademark applications:
- --------------------------------------------------------------------------------
United States Patent Applications
- --------------------------------------------------------------------------------
# FILING DATE TITLE
- --------------------------------------------------------------------------------
TM101 09/18/98 Paradigm Genetics
- --------------------------------------------------------------------------------
TM102 12/17/98 Paradigm Genetics & Design
- --------------------------------------------------------------------------------
TM103 09/17/98 AgDB
- --------------------------------------------------------------------------------
TM104 09/18/98 GeneFinder
- --------------------------------------------------------------------------------
TM105 09/18/98 FunctionFinder
- --------------------------------------------------------------------------------
TM106 09/18/98 TargetFinder
- --------------------------------------------------------------------------------
TM107 09/18/98 LeadFinder
- --------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE C
COPYRIGHTS
NONE
3
<PAGE>
SCHEDULE D
Assignments
The following assignments of intellectual property have taken place:
Prionics
- --------
Any patents arising from an invention first conceived or discovered jointly by
one or more employees of PRIONICS and one or more employees of PARADIGM in the
performance of DEVELOPMENT, which invention relates to the detection of prions,
shall belong to PRIONICS.
4
<PAGE>
SCHEDULE E
Permitted Intellectual Property Collateral Transfer
The Grantor shall be permitted to license, transfer, convey or encumber any
Intellectual Property Collateral, as necessary or desirable, in connection with
contractual relationships entered into with Monsanto Company or any of its
affiliates, as previously described to the Lender.
5
<PAGE>
Exhibit 10.33
-------------
PROMISSORY NOTE
---------------
1158-002
Date: July 23, 1999
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Transamerica Business Credit Corporation or its assigns (the "Payee") at its
office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of Two Million and Dollars
($2,000,000) received by the undersigned, plus interest, in lawful money of the
United States and in immediately available funds. Interest only payments shall
be payable commencing September 1, 1999 and continuing through February 1, 2002
in the amounts set forth on Exhibit I. Thereafter, interest and principal
payments shall be due in six consecutive monthly installments of Three Hundred
Forty Six Thousand, Five Hundred Seventy and 78/100 Dollars ($346,570.78). No
amount of principal paid or prepaid hereunder may be reborrowed.
This Note is one of the Notes referred to in the Loan and Security
Agreement dated as of July 20, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Agreement"), between the undersigned and the
Payee and is subject and entitled to all provisions and benefits thereof.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.
If any installment of this Note is not paid within five days after its due
date, the undersigned agrees to pay on demand, in addition to the amount of such
installment, an amount equal to 5% of such installment, but only to the extent
permitted by Applicable Law.
The undersigned shall have the right to prepay this Note at any time on or
after September 1, 2000, on thirty days' prior written notice to the Payee. On
the date of any such prepayment, the undersigned shall pay an amount equal to
the present value of the remaining payments (principal and interest) due
hereunder discounted at 6% simple interest per annum, together with all
interest, fees and other amounts payable on the amount so prepaid or in
connection therewith to the date of such prepayment. Any prepayments shall be
applied to the installments hereof in the inverse order of maturity.
Upon the maturity of this Note, the entire unpaid principal amount on this
Note, together with all interest, fees and other amounts payable hereon or in
connection herewith, shall be immediately due and payable without further notice
or demand, with interest on all such amounts at a rate not to exceed the lawful
limit, from the date of such maturity or acceleration, as the case may be, until
all such amounts have been paid. Upon default or the acceleration of the
maturity of this Note in accordance with the terms of the Agreement, the entire
unpaid principal amount on this Note, together with all interest, fees,
prepayment fees and charges in an amount equal to the present value of the
remaining payments (principal and interest) due hereunder discounted at 6%
simple interest per annum and other amounts payable hereon or in connection
herewith, shall be immediately due and payable without further notice or demand,
with interest on all such
<PAGE>
amounts at a rate not to exceed the lawful limit, from the date of such
maturity, default or acceleration, as the case may be, until all such amounts
have been paid.
If any payment on this Note becomes payable on a day other than a Business
Day, the maturity thereof shall be extended to the next succeeding Business Day.
The undersigned hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice. The undersigned agrees to pay all amounts under this Note
without offset, deduction, claim, counterclaim, defense or recoupment, all of
which are hereby waived.
The Payee, the undersigned and any other parties to the Loan Documents
intend to contract in strict compliance with applicable usury law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained in the Loan Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount of interest permitted to be
charged by Applicable Law from time to time in effect. Neither the undersigned
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under Applicable Law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. The Payee expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation is accelerated. If (a) the maturity of any Obligation is
accelerated for any reason, (b) any Obligation is prepaid and as a result any
amounts held to constitute interest are determined to be in excess of the legal
maximum, or (c) the Payee or any other holder of any or all of the Obligations
shall otherwise collect amounts which are determined to constitute interest
which would otherwise increase the interest on any or all of the Obligations to
an amount in excess of that permitted to be charged by Applicable Law then in
effect, then all sums determined to constitute interest in excess of such legal
limit shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at the Payee's or such holder's option,
promptly returned to the undersigned upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under Applicable Law, the Payee and the
undersigned (and any other payors thereof) shall to the greatest extent
permitted under Applicable Law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and
spread the total amount of interest through the entire contemplated term of this
Note in accordance with the amount outstanding from time to time thereunder and
the maximum legal rate of interest from time to time in effect under Applicable
Law in order to lawfully charge the maximum amount of interest permitted under
Applicable Law.
This Note may not be changed, modified or terminated orally, but only by an
agreement in writing signed by the undersigned and the Payee or any holder
hereof.
2
<PAGE>
The undersigned shall, upon demand, pay to the Payee all costs and expenses
incurred by the Payee (including the reasonable fees and disbursements of
counsel) in connection with the preparation, execution and delivery of this Note
and all other Loan Documents, and in connection with the administration,
modification and amendment of the Loan Documents, and pay to the Payee all costs
and expenses (including the reasonable fees and disbursements of counsel) paid
or incurred by the Payee in (A) enforcing or defending its rights under or in
respect of this Note or any of the other Loan Documents, (B) collecting any of
the liabilities by the undersigned to the Payee or otherwise administering the
Loan Documents, (C) foreclosing or otherwise collecting upon any collateral and
(D) obtaining any legal, accounting or other advice in connection with any of
the foregoing.
This Note shall be binding upon the successors and assigns of the
undersigned and inure to the benefit of the Payee and its successors, endorsees
and assigns. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions hereof
shall in no way be affected thereby.
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE PAYEE HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE
ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH DISPUTE SHALL BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
PARADIGM GENETICS, INC.
By: /s/ John A. Ryals
--------------------------------
Name: John A. Ryals
-------------------------
Title: CEO, President
-------------------------
3
<PAGE>
EXHIBIT 1
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------
PARADIGM GENETICS Rate Adjustment 7/16/99 5.57% 0.99%
1158-002, SENIOR TERM NOTE 1/29/99 4.58% 12.50%
-------------------------------------------------------------------------------
</TABLE>
COMPOUND PERIOD Monthly
Nominal Annual Rate 13.490%
Periodic Rate 1.1242%
Daily Rate 0.03747%
<TABLE>
<S> <C> <C> <C> <C>
Event Start Date Amount Number Period
1 Loan 23-Jul-99 2,000,000 1
2 Payment 01-Sep-99 0.00 30 Monthly
3 Payment 01-Mar-02 346,570.78 6 Monthly
</TABLE>
AMORTIZATION SCHEDULE - Normal Amortization, 360 Day Year
<TABLE>
<CAPTION>
# Date Payment Interest Principal Balance
<S> <C> <C> <C> <C> <C>
Loan 23-Jul-99 0.00 2,000,000.00
1 01-Sept-99 29,304.16 29,304.16 0.00 2,000,000.00
2 01-Oct-99 22,483.33 22,483.33 0.00 2,000,000.00
3 01-Nov-99 22,483.33 22,483.33 0.00 2,000,000.00
4 01-Dec-99 22,483.33 22,483.33 0.00 2,000,000.00
1999 Totals 96,754.15 96,754.15
5 01-Jan-00 22,483.33 22,483.33 0.00 2,000,000.00
6 01-Feb-00 22,483.33 22,483.33 0.00 2,000,000.00
7 01-Mar-00 22,483.33 22,483.33 0.00 2,000,000.00
8 01-Apr-00 22,483.33 22,483.33 0.00 2,000,000.00
9 01-May-00 22,483.33 22,483.33 0.00 2,000,000.00
10 01-Jun-00 22,483.33 22,483.33 0.00 2,000,000.00
11 01-Jul-00 22,483.33 22,483.33 0.00 2,000,000.00
12 01-Aug-00 22,483.33 22,483.33 0.00 2,000,000.00
13 01-Sept-00 22,483.33 22,483.33 0.00 2,000,000.00
14 01-Oct-00 22,483.33 22,483.33 0.00 2,000,000.00
15 01-Nov-00 22,483.33 22,483.33 0.00 2,000,000.00
16 01-Dec-00 22,483.33 22,483.33 0.00 2,000,000.00
2000 Totals 269,799.96 269,799.96 0.00 2,000,000.00
17 01-Jan-01 22,483.33 22,483.33 0.00 2,000,000.00
18 01-Feb-01 22,483.33 22,483.33 0.00 2,000,000.00
19 01-Mar-01 22,483.33 22,483.33 0.00 2,000,000.00
20 01-Apr-01 22,483.33 22,483.33 0.00 2,000,000.00
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
21 01-May-01 22,483.33 22,483.33 0.00 2,000,000.00
22 01-Jun-01 22,483.33 22,483.33 0.00 2,000,000.00
23 01-Jul-01 22,483.33 22,483.33 0.00 2,000,000.00
24 01-Aug-01 22,483.33 22,483.33 0.00 2,000,000.00
25 01-Sep-01 22,483.33 22,483.33 0.00 2,000,000.00
26 01-Oct-01 22,483.33 22,483.33 0.00 2,000,000.00
27 01-Nov-01 22,483.33 22,483.33 0.00 2,000,000.00
28 01-Dec-01 22,483.33 22,483.33 0.00 2,000,000.00
2001 Totals 269,799.96 269,799.96 0.00
29 01-Jan-02 22,483.33 22,483.33 0.00 2,000,000.00
30 01-Feb-02 22,483.33 22,483.33 0.00 2,000,000.00
31 01-Mar-02 346,570.78 22,483.33 324,087.45 1,675,912.55
32 01-Apr-02 346,570.78 18,840.05 327,730.73 1,348,181.82
33 01-May-02 346,570.78 15,155.81 331,414.97 1,016,766.85
34 01-Jun-02 346,570.78 11,430.15 335,140.63 681,626.22
35 01-Jul-02 346,570.78 7,662.61 338,908.17 342,718.05
36 01-Aug-02 346,570.78 3,852.73 342,718.05 0.00
2002 Totals 2,124,391.34 124,391.34 2,000,000.00
Grand Totals 2,760,745.41 760,745.41 2,000,000.00
</TABLE>
5
<PAGE>
Exhibit 10.34
-------------
MASTER LOAN AND SECURITY AGREEMENT
NO 7237 DATED JUNE 18, 1998
LENDER CUSTOMER:
OXFORD VENTURE LEASING, LLC Paradigm Genetics, Inc.
a Virginia limited liability a North Carolina corporation
corporation
Address: Address:
8180 Greensboro Drive, suite 1000 106 Alexander Drive, building 6
McLean, Virginia 22102 Research Triangle Park, NC 27709
In consideration of each Loan Agreement, Customer hereby agrees with Lender
that, whenever Customer shall be at any time or times directly or contingently
indebted, liable or obligated to Lender in any manner whatsoever, Lender shall
have the following rights:
1. DEFINITIONS. To the extent not otherwise specifically defined in this
Agreement, unless the context otherwise requires, all other terms contained in
this Agreement shall have the meanings assigned or referred to them in the UCC.
The following terms shall have the following meanings:
"Acceptance Date" with respect to each item of Equipment shall have the
meaning assigned to such term in Section 3 of this Agreement.
"Affiliate" shall mean, with respect to any person, firm or entity, any
other person, firm or entity controlling, controlled by, or under common control
with such person, firm or entity; for the purposes hereof "control" shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any such person, firm or entity,
whether through the legal or beneficial ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Master Loan and Security Agreement, as amended
or modified from time to time.
"Attorneys' Fees and Expenses" shall mean reasonable attorneys' fees and
legal costs and expenses (including, without limitation, those fees, costs and
expenses incurred in connection with bankruptcy proceedings, including Relief
from Stay Motions, Cash Collateral Motions and disputes concerning any proposed
disclosure statement and/or bankruptcy plan), provided that legal fees shall be
based upon standard hourly rates and not the presumed rate set forth in N.C.
Gen. Stat. 6-12.2.
"Collateral" shall mean all Equipment and any licenses, trademarks or other
tangible or intangible property ancillary to the Equipment and all products,
proceeds, rents and profits therefrom or thereof including proceeds in the form
of goods, accounts, chattel paper, documents, instruments and insurance
proceeds.
"Default" shall have the meaning ascribed to such term in Section 8 of this
Agreement.
<PAGE>
"Equipment" shall mean one or more items or units of personal property now
owned or hereafter acquired by Customer, as described in each Equipment
Schedule, wherever the same may be located, including all present and future
additions, attachments, accessions and accessories thereto and all replacements,
substitutions and a right to use license for any software related to any of the
foregoing and proceeds thereof including all proceeds of insurance thereon.
"Equipment Schedule" shall mean each Equipment Schedule, which incorporates
by reference the terms and conditions of this Agreement and describes one or
more items of Equipment and specific terms and conditions with respect thereto.
"Event of Default" shall have the meaning ascribed to such term in Section
8 of this Agreement.
"Loan Agreement" shall mean the applicable Equipment Schedule incorporating
the terms and conditions of this Agreement, including all exhibits, addenda,
schedules, certificates, riders and all other documents and instruments executed
and delivered in connection with the applicable Equipment Schedule or this
Master Loan and Security Agreement.
"Note" shall mean a promissory note of Customer in favor of Lender
evidencing Customer's obligations to Lender with respect to a Loan Agreement.
"Obligations" shall mean all liabilities, absolute or contingent, joint,
several or independent, of Customer or any Affiliate of Customer now or
hereafter existing, due or to become due to, or held or to be held by, Lender
for its own account or as agent for another or others, whether created directly
or acquired by assignment or otherwise and howsoever evidenced, including,
without limitation, the Loan Agreement, and all interest, taxes, fees, charges,
expenses and Attorneys' Fees and Expenses chargeable to Customer or incurred by
Lender under the Loan Agreement, or any other document or instrument delivered
in connection herewith.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust, or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Security Deposit" with respect to each item of Equipment shall have the
meaning assigned to such term in the Equipment Schedule applicable to such item
of Equipment.
"UCC" shall mean the Uniform Commercial Code as enacted in the State of
Connecticut.
2. INDEPENDENT LOAN; CROSS-COLLATERALLZATION; SECURITY INTEREST. Each
Equipment Schedule shall constitute a separate, distinct and independent Loan
Agreement and contractual obligation of Customer. As security for the due and
punctual payment of any and all of the present and future Obligations of
Customer to Lender, Customer hereby (i) grants to Lender with respect to each
Loan Agreement and for the full amount of all Obligations, a security interest
in all of the Collateral and all collateral securing any other lease
2
<PAGE>
or security agreement between Customer and Lender, whether now in existence or
hereafter entered into and (ii) assigns to Lender all of its rights, title and
interest in surplus money to which Customer may be entitled upon the sale of all
such Collateral. The extent to which Lender's security interest in any item of
Collateral shall be entitled to purchase money priority shall be determined by
reference to the unpaid principal balance of any Note evidencing the financing
of the purchase price of such item of Equipment. Lender shall release its
security interest in the Equipment upon Customer's payment in full of all
principal, interest and other amounts under the Note and Equipment Schedule
evidencing the financing of the purchase price of the Equipment.
3. ACCEPTANCE OF EQUIPMENT. The Equipment is to be delivered and installed
at the location specified or referred to in the applicable Equipment Schedule.
The Equipment shall be deemed to have been accepted by Customer for all purposes
under this Agreement upon Customer's execution of an Equipment Schedule (the
"Acceptance Date"). Customer shall not be liable or responsible for any failure
or delay in the delivery of the Equipment to Customer for whatever reason.
4. TERM; PRINCIPAL AND INTEREST; NO PREPAYMENT; LATE CHARGES. The term for
any Loan Agreement shall be as specified in the applicable Equipment Schedule.
No Loan Agreement is prepayable by Customer, in whole or in part, without the
express written consent of Lender in its sole discretion. Principal and interest
payments shall be in the amounts and shall be due and payable as set forth in
the applicable Equipment Schedule. If any payment of principal or interest or
other amount payable hereunder shall not be paid within 5 days of the date when
due, Customer shall pay as an administrative and late charge an amount equal to
5% of the amount of any such overdue payment. In addition, Customer shall pay
overdue interest on any delinquent payment or other amounts due under any Loan
Agreement (by reason of acceleration or otherwise) from the due date until paid
at the rate of one and one-half percent (1.5%) per month or the maximum amount
permitted by applicable law, whichever is lower. All payments to be made to
Lender shall be made to Lender in immediately available funds at the address
shown above, or at such other place as Lender shall specify in writing.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Customer hereby represents
and warrants to and covenants with Lender (provided that if Customer is an
individual or sole proprietorship, the representations, warranties and covenants
relating to corporate status shall not apply) that, as of the date hereof and
for so long as any Obligations shall remain outstanding:
(a) Customer is duly organized and is existing in good standing under the
laws of its jurisdiction of organization and is duly qualified and in good
standing in those jurisdictions where the conduct of its business or the
ownership of its properties requires qualification;
(b) Customer has the power and authority to own the Collateral, to enter
into and perform this Agreement and any other document or instrument delivered
in connection herewith and to incur the Obligations;
(c) Customer's chief executive office is located at the address set forth
above;
3
<PAGE>
(d) Customer does not utilize, and has not in the last five years utilized,
any trade names in the conduct of its business except as set forth on Schedule 1
hereto;
(e) Customer has not changed its name, been the surviving entity in a
merger, acquired any business or changed the location of its chief executive
office within the previous five years. except as set forth on Schedule 2 hereto;
(f) Neither the execution, delivery or performance by Customer of the Loan
Agreement nor compliance by it with the terms and provisions hereof, nor the
consummation of the transactions contemplated herein, (i) will contravene any
applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in any lien upon any property, pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or any other material agreement or
instrument to which Customer is a party or by which it or any of its property or
assets are bound or to which it may be subject or (iii) will violate any
provision of its Certificate of Incorporation or By-Laws, or other governance
documents;
(g) The Loan Agreement, the Note and any document or instrument delivered
in connection herewith and the transactions contemplated hereby or thereby are
duly authorized, executed and delivered, and the Loan Agreement, the Note and
such other documents and instruments constitute valid and legally binding
obligations of Customer and are enforceable against Customer in accordance with
their respective terms; subject to the effects of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws now or hereafter
in effect relating to or affecting creditor's rights or remedies generally.
(h) No order, consent, approval, license, authorization, or validation of,
or filing, recording or registration with, or exemption by any governmental or
public body or authority, or any subdivision thereof is required to authorize or
required in connection with (i) the grant by Customer of the security interest
in connection with the Loan Agreement, (ii) the execution, delivery and
performance of the Loan Agreement, (iii) the legality, validity, binding effect
or enforceability of the Loan Agreement or (iv) the perfection or maintenance of
the aforementioned lien and security interest;
(i) Customer has filed all federal, state and local tax returns and other
reports it is required to file, has paid or made adequate provision for payment
of all such taxes, assessments and other governmental charges, and shall pay or
deposit promptly when due all sales, use, excise, personal property, income,
withholding, corporate, franchise and other taxes, assessments and governmental
charges upon or relating to the manufacture, purchase, ownership, maintenance,
modification, delivery, installation, possession, condition, use, acceptance,
rejection, operation or return of the Equipment and, upon request by Lender,
Customer will submit to Lender proof satisfactory to Lender that such payments
and/or deposits have been made;
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(j) There are no pending or threatened actions or proceedings before any
court or administrative agency, an unfavorable resolution of which could have a
material adverse effect on Customer's financial condition or operations;
(k) No representation, warranty or statement by Customer contained in the
Loan Agreement or in any certificate or other document furnished or to be
furnished by Customer pursuant to the Loan Agreement contains or at the time of
delivery shall contain any untrue statement of material fact, or omits, or shall
omit at the time of delivery, to state a material fact necessary to make it not
misleading;
(1) All financial statements delivered and to be delivered by Customer to
Lender in connection with the execution and delivery of the Loan Agreement are
true and correct in all material respects and have been prepared in accordance
with generally accepted accounting principles, and at all times since the date
of the most recent financial statements, there has been no material change in
Customer's financial affairs or business operations. Customer shall furnish
Lender: (i) within 90 days after the last day of each fiscal year of Customer, a
financial statement including a balance sheet, income statement, statement of
retained earnings and statement of cash flows, each prepared in accordance with
generally accepted accounting principles consistently applied satisfactory to
Lender, with a report signed by an independent certified public accountant to
follow by no more than 60 days; (ii) upon the request of Lender, within 45 days
after the close of each quarter of each fiscal year of Customer, financial
statements similar to those described in the immediately preceding clause,
prepared by Customer and certified by the chief financial officer of Customer,
(iii) promptly upon the request of Lender, such tax returns or financial
statements regarding any guarantor of the Obligations or any Affiliate of
Customer as Lender may reasonably request from time to time; (iv) promptly upon
request of Lender, in form satisfactory to Lender, such other and additional
information as Lender may reasonably request from time to time, and; (v)
promptly inform Lender of any Defaults (defined below) or any events or changes
in the financial condition of Customer occurring since the date of the last
financial statements of Customer delivered to Lender which, individually or
cumulatively, when viewed in light of prior financial statements may result in a
material adverse change in the financial condition of Customer;
(m) Customer shall permit Lender, through its authorized attorneys,
accountants and representatives, to inspect and examine the Equipment and the
books, accounts, records, ledgers and assets of every kind and description of
Customer with respect thereto at all reasonable times; provided, however, that
the failure of Lender to inspect the Equipment or to inform Customer of any
noncompliance shall not relieve Customer of any of its Obligations hereunder;
(n) Customer is the owner of the Equipment free and clear of all rights,
title, security interests, encumbrances or liens of any other party, will defend
the Equipment to the extent necessary to protect the Collateral against all
claims and demands of all persons at any time claiming any interest therein and
shall deliver to Lender any and all evidence of ownership of, and certificates
of title to, any and all of the Equipment;
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(o) The Equipment is personal property and not a fixture under the law of
the jurisdiction in which the Equipment is located even though the Equipment may
hereafter become attached or affixed to real property;
(p) Each site where Equipment is located, if not owned by Customer, is
leased by Customer pursuant to a valid lease or rental agreement which permits
the possession, use and operation of the Equipment at such location;
(q) Customer shall provide Lender with disclaimers and waivers from
landlords, mortgagees and other persons holding any interest or claim in and to
any premises where Equipment is located, acceptable in all respects to Lender,
which may be necessary or advisable in the sole discretion of Lender to confirm
that the first priority security interest and rights of Lender in the Equipment
are and will remain valid and superior against all other parties;
(r) The Equipment is in the possession of Customer at the location(s)
specified in the applicable Equipment Schedule, and shall not be removed from
such location without the prior written consent of Lender, which consent shall
in any event be conditioned upon Customer having completed all notifications,
filings, recordings, and other actions in such new location as Lender may
require to protect and perfect Lender's interests in the Collateral;
(s) Customer shall not, without the prior written consent of Lender, sell,
offer to sell, lease, rent, hire or in any other manner dispose, transfer or
surrender use and possession of any Equipment;
(t) Customer will not, directly or indirectly, create, incur or permit to
exist any lien, encumbrance, mortgage, pledge, attachment or security interest
on or with respect to the Equipment other than in connection with the execution
and delivery of the Loan Agreement;
(u) Customer shall permit each item of Equipment to be used only within the
continental United States by qualified personnel solely for business purposes
and the purpose for which it was designed and, at its sole expense, shall
service, repair, overhaul and maintain each item of Equipment in the same
condition as when received, ordinary wear and tear excepted, in good operating
order, consistent with prudent industry practice (but, in no event less than the
same extent to which Customer maintains other similar equipment in the prudent
management of its assets and properties) and in compliance with all applicable
laws, ordinances, regulations. and conditions of all insurance policies required
to be maintained by Customer under the Loan Agreement and all manuals, orders,
recommendations, instructions and other written requirements as to the repair
and maintenance of such item of Equipment issued at any time by the vendor
and/or manufacturer thereof;
(v) If any item of Equipment does not comply with the requirements of the
Loan Agreement, Customer shall bring such Equipment into compliance with the
provisions hereof; and Customer shall not use any Equipment, nor allow the same
to be used, for any unlawful purpose;
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(w) Customer acknowledges that Lender has not selected, manufactured or
supplied the Equipment to Customer and has acquired any Equipment subject hereto
solely in connection with this Loan Agreement and Customer has received and
approved the terms of any purchase order or agreement with respect to the
Equipment; and
(x) Customer has all permits, licenses and other authorizations which are
required with respect to its business under Environmental Laws (as defined
below) and is in material compliance with all terms and conditions of such
permits, licenses and other authorizations, including all limitations,
restrictions, standards, prohibitions, requirements, obligations, schedules and
timetables. The Customer is not presently in material violation of any
Environmental Laws. "Environmental Laws" shall mean any Federal, state or local
law relating to releases or threatened releases of Hazardous Substances; the
manufacture, handling, transport, use, treatment, storage or disposal of
Hazardous Substances or materials containing Hazardous Substances; or otherwise
relating to pollution of the environment or the protection of human health.
"Hazardous Substances" shall mean substances or materials which contain
substances defined in or regulated as toxic or hazardous materials, chemicals,
substances, waste or pollutants under any present or future Federal statutes and
their state counterparts, as well as any implementing regulations as amended
from time to time and as interpreted by administering agencies.
6. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDY; LIMITATION OF LIABILITY.
Customer has selected both the Equipment and the supplier (identified in the
Equipment Schedule, herein ("Supplier") from whom Customer agrees to purchase
the Equipment. CUSTOMER ACKNOWLEDGES THAT LENDER HAS NO SPECIAL FAMILIARITY OR
EXPERTISE WITH RESPECT TO THE EQUIPMENT. CUSTOMER AGREES THAT THE EQUIPMENT IS
"AS IS" AND IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY CUSTOMER AND THAT
CUSTOMER IS SATISFIED THAT THE SAME IS SUITABLE FOR CUSTOMER'S PURPOSES, AND
THAT EXCEPT AS MAY OTHERWISE BE SPECIFICALLY PROVIDED HEREIN OR IN THE EQUIPMENT
SCHEDULE, LENDER HAS MADE NO REPRESENTATION OR WARRANTY AS TO ANY MATTER
WHATSOEVER. LENDER DISCLAIMS, AND CUSTOMER HEREBY EXPRESSLY WAIVES AS TO LENDER,
ALL WARRANTIES WITH RESPECT TO THE EQUIPMENT INCLUDING BUT NOT LIMITED TO ALL
EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE, QUALITY, CAPACITY, OR WORKMANSHIP, ALL EXPRESS OR IMPLIED WARRANTIES
AGAINST PATENT INFRINGEMENTS OR DEFECTS, WHETHER HIDDEN OR APPARENT, AND ALL
EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO COMPLIANCE OF THE EQUIPMENT WITH
THE REQUIREMENTS OF ANY LAW, REGULATION, SPECIFICATION OR CONTRACT RELATIVE
THERETO. IN NO EVENT SHALL LENDER BE LIABLE (INCLUDING WITHOUT LIMITATION, UNDER
ANY THEORY IN TORTS) FOR ANY LOSS OF USE, REVENUE, ANTICIPATED PROFITS OR
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN
CONNECTION WITH THE LOAN OR THE USE, PERFORMANCE OR MAINTENANCE OF THE
EQUIPMENT. If the Equipment is not properly installed, does not operate as
represented or warranted by the Supplier, manufacturer and/or service company or
is unsatisfactory for any reason, Customer shall make any claim on
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account thereof solely against the Supplier, manufacturer and/or service company
and shall, nevertheless, pay Lender all amounts payable under the Loan Agreement
and any such claims shall not act as a defense, counterclaim, deduction, setoff
or otherwise limit Customer's Obligations under the Loan Agreement.
7. RISK OF LOSS AND DAMAGE; INSURANCE. Customer assumes all risk of loss,
damage or destruction to the Equipment from whatever cause and for whatever
reason. If all or a portion of an item of Equipment shall become lost, stolen,
destroyed, damaged beyond repair or rendered permanently unfit for use for any
reason, or in the event of any condemnation, confiscation, theft or seizure or
requisition of title to or use of such item of Equipment, Customer shall
promptly pay to Lender an amount equal to the outstanding principal balance of
and accrued and unpaid interest on any Note with respect to such Equipment, less
the net amount of the recovery, if any, received by Lender from insurance on the
Equipment. For so long as any Obligations shall remain outstanding, Customer
shall procure and maintain insurance in such amounts and with such coverages,
and upon such terms and with such companies, as Customer may determine in its
reasonable discretion consistent with industry standards at Customer's expense;
provided, however, that in no event shall such insurance be less than the
following coverages and amounts: (a) Worker's Compensation and Employer's
Liability Insurance, in the full statutory amounts provided by law (b)
Comprehensive General Liability Insurance including products completed
operations and contractual liability coverage, with minimum limits on a per
occurrence basis, as reasonably required by Lender, and Combined Single Limit
Bodily Injury and Property Damage on an aggregate basis, as reasonably required
by Lender or in either case, as otherwise specified in any Equipment Schedule
hereto; and (c) All Risk Physical Damage Insurance, including earthquake and
flood, on each item of Equipment, in an amount not less than the greater of (i)
the outstanding principal balance owing under any Note with respect to such
Equipment; or (ii) its fill replacement value. Customer shall cause Lender to be
included as an additional insured on each such Comprehensive General Liability
Insurance policy. On each such All Risk Physical Damage Insurance policy Lender
shall be named as loss payee. Such policies shall be endorsed to provide that
the coverage afforded to Lender shall not be rescinded, impaired or invalidated
by any act or neglect of Customer. Customer agrees to waive Customer's rights
and its insurance carrier's rights of subrogation against Lender for any and all
loss or damage. In addition to the foregoing minimum insurance coverage,
Customer shall procure and maintain such other insurance coverage as Lender
reasonably may require. All policies shall be endorsed or contain a clause
requiring the insurer to furnish Lender with at least 30 days prior written
notice of any material change, cancellation or non-renewal of coverage. Upon
execution of this Agreement, and thereafter, 30 days prior to the expiration of
each insurance policy required hereunder, Customer shall furnish Lender with a
certificate of insurance or other evidence satisfactory to Lender that the
insurance coverages required under such policy are and will continue in effect,
provided, however, that Lender shall be under no duty either to ascertain the
existence of or to examine such insurance coverage or to advise Customer in the
event such insurance coverage should not comply with the requirements hereof. If
Customer shall at any time or times hereafter fail to obtain and/or maintain any
of the policies of insurance required herein, or fail to pay any premium in
whole or in part relating to any such policies, Lender may, but shall not be
obligated to, obtain and/or cause to be maintained insurance coverage with
respect to the Collateral, including, at Lender's option, the coverage provided
by all or any of the policies of Customer and pay all or any part of the premium
therefor, without waiving any Event
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of Default by Customer, and any sums so disbursed by Lender shall be additional
Obligations of Customer to Lender payable on demand. Lender shall have the right
to settle and compromise any and all claims under any of the All Risk Physical
Damage policies required to be maintained by Customer hereunder and Customer
hereby appoints Lender as its attorney-in- fact, with power to demand, receive
and receipt for all monies payable thereunder, to execute in the name of
Customer or Lender or both any proof of loss, notice, draft or other instruments
in connection with such policies or any loss thereunder and generally to do and
perform any and all acts as Customer, but for this appointment, might or could
perform.
8. EVENTS OF DEFAULT. An "Event of Default" under this Agreement shall be
deemed to have occurred upon the occurrence or existence of any one or more of
the following events or conditions (each a "Default") and after the giving of
any required notice or the passage of any required period of time (or both)
specified below with respect to such Default (a) Customer shall fail to make any
payment due under any Note or as required under the Loan Agreement within 10
days of its due date; or (b) Customer shall fail to obtain or maintain any of
the insurance required under the Loan Agreement; or (c) Customer shall remove,
sell, transfer, encumber, or part with possession of any Equipment; (d) Customer
shall fail to perform or observe any other covenant, condition or agreement
under the Loan Agreement, and such failure shall continue for 30 days after
notice thereof to Customer, or (e) Customer or any of its Affiliates shall
default in the payment or performance of any Obligation owing to Lender, and
such default shall continue for 20 days after notice thereof to Customer, or (f)
any representation or warranty made by Customer herein or in any certificate,
agreement, statement or document heretofore or hereafter furnished Lender,
including without limitation any financial information disclosed to Lender,
shall prove to be false or incorrect in any material respect; or (g) death or
judicial declaration of incompetence of Customer, if an individual; or (h) the
commencement of any bankruptcy, insolvency, arrangement, reorganization,
receivership, liquidation or other similar proceeding by or against Customer or
any of its properties or businesses, or the appointment of a trustee, receiver,
liquidator or custodian for Customer or any of its properties or businesses, or
if Customer suffers the entry of an order for relief under Title 11 of the
United States Code: or (i) the making by Customer of a general assignment or
deed of trust for the benefit of creditors; or (j) Customer shall default in any
payment or other material obligation to any other lender and such lender has
accelerated the debt in accordance with its terms; or (k) Customer shall merge
with or consolidate into any other entity or sell all or substantially all of
its assets or in any manner terminate its existence; or (l) if Customer is a
privately held corporation, more than 50% of Customer's voting capital stock, or
effective control of Customer's voting capital stock, issued and outstanding
from time to time, is not retained by the holders of such stock on the date the
Loan Agreement is executed or (m) if Customer is a publicly held corporation,
there shall be a change in the ownership of Customer's stock such that Customer
is no longer subject to the reporting requirements of the Securities Exchange
Act of 1934 or no longer has a class of equity securities registered under
Section 12 of the Securities Act of 1933; or (n) Lender shall determine that
there has been a material adverse change in the financial condition or business
operations of Customer since the date of the execution of the Loan Agreement, or
that Customer's ability to perform its obligations is materially impaired, or
(o) if Customer leases the premises where any Equipment is located, a breach by
Customer of any such lease and the commencement of an action by the landlord to
evict Customer or to repossess the premises; or (p) any event or condition set
forth in subsections (e) through (o) of this Section 8
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<PAGE>
shall occur with respect to any guarantor or other person liable or responsible,
in whole or in part, for payment or performance of any Obligations; or (q) any
event or condition set forth in subsections (h) through (j) shall occur with
respect to any Affiliate of Customer. Customer shall promptly notify Lender of
the occurrence of any Event of Default or the occurrence or existence of any
event or condition which, upon the giving of notice or lapse of time, or both,
would constitute an Event of Default.
9. RIGHTS AND REMEDIES; ACCELERATION. (a) Upon the occurrence of an Event
of Default, Lender shall have all of the rights and remedies enumerated herein
(all of which are cumulative and not exclusive of any other right or remedy
available to Lender) and Lender may, at its sole option and discretion, exercise
one or more of the following remedies with respect to any or all of the
Collateral: (i) by written notice to Customer, terminate any or all Loan
Agreements as such notice shall specify, and, with respect to such terminated
Loan Agreements, declare immediately due and payable and recover from Customer,
as liquidated damages for loss of Lender's bargain and not as a penalty, an
amount equal to the aggregate of all unpaid periodic installment payments and
other sums due under Loan Agreements to the date of default plus the charges set
forth in Section 4 hereof, if any, plus, to the extent not in duplication
thereof, an amount equal to the outstanding principal balances of and accrued
and unpaid interest on any of the Notes with respect to the Loan Agreements,
(ii) Lender may declare, at its Option, all or any part of the Obligations
immediately due and payable, without demand, notice of intention to accelerate,
notice of acceleration, notice of nonpayment, presentment, protest, notice of
dishonor, or any other notice whatsoever, all of which are hereby waived by
Customer and any endorser, guarantor, surety or other party liable in any
capacity for any of the Obligations; (iii) cause Customer to promptly ship, with
insurance and freight prepaid by Customer, any or all Equipment to such location
as Lender may designate, or Lender, at its option, may enter upon the premises
where the Equipment is located and take immediate possession of and remove the
same by summary proceedings or otherwise, all without liability to Lender for or
by reason of damage to property or such entry or taking possession except for
Lender's gross negligence or willful misconduct; (iv) sell any or all Collateral
at public or private sale or otherwise dispose of, hold, use, operate, lease to
others or keep idle the Equipment, all as Lender in its sole discretion may
determine and all free and clear of any rights of Customer other than Lender's
obligations to act in a commercially reasonable manner under applicable law, (v)
remedy such default, including making repairs or modifications to the Equipment,
for the account and expense of Customer, and Customer agrees to reimburse Lender
for all of Lender's costs and expenses; (vi) apply any Security Deposit or other
cash collateral or sale or remarketing proceeds of the Equipment at any time to
reduce any amounts due to Lender, or (vii) exercise any other right or remedy
which may be available to Lender under applicable law, or proceed by appropriate
court action to enforce the tern's hereof or to recover damages for the breach
hereof, including Attorneys' Fees and Expenses. Any notice required to be given
by Lender of a sale or other disposition or other intended action which is made
in accordance with the terms of the Loan Agreement at least ten (10) days prior
to such proposed action, shall constitute fair and reasonable notice to Customer
of any such action. Lender shall be liable to Customer only for its gross
negligence or willful misconduct or for its failure to comply with any
applicable law imposing duties upon Lender; Lender's liability for any such
failure shall be limited to the actual loss suffered by Customer directly
resulting from such failure; and in no event shall Lender have any liability to
Customer for incidental, consequential, punitive or
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exemplary damages. No remedy referred to in this Section 9 shall be exclusive,
but each shall be cumulative and in addition to any other remedy referred to
above or otherwise available to Lender at law or in equity.
(b) The exercise or pursuit by Lender of any one or more of such remedies
shall not preclude the simultaneous or later exercise or pursuit by Lender of
any or all such other remedies, and all remedies hereunder shall survive
termination of the Loan Agreement. In the event Lender takes possession and
disposes of the Collateral, the proceeds of any such disposition shall be
applied in the following order: (1) to all of Lender's costs. charges and
expenses incurred in taking, removing, holding, repairing and selling or leasing
the Equipment; (2) to pay the Lender the remaining amount of any Obligations
owed to Lender and (3) the balance, if any, to Customer. A termination shall
occur only upon written notice by Lender and only with respect to such Equipment
as Lender shall specify in such notice. Termination under this Section 9 shall
not affect Customer's duty to perform Customer's Obligations under the Loan
Agreement in full. Customer agrees to reimburse Lender on demand for any and all
costs and expenses incurred by Lender in enforcing its rights and remedies
hereunder following the occurrence of an Event of Default, including, without
limitation, Attorneys' Fees and Expenses, and the costs of repossession,
storage, insuring, reletting, selling and disposing of any and all Equipment.
10. INDEMNITY. (a) Customer agrees to indemnify, reimburse and hold Lender
and its successors, Affiliates, assigns, officers, directors, employees, agents
and servants (hereinafter in this Section 10 referred to individually as
"Indemnitee", and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements,
including Attorneys' Fees and Expenses of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of the Loan Agreement or any other document executed in connection
herewith or therewith or in any other way connected with the administration of
the transactions contemplated hereby or thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Equipment
(including, without limitation, latent or other defects, whether or not
discoverable), the violation by Customer of the laws of any country, state or
other governmental body or unit, any tort of Customer (including, without
limitation, claims arising or imposed under the doctrine of strict liability, or
for or on account of injury to or the death of any Person (including any
Indemnitee), or property damage), or contract claim related to the Equipment, or
any claim based on patent, trademark or copyright infringement related to the
Equipment or any obligation or liability to the manufacturer or supplier of the
Equipment under any Supply Contracts (referenced in the Equipment Schedule),
including purchase orders issued by Customer or Lender or assigned to Lender;
provided, however, that no Indemnitee shall be indemnified pursuant to this
Section 10 for losses, damages or liabilities to the extent caused solely by the
gross negligence or willful misconduct of such Indemnitee. Customer agrees that
upon written notice by any Indemnitee of the assertion of such a liability,
obligation, damage, injury, penalty, claim, demand, action, suit or judgment,
Customer shall assume full responsibility for the
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<PAGE>
defense thereof. Each Indemnitee agrees to use its best efforts to promptly
notify Customer of any such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 10(a) hereof; Customer
agrees to pay, or reimburse Lender for any and all reasonable fees, costs and
expenses (including Attorneys' Fees and Expenses) of whatever kind or nature
incurred in connection with the creation, preservation or protection of Lender's
liens on, and security interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge of any taxes
or liens upon or in respect of the Collateral, premiums for insurance with
respect to the Collateral and all other fees, costs and expenses reasonably
incurred in connection with protecting, maintaining or preserving the Collateral
and Lender's interest therein, whether through judicial proceedings or
otherwise, or in defending or prosecuting any actions, suits or proceedings
arising out of or relating to the Collateral.
(c) Customer shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnitees from and against any and
all Losses imposed upon or incurred by or asserted against any Indemnitees, and
arising out of or in any way relating to any one or more of the following,
unless caused solely by the gross negligence or willful misconduct of any
Indemnitee: (i) any presence of any Hazardous Substances in, on, above or under
Customer's leased or owned real property (the "Property"); (ii) any past,
present or threatened Release of Hazardous Substances in, on, above, under or
from the Property or (iii) any past or present violation of any Environmental
Laws by Customer. The term "Release" of any Hazardous Substance includes, but is
not limited to, any release, deposit, discharge, emission, leaking, spilling,
seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping,
disposing or other movement of Hazardous Substances. The term "Losses" includes
any and all claims, suits, liabilities (including, without limitation, strict
liabilities), actions, proceedings, obligations, debts, damages, losses, costs,
expenses, diminutions in value, fines, penalties, charges, fees, expenses,
judgments, awards, amounts paid in settlement, costs of remediating a Hazardous
Substance (whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including, but not limited to
sampling, testing and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas) or punitive damages, of
whatever kind or nature (including, but not limited to Attorneys' Fees and
Expenses).
(d) Without limiting the application of Section 10(a) or (b), or (c)
hereof, Customer agrees to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses (including Attorneys' Fees and
Expenses) which such Indemnitee may suffer, expend or incur in consequence of or
growing out of any misrepresentation or omission of a material fact by Customer
in the Loan Agreement or in any writing contemplated by or made or delivered
pursuant to or in connection with the Loan Agreement.
(e) If and to the extent that the obligations of Customer under this
Section 10 are unenforceable for any reason, Customer hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.
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11. MAINTENANCE; INSPECTION. During the term of the Loan Agreement,
Customer shall, unless Lender shall otherwise consent in writing: (a) maintain
conspicuously on any Equipment such labels, plates, decals or other markings as
Lender may reasonably require, stating that Lender has a security interest in
such Equipment; (b) furnish to Lender such information concerning the condition,
location, use and operation of the Equipment as Lender may request; (c) permit
any person designated by Lender to visit and inspect any Equipment and any
records maintained in connection therewith, provided, however, that the failure
of Lender to inspect the Equipment or to inform Customer of any noncompliance
shall not relieve Customer of any of its obligations hereunder, and (d) make no
additions, alterations, modifications or improvements (collectively,
"Improvements") to any item of Equipment that are not readily removable without
causing material damage to such item of Equipment or which will cause the value,
utility or useful life of such item of Equipment to materially decline. If any
such Improvement is made and cannot be removed without causing material damage
or decline in value, utility or useful life (a "Non-Severable Improvement"),
then Customer warrants that such Non-Severable Improvement shall immediately
become subject to Lender's security interest upon being installed and shall be
free and clear of all liens and encumbrances and shall become Equipment subject
to all of the terms and conditions of the Loan Agreement.
12. FURTHER ASSURANCES. Customer shall promptly execute and deliver to
Lender such further documents and take such further action as Lender reasonably
may require in order to more effectively carry out the intent and purpose of the
Loan Agreement. Customer shall execute and deliver to Lender upon Lender's
request any and all schedules, forms and other reports and information as Lender
may reasonably deem necessary or appropriate to respond to requirements or
regulations imposed by any governmental authorities or to comply with the
provisions of the law of any jurisdiction in which Customer may then be
conducting business or in which any of the Equipment may be located. Customer
shall execute and deliver to Lender upon Lender's request such further and
additional documents, instruments and assurances as Lender deems necessary to
acknowledge and confirm, for the benefit of Lender or any assignee or transferee
of any of Lender's rights, title and interests hereunder in accordance with
Section 13 hereof (an "Assignee"), all of the terms and conditions of all or any
part of the Loan Agreement and Lender's or Assignee's rights with respect
thereto, and Customer's compliance with all of the terms and provisions thereof.
13. ASSIGNMENT. The provisions of the Loan Agreement shall be binding upon
and shall inure to the benefit of the heirs, administrators, successors and
assigns of Lender and Customer, provided, however, Customer may not assign any
of its rights, transfer any interest in the Equipment or delegate any of its
obligations under the Loan Agreement without the prior written consent of Lender
in its sole discretion. Lender may, from time to time, absolutely or as
security, without notice to Customer, sell, assign, transfer, participate,
pledge or otherwise dispose of all or any part of a Loan Agreement, the
Obligations and/or the Collateral therefor, subject to the rights of Customer
under the Loan Agreement for the use and possession of the Equipment. In such
event, each and every immediate and successive Assignee shall have the right to
enforce the Loan Agreement with respect to those Obligations and/or Collateral
transferred to the Assignee, by legal action or otherwise, for its own benefit
as fully as if such Assignee were herein by name specifically given such rights.
Customer agrees that the rights of any such Assignee hereunder or with respect
to the related Obligations, shall not be subject to
13
<PAGE>
any defense, set off or counterclaim that Customer may assert or claim against
Lender, and that any such Assignee shall have all of Lender's rights hereunder
but none of Lender's obligations. Lender shall have an unimpaired right to
enforce the Loan Agreement for its benefit with respect to that portion of any
Loan Agreement, Obligations and/or Collateral that Lender has not sold,
assigned, pledged or otherwise transferred.
14. GOVERNING LAW; MEDIATION OF THE LOAN AGREEMENT. THE LOAN AGREEMENT AND
THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT, WITHOUT
REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. CUSTOMER HEREBY CONSENTS AND
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF CONNECTICUT FOR
THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF ITS
OBLIGATIONS UNDER THE LOAN AGREEMENT, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT
IT MAY HAVE TO THE VENUE OF SUCH COURTS. CUSTOMER HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THE LOAN
AGREEMENT. Any action by Customer against Lender for any cause of action under
the Loan Agreement shall be brought within one year after any such cause of
action first arises. If requested by Lender, Customer agrees that prior to the
commencement of any litigation regarding the terms and conditions of the Loan
Agreement, the parties hereto shall subject themselves to non-binding mediation
with a qualified mediator mutually satisfactory to both parties.
15. NOTICES. Any demand or notice required or permitted to be given
hereunder shall be deemed effective (a) when deposited in the United States
mail, and sent by certified mail, return receipt requested, postage prepaid,
addressed to Lender or to Customer at the addresses set forth herein, or to such
other address as may be hereafter provided by the party to be notified by
written notice complying with the provisions hereof or (b) when transmitted to
Lender or Customer by facsimile at the respective numbers provided for such
purpose; provided, that such facsimile notice is promptly followed by notice
given in accordance with the immediately preceding subsection (a).
16. SECURITY DEPOSIT. Lender may, at its option, apply the Security
Deposit, if any is indicated in an Equipment Schedule, to cure any default of
Customer, whereupon Customer shall promptly restore such Security Deposit to its
original amount. Lender shall return to Customer any unapplied Security Deposit,
without interest, upon full payment and performance of Customer's Obligations
under the Loan Agreement.
17. MISCELLANEOUS; GENERAL PROVISIONS. The Loan Agreement will not be
binding on Lender until accepted and executed by Lender at its executive office
in South Norwalk, Connecticut. All options, powers and rights granted to Lender
hereunder or under any promissory note, guaranty, letter of credit agreement,
depository agreement, instrument, document or other writing delivered to Lender
shall be cumulative and shall be in addition to any other options, powers or
rights which Lender may now or hereafter have under any applicable
14
<PAGE>
law or otherwise. Time is of the essence in the payment and performance of all
of Customer's obligations under the Loan Agreement. The captions in the Loan
Agreement are for convenience only and shall not define or limit any of the
terms thereof.
Any provisions of the Loan Agreement which are unenforceable in any
jurisdiction shall. as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof, and
any such unenforceability in any jurisdiction shall not render unenforceable
such provisions in any other jurisdiction. To the extent permitted by applicable
law, Customer hereby waives any provisions of law which render any provision of
the Loan Agreement unenforceable in any respect.
CUSTOMER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS LOAN AGREEMENT IS
A PART IS A COMMERCIAL TRANSACTION AND EXCEPT AS OTHERWISE PROVIDED IN THE LOAN
AGREEMENT CUSTOMER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
NOTICE AND JUDICIAL HEARING IN CONNECTION WITH LENDER'S TAKING POSSESSION OR
LENDER'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION,
ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND
ANY SUCH RIGHT WHICH CUSTOMER WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, INCLUDING, WITHOUT LIMITATION, ITS
RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL
STATUTES.
THE LOAN AGREEMENT AND ANY OTHER WRITTEN AGREEMENT(S) BETWEEN THE PARTIES
EXECUTED SIMULTANEOUSLY HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES CONCERNING THE SUBJECT MATTER HEREOF, AND SUPERSEDE AND MAY NOT BE
CONTRADICTED BY ANY PRIOR WRITTEN AGREEMENTS BETWEEN THE PARTIES, INCLUDING,
WITHOUT LIMITATION, PROPOSALS, LETTERS, COMMITMENT LETTERS OR BY ANY PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. CUSTOMER
ACKNOWLEDGES AND CERTIFIES THAT NO SUCH ORAL AGREEMENTS EXIST. THE LOAN
AGREEMENT MAY NOT BE AMENDED, NOR MAY ANY RIGHTS UNDER THE LOAN AGREEMENT BE
WAIVED, EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY THE PARTY AGAINST WHOM SUCH
AGREEMENT OR WAIVER IS ASSERTED. The failure of Lender at any time or times
hereafter to require strict performance by Customer of any of the provisions,
warranties, terms and conditions contained in the Loan Agreement or in any other
agreement, guaranty, note, depository agreement, letter of credit, instrument or
document now or at any time or times hereafter executed by Customer or an
Affiliate of Customer and delivered to Lender shall not waive, affect or
diminish any right of Lender at any time or times hereafter to demand strict
performance thereof. The Loan Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument. Each reference herein
to Lender" shall be deemed to include its successors and assigns, and each
reference to "Customer" and any pronouns referring thereto as used herein shall
be construed in the masculine, feminine, neuter, singular or plural, as the
context may require, and shall be deemed to include the legal representatives,
successors and assigns of
15
<PAGE>
Customer, all of whom shall be bound by the provisions hereof. EACH REFERENCE
HEREIN TO "CUSTOMER" SHALL MEAN AND INCLUDE ANY AND ALL CUSTOMERS WHO SIGN
BELOW, EACH OF WHOM SHALL BE JOINTLY AND SEVERALLY LIABLE UNDER THIS LOAN
AGREEMENT.
The Loan Agreement and all related documents, including (a) amendments,
addenda, consents, waivers and modifications which may be executed
contemporaneously or subsequently herewith, (b) documents received by Lender
from the Customer, and (c) financial statements, certificates and other
information previously or subsequently furnished to Lender, may be reproduced by
Lender by any photographic, photostatic, microfilm, micro-card, miniature
photographic, compact disk reproduction or other similar process and Lender may
destroy any original document so reproduced. Customer agrees, herein waives all
right to object to the admissibility of such reproduction and stipulates that
any such reproduction shall, to the extent permitted by law, be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original itself is in existence and whether or not the
reproduction was made by Lender in the regular course of business) and that any
enlargement, facsimile or further reproduction of the reproduction shall
likewise be admissible in evidence.
18. SURVIVAL. Sections 6, 7, 9, 10, 11, 13, 15, and 17 shall survive and
continue in full force and effect without regard to the payment in full of all
Obligations under the Loan Agreement.
Executed and delivered by duly authorized representatives of the parties
hereto as of the date set forth below.
LENDER CUSTOMER:
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC.
By: /s/ J.A. Philbrick By: /s/ John Ryals
------------------- ---------------
Name: J.A. Philbrick Name: John Ryals
----------------- -------------
Title: President Title: CEO/President
--------------- --------------
Date: July 7, 1998 Date: July 6, 1998
-------------- ---------------
16
<PAGE>
SCHEDULE 1
Trade Names
17
<PAGE>
SCHEDULE 2
Name Changes; Changes in Chief Executive Office
18
<PAGE>
EXHIBIT 10.36
EQUIPMENT SCHEDULE
TO
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT NO. 7237 DATED: June 18, 1998
EQUIPMENT SCHEDULE NO. 02
LENDER: CUSTOMER:
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC.
8180 GREENSBORO DRIVE, STE 1000 106 ALEXANDER DRIVE, BLG 6
McLEAN, VA 22102 RESEARCH TRIANGLE PARK, NC 27709
LENDER AND CUSTOMER HAVE ENTERED INTO MASTER LOAN AND SECURITY AGREEMENT NO.
7237 DATED JUNE 18, 1998 (THE "AGREEMENT") WHICH IS INCORPORATED HEREIN. THIS IS
AN EQUIPMENT SCHEDULE TO THE AGREEMENT. ALL WORDS AND TERMS USED HEREIN AND NOT
SPECIFICALLY DEFINED HEREIN SHALL HAVE THE SAME MEANINGS AS SET FORTH IN THE
AGREEMENT.
1. EQUIPMENT LOCATION (if other than above address of Customer): none
2. EQUIPMENT: (See attached Exhibit A)
3. ACQUISITION COST OF THE EQUIPMENT: $812,901.28
4. SUPPLIER(S): (See attached Exhibit A)
5. THE LOAN AND LOAN AGREEMENT REPAYMENT. As requested by Customer
pursuant to the Agreement, Lender agrees to lend to Customer the sum of eight
hundred twelve thousand nine hundred one and 28/100 dollars. Customer agrees to
repay the Loan Agreement in successive installments (which installment payments
are inclusive of interest) as set forth in the following Schedule:
SCHEDULE
Advance Payment Amount: $8,637.08
Number of Installments (Exclusive of Advance Payment): 48
Payment Period:
___ X __ Monthly ____ Quarterly
Periodic Installment Payment Amount Per Period: $8,637.08 for the next
eleven (11) months, followed by
$25,121.09 for thirty-six months, followed by one payment of
$81,290.13.
Commencement Date: 7/20/98
Special Provisions (if any): none
<PAGE>
6. SECURITY DEPOSIT: None
7. DISBURSEMENT OF PROCEEDS. Customer hereby authorizes Lender to disburse
the $812,901.28 proceeds as follows:
(a) $812,901.28 to: Paradigm Genetics, Inc.
$812,901.28 TOTAL PROCEEDS
Customer may direct the Lender in writing to withhold payments from Supplier(s),
either now or in the future. Lender shall be entitled to rely on such written
direction of Customer as being conclusive as to the intent of the Customer with
regard to withheld payments.
Customer hereby acknowledges and agrees that it shall constitute an additional
Event of Default under the Loan Agreement if, for any reason, the Acquisition
Cost of the Equipment has not been fully paid to the appropriate Supplier(s)
thereof within ten (10) days after demand therefor by Lender. Customer hereby
agrees to indemnify, and hold harmless Lender from and against any liability,
claim, loss or damage, including Attorneys' Fees and Expenses, that may be
incurred by Lender as a result of any amounts to be withheld hereunder,
including any claims of the Supplier(s) therefor.
8. ADJUSTMENTS: Customer acknowledges that payments under the Loan
Agreement herein are based upon the Acquisition Cost of the Equipment set forth
above, and as a result of authorized changes to the Equipment, the final
Acquisition Cost of the Equipment may increase or decrease by up to 10%. In such
event, the Loan Payments shall be adjusted accordingly, and Customer authorizes
Lender to correct the Loan Agreement (and all related documentation) to reflect
such changes and Customer, if requested by Lender, shall confirm such changes to
Lender in writing.
9. SUPPLY CONTRACT: Customer acknowledges either that (a) Customer has
reviewed and approved any written purchase agreement or purchase order covering
the Equipment ("Supply Contract") purchased from Supplier, or (b) Lender has
informed or advised Customer, in writing, either previously or by the Loan
Agreement, of the following: (i) the identity of the Supplier, (ii) that
Customer may have rights under the Supply Contract and (iii) that Customer may
contact the Supplier for a description of any such rights Customer may have
under the Supply Contract. If Customer has entered into a written Supply
Contract, then Customer hereby assigns to Lender all of Customer's rights and
interests in and to the Equipment and the Supply Contract. If requested by
Lender, Customer shall obtain any consent required for such assignment. If
Customer has not entered into any such Supply Contract, Customer authorizes
Lender to (and Lender may at its option) act on behalf of Customer to obtain a
Supply Contract from Supplier. Except for the obligation to pay Supplier for the
Equipment, if (and only if) the Equipment is accepted by Customer under the Loan
Agreement, such assignment shall not include any of Customer's obligations under
such Supply Contract and Customer shall at all times remain liable to perform
all of its duties and obligations under the Supply Contract to the same extent
as if an assignment has not occurred. Customer hereby represents and warrants
that: (i) Customer has delivered herewith a true and correct copy of the Supply
Contract, neither Supplier nor Customer is in default under the Supply Contract
and it shall not be amended
2
<PAGE>
without Lender's prior written consent and (ii) the Supply Contract is free from
all claims, security interests, liens and encumbrances, except for the interest
being conveyed by the Loan Agreement. Customer indemnifies and holds Lender
harmless with respect to any and all claims relating to the performance of
Customer's obligations under the Supply Contract.
10. SEE RATE ADJUSTMENT RIDER ATTACHED AND INCORPORATED BY REFERENCE.
By execution hereof, the signer certifies that he/she is a duly authorized
officer, partner or proprietor of Customer and that he/she has read, accepted
and duly executed this Equipment Schedule to the Master Loan and Security
Agreement on behalf of Customer.
ACCEPTED AT LESSOR'S OFFICE AT McLEAN, VIRGINIA.
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
(LENDER) (CUSTOMER)
By: By:
------------------------------ ------------------------------
Name: J.A. Philbrick Name: John Ryals
---------------------------- ---------------------------
Title: President Title: CEO/President
------------------------- --------------------------
Date: 7-13-98 Date: 16 July 1998
-------------------------- ---------------------------
3
<PAGE>
EXHIBIT A
LIST OF EQUIPMENT
The following list and description of Equipment supplements and forms a part of
Equipment Schedule No. 02 to Master Loan and Security Agreement No. 7237 dated
June 18, 1998 between Lender and Customer and may be attached to said Equipment
Schedule and any related UCC Financing Statements, or other document relating to
the Master Loan and Security Agreement, the Equipment Schedule or any other
document describing the Equipment.
SEE ATTACHED EQUIPMENT SCHEDULE EXHIBIT A ATTACHED
All property listed above, together with any and all attachments, accessions,
additions, replacements, improvements, modifications and substitutions thereto
and therefor and a right to use license for any software related to any of the
foregoing now or hereafter acquired and all proceeds, in the form of goods,
accounts, chattel paper, documents, instruments and insurance proceeds.
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
(LENDER) (CUSTOMER)
By: By:
------------------------------ ------------------------------
Name: J.A. Philbrick Name: John Ryals
--------------------------- ----------------------------
Title: President Title: CEO/President
-------------------------- ---------------------------
4
<PAGE>
PROMISSORY NOTE TO: MASTER LOAN AND SECURITY AGREEMENT NO. 7237
Dated June 18, 1998
EQUIPMENT SCHEDULE NO. 02
U.S. $812,901.28 McLean, Virginia
Dated: JULY 20, 1998
FOR VALUE RECEIVED, Paradigm Genetics, Inc., a North Carolina corporation
(the "Borrower"), hereby promises to pay to the order of OXFORD VENTURE LEASING,
LLC. or its successors or assigns (the "Payee") at its offices located at 8180
Greensboro Drive, suite 1000, McLean, Virginia 22102, or at such other place as
the Payee or any holder hereof may from time to time designate, the principal
amount of U.S. eight hundred twelve thousand nine hundred one and 28/100 dollars
($812,901.28), with interest (based on a year of 360 days and 30 day months) on
the principal amount hereof remaining from time to time unpaid, such principal
and interest to be paid in consecutive monthly installments until fully paid, in
the manner and at a rate of interest per annum as determined and provided in the
Loan Agreement. Anything in this Note to the contrary notwithstanding, in the
event that any payment of interest hereunder shall exceed the legal limit, such
amount in excess of such limit shall be deemed a payment of principal hereunder.
This Note evidences a loan by the Payee to the undersigned pursuant to the
Loan Agreement indicated above between the undersigned and the Payee as from
time to time may be amended, restated, replaced, supplemented, substituted for
or renewed, and the holder of this Note is entitled to the benefits thereof,
including without limitation, the security interest in the Equipment granted
therein. Each term defined in the Loan Agreement and not otherwise defined
herein shall have the same definition when used herein.
The principal hereof and accrued interest hereon shall become forthwith due
and payable as provided in the Loan Agreement. Payments hereunder not made when
due shall accrue late charges as provided in the Loan Agreement. This Note may
not be prepaid in whole or in part except as otherwise specifically provided in
the Loan Agreement.
The Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice. No act or omission of the Payee, including without limitation
any failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of such right, remedy or recourse. Any waiver or release may
be effected only by a written document executed by Payee and then only to the
extent specified therein. The undersigned hereby promises to pay all Attorneys
Fees and Expenses that may be incurred in connection with the enforcement and/or
collection of this Note.
The undersigned authorizes the Payee to insert above as the date of the
Note, the date on which Payee disburses funds pursuant to the Loan Agreement.
5
<PAGE>
This Note is freely assignable by the Payee, in whole or in part, and from
time to time. All of the terms and provisions of this Note inure to and are
binding upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties. None of the rights or
obligations of the Borrower hereunder may be assigned or otherwise transferred
without the prior written consent of the Payee.
THIS NOTE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY
HAVE TO THE VENUE OF SUCH COURTS. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. Any action
by Borrower against Payee for any cause of action under this Note shall be
brought within one year after any such cause of action first arises. If
requested by Payee, Borrower agrees that prior to the commencement of any
litigation regarding the terms and conditions of this Note, the parties hereto
shall subject themselves to non-binding mediation with a qualified mediator
mutually satisfactory to both parties.
IN WITNESS WHEREOF, the Borrower by its duly authorized officer has
executed and delivered this Note as of the date first above written.
PARADIGM GENETICS, INC.
Borrower
By:
------------------------------
Name: John Ryals
---------------------------
Title: CEO/President
--------------------------
6
<PAGE>
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT (this "Rider") to the Promissory Note
dated 7/20/1998 (the "Note") issued in connection with the Master Loan and
Security Agreement No. 7237 dated June 18, 1998 and the Equipment Schedule No.
02 (collectively, the "Loan Agreement"), between Paradigm Genetics, Inc., as
borrower (the "Customer") and OXFORD VENTURE LEASING, LLC, as Lender ("Oxford").
This Rider is entered into pursuant to and incorporates by this reference all of
the terms and provisions of the Loan Agreement and the Note. By its execution
and delivery of this Rider, Customer hereby reaffirms all of the
representations, warranties and covenants contained in the Loan Agreement and
the Note as of the date hereof, and further represents and warrants to Lender
that no Default has occurred and is continuing as of the date hereof.
1. Purpose. This Rider amends and restates the terms of the payments set
forth in the Note.
2. Definitions. The following terms shall have the following meanings
herein:
(a) "Adjustment Date" shall mean the date Oxford disburses any portion
of the proceeds of the Loan Agreement.
(b) "Final T-Note Average" shall mean the average of the yields on
U.S. Treasury Notes maturing in four years, as published by the Dow Jones
Telerate Access Service, Page 19901, for the close of business on each business
day of the two full calendar weeks immediately preceding the week containing the
Adjustment Date.
(c) "Preliminary Payments" shall mean the payments set forth in the
Equipment Schedule and the Note, consisting of $8,637.08 due upon execution (the
"Advance Payment") followed by eleven (11) consecutive monthly payments of
$8,637.08, followed by thirty-six (36) consecutive monthly payments of
$25,121.09, followed by one (1) final payment of $81,290.13.
(d) "Preliminary T-Note Average" shall mean 5.615%.
3. Adjustment of Payments. The Preliminary Payments were calculated based
on a spread over the Preliminary T-Note Average. Should the Final T-Note Average
differ from the Preliminary T-Note Average, then the Preliminary Payments shall
be revised. For each increase or decrease of one (1) basis point (i.e., 1/100 of
1%) in the Final T-Note Average above or below the Preliminary T-Note Average,
the Preliminary Payments shall be revised as follows (complete below as
applicable):
The Advance Payment, due upon execution of the Equipment Schedule, and the
next eleven payments shall remain unchanged.
7
<PAGE>
Each of the payments for the months number 13-48 initially scheduled in the
amount of $25,121.09 shall increase or decrease by $6.50.
THE CALCULATION OF THE CONTRACT PAYMENTS UNDER THIS RIDER WILL SUPERSEDE ANY
PRIOR PROPOSAL OR QUOTATION. CUSTOMER HEREBY ACKNOWLEDGES AND AGREES TO THE
CALCULATION OF THE PAYMENT SCHEDULE SET FORTH HEREIN.
4. Oxford's Requirements. The commencement of the Loan Agreement is
subject to satisfaction of all documentation and credit requirements of Oxford.
If such requirements are not satisfied by the Adjustment Date, then Oxford may,
at its sole option, declare that the Adjustment Date shall be the date when such
requirements are satisfied.
Date as of: July 13, 1998
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
By: By:
------------------------------ ------------------------------
Name: President Name: CEO/President
--------------------------- --------------------------
Title: J.A.Philbrick Title: John Ryals
-------------------------- --------------------------
8
<PAGE>
ACKNOWLEDGMENT OF ASSIGNMENT
----------------------------
TO: PHOENIXCOR, INC.
65 WATER STREET
SOUTH NORWALK, CONNECTICUT 06854
RE: ASSIGNMENT OF LOAN WITH OXFORD VENTURE LEASING, LLC
Ladies and Gentlemen:
Reference is made to the annexed Master Loan and Security Agreement No. 7237
dated June 18,1998 with Equipment Schedule 02 (the "Loan Agreement") between
Oxford Venture Leasing, LLC ("Lender") and the undersigned Paradigm Genetics,
Inc. ("Borrower"), covering the collateral described in the Loan Agreement (the
"Collateral"). We consent to Lender's assignment of the Loan Agreement to you,
acknowledge receipt of notice of such assignment and in consideration of your
advancement of funds to the Lender with respect to the Loan Agreement, we hereby
acknowledge and agree that:
1. The Loan Agreement is in full force and effect and constitutes our
valid and binding obligation, enforceable in accordance with their terms. We
have not entered into any agreement with any person modifying the provisions of
the Loan Agreement and we cannot make any future modification, termination or
settlement of amounts due under the Loan Agreement except with the consent of
you or your assigns.
2. The Loan Agreement describes the entire agreement between Lender and us
regarding our use of and rights and obligations with respect to the Collateral
except: (none). There are no "side letters" or verbal understandings between us
and Lender modifying the provisions of the Loan Agreement or otherwise affecting
our obligations to make the payments thereunder.
3. The Collateral was first delivered to our premises located at 106
Alexander Drive, Building 6, Research Triangle Park, NC 27709 on or after the
invoice dates set forth on the attached Equipment Schedule Exhibit A and has
been unconditionally accepted by us and is in satisfactory working order on the
date hereof. We agree to make no claim against you with respect to the
Collateral. We further agree that you may inspect the Collateral on reasonable
prior verbal or written notice to us.
4. Lender has assigned to you all of its right, title and interest in the
Loan Agreement but none of its obligations and you are the Lender of record
under the Loan Agreement. We remit to you all of the forty-nine (49) successive
monthly installments consisting of twelve (12) payments of $8,637.08, followed
by thirty-six payments of $25,121.09, followed by one final payment of
$81,290.13 commencing on the funding date on or about July 14, 1998 and
continuing on the same day of every month thereafter. We will have no obligation
to you and you will have no obligation to us with respect to any installments
under the Note due or paid to Lender prior to such date. We agree to pay all the
installments to you or your assigns
9
<PAGE>
unconditionally without defense, setoff or counterclaim. However, we preserve
all our rights against Lender. We agree to make all payments due and to give all
notices and information required under the Loan Agreement to you at your above
address or to any revised address of which you or your assigns may advise us.
5. We have received no notice of a prior sale, transfer, assignment,
hypothecation or pledge of the Loan Agreement, the amounts payable thereunder or
the Collateral.
6. No event of default (or that which would constitute an event of default
under the Loan Agreement with the passage of time, giving of no notice, or both)
on our part, or to our knowledge, on the part of Lender, has occurred in the
performance of each such party's obligations under the Loan Agreement.
7. This Acknowledgment of Assignment shall inure to the benefit of your
successors and assigns.
8. We acknowledge that the Loan and all related documents are governed by
the laws of the State of Connecticut and were entered into with the
understanding that they where to be assigned to you and you require that the
laws of Connecticut govern your transactions so that the documents will be
applied and interpreted uniformly. We agree that such laws bear a reasonable
relationship to the Loan and related documents.
DATED: July 13, 1998
Very truly yours,
PARADIGM GENETICS, INC.
By: J. Ryals
-------------------------
Title: CEO/President
----------------------
10
<PAGE>
ACKNOWLEDGMENT OF LENDER
------------------------
The undersigned Lender under the Loan Agreement defined in the foregoing
Acknowledgment of Assignment hereby consents to the foregoing and confirms that
it has assigned all remaining installments under the Loan Agreement to
Phoenixcor, Inc. as specified in the Acknowledgment of Assignment.
DATED: July 13, 1998
OXFORD VENTURE LEASING, LLC
(LENDER)
By:
------------------------------
Title: President
---------------------------
11
<PAGE>
TAX ACKNOWLEDGMENT AND INDEMNIFICATION
Oxford Venture Leasing, LLC
8180 Greensboro Drive, Suite 1000
McLean, VA 22102
This Tax Acknowledgment and Indemnification ("Acknowledgment") is attached
to and made a part of that certain Loan Schedule No. 02 (the "Loan Schedule"),
to Master Loan and Security Agreement No. 7237, dated as of June 18, 1998 (the
"Loan Agreement"), by and between Oxford Venture Leasing, LLC and the
undersigned.
Notwithstanding any provision to the contrary in the Loan Agreement, we
hereby confirm our understanding and acknowledgment of the following:
1. While you normally bill us for taxes, if any, payable on the rentals
(sales/use taxes), you will not bill us for or furnish any advice with respect
to any taxes on the Equipment ("Taxes"), including personal property, ad valorem
or other taxes imposed by any state, federal, local or foreign government in
connection with the purchase, possession, ownership or operation of the
Equipment.
2. It is our obligation to and we shall timely submit such reports,
declarations, inventories and other documentation, file such returns, and pay
the applicable Taxes when due in connection with the Equipment. If local law
prohibits us from making direct payment or filing the applicable report or
return it is our responsibility to and we shall immediately advise you in
writing to such effect and furnish you with the forms, data and information as
will enable you to make and file the return or report, along with our payment
for the Tax due. Any accrual of interest and penalties resulting from our
failure to comply with the foregoing, or otherwise, is and shall be our
responsibility.
3. Upon your request, we shall provide you with copies of satisfactory
documentation and proof of payment of such Taxes. We shall indemnify you and
hold you harmless from and against any such Taxes, and any penalties and
interest thereon, and any other liabilities and damages that you may incur
arising out of our failure to pay when due such Taxes. The indemnity and
covenants set forth herein shall continue in full force and effect and shall
survive the expiration or earlier termination of the Loan Agreement or the Loan
Schedule.
All capitalized terms used herein and not defined herein shall have the
meanings set forth or referred to in the Loan Schedule. Except as specifically
set forth herein, all of the terms and conditions of the Loan Agreement and the
Loan Schedule shall remain in full force and effect and are hereby ratified and
affirmed. To the extent that the provisions of this Acknowledgment conflict with
any provisions contained in the Loan Agreement or the Loan Schedule, the
provisions of this Acknowledgment shall control.
12
<PAGE>
Very truly yours,
PARADIGM GENETICS, INC.
By: J. Ryals
-------------------------
Title: CEO/President
----------------------
Date: 16 July 98
-----------------------
13
<PAGE>
EXHIBIT 10.38
EQUIPMENT SCHEDULE
TO
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT NO. 7237 DATED: June 18, 1998
EQUIPMENT SCHEDULE NO. 04
LENDER: CUSTOMER:
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC.
8180 GREENSBORO DRIVE, STE 1000 106 ALEXANDER DRIVE, BLG 6
McLEAN, VA 22102 RESEARCH TRIANGLE PARK, NC 27709
LENDER AND CUSTOMER HAVE ENTERED INTO MASTER LOAN AND SECURITY AGREEMENT NO.
7237 DATED JUNE 18, 1998 (THE "AGREEMENT") WHICH IS INCORPORATED HEREIN. THIS IS
AN EQUIPMENT SCHEDULE TO THE AGREEMENT. ALL WORDS AND TERMS USED HEREIN AND NOT
SPECIFICALLY DEFINED HEREIN SHALL HAVE THE SAME MEANINGS AS SET FORTH IN THE
AGREEMENT.
1. EQUIPMENT LOCATION (if other than above address of Customer): none
2. EQUIPMENT: (See attached Exhibit A)
3. ACQUISITION COST OF THE EQUIPMENT: $483,274.41
4. SUPPLIER(S): (See attached Exhibit A)
5. THE LOAN AND LOAN AGREEMENT REPAYMENT. As requested by Customer
pursuant to the Agreement, Lender agrees to lend to Customer the sum of four
hundred eighty-three thousand two hundred seventy-four and 41/100 dollars.
Customer agrees to repay the Loan Agreement in successive installments (which
installment payments are inclusive of interest) as set forth in the following
Schedule:
SCHEDULE
Advance Payment Amount: $5,134.79
Number of Installments (Exclusive of Advance Payment): 48
Payment Period:
___X ___ Monthly ____ Quarterly
Periodic Installment Payment Amount Per Period: $5,134.79 for the next
eleven (11) months, followed by $14,934.63 for thirty-six months,
followed by one payment of $48,327.44.
Commencement Date: __________________
Special Provisions (if any): none
<PAGE>
6. SECURITY DEPOSIT: None
7. DISBURSEMENT OF PROCEEDS. Customer hereby authorizes Lender to disburse
the $539,626.43 proceeds as follows:
(a) $483,274.41 to: Paradigm Genetics, Inc.
$483,274.41 TOTAL PROCEEDS
Customer may direct the Lender in writing to withhold payments from Supplier(s),
either now or in the future. Lender shall be entitled to rely on such written
direction of Customer as being conclusive as to the intent of the Customer with
regard to withheld payments.
Customer hereby acknowledges and agrees that it shall constitute an additional
Event of Default under the Loan Agreement if, for any reason, the Acquisition
Cost of the Equipment has not been fully paid to the appropriate Supplier(s)
thereof within ten (10) days after demand therefor by Lender. Customer hereby
agrees to indemnify, and hold harmless Lender from and against any liability,
claim, loss or damage, including Attorneys' Fees and Expenses, that may be
incurred by Lender as a result of any amounts to be withheld hereunder,
including any claims of the Supplier(s) therefor.
8. ADJUSTMENTS: Customer acknowledges that payments under the Loan
Agreement herein are based upon the Acquisition Cost of the Equipment set forth
above, and as a result of authorized changes to the Equipment, the final
Acquisition Cost of the Equipment may increase or decrease by up to l0%. In such
event, the Loan Payments shall be adjusted accordingly, and Customer authorizes
Lender to correct the Loan Agreement (and all related documentation) to reflect
such changes and Customer, if requested by Lender, shall confirm such changes to
Lender in writing.
9. SUPPLY CONTRACT: Customer acknowledges either that (a) Customer has
reviewed and approved any written purchase agreement or purchase order covering
the Equipment ("Supply Contract") purchased from Supplier, or (b) Lender has
informed or advised Customer, in writing, either previously or by the Loan
Agreement, of the following: (i) the identity of the Supplier, (ii) that
Customer may have rights under the Supply Contract and (iii) that Customer may
contact the Supplier for a description of any such rights Customer may have
under the Supply Contract. If Customer has entered into a written Supply
Contract, then Customer hereby assigns to Lender all of Customer's rights and
interests in and to the Equipment and the Supply Contract. If requested by
Lender, Customer shall obtain any consent required for such assignment. If
Customer has not entered into any such Supply Contract, Customer authorizes
Lender to (and Lender may at its option) act on behalf of Customer to obtain a
Supply Contract from Supplier. Except for the obligation to pay Supplier for the
Equipment, if (and only if) the Equipment is accepted by Customer under the Loan
Agreement, such assignment shall not include any of Customer's obligations under
such Supply Contract and Customer shall at all times remain liable to perform
all of its duties and obligations under the Supply Contract to the same extent
as if an assignment has not occurred. Customer hereby represents and warrants
that: (i) Customer has delivered herewith a true and correct copy of the Supply
Contract, neither Supplier nor Customer is in default under the Supply Contract
and it shall not be amended without Lender's prior written consent and (ii) the
Supply Contract is free from all claims, security interests, liens and
encumbrances, except for the interest being conveyed by the Loan Agreement.
Customer indemnifies and holds Lender harmless with respect to any and all
claims relating to the performance of Customer's obligations under the Supply
Contract.
<PAGE>
10. SEE RATE ADJUSTMENT RIDER ATTACHED AND INCORPORATED BY REFERENCE.
By execution hereof the signer certifies that he/she is a duly authorized
officer, partner or proprietor of Customer and that he/she has read, accepted
and duly executed this Equipment Schedule to the Master Loan and Security
Agreement on behalf of Customer.
ACCEPTED AT LESSOR'S OFFICE AT McLEAN, VIRGINIA.
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
(LENDER) (CUSTOMER)
<TABLE>
<CAPTION>
By: By:
<S> <C> <C> <C>
Name: J. A. Philbrick Name: John Ryals
--------------- ----------
Title: President Title: CEO
--------------- ----------
Date: 8/28/98 Date: 8/31/98
--------------- ----------
</TABLE>
<PAGE>
EXHIBIT A
LIST OF EQUIPMENT
The following list and description of Equipment supplements and forms a part of
Equipment Schedule No. 04 to Master Loan and Security Agreement No. 7237 dated
June 18, 1998 between Lender and Customer and may be attached to said Equipment
Schedule and any related UCC Financing Statements, or other document relating to
the Master Loan and Security Agreement, the Equipment Schedule or any other
document describing the Equipment.
SEE ATTACHED EQUIPMENT SCHEDULE EXHIBIT A ATTACHED
All property listed above, together with any and all attachments, accessions,
additions, replacements, improvements, modifications and substitutions thereto
and therefor and a right to use license for any software related to any of the
foregoing now or hereafter acquired and all proceeds, in the form of goods,
accounts, chattel paper, documents, instruments and insurance proceeds.
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
(LENDER) (CUSTOMER)
By: By:
Name: J.A. Philbrick Name: John Ryals
-------------- ----------
Title: President Title: CEO
--------- ---
<PAGE>
PROMISSORY NOTE TO: MASTER LOAN AND SECURITY AGREEMENT NO. 7237
Dated June 18, 1998
EQUIPMENT SCHEDULE NO. 04
U.S. $483,274.41 McLean, Virginia
Dated: _____________________
FOR VALUE RECEIVED, Paradigm Genetics, Inc., a North Carolina corporation
(the "Borrower"), hereby promises to pay to the order of OXFORD VENTURE LEASING,
LLC. or its successors or assigns (the "Payee") at its offices located at 8180
Greensboro Drive, suite 1000, McLean, Virginia 22102, or at such other place as
the Payee or any holder hereof may from time to time designate, the principal
amount of U.S. four hundred eighty-three thousand two hundred seventy-four and
41/100 dollars ($483,274.41), with interest (based on a year of 360 days and 30
day months) on the principal amount hereof remaining from time to time unpaid,
such principal and interest to be paid in consecutive monthly installments until
fully paid, in the manner and at a rate of interest per annum as determined and
provided in the Loan Agreement. Anything in this Note to the contrary
notwithstanding, in the event that any payment of interest hereunder shall
exceed the legal limit, such amount in excess of such limit shall be deemed a
payment of principal hereunder.
This Note evidences a loan by the Payee to the undersigned pursuant to the Loan
Agreement indicated above between the undersigned and the Payee as from time to
time may be amended, restated, replaced, supplemented, substituted for or
renewed, and the holder of this Note is entitled to the benefits thereof,
including without limitation, the security interest in the Equipment granted
therein. Each term defined in the Loan Agreement and not otherwise defined
herein shall have the same definition when used herein.
The principal hereof and accrued interest hereon shall become forthwith due and
payable as provided in the Loan Agreement. Payments hereunder not made when due
shall accrue late charges as provided in the Loan Agreement. This Note may not
be prepaid in whole or in part except as otherwise specifically provided in the
Loan Agreement.
The Borrower hereby waives diligence, demand, presentment, protest and notice of
any kind, and assents to extensions of the time of payment, release, surrender
or substitution of security, or forbearance or other indulgence, without notice.
No act or omission of the Payee, including without limitation any failure to
exercise any right, remedy or recourse, shall be deemed to be a waiver or
release of such right, remedy or recourse. Any waiver or release may be effected
only by a written document executed by Payee and then only to the extent
specified therein. The undersigned hereby promises to pay all Attorneys Fees and
Expenses that may be incurred in connection with the enforcement and/or
collection of this Note.
The undersigned authorizes the Payee to insert above as the date of the Note,
the date on which Payee disburses funds pursuant to the Loan Agreement.
<PAGE>
This Note is freely assignable by the Payee, in whole or in part, and from time
to time. All of the terms and provisions of this Note inure to and are binding
upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties. None of the rights or
obligations of the Borrower hereunder may be assigned or otherwise transferred
without the prior written consent of the Payee.
THIS NOTE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND THE FEDERAL ACTION OR OTHER PROCEEDING ARISING OUT
OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY
HAVE TO THE VENUE OF SUCH COURTS. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. Any action
by Borrower against Payee for any cause of action under this Note shall be
brought within one year after any suck cause of action first arises. If
requested by Payee, Borrower agrees that prior to the commencement of any
litigation regarding the terms and conditions of this Note, the parties hereto
shall subject themselves to non-binding mediation with a qualified mediator
mutually satisfactory to both parties.
IN WITNESS WHEREOF, the Borrower by its duly authorized officer has
executed and delivered this Note as of the date first above written.
PARADIGM GENETICS, INC.
Borrower
By:
-------------------------
Name: John Ryals
Title: CEO
<PAGE>
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT (this "Rider") to the Promissory Note
dated _____________ 1998 (the "Note") issued in connection with the Master Loan
and Security Agreement No. 7237 dated June 18, 1998 and the Equipment Schedule
No. 04 (collectively, the "Loan Agreement"), between Paradigm Genetics, Inc., as
borrower (the "Customer") and OXFORD VENTURE LEASING, LLC, as Lender ("Oxford").
This Rider is entered into pursuant to and incorporates by this reference all of
the terms and provisions of the Loan Agreement and the Note. By its execution
and delivery of this Rider, Customer hereby reaffirms all of the
representations, warranties and covenants contained in the Loan Agreement and
the Note as of the date hereof, and further represents and warrants to Lender
that no Default has occurred and is continuing as of the date hereof.
1. Purpose. This Rider amends and restates the tens of the payments set forth
in the Note.
2. Definitions. The following terms shall have the following meanings herein:
(a) "Adjustment Date" shall mean the date Oxford disburses any portion of the
proceeds of the Loan Agreement.
(b) "Final T-Note. Average" shall mean the average of the yields on U.S.
Treasury Notes maturing in four years, as published by the Dow Jones
Telerate Access Service, Page 19901, for the close of business on each
business day of the two full calendar weeks immediately preceding the week
containing the Adjustment Date.
(c) "Preliminary Payments" shall mean the payments set forth in the Equipment
Schedule and the Note, consisting of $5,134.79 due upon execution (the
"Advance Payment") followed by eleven (11) consecutive monthly payments of
$5,134.79, followed by thirty-six (36) consecutive monthly payments of
$14,934.63, followed by one (1) final payment of $48,327.44.
(d) "Preliminary T-Note Average" shall mean 5.6 15%.
3. Adjustment of Payments. The Preliminary Payments were calculated based on a
spread over the Preliminary T-Note Average. Should the Final T-Note Average
differ from the Preliminary T-Note Average, then the Preliminary Payments shall
be revised. For each increase or decrease of one (1) basis point (i.e., 1/100 of
1%) in the Final T-Note Average above or below the Preliminary T-Note Average,
the Preliminary Payments shall be revised as follows (complete below as
applicable):
The Advance Payment, due upon execution of the Equipment Schedule, and the next
eleven payments shall remain unchanged.
Each of the payments for the months number 13-48 initially scheduled in the
amount of $14,934.63 shall increase or decrease by $3.87.
<PAGE>
THE CALCULATION OF THE CONTRACT PAYMENTS UNDER THIS RIDER WILL SUPERSEDE ANY
PRIOR PROPOSAL OR QUOTATION. CUSTOMER HEREBY ACKNOWLEDGES AND AGREES TO THE
CALCULATION OF THE PAYMENT SCHEDULE SET FORTH HEREIN.
4. Oxford's Requirements. The commencement of the Loan Agreement is subject to
satisfaction of all documentation and credit requirements of Oxford. If such
requirements are not satisfied by the Adjustment Date, then Oxford may, at its
sole option, declare that the Adjustment Date shall be the date when such
requirements are satisfied.
Dated as of: August 28, 1998
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
By: By:
-------------- ----------
Name: J.A. Philbrick Name: John Ryals
-------------- ----------
Title: President Title: CEO
--------- ---
<PAGE>
EXHIBIT 10.39
EQUIPMENT SCHEDULE
TO
MASTER LOAN AND SECURITY AGREEMENT
<TABLE>
<CAPTION>
MASTER LOAN AND SECURITY AGREEMENT NO. 7237 DATED: June 18, 1998
EQUIPMENT SCHEDULE NO. 05
<S> <C>
LENDER: CUSTOMER:
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC.
8180 GREENSBORO DRIVE, STE 1000 106 ALEXANDER DRIVE, BLG 6
MCLEAN, VA 22102 RESEARCH TRIANGLE PARK, NC 27709
</TABLE>
LENDER AND CUSTOMER HAVE ENTERED INTO MASTER LOAN AND SECURITY AGREEMENT NO.
7237 DATED JUNE 18, 1998 (THE "AGREEMENT") WHICH IS INCORPORATED HEREIN. THIS
IS AN EQUIPMENT SCHEDULE TO THE AGREEMENT. ALL WORDS AND TERMS USED HEREIN AND
NOT SPECIFICALLY DEFINED HEREIN SHALL HAVE THE SAME MEANINGS AS SET FORTH IN THE
AGREEMENT.
1. EQUIPMENT LOCATION (if other than above address of Customer): none
2. EQUIPMENT: (See attached Exhibit A)
3. ACQUISITION COST OF THE EQUIPMENT: $615,671.43.
4. SUPPLIER(S): (See attached Exhibit A)
5. THE LOAN AND LOAN AGREEMENT REPAYMENT. As requested by Customer
pursuant to the Agreement, Lender agrees to lend to Customer the sum of Six
Hundred Fifteen Thousand Six Hundred Seventy One and 43/100 dollars. Customer
agrees to repay the Loan Agreement in successive installments (which installment
payments are inclusive of interest) as set forth in the following Schedule:
SCHEDULE
Advance Payment Amount: $6,541.51.
Number of Installments (Exclusive of Advance Payment): 48
Payment Period:
__ X __ Monthly _____ Quarterly
Periodic Installment Payment Amount Per Period: $6,541.51 for the next
eleven (11) months, followed by $19,026.09 for thirty-six months,
followed by one payment of $61,567.14.
Commencement Date: ___________________
Special Provisions (if any): none
<PAGE>
6. SECURITY DEPOSIT: None
7. DISBURSEMENT OF PROCEEDS. Customer hereby authorizes Lender to
disburse the $615,671.43 proceeds as follows:
(a) $615,571.43 to: Paradigm Genetics, Inc.
----------
$615,671.43 TOTAL PROCEEDS
----------
Customer may direct the Lender in writing to withhold payments from Supplier(s),
either now or in the future. Lender shall be entitled to rely on such written
direction of Customer as being conclusive as to the intent of the Customer with
regard to withheld payments.
Customer hereby acknowledges and agrees that it shall constitute an additional
Event of Default under the Loan Agreement if, for any reason, the Acquisition
Cost of the Equipment has not been fully paid to the appropriate Supplier(s)
thereof within ten (10) days after demand therefor by Lender. Customer hereby
agrees to indemnify, and hold harmless Lender from and against any liability,
claim, loss or damage, including Attorneys' Fees and Expenses, that may be
incurred by Lender as a result of any amounts to be withheld hereunder,
including any claims of the Supplier(s) therefor.
8. ADJUSTMENTS: Customer acknowledges that payments under the Loan
Agreement herein are based upon the Acquisition Cost of the Equipment set forth
above, and as a result of authorized changes to the Equipment, the final
Acquisition Cost of the Equipment may increase or decrease by up to 10%. In
such event, the Loan Payments shall be adjusted accordingly, and Customer
authorizes Lender to correct the Loan Agreement (and all related documentation)
to reflect such changes and Customer, if requested by Lender, shall confirm such
changes to Lender in writing.
9. SUPPLY CONTRACT: Customer acknowledges either that (a) Customer has
reviewed and approved any written purchase agreement or purchase order covering
the Equipment ("Supply Contract") purchased from Supplier, or (b) Lender has
informed or advised Customer, in writing, either previously or by the Loan
Agreement, of the following: (i) the identity of the Supplier, (ii) that
Customer may have rights under the Supply Contract and (iii) that Customer may
contact the Supplier for a description of any such rights Customer may have
under the Supply Contract. If Customer has entered into a written Supply
Contract, then Customer hereby assigns to Lender all of Customer's rights and
interests in and to the Equipment and the Supply Contract. If requested by
Lender, Customer shall obtain any consent required for such assignment. If
Customer has not entered into any such Supply Contract, Customer authorizes
Lender to (and Lender may at its option) act on behalf of Customer to obtain a
Supply Contract from Supplier. Except for the obligation to pay Supplier for
the Equipment, if (and only if) the Equipment is accepted by Customer under the
Loan Agreement, such assignment shall not include any of Customer's obligations
under such Supply Contract and Customer shall at all times remain liable to
perform all of its duties and obligations under the Supply Contract to the same
extent as if an assignment has not occurred. Customer hereby represents and
warrants that: (i) Customer has delivered herewith a true and correct copy of
the Supply Contract, neither Supplier nor Customer is in default under the
Supply Contract and it shall not be amended
2
<PAGE>
without Lender's prior written consent and (ii) the Supply Contract is free from
all claims, security interests, liens and encumbrances, except for the interest
being conveyed by the Loan Agreement. Customer indemnifies and holds Lender
harmless with respect to any and all claims relating to the performance of
Customer's obligations under the Supply Contract.
10. SEE RATE ADJUSTMENT RIDER ATTACHED AND INCORPORATED BY REFERENCE.
By execution hereof, the signer certifies that he/she is a duly authorized
officer, partner or proprietor of Customer and that he/she has read, accepted
and duly executed this Equipment Schedule to the Master Loan and Security
Agreement on behalf of Customer.
ACCEPTED AT LESSOR'S OFFICE AT MCLEAN, VIRGINIA.
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
(LENDER) (CUSTOMER)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By: By:
--------------- -------------
Name: J. A. Philbrick Name: John Ryals
--------------- -------------
Title: President Title: CEO/President
--------------- -------------
Date: 10/28/98 Date: 10/28/98
--------------- -------------
</TABLE>
3
<PAGE>
EXHIBIT A
LIST OF EQUIPMENT
The following list and description of Equipment supplements and forms a
part of Equipment Schedule No. 05 to Master Loan and Security Agreement No. 7237
dated June 18, 1998 between Lender and Customer and may be attached to said
Equipment Schedule and any related UCC Financing Statements, or other document
relating to the Master Loan and Security Agreement, the Equipment Schedule or
any other document describing the Equipment.
SEE ATTACHED EQUIPMENT SCHEDULE EXHIBIT A ATTACHED
All property listed above, together with any and all attachments, accessions,
additions, replacements, improvements, modifications and substitutions thereto
and therefor and a right to use license for any software related to any of the
foregoing now or hereafter acquired and all proceeds, in the form of goods,
accounts, chattel paper, documents, instruments and insurance proceeds.
OXFORD VENTURE LEASING, LLC PARADIGM GENETICS, INC
(LENDER) (CUSTOMER)
By: By:
--------------- --------------
Name: J. A. Philbrick Name: John Ryals
--------------- --------------
Title: Title: CEO/President
--------------- --------------
4
<PAGE>
PROMISSORY NOTE TO: MASTER LOAN AND SECURITY AGREEMENT NO. 7237
Dated June 18, 1998
EQUIPMENT SCHEDULE NO. 05
U.S. $615,671.43 McLean, Virginia
Dated:
---------------------
FOR VALUE RECEIVED, Paradigm Genetics, Inc., a North Carolina corporation
(the "Borrower"), hereby promises to pay to the order of OXFORD VENTURE LEASING,
LLC. or its successors or assigns (the "Payee") at its offices located at 8180
Greensboro Drive, Suite 1000, McLean, Virginia 22102, or at such other place as
the Payee or any holder hereof may from time to time designate, the principal
amount of U.S. Six Hundred Fifteen Thousand Six Hundred Seventy-One and 43/100
dollars ($615,671.43), with interest (based on a year of 360 days and 30 day
months) on the principal amount hereof remaining from time to time unpaid, such
principal and interest to be paid in consecutive monthly installments until
fully paid, in the manner and at a rate of interest per annum as determined and
provided in the Loan Agreement. Anything in this Note to the contrary
notwithstanding, in the event that any payment of interest hereunder shall
exceed the legal limit, such amount in excess of such limit shall be deemed a
payment of principal hereunder.
This Note evidences a loan by the Payee to the undersigned pursuant to the
Loan Agreement indicated above between the undersigned and the Payee as from
time to time may be amended, restated, replaced, supplemented, substituted for
or renewed, and the holder of this Note is entitled to the benefits thereof,
including without limitation, the security interest in the Equipment granted
therein. Each term defined in the Loan Agreement and not otherwise defined
herein shall have the same definition when used herein.
The principal hereof and accrued interest hereon shall become forthwith due
and payable as provided in the Loan Agreement. Payments hereunder not made when
due shall accrue late charges as provided in the Loan Agreement. This Note may
not be prepaid in whole or in part except as otherwise specifically provided in
the Loan Agreement.
The Borrower hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice. No act or omission of the Payee, including without limitation
any failure to exercise any right, remedy or recourse, shall be deemed to be a
waiver or release of such right, remedy or recourse. Any waiver or release may
be effected only by a written document executed by Payee and then only to the
extent specified therein. The undersigned hereby promises to pay all Attorneys
Fees and Expenses that may be incurred in connection with the enforcement and/or
collection of this Note.
The undersigned authorizes the Payee to insert above as the date of the
Note, the date on which Payee disburses funds pursuant to the Loan Agreement.
5
<PAGE>
This Note is freely assignable by the Payee, in whole or in part, and from
time to time. All of the terms and provisions of this Note inure to and are
binding upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties. None of the rights or
obligations of the Borrower hereunder may be assigned or otherwise transferred
without the prior written consent of the Payee.
THIS NOTE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY
HAVE TO THE VENUE OF SUCH COURTS. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. Any action
by Borrower against Payee for any cause of action under this Note shall be
brought within one year after any such cause of action first arises. If
requested by Payee, Borrower agrees that prior to the commencement of any
litigation regarding the terms and conditions of this Note, the parties hereto
shall subject themselves to non-binding mediation with a qualified mediator
mutually satisfactory to both parties.
IN WITNESS OF, the Borrower by its duly authorized officer has executed and
delivered this Note as of the date first above written.
PARADIGM GENETICS, INC.
Borrower
By:
-------------------------------
Name: John Ryals
-----------------------------
Title: CEO/President
----------------------------
6
<PAGE>
EXHIBIT 10.40
EQUIPMENT SCHEDULE
TO
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT NO. 7237 DATED: June 18, 1998
EQUIPMENT SCHEDULE NO. 06
LENDER: CUSTOMER:
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS, INC.
133 NORTH FAIRFAX STREET 104 ALEXANDER DRIVE, BLG 2
ALEXANDRIA, VIRGINIA 22314 RESEARCH TRIANGLE PARK, NC 27709
LENDER AND CUSTOMER HAVE ENTERED INTO MASTER LOAN AND SECURITY AGREEMENT NO.
7237 DATED JUNE 18, 1998 (THE "AGREEMENT") WHICH IS INCORPORATED HEREIN. THIS
IS AN EQUIPMENT SCHEDULE TO THE AGREEMENT. ALL WORDS AND TERMS USED HEREIN AND
NOT SPECIFICALLY DEFINED HEREIN SHALL HAVE THE SAME MEANINGS AS SET FORTH IN THE
AGREEMENT.
1. EQUIPMENT LOCATION (if other than above address of Customer): none
2. EQUIPMENT: (See attached Exhibit A)
3. ACQUISITION COST OF THE EQUIPMENT: $732,119.41.
4. SUPPLIER(S): (See attached Exhibit A)
5. THE LOAN AND LOAN AGREEMENT REPAYMENT. As requested by Customer
pursuant to the Agreement, Lender agrees to lend to Customer the sum of Seven
Hundred Thirty-Two Thousand One Hundred Nineteen and 41/100 dollars. Customer
agrees to repay the Loan Agreement in successive installments (which installment
payments are inclusive of interest) as set forth in the following Schedule:
SCHEDULE
Advance Payment Amount: $7,778.77.
Number of Installments (Exclusive of Advance Payment): 48
Payment Period:
X Monthly Quarterly
Periodic Installment Payment Amount Per Period: $7,778.77 for the next
eleven (11) months, followed by $26,809.84 for thirty-six (36) months
followed by one payment of $73,211.94.
Commencement Date: 12/31/98
Special Provisions (if any): none
6. SECURITY DEPOSIT: None
<PAGE>
7. DISBURSEMENT OF PROCEEDS. Customer hereby authorizes Lender to disburse the
$732,119.41 proceeds as follows:
(a) $732,119.41 to: Paradigm Genetics, Inc.
----------
$732,119.41 TOTAL PROCEEDS
==========
Customer may direct the Lender in writing to withhold payments from Supplier(s),
either now or in the future. Lender shall be entitled to rely on such written
direction of Customer as being conclusive as to the intent of the Customer with
regard to withheld payments.
Customer hereby acknowledges and agrees that it shall constitute an additional
Event of Default under the Loan Agreement if, for any reason, the Acquisition
Cost of the Equipment has not been fully paid to the appropriate Supplier(s)
thereof within ten (10) days after demand therefor by Lender. Customer hereby
agrees to indemnify, and hold harmless Lender from and against any liability,
claim, loss or damage, including Attorneys' Fees and Expenses, that may be
incurred by Lender as a result of any amounts to be withheld hereunder,
including any claims of the Supplier(s) therefor.
8. ADJUSTMENTS: Customer acknowledges that payments under the Loan
Agreement herein are based upon the Acquisition Cost of the Equipment set forth
above, and as a result of authorized changes to the Equipment, the final
Acquisition Cost of the Equipment may increase or decrease by up to 10%. In
such event, the Loan Payments shall be adjusted accordingly, and Customer
authorizes Lender to correct the Loan Agreement (and all related documentation)
to reflect such changes and Customer, if requested by Lender, shall confirm such
changes to Lender in writing.
9. SUPPLY CONTRACT: Customer acknowledges either that (a) Customer has
reviewed and approved any written purchase agreement or purchase order covering
the Equipment ("Supply Contract") purchased from Supplier, or (b) Lender has
informed or advised Customer, in writing, either previously or by the Loan
Agreement, of the following: (i) the identity of the Supplier, (ii) that
Customer may have rights under the Supply Contract and (iii) that Customer may
contact the Supplier for a description of any such rights Customer may have
under the Supply Contract. If Customer has entered into a written Supply
Contract, then Customer hereby assigns to Lender all of Customer's rights and
interests in and to the Equipment and the Supply Contract. If requested by
Lender, Customer shall obtain any consent required for such assignment. If
Customer has not entered into any such Supply Contract, Customer authorizes
Lender to (and Lender may at its option) act on behalf of Customer to obtain a
Supply Contract from Supplier. Except for the obligation to pay Supplier for the
Equipment, if (and only if) the Equipment is accepted by Customer under the Loan
Agreement, such assignment shall not include any of Customer's obligations under
such Supply Contract and Customer shall at all times remain liable to perform
all of its duties and obligations under the Supply Contract to the same extent
as if an assignment has not occurred. Customer hereby represents and warrants
that: (i) Customer has delivered herewith a true and correct copy of the Supply
Contract, neither Supplier nor Customer is in default under the Supply Contract
and it shall not be amended without Lender's prior written consent and (ii) the
Supply Contract is free
2
<PAGE>
from all claims, security interests, liens and encumbrances, except for the
interest being conveyed by the Loan Agreement. Customer indemnifies and holds
Lender harmless with respect to any and all claims relating to the performance
of Customer's obligations under the Supply Contract.
10. SEE RATE ADJUSTMENT RIDER ATTACHED AND INCORPORATED BY REFERENCE.
By execution hereof, the signer certifies that he/she is a duly authorized
officer, partner or proprietor of Customer and that he/she has read, accepted
and duly executed this Equipment Schedule to the Master Loan and Security
Agreement on behalf of Customer.
ACCEPTED AT LESSOR'S OFFICE AT ALEXANDRIA, VIRGINIA.
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS, INC.
(LENDER) (CUSTOMER)
By: By:
------------------------------ ------------------------------
Name: J.A. Philbrick Name: John A. Ryals
---------------------------- ------------------------------
Title: President Title: CEO, President
---------------------------- -----------------------------
Date: 12.28.98 Date: December 28, 1998
--------------------------- -----------------------------
3
<PAGE>
EXHIBIT A
LIST OF EQUIPMENT
The following list and description of Equipment supplements and forms a part of
Equipment Schedule No. 06 to Master Loan and Security Agreement No. 7237 dated
June 18, 1998 between Lender and Customer and may be attached to said Equipment
Schedule and any related UCC Financing Statements, or other document relating to
the Master Loan and Security Agreement, the Equipment Schedule or any other
document describing the Equipment.
SEE ATTACHED EQUIPMENT SCHEDULE EXHIBIT A ATTACHED
All property listed above, together with any and all attachments, accessions,
additions, replacements, improvements, modifications and substitutions thereto
and therefor and a right to use license for any software related to any of the
foregoing now or hereafter acquired and all proceeds, in the form of goods,
accounts, chattel paper, documents, instruments and insurance proceeds.
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS, INC.
(LENDER) (CUSTOMER)
By: By:
------------------------------ ------------------------------
Name: J.A. PHILBRICK Name: John A. Ryals
----------------------------- ----------------------------
Title: PRESIDENT Title: CEO, President
--------------------------- --------------------------
4
<PAGE>
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT (this "Rider") to the Promissory Note
dated 12/31/98 (the "Note") issued in connection with the Master Loan and
Security Agreement No. 7237 dated June 18, 1998 and the Equipment Schedule No.
06 (collectively, the "Loan Agreement"), between Paradigm Genetics, Inc., as
borrower (the "Customer") and OXFORD VENTURE FINANCE, LLC, as Lender ("Oxford").
This Rider is entered into pursuant to and incorporates by this reference all of
the terms and provisions of the Loan Agreement and the Note. By its execution
and delivery of this Rider, Customer hereby reaffirms all of the
representations, warranties and covenants contained in the Loan Agreement and
the Note as of the date hereof, and further represents and warrants to Lender
that no Default has occurred and is continuing as of the date hereof.
1. Purpose. This Rider amends and restates the terms of the payments set forth
in the Note.
2. Definitions. The following terms shall have the following meanings herein:
(a) "Adjustment Date" shall mean the date Oxford disburses any portion of the
proceeds of the Loan Agreement.
(b) "Final T-Note Average" shall mean the average of the yields on U.S.
Treasury Notes maturing in four years, as published by the Dow Jones Telerate
Access Service, Page 19901, for the close of business on each business day of
the two full calendar weeks immediately preceding the week containing the
Adjustment Date.
(c) "Preliminary Payments" shall mean the payments set forth in the Equipment
Schedule and the Note, consisting of $7,778.77 due upon execution (the "Advance
Payment") followed by eleven (11) consecutive monthly payments of $7,778.77,
followed by thirty-six (36) consecutive monthly payments of $21,809.84 followed
by one (1) final payment of $73,211.94.
(d) "Preliminary T-Note Average" shall mean 4.25%.
3. Adjustment of Payments. The Preliminary Payments were calculated based on a
spread over the Preliminary T-Note Average. Should the Final T-Note Average
differ from the Preliminary T-Note Average, then the Preliminary Payments shall
be revised. For each increase or decrease of one (1) basis point (i.e., 1/100 of
1%) in the Final T-Note Average above or below the Preliminary T-Note Average,
the Preliminary Payments shall be revised as follows (complete below as
applicable):
The Advance Payment, due upon execution of the Equipment Schedule, and the next
eleven payments shall remain unchanged.
Each of the payments for the months number 13-48 initially scheduled in the
amount of $21,809.84 shall increase or decrease by $5.95.
5
<PAGE>
THE CALCULATION OF THE CONTRACT PAYMENTS UNDER THIS RIDER WILL SUPERSEDE ANY
PRIOR PROPOSAL OR QUOTATION. CUSTOMER HEREBY ACKNOWLEDGES AND AGREES TO THE
CALCULATION OF THE PAYMENT SCHEDULE SET FORTH HEREIN.
4. Oxford's Requirements. The commencement of the Loan Agreement is subject to
satisfaction of all documentation and credit requirements of Oxford. If such
requirements are not satisfied by the Adjustment Date, then Oxford may, at its
sole option, declare that the Adjustment Date shall be the date when such
requirements are satisfied.
Dated as of December 23, 1998
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS, INC.
By: By:
------------------------------ ------------------------------
Name: J.A. Phillbrick Name: John A. Ryals
----------------------------- ------------------------------
Title: President Title: CEO, President
--------------------------- --------------------------
6
<PAGE>
ACKNOWLEDGMENT OF ASSIGNMENT
----------------------------
Phoenixcor, Inc.
65 Water Street
South Norwalk, CT. 06854
Re: Assignment of Loan with Paradigm Genetics, Inc.
Ladies and Gentlemen:
Reference is made to the annexed Equipment Schedule No. 06 to Master Loan and
Security Agreement No. 7237, dated June 18, 1998 (the "Loan Agreement") between
Oxford Venture Finance, LLC as ("Lender") and Paradigm Genetics, Inc. as
Customer covering the collateral described in the Loan Agreement (the
"Collateral"). We consent to Lender's assignment of the Loan Agreement to you,
acknowledge receipt of notice of such assignment and in consideration of your
advancement of funds to the Lender with respect to the Loan Agreement, we hereby
acknowledge and agree that:
1. The Loan Agreement is in full force and effect and constitutes our
valid and binding obligation, enforceable in accordance with their terms. We
have not entered into any agreement with any person modifying the provisions of
the Loan Agreement and we cannot make any future modification, termination or
settlement of amounts due under the Loan Agreement except with the consent of
you or your assigns.
2. The Loan Agreement describes the entire agreement between Lender and us
regarding our use of and rights and obligations with respect to the Collateral
except (none). There are no "side letters" or verbal understandings between us
and Lender modifying the provisions of the Loan Agreement or otherwise affecting
our obligations to make the payment thereunder.
3. The Collateral was first delivered to our premises located at 104
Alexander Drive, Bldg 2, Research Triangle Park, NC 22709 on or after the
Invoice Dates set forth on the Exhibit A to Equipment Schedule No. 06 and has
been unconditionally accepted by us and is in satisfactory working order on the
date hereof. We agree to make no claim against you with respect to the
Collateral. We further agree that you may inspect the Collateral on reasonable
prior verbal or written notice to us.
4. Lender has assigned has assigned to you all of its right, title and
interest in the Loan Agreement but none of its obligations and you are the
Lender of record under the Loan Agreement. We agree to remit to you the
remaining advance payment and eleven (11) monthly rentals followed by thirty-six
(36) and a final payment, each a successive monthly installment in the amounts
one advance and 11 each in the amount of $7,778.77, 36 of $21,809.84 and a final
of $73,211.94 commencing on the funding date on or about December 23, 1998 and
continuing on the same day of every month thereafter. We will have no
obligation to you and you will have no obligation to us with respect to any
installment under the Note due or paid to Lender prior to such date. We agree to
pay the remaining installment to you or your assigns unconditionally
7
<PAGE>
without defense, setoff or counterclaim. However, we preserve all our rights
against Lender. We agree to make all payment due and to give all notices, and
information required under the Loan Agreement to you at your above address or to
any revised address of which you or your assigns may advise us.
5. We have received no notice of a prior sale, transfer, assignment,
hypothecation or pledge of the Loan Agreement, the amounts payable there under
or the Collateral.
6. No event of default (or that which would constitute an event of default
under the Loan Agreement with the passage of time, giving of notice, or both) on
our part, or to our knowledge, on the part of Lender, has occurred in the
performance of each such party's obligations under the Loan Agreement.
7. This Acknowledgment of Assignment shall inure to the benefit of your
successors and assigns.
8. We acknowledge that the Loan Agreement and all related documents are
governed by the laws of the State of Connecticut and were entered into with the
understanding that they were to be assigned to you and you require that the laws
of Connecticut govern your transactions so that the documents will be applied
and interpreted uniformly. We agree that such laws bear a reasonable
relationship to the Loan Agreement and related documents.
Dated: December 23, 1998
Very truly yours,
PARADIGM GENETICS INC.
By:
-------------------------
Title: CEO, President
---------------------
ACKNOWLEDGEMENT OF LENDER
-------------------------
The undersigned Lender under the Loan Agreement defined in the foregoing
Acknowledgment of Assignment hereby consents to the foregoing and confirms that
it has assigned all remaining installments under the loan Agreement to
Phoenixcor, Inc. as specified in the Acknowledgment of Assignment.
Dated: December 23, 1998
OXFORD VENTURE FINANCE, LLC
By:
------------------------
8
<PAGE>
SCHEDULE A TO ASSIGNMENT FROM OXFORD VENTURE FINANCE, LLC
TO PHOENIXCOR, INC.
The Loan Documents covered by the annexed Assignment covering the loan
transaction with PARADIGM Genetics, Inc.-- include (without limitation) the
following:
1. Master Loan and Security Agreement dated June 18, 1998 (copy should be on
file at PC)
2. Promissory Note
3. Schedule No. 06
4. Invoice
5. UCC- 1 Financing Statement
6. Acknowledgment of Assignment
7. Tax Letter
8. Insurance Letter
9
<PAGE>
PROMISSORY NOTE TO: MASTER LOAN AND SECURITY AGREEMENT NO. 7237
Dated June 18, 1998
EQUIPMENT SCHEDULE NO. 06
U.S. $732,119.41 Alexandria, Virginia
Dated: 12/31/98
FOR VALUE RECEIVED, Paradigm Genetics. Inc., a North Carolina corporation
(the "Borrower"), hereby promises to pay to the order of OXFORD VENTURE FINANCE,
LLC or its successors or assigns (the "Payee") at its offices located at 133
North Fairfax Street. Alexandria, Virginia, 22314, or at such other place as the
Payee or any holder hereof may from time to time designate, the principal amount
of U.S. Seven Hundred Thirty-Two Thousand One Hundred Nineteen and 41/100
dollars ($732,119.41), with interest (based on a year of 360 days and 30 day
months) on the principal amount hereof remaining from time to time unpaid, such
principal and interest to be paid in consecutive monthly installments until
fully paid, in the manner and at a rate of interest per annum as determined and
provided in the Loan Agreement. Anything in this Note to the contrary
notwithstanding, in the event that any payment of interest hereunder shall
exceed the legal limit, such amount in excess of such limit shall be deemed a
payment of principal hereunder.
This Note evidences a loan by the Payee to the undersigned pursuant to the Loan
Agreement indicated above between the undersigned and the Payee as from time to
time may be amended, restated, replaced, supplemented, substituted for or
renewed, and the holder of this Note is entitled to the benefits thereof,
including without limitation, the security interest in the Equipment granted
therein. Each term defined in the Loan Agreement and not otherwise defined
herein shall have the same definition when used herein.
The principal hereof and accrued interest hereon shall become forthwith due and
payable as provided in the Loan Agreement. Payments hereunder not made when due
shall accrue late charges as provided in the Loan Agreement. This Note may not
be prepaid in whole or in part except as otherwise specifically provided in the
Loan Agreement.
The Borrower hereby waives diligence, demand, presentment, protest and notice of
any kind, and assents to extensions of the time of payment, release, surrender
or substitution of security, or forbearance or other indulgence, without notice.
No act or omission of the Payee, including without limitation any failure to
exercise any right, remedy or recourse, shall be deemed to be a waiver or
release of such right, remedy or recourse. Any waiver or release may be effected
only by a written document executed by Payee and then only to the extent
specified therein. The undersigned hereby promises to pay all Attorneys Fees and
Expenses that may be incurred in connection with the enforcement and/or
collection of this Note.
10
<PAGE>
The undersigned authorizes the Payee to insert above as the date of the Note,
the date on which Payee disburses funds pursuant to the Loan Agreement.
This Note is freely assignable by the Payee, in whole or in part, and from time
to time. All of the terms and provisions of this Note inure to and are binding
upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties. None of the rights or
obligations of the Borrower hereunder may be assigned or otherwise transferred
without the prior written consent of the Payee.
THIS NOTE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY
HAVE TO THE VENUE OF SUCH COURTS. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. Any action
by Borrower against Payee for any cause of action under this Note shall be
brought within one year after any such cause of action first arises. If
requested by Payee, Borrower agrees that prior to the commencement of any
litigation regarding the terms and conditions of this Note, the parties hereto
shall subject themselves to non-binding mediation with a qualified mediator
mutually satisfactory to both parties.
IN WITNESS WHEREOF, the Borrower by its duly authorized officer has
executed and delivered this Note as of the date first above written.
PARADIGM GENETICS, INC.
Borrower
By:
------------------------------
Name: John A.Ryals
---------------------------
Title: CEO, President
--------------------------
11
<PAGE>
TAX ACKNOWLEDGMENT AND INDEMNIFICATION
Oxford Venture Finance, LLC
133 North Fairfax Street
Alexandria, Virginia 22314
This Tax Acknowledgment and Indemnification ("Acknowledgment") is attached
to and made a part of that certain Loan Schedule No. 06 (the "Loan Schedule"),
to Master Loan and Security Agreement No. 7237, dated as of June 18, 1998 (the
"Loan Agreement"), by and between Oxford Venture Finance, LLC and the
undersigned.
Notwithstanding any provision to the contrary in the Loan Agreement, we
hereby confirm our understanding and acknowledgment of the following:
1. While you normally bill us for taxes, if any, payable on the rentals
(sales/use taxes), you will not bill us for or furnish any advice with respect
to any taxes on the Equipment ("Taxes"), including personal property, ad valorem
or other taxes imposed by any state, federal, local or foreign government in
connection with the purchase, possession, ownership or operation of the
Equipment.
2. It is our obligation to and we shall timely submit such reports,
declarations, inventories and other documentation, file such returns, and pay
the applicable Taxes when due in connection with the Equipment. If local law
prohibits us from making direct payment or filing the applicable report or
return it is our responsibility to and we shall immediately advise you in
writing to such effect and furnish you with the forms, data and information as
will enable you to make and file the return or report, along with our payment
for the Tax due. Any accrual of interest and penalties resulting from our
failure to comply with the foregoing, or otherwise, is and shall be our
responsibility.
3. Upon your request, we shall provide you with copies of satisfactory
documentation and proof of payment of such Taxes. We shall indemnify you and
hold you harmless from and against any such Taxes, and any penalties and
interest thereon, and any other liabilities and damages that you may incur
arising out of our failure to pay when due such Taxes. The indemnity and
covenants set forth herein shall continue in full force and effect and shall
survive the expiration or earlier termination of the Loan Agreement or the Loan
Schedule.
All capitalized terms used herein and not defined herein shall have the
meanings set forth or referred to in the Loan Schedule. Except as specifically
set forth herein, all of the terms and conditions of the Loan Agreement and the
Loan Schedule shall remain in full force and effect and are hereby ratified and
affirmed. To the extent that the provisions of this Acknowledgment conflict with
any provisions contained in the Loan Agreement or the Loan Schedule, the
provisions of this Acknowledgment shall control.
12
<PAGE>
Very truly yours,
PARADIGM GENETICS, INC.
By:
------------------------------
Title: CEO, President
--------------------------
Date: December 28, 1998
----------------------
13
<PAGE>
EXHIBIT 10.41
EQUIPMENT SCHEDULE
TO
MASTER LOAN AND SECURITY AGREEMENT
<TABLE>
<CAPTION>
MASTER LOAN AND SECURITY AGREEMENT NO. 7237 DATED: June 18, 1998 EQUIPMENT SCHEDULE NO. 07
EQUIPMENT SCHEDULE NO. 07
<S> <C>
LENDER: CUSTOMER:
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS, INC.
133 NORTH FAIRFAX STREET 104 ALEXANDER DRIVE, BLG 2
ALEXANDRIA, VIRGINIA 22314 RESEARCH TRIANGLE PARK, NC 27709
</TABLE>
LENDER AND CUSTOMER HAVE ENTERED INTO MASTER LOAN AND SECURITY AGREEMENT NO.
7237 DATED JUNE 18, 1998 (THE "AGREEMENT") WHICH IS INCORPORATED HEREIN. THIS
IS AN EQUIPMENT SCHEDULE TO THE AGREEMENT. ALL WORDS AND TERMS USED HEREIN AND
NOT SPECIFICALLY DEFINED HEREIN SHALL HAVE THE SAME MEANINGS AS SET FORTH IN THE
AGREEMENT.
1. EQUIPMENT LOCATION (if other than above address of Customer): none
2. EQUIPMENT: (See attached Exhibit A)
3. ACQUISITION COST OF THE EQUIPMENT: $400,342.76.
----------
4. SUPPLIER(S): (See attached Exhibit A)
5. THE LOAN AND LOAN AGREEMENT REPAYMENT. As requested by Customer
pursuant to the Agreement, Lender agrees to lend to Customer the sum of Four
Hundred Thousand Three Hundred Forty-two and 76/100 dollars. Customer agrees to
repay the Loan Agreement in successive installments (which installment payments
are inclusive of interest) as set forth in the following Schedule:
SCHEDULE
Advance Payment Amount: $ 4253.64
-------
Number of Installments (Exclusive of Advance Payment): 48
--
Payment Period:
X Monthly _____ Quarterly
-
Periodic Installment Payment Amount Per Period: $4,253.64 for the next
eleven (11) months, followed by $11,926.21 for thirty-six (36) months,
followed by one payment of $40,034.28.
Commencement Date: 12-30-99
Special Provisions (if any): none
<PAGE>
6. SECURITY DEPOSIT: None
7. DISBURSEMENT OF PROCEEDS. Customer hereby authorizes Lender to disburse
the $400,342.76 proceeds as follows:
----------
(a) $400,342.76 to: Paradigm Genetics, Inc.
----------
$400,342.76 TOTAL PROCEEDS
==========
Customer may direct the Lender in writing to withhold payments from Supplier(s),
either now or in the future. Lender shall be entitled to rely on such written
direction of Customer as being conclusive as to the intent of the Customer with
regard to withheld payments.
Customer hereby acknowledges and agrees that it shall constitute an additional
Event of Default under the Loan Agreement if, for any reason, the Acquisition
Cost of the Equipment has not been fully paid to the appropriate Supplier(s)
thereof within ten (10) days after demand therefor by Lender. Customer hereby
agrees to indemnify, and hold harmless Lender from and against any liability,
claim, loss or damage, including Attorneys' Fees and Expenses, that may be
incurred by Lender as a result of any amounts to be withheld hereunder,
including any claims of the Supplier(s) therefor.
8. ADJUSTMENTS: Customer acknowledges that payments under the Loan
Agreement herein are based upon the Acquisition Cost of the Equipment set forth
above, and as a result of authorized changes to the Equipment, the final
Acquisition Cost of the Equipment may increase or decrease by up to 10%. In
such event, the Loan Payments shall be adjusted accordingly, and Customer
authorizes Lender to correct the Loan Agreement (and all related documentation)
to reflect such changes and Customer, if requested by Lender, shall confirm such
changes to Lender in writing.
9. SUPPLY CONTRACT: Customer acknowledges either that (a) Customer has
reviewed and approved any written purchase agreement or purchase order covering
the Equipment ("Supply Contract") purchased from Supplier, or (b) Lender has
informed or advised Customer, in writing, either previously or by the Loan
Agreement, of the following: (i) the identity of the Supplier, (ii) that
Customer may have rights under the Supply Contract and (iii) that Customer may
contact the Supplier for a description of any such rights Customer may have
under the Supply Contract. If Customer has entered into a written Supply
Contract, then Customer hereby assigns to Lender all of Customer's rights and
interests in and to the Equipment and the Supply Contract. If requested by
Lender, Customer shall obtain any consent required for such assignment. If
Customer has not entered into any such Supply Contract, Customer authorizes
Lender to (and Lender may at its option) act on behalf of Customer to obtain a
Supply Contract from Supplier. Except for the obligation to pay Supplier for the
Equipment, if (and only if) the Equipment is accepted by Customer under the Loan
Agreement, such assignment shall not include any of Customer's obligations under
such Supply Contract and Customer shall at all times remain liable to perform
all of its duties and obligations under the Supply Contract to the same extent
as if an assignment has not occurred. Customer hereby represents and warrants
that: (i) Customer has delivered herewith a true and correct copy of the Supply
Contract, neither Supplier nor Customer is in default under the Supply Contract
and it shall not be amended
2
<PAGE>
without Lender's prior written consent and (ii) the Supply Contract is free from
all claims, security interests, liens and encumbrances, except for the interest
being conveyed by the Loan Agreement. Customer indemnifies and holds Lender
harmless with respect to any and all claims relating to the performance of
Customer's obligations under the Supply Contract.
10. SEE RATE ADJUSTMENT RIDER ATTACHED AND INCORPORATED BY REFERENCE.
By execution hereof, the signer certifies that he/she is a duly authorized
officer, partner or proprietor of Customer and that he/she has read, accepted
and duly executed this Equipment Schedule to the Master Loan and Security
Agreement on behalf of Customer.
ACCEPTED AT LESSOR'S OFFICE AT ALEXANDRIA, VIRGINIA.
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS. INC.
- --------------------------- -----------------------
(LENDER) (CUSTOMER)
By: By:
------------------------- -------------------------
Name: J ALDEN PHILBRICK, IV Name: IAN HOWES
----------------------- -----------------------
Title: PRESIDENT Title: CFO
---------------------- ----------------------
Date: Date: 12-08-99
---------------------- ----------------------
3
<PAGE>
EXHIBIT A
LIST OF EQUIPMENT
The following list and description of Equipment supplements and forms a part of
Equipment Schedule No. 07 to Master Loan and Security Agreement No. 7237 dated
June 18, 1998 between Lender and Customer and may be attached to said Equipment
Schedule and any related UCC Financing Statements, or other document relating to
the Master Loan and Security Agreement, the Equipment Schedule or any other
document describing the Equipment.
SEE ATTACHED EQUIPMENT SCHEDULE EXHIBIT A ATTACHED
All property listed above, together with any and all attachments, accessions,
additions, replacements, improvements, modifications and substitutions thereto
and therefor and a right to use license for any software related to any of the
foregoing now or hereafter acquired and all proceeds, in the form of goods,
accounts, chattel paper, documents, instruments and insurance proceeds.
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS. INC.
-----------------------
(LENDER) (CUSTOMER)
By: By:
------------------------- -------------------------
Name: J ALDEN PHILBRICK, IV Name: IAN HOWES
----------------------- -----------------------
Title: PRESIDENT Title: CFO
---------------------- ----------------------
4
<PAGE>
PROMISSORY NOTE TO: MASTER LOAN AND SECURITY AGREEMENT NO. 7237
Dated June 18, 1998
EQUIPMENT SCHEDULE NO.07
U.S. $400,342.76 Alexandria, Virginia
----------
Dated: 12-30-99
--------
FOR VALUE RECEIVED, Paradigm Genetics, Inc., a North Carolina corporation
----------------------- --------------
(the "Borrower"), hereby promises to pay to the order of OXFORD VENTURE FINANCE,
LLC. or its successors or assigns (the "Payee") at its offices located at 133
North Fairfax Street, Alexandria, Virginia, 22314, or at such other place as the
Payee or any holder hereof may from time to time designate, the principal amount
of U.S. Four Thousand Three Hundred Forty-two and 76/100 dollars ($400,342.76),
with interest (based on a year of 360 days and 30 day months) on the principal
amount hereof remaining from time to time unpaid, such principal and interest to
be paid in consecutive monthly installments until fully paid, in the manner and
at a rate of interest per annum as determined and provided in the Loan
Agreement. Anything in this Note to the contrary notwithstanding, in the event
that any payment of interest hereunder shall exceed the legal limit, such amount
in excess of such limit shall be deemed a payment of principal hereunder.
This Note evidences a loan by the Payee to the undersigned pursuant to the Loan
Agreement indicated above between the undersigned and the Payee as from time to
time may be amended, restated, replaced, supplemented, substituted for or
renewed, and the holder of this Note is entitled to the benefits thereof,
including without limitation, the security interest in the Equipment granted
therein. Each term defined in the Loan Agreement and not otherwise defined
herein shall have the same definition when used herein.
The principal hereof and accrued interest hereon shall become forthwith due and
payable as provided in the Loan Agreement. Payments hereunder not made when due
shall accrue late charges as provided in the Loan Agreement. This Note may not
be prepaid in whole or in part except as otherwise specifically provided in the
Loan Agreement.
The Borrower hereby waives diligence, demand, presentment, protest and notice of
any kind, and assents to extensions of the time of payment, release, surrender
or substitution of security, or forbearance or other indulgence, without notice.
No act or omission of the Payee, including without limitation any failure to
exercise any right, remedy or recourse, shall be deemed to be a waiver or
release of such right, remedy or recourse. Any waiver or release may be
effected only by a written document executed by Payee and then only to the
extent specified therein. The undersigned hereby promises to pay all Attorneys
Fees and Expenses that may be incurred in connection with the enforcement and/or
collection of this Note.
The undersigned authorizes the Payee to insert above as the date of the Note,
the date on which Payee disburses finds pursuant to the Loan Agreement.
5
<PAGE>
This Note is freely assignable by the Payee, in whole or in part, and from time
to time. All of the terms and provisions of this Note inure to and are binding
upon the heirs, executors, administrators, successors, representatives,
receivers, trustees and assigns of the parties. None of the rights or
obligations of the Borrower hereunder may be assigned or otherwise transferred
without the prior written consent of the Payee.
THIS NOTE AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CONNECTICUT, WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. BORROWER
HEREBY CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF
THE STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ITS OBLIGATIONS HEREUNDER, AND EXPRESSLY WAIVES ANY OBJECTIONS THAT IT MAY
HAVE TO THE VENUE OF SUCH COURTS. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE. Any action
by Borrower against Payee for any cause of action under this Note shall be
brought within one year after any such cause of action first arises. If
requested by Payee, Borrower agrees that prior to the commencement of any
litigation regarding the terms and conditions of this Note, the parties hereto
shall subject themselves to non-binding mediation with a qualified mediator
mutually satisfactory to both parties.
IN WITNESS WHEREOF, the Borrower by its duly authorized officer has
executed and delivered this Note as of the date first above written.
PARADIGM GENETICS, INC.
-----------------------
Borrower
By:
---------------------
Name: Ian Howes
-----------------
Title: CFO
----------------
6
<PAGE>
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT
RATE ADJUSTMENT RIDER AND ACKNOWLEDGMENT (this "Rider") to the Promissory Note
dated 12-30-99, 1998 (the "Note") issued in connection with the Master Loan and
Security Agreement No. 7237 dated June 18, 1998 and the Equipment Schedule No.
07 (collectively, the "Loan Agreement"), between Paradigm Genetics. Inc.. as
borrower (the "Customer") and OXFORD VENTURE FINANCE, LLC, as Lender ("Oxford").
This Rider is entered into pursuant to and incorporates by this reference all of
the terms and provisions of the Loan Agreement and the Note. By its execution
and delivery of this Rider, Customer hereby reaffirms all of the
representations, warranties and covenants contained in the Loan Agreement and
the Note as of the date hereof, and further represents and warrants to Lender
that no Default has occurred and is continuing as of the date hereof.
1. Purpose. This Rider amends and restates the terms of the payments set forth
in the Note.
2. Definitions. The following terms shall have the following meanings herein:
(a) "Adjustment Date" shall mean the date Oxford disburses any portion of the
proceeds of the Loan Agreement.
(b) "Final T-Note Average" shall mean the average of the yields on U.S.
Treasury Notes maturing in four years, as published by the Dow Jones
Telerate Access Service, Page 19901, for the close of business on each
business day of the two fill calendar weeks immediately preceding the week
containing the Adjustment Date.
(c) "Preliminary Payments" shall mean the payments set forth in the Equipment
Schedule and the Note, consisting of $4,253.64 due upon execution (the
"Advance Payment") followed by eleven (11) consecutive monthly payments of
$4,253.64, followed by thirty-six (36) consecutive monthly payments of
$11,926.21 and one (1) final payment of $40,034.28.
(d) "Preliminary T-Note Average" shall mean 4.25%.
3. Adjustment of Payments. The Preliminary Payments were calculated based on a
spread over the Preliminary T-Note Average. Should the Final T-Note Average
differ from the Preliminary T-Note Average, then the Preliminary Payments shall
be revised. For each increase or decrease of one (1) basis point (i.e., 1/100
of 1%) in the Final T-Note Average above or below the Preliminary T-Note
Average, the Preliminary Payments shall be revised as follows (complete below as
applicable):
The Advance Payment, due upon execution of the Equipment Schedule, shall remain
unchanged.
Each of the payments for the months number 12-48 initially scheduled for thirty-
six (36) consecutive monthly payments of $11,926.21 shall increase or decrease
by $3.25.
THE CALCULATION OF THE CONTRACT PAYMENTS UNDER THIS RIDER WILL SUPERSEDE ANY
PRIOR PROPOSAL OR QUOTATION. CUSTOMER HEREBY
7
<PAGE>
ACKNOWLEDGES AND AGREES TO THE CALCULATION OF THE PAYMENT SCHEDULE SET FORTH
HEREIN.
4. Oxford's Requirements. The commencement of the Loan Agreement is subject to
satisfaction of all documentation and credit requirements of Oxford. If such
requirements are not satisfied by the Adjustment Date, then Oxford may, at its
sole option, declare that the Adjustment Date shall be the date when such
requirements are satisfied.
Dated as of December 7, 1999 .
-----------------
OXFORD VENTURE FINANCE, LLC PARADIGM GENETICS. INC.
-----------------------
(LENDER) (CUSTOMER)
By: By:
------------------------- -------------------------
Name: J ALDEN PHILBRICK, IV Name: IAN HOWES
----------------------- -----------------------
Title: PRESIDENT Title: CFO
---------------------- ----------------------
8
<PAGE>
Exhibit 10.43
-------------
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION TO SUCH
ACT.
Void After July 27, 2009 (the Tenth Anniversary of the Date Hereof)
WARRANT FOR THE
PURCHASE OF SHARES OF COMMON STOCK
of
PARADIGM GENETICS INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
----------------------------------------------------------
THIS CERTIFIES THAT, for value received, ARE-104 Alexander Road, LLC, a
Delaware limited liability company, together with its successors and assigns
(the `Investor"), is initially entitled to purchase up to One Hundred Fifty
Thousand (150,000) duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (the "Common Stock") of Paradigm Genetics Inc., a North
Carolina corporation (the "Company"), at the per share purchase price described
in Section 1.3 below, subject to the provisions and upon the terms and
conditions hereinafter set forth.
1. Exercise of Warrant. The terms and conditions upon which this Warrant
-------------------
may be exercised, and the Common Stock covered hereby (the "Warrant Stock") may
be purchased, are as follows:
1.1 Term. The purchase right represented by this Warrant may be
----
exercised in whole or in part at any time and from time to time from and after
the date hereof and on or before the earlier of (i) July 27, 2009 (the tenth
anniversary of the date hereof) or (ii) the fifth anniversary of the date of the
consummation of a bona fide, underwritten initial public offering of Common
Stock, at a public offering price equal to or exceeding $10.00 per share (as
adjusted for any stock dividends, combinations, splits or the like with respect
to such shares) and an aggregate offering price to the public of not less than
$20,000,000; provided that, if the last day on which this Warrant may be
exercised is a Sunday or a legal holiday or a day on which banking institutions
doing business in the State of North Carolina are authorized by law to close,
this Warrant may be exercised prior to 5:00 p.m. local time) on the next
succeeding full business day with the same force and effect as if exercised on
such last day specified herein.
<PAGE>
1.2 Number of Shares. This Warrant is initially exercisable for One
----------------
Hundred Fifty Thousand (150,000) shares of Common Stock, subject to adjustment
pursuant to Section 2 of this Warrant.
1.3 Purchase Price. The initial per share purchase price for the
--------------
shares of Common Stock to be issued upon exercise of this Warrant shall be
$3.00, subject to adjustment as provided herein (the "Warrant Price").
1.4 Method of Exercise. The exercise of the purchase rights evidenced
------------------
by this Warrant shall be effected by (a) the surrender of the Warrant, together
with a duly executed copy of the form of a subscription attached hereto, to the
Company at its principal offices and (b) the delivery of the purchase price (i)
by check or bank draft payable to the Company's order or by wire transfer to the
Company's account for the number of shares for which the purchase rights
hereunder are being exercised or (ii) pursuant to the procedure set forth in
Section 1.5. Any such exercise of this Warrant may be made contingent upon the
closing of a public offering, merger, recapitalization or similar transaction.
Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided herein or at such latter
date as may be specified in the executed form of subscription, and at such time
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such exercise as provided herein
shall be deemed to have become the holder or holders of record thereof.
1.5 Cashless Exercise. In addition to and without limiting the
-----------------
rights of the holder hereof under the terms hereof, at the holder's option this
Warrant may be exercised in whole or in part at any time or from time to time
prior to its expiration for a number of shares of Common Stock having an
aggregate fair market value on the date of such exercise equal to the difference
between (a) the fair market value of the number of shares of Common Stock
subject to this Warrant designated for exercise by the holder hereof on the date
of the exercise and (b) the aggregate Warrant Price for such shares in effect at
such time.
The "fair market value" of shares of Common Stock shall be calculated
on the basis of (a) if the Common Stock is then traded on a securities exchange
or the Nasdaq National Market, the average of the closing prices of the Common
Stock on such exchange or market over the 20 trading day period ending three (3)
trading days prior to the date of exercise, (b) if the Common Stock is then
regularly traded over-the-counter, the average of the sale prices or secondarily
the closing bid of the Common Stock over the 20 trading day period ending three
(3) trading days prior to the date of exercise, or (c) if there is no active
public market for the Common Stock, the fair market value thereof shall be the
price per share that the Company could obtain from a willing buyer for shares
sold by the Company from authorized but unissued shares, as determined in good
faith by the Company's Board of Directors. If the holder of this Warrant
exercises this Warrant contingent upon the closing of a public offering, the
"fair market value" of a share of Common Stock on the date of exercise shall be
equal to the initial price to the public specified in the final prospectus with
respect to such public offering.
2
<PAGE>
No payment of any cash or other consideration to the Company shall be
required from the holder of this Warrant in connection with any exercise of this
Warrant pursuant to this Section 1.5. Such exercise shall be effective upon the
date of receipt by the Company of the original Warrant surrendered for
cancellation and a written request from the holder hereof that the exercise
pursuant to this Section 1.5 be made, or at such later date as may be specified
in such request.
1.6 Issuance of Shares. As soon as reasonably practicable after each
------------------
exercise of this Warrant, in whole or in part, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, (a) a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock to which such holder shall
be entitled upon such exercise, and (b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment thereof) to the number of such shares called for on the
face of this Warrant minus the number of such shares designated by the holder
upon such exercise as provided herein.
2. Certain Adjustments.
-------------------
2.1 Mergers Consolidations or Sale of Assets. If after the date hereof
----------------------------------------
there shall be a capital reorganization (other than a combination or subdivision
of Common Stock otherwise provided for herein), or spin-off, or a merger or
consolidation of the Company with or into another corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person, then, as a part of such transaction, lawful provision shall be made so
that the Investor shall thereafter be entitled to receive upon exercise of this
Warrant, during the period specified in this Warrant and upon payment of the
purchase price, the number of shares of stock or other securities, cash or
property of the Company or the successor corporation resulting from such
transaction, to which a holder of the Common Stock deliverable upon exercise of
this Warrant would have been entitled under the provisions of the agreement in
such transaction if this Warrant had been exercised immediately before such
transaction. In any such case, appropriate adjustment (as determined reasonably
and in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Investor after such transaction to the end that the provisions
of this Warrant (including adjustment of the purchase price then in effect and
the number of shares of Common Stock issuable upon exercise hereof) shall
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
2.2 Splits and Subdivisions Dividends. If the Company should effect or
---------------------------------
fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of the holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or warrants, options or other rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock
3
<PAGE>
Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or 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 distribution, split
or subdivision if no record date is fixed), the per share purchase price shall
be appropriately decreased and the number of shares of Common Stock issuable
upon exercise hereof shall be appropriately increased in proportion to such
increase of outstanding shares.
2.3 Combination of Shares. If the number of shares of Common Stock
---------------------
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share purchase price shall be
appropriately increased and the number of shares of Common Stock issuable upon
exercise hereof shall be appropriately decreased in proportion to such decrease
in outstanding shares.
2.4 Adjustments for Other Distributions. In the event the Company
-----------------------------------
shall declare a distribution payable in securities of the Company (other than
Common Stock Equivalents) or other persons, evidences of indebtedness issued by
the Company or other persons, assets (including cash dividends) or options or
rights not referred to in Section 2.2, then, in each such case for purposes of
this Section 2.4, upon exercise of this Warrant the holder hereof shall be
entitled to a proportionate share of any such distribution as though such holder
was the holder of the number of shares of Common Stock of the Company into which
this Warrant may be exercised as of the record date fixed for the determination
of the holders of Common Stock of the Company entitled to receive such
distribution.
2.5 Issuance of Additional Common Stock
-----------------------------------
(a) If, after the date hereof, the Company shall issue or sell
(ii) Additional Shares (defined below) without consideration
or for a consideration per share less than the Warrant
Price, or
(ii) Common Stock Equivalents exercisable for Additional
Shares with a minimum exercise or exchange price less than
the Warrant Price, or
then, and in each such case, the Warrant Price shall be reduced, concurrently
with such issue or sale, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction:
(i) the numerator of which shall be (A) the number of shares
of Common Stock outstanding immediately prior to such issue
or sale plus (B) the number of shares of Common Stock that
the aggregate consideration received by the Company upon such
issuance or sale (or, in the case of Common Stock Equivalents
exercisable for Additional Shares, receivable by the Company
4
<PAGE>
upon exercise or exchange) would purchase at
such Warrant Price, and
(ii) the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such issue or
sale (or, in the case of Common Stock Equivalents
exercisable for Additional Shares, assuming exercise or
exchange thereof).
(b) For the purposes of this Section 2.5, the consideration for the
issue or sale of Additional Shares shall, irrespective of the accounting
treatment of such consideration, (i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company, and (ii) insofar as it
consists of property (including securities) other than cash, be computed at the
fair value thereof at the time of such issue or sale as determined in good faith
by the Board of Directors.
(c) Notwithstanding anything contained herein to the contrary, the
consideration for any Common Stock Equivalents shall be the total amount of
consideration received by the Company for the issuance of such Common Stock
Equivalents plus the minimum amount of consideration payable to the Company upon
exercise, conversion or exchange of Common Stock Equivalents (the "Net
Consideration") determined as of the date of issuance of such Common Stock
Equivalents. Any obligation, agreement or understanding to issue Common Stock
Equivalents at any time in the future shall be deemed to be an issuance at the
time such obligation or agreement is made or arises. No adjustment of the
Warrant Price shall be made under this Section 2.5 upon the issuance of any
shares of Common Stock which are issued pursuant to the exercise, conversion or
exchange of any Common Stock Equivalents if any adjustment shall previously have
been made upon the issuance of any such Common Stock Equivalents.
Should the Net Consideration for any such Common Stock Equivalents be
increased or decreased from time to time, then, upon the effectiveness of such
change, the Warrant Price will be that which would have been obtained (i) had
the adjustments made upon the issuance of such Common Stock Equivalents been
made upon the basis of the actual Net Consideration (as so increased or
decreased) of such Common Stock Equivalents, and (ii) had adjustments to such
Warrant Price since the date of issuance of such Common Stock Equivalents been
made to such Warrant Price as adjusted pursuant to (i) above. Any adjustment of
the Warrant Price with respect to this paragraph which relates to Common Stock
Equivalents shall be disregarded if, as, and when all of such Common Stock
Equivalents expire or are canceled without being exercised, so that the Warrant
Price effective immediately upon cancellation or expiration shall be equal to
the Warrant Price in effect at the time of the issuance of the expired or
canceled Common Stock Equivalents, with such additional adjustments as would
have been made to such Warrant Price had the expired or canceled Common Stock
Equivalents not been issued.
(d) "Additional Shares" means all shares of Common Stock, whether or
not subsequently reacquired or retired by the Company other than shares of
Common Stock issued or to be issued to directors, officers, employees and
consultants of the Company or any
5
<PAGE>
subsidiary pursuant to any bona fide qualified or non-qualified stock option
plan or agreement, stock purchase plan or agreement, stock restriction
agreement, employee stock ownership plan (ESOP) or other stock incentive plans
or arrangements.
(e) The number of shares of Common Stock that the holder of this
Warrant shall be entitled to receive upon each exercise hereof after any
adjustment pursuant to this Section 2.5 shall be determined by multiplying (i)
the number of shares of Common Stock that were issuable immediately prior to
such adjustment, by (ii) the fraction of which (A) the numerator is the Warrant
Price immediately prior to such adjustment and (B) the denominator is the
Warrant Price immediately following such adjustment.
2.6 Certificate as to Adjustments. In the case of each adjustment or
-----------------------------
readjustment of the Warrant Price pursuant to this Section 2, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms hereof and cause a certificate, signed by the Company's Chief
Financial Officer, setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based to be
delivered to the holder of this Warrant. The Company will furnish or cause to
be furnished to such holder a certificate setting forth (a) such adjustments and
readjustments, (b) the Warrant Price at the time in effect and how it was
calculated and (c) the number of shares of Common Stock issuable upon exercise
hereof and the amount, if any, of other property at the time receivable upon the
exercise of the Warrant.
2.7 Other Dilutive Events. If any event shall occur as to which the
---------------------
provisions of Section 2 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of such sections,
then, in each such case, the Board of Directors of the Company shall make such
adjustment, if any, on a basis consistent with the essential intent and
principles established in Section 2, necessary to preserve, without dilution,
the purchase rights represented by this Warrant. The Company will promptly
notify the Investor of any such adjustments and shall make the suggested
adjustments.
2.8 No Dilution or Impairment. The Company will not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, 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 of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
permit the par value of any shares of stock receivable upon the exercise of this
Warrant to exceed the amount payable therefor upon such exercise, (b) will take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock on the
exercise of the Warrants from time to time outstanding; and (c) will not take
any action which results in any adjustments of the Warrant Price if the total
number of shares of Common Stock issuable after the action upon the exercise of
all of the Warrants would
6
<PAGE>
exceed the total number of shares of Common Stock then authorized by the
Company's certificate of incorporation and available for the purpose of issue
upon such exercise.
2.9 Notices of Record Date etc. In the event of:
--------------------------
(a) any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend theretofore paid) or other distribution, or 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;
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the holder of this Warrant at least thirty (30) days
prior to the earliest date specified below, a notice specifying: (i) 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; and (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
stockholders entitled to vote thereon and the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up.
3. Fractional Shares. No fractional shares shall be issued in connection
-----------------
with any exercise of this Warrant. In lieu of the issuance of such fractional
share, the Company shall make a cash payment equal to the then fair market value
of such fractional share as determined in accordance with Section 1.5 hereof.
4. Representations and Warranties of the Company.
---------------------------------------------
4.1 Authorization. The Company has full power and authority to enter
-------------
into this Warrant. This Warrant has been duly authorized, executed and
delivered by the Company and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms.
4.2 Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the exercise of this Warrant, such
number of its shares of Common Stock, free from preemptive rights, as shall from
time to time be sufficient to effect the exercise of this
7
<PAGE>
Warrant, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the exercise of the entire
Warrant, in addition to such other remedies as shall be available to the holder
of this Warrant, the Company will take such action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes. If any shares of its Common
Stock to be reserved for the purpose of issuance upon exercise of the Warrants
require registration with or approval of any governmental authority under any
applicable law (other than registration of the Common Stock under the Act)
before such shares of Common Stock may be validly issued or delivered, then it
shall secure such registration or approval, as the case may be, and maintain
such registration or approval in effect so long as so required.
4.3 Adjustment in Number of Shares Issuable and Purchase Price.
----------------------------------------------------------
There has not been nor will there be any adjustment to the number of shares
issuable or the purchase price payable upon the exercise of any securities of
the Company convertible into or exchangeable for shares of Common Stock
resulting from the issuance or exercise of this Warrant.
4.4 Valid Issuance. This Warrant, when issued and delivered in
--------------
accordance with the terms hereof will be duly authorized and validly issued, and
the Common Stock issuable upon the exercise hereof, when issued pursuant to the
terms hereof and upon payment of the exercise price, shall, upon such issuance,
be duly authorized, validly issued, fully paid and nonassessable.
5. Privilege of Stock Ownership. Prior to the exercise of this Warrant,
----------------------------
the Investor shall not be entitled, by virtue of holding this Warrant, to any
rights of a stockholder of the Company, including (without limitation) the right
to vote, receive dividends or other distributions, exercise preemptive rights or
be notified of stockholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company. Nothing in this Section 5, however, shall limit the right of the
Investor to be provided the notices described in Section 2 hereof or to
participate in distributions described in Section 2 hereof if the Investor
ultimately exercises this Warrant.
6. Limitation of Liability. Except as otherwise provided herein, in the
-----------------------
absence of affirmative action by the holder hereof to purchase the Common Stock
in accordance herewith, no mere enumeration herein of the rights or privileges
of the holder hereof shall give rise to an obligation on such holder to purchase
any securities or any liability of such holder for the purchase price or as a
stockholder of the Company, whether such obligation or liability is asserted by
the Company or by creditors of the Company.
7. Representations and Warranties of the Investor. The Investor
----------------------------------------------
represents and warrants to the Company as follows:
7.1 Investment Experience. The Investor represents that it can bear
---------------------
the economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Warrant and the Common Stock issuable upon
exercise hereof. The Investor also represents it has not been
8
<PAGE>
organized solely for the purpose of acquiring the Warrant or the Common Stock
issuable upon exercise hereof.
7.2 Restricted Securities. The Investor understands that the Warrant
---------------------
being issued hereunder and the Common Stock issuable upon exercise hereof are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and have not been registered under the Act nor
qualified under applicable state securities laws and that under such laws and
applicable regulations such securities may not be resold without registration
under the Act, except in certain limited circumstances. In this connection, the
Investor represents that it is familiar with Rule 144 promulgated under the Act
("Rule 144"), as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
7.3 Accredited Investor. The Investor is an "accredited investor"
-------------------
within the meaning of Rule 501 of Regulation D promulgated under the Act.
7.4 Legends. It is understood that the certificates evidencing the
-------
Common Stock issuable upon exercise hereof may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN EXEMPTION TO SUCH ACT"
8. Transfers and Exchanges.
-----------------------
8.1 The Investor agrees not to sell, hypothecate, pledge or otherwise
dispose of any interest in the Warrant or the Common Stock issuable upon
exercise hereof in the United States, its territories, possessions or any area
subject to its jurisdiction, or to any person who is a national thereof or
resident therein (including any estate of such person), or any corporation,
partnership or other entity created or organized therein, other than in
accordance with the Act. With respect to any offer, sale or other disposition
of this Warrant, or any shares of Common Stock acquired pursuant to the exercise
of this Warrant prior to registration of such shares, the holder hereof and each
subsequent holder of the Warrant agrees to give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such holder's counsel, if reasonably requested by the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state law then in effect) of this Warrant or such shares of Common Stock and
indicating whether or not under the Act certificates for this Warrant or such
shares of Common Stock to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Act; provided, however, that the holder may transfer
or assign this Warrant, or any shares of Common Stock acquired pursuant to the
exercise of this Warrant prior to registration of such shares to Alexandria Real
Estate Equities, Inc., a Maryland corporation ("Alexandria") or to another
wholly-owned
9
<PAGE>
subsidiary of Alexandria without written notice to the Company or an opinion of
holder's counsel. Each certificate representing this Warrant or the shares of
Common Stock thus transferred (except a transfer pursuant to Rule 144) shall
bear a legend as to the applicable restrictions on transferability in order to
insure compliance with the Act, unless in the aforesaid opinion of counsel for
the holder, such legend is not required in order to insure compliance with the
Act. The Company may issue stop transfer instructions to its transfer agent in
connection with the foregoing restrictions.
8.2 Upon presentation to the Company of the form of Assignment
attached hereto, a new Warrant shall be issued to the new holder hereof. New
Warrants issued in connection with transfers or exchanges shall not require the
signature of the new holder hereof and shall be identical in form and provision
to this Warrant except as to the number of shares.
8.3 Each certificate evidencing the shares of Common Stock issued
upon exercise of this Warrant, or upon any transfer of such shares (other than a
transfer registered under the Act or any subsequent transfer of shares so
registered) shall, at the option of the Company, contain a legend, in form and
substance reasonably satisfactory to the Company and its counsel, restricting
the transfer of such shares to sales or other dispositions exempt from the
requirements of the Act.
8.4 Ownership of Warrants. The Company may treat the person in whose
---------------------
name any Warrant is registered on the register kept at the office of the Company
as the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, except that, if and when any Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer thereof
as the owner of such Warrant for all purposes, notwithstanding any notice to the
contrary. A Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
8.5 Transfer and Exchange of Warrants. Upon the surrender of any
---------------------------------
Warrant, properly endorsed, for registration of transfer or for exchange, the
Company at its expense will execute and deliver to or upon the order of the
holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
or Warrants so surrendered.
9. Successors and Assigns. The terms and provisions of this Warrant shall
----------------------
be binding upon the Company and the Investor and their respective successors and
assigns, subject at all times to the restrictions set forth herein.
10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
-------------------------------------------------
the Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will
10
<PAGE>
make and deliver a new warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
11. Saturdays, Sundays, Holidays. etc. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
12. Amendments and Waivers. Any term of this Warrant may be amended and
----------------------
the observance of any term of this Warrant 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 Investor. Any such amendment or waiver
shall be binding on the parties.
13. Governing Law. The terms and conditions of this Warrant shall be
-------------
governed by and construed in accordance with North Carolina law, without regard
to conflict of law provisions.
14. Notices. Except as otherwise provided in this Warrant, any
-------
requirement for a notice, demand or request under this Warrant will be satisfied
by a writing (a) hand delivered with receipt; (b) mailed by United States
registered or certified mail or Express Mail, return receipt requested, postage
prepaid; or (c) sent by Federal Express or any other nationally recognized
overnight courier service, and addressed as follows: if to the holder, at its
address as shown on the books of the Company; and if to the Company, at the
address indicated on the signature page of this Warrant, Attn: Chief Financial
Officer, with a copy to Gerald F. Roach, Esq., Smith, Anderson, Blount, Dorsett,
Mitchell & Jernigan, L.L.P., 2500 First Union Capital Center, Raleigh, North
Carolina 27601. All notices that are sent in accordance with this Section 14
will be deemed received by the holder or the Company on the earliest of the
following applicable time periods: (i) the date the return receipt is executed;
or (ii) the date delivered as documented by the overnight courier service or the
hand delivery receipt. Either the holder or the Company may designate a change
of address by written notice to the other party.
15. Registration Rights.
-------------------
(a) The shares of Common Stock issued or issuable upon the exercise
hereof shall constitute "Registrable Securities" for purposes of this Warrant;
provided, that Registrable Securities shall not include any shares of Common
Stock that have been sold to the public either pursuant to a registration
statement or the exemption from registration under the Securities Act provided
by Rule 144.
(b) If at any time the Company proposes to file a registration
statement under the Act with respect to an offering of equity securities by the
Company for its own account or for the account of any securityholders of any
class of its equity securities (other than (i) a registration statement on Form
S-4 or S-8 (or any substitute form that may be adopted by the Securities and
Exchange Commission (the "Commission")) or (ii) a registration statement filed
in connection with an exchange offer or offering of securities solely to the
Company's existing securityholders) or a registration on any registration form
that does not permit secondary sales,
11
<PAGE>
then the Company shall give written notice of such proposed filing to the
Investor as soon as practicable (but in no event less than 20 days before the
anticipated filing date), and such notice shall offer such Investor the
opportunity to register such number of shares of Registrable Securities as each
such Investor may request in writing within 15 days after such notice from the
Company (which request shall specify the Registrable Securities intended to be
disposed of and the intended method of distribution thereof) (a "Piggy-Back
Registration").
The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten public offering to permit
the Registrable Securities requested by the Investor thereof to be included in a
Piggy-Back Registration on the same terms and conditions as any similar
securities of the Company or any other securityholder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. The Investor shall
have the right to withdraw its request for inclusion of its Registrable
Securities in any registration statement pursuant to this Section 15 by giving
written notice to the Company of its request to withdraw. The Company may
withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective; provided that the Company shall reimburse the Investor for all
reasonable out-of-pocket expenses (including counsel fees and expenses) incurred
prior to such withdrawal. Notwithstanding the foregoing, if the representative
of the underwriters advises the Company in writing that market factors require a
limitation on the number of shares to be underwritten, the representative may
reduce the number of Registrable Securities to be included in the registration
and underwriting (to zero, if necessary) on a pro rata basis (based on number of
shares owned) with all other secondary shares sought to be included therein.
No failure to effect a registration under Section 15(b) and to
complete the sale of Registrable Securities in connection therewith shall
relieve the Company of any other obligation under this Agreement (-including,
without limitation, the Company's obligations under Sections 15(d) and 15(e)).
(c) In the case of a Piggy-Back Registration:
(1) The Company will, as expeditiously as possible:
(A) prepare and file with the Commission such amendments
and post-effective amendments to the applicable registration statement as may be
necessary to keep the registration statement effective for as long as such
registration is required to remain effective pursuant to the terms hereof, cause
the prospectus to be supplemented by any required prospectus supplement, and, as
so supplemented, to be filed pursuant to Rule 424 under the Act;
(B) furnish to the Investor at least one signed copy of
the registration statement and any post-effective amendment thereto, as soon as
such documents become available to the Company, and such number of conformed
copies thereof and such number of copies of the prospectus (including each
preliminary prospectus) and any amendments or supplements thereto, and any
documents incorporated by reference therein, as the Investor may reasonably
request as soon as such documents become available to the Company;
12
<PAGE>
(C) on or prior to the date on which the registration
statement is declared effective, qualify such Registrable Securities requested
to be included under such other securities or blue sky laws of such
jurisdictions as the Investor reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable the Investor
to consummate the disposition in such jurisdictions of such Registrable
Securities; provided, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify, (ii) subject itself to general taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(D) notify the Investor at any time when a prospectus
relating to such Registrable Securities 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 contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
(E) notify the Investor of any stop order or other
suspension. of effectiveness of the registration statement; and obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible time.
(F) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith (including
those requested by the managing underwriters, if any, or the Investor) in order
to expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (i) make such
representations and warranties to the Investor and the underwriters, if any,
with respect to the business of the Company and its subsidiaries, the
registration statement, prospectus and documents incorporated by reference or
deemed incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the Investor addressed to the Investor and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such holders and underwriters, including without limitation the
matters referred to clause (i) above; (iii) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the Company
(and, if necessary, any other certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
registration statement), addressed to the Investor and each of the underwriters,
if any, such letters to be in
13
<PAGE>
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings; and (iv) deliver
such documents and certificates as may be requested by the Investor, its counsel
and the managing underwriters, if any, to evidence the continued validity of the
representations and warranties of the Company and its subsidiaries made pursuant
to clause (i) above and to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Company; and notify the Investor promptly of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Warrant
and/or Common Stock for sale in any jurisdiction; and
(G) take all other steps reasonably necessary to effect
the registration of the Registrable Securities contemplated hereby.
(2) The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(3) The Company will use its best efforts (i) to cause any class
of Registrable Securities to be listed on a national securities exchange (if
such shares are not already so listed) and on each additional national
securities exchange on which similar securities issued by the Company are then
listed (if any), if the listing of such Registrable Securities is then permitted
under the rules of such exchange or (ii) to secure designation of all such
Registrable Securities covered by such registration statement as a NASDAQ
"national market system security" within the meaning of Rule 1lAa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such Registrable
Securities.
(d) The Company shall keep effective and maintain any registration,
qualification, approval or listing specified in this Section 15 for a period of
180 days plus the term of any lock-up or until the holders have completed the
distribution described in the registration statement, whichever occurs first,
and from time to time shall amend or supplement the prospectus used in
connection therewith to the extent necessary in order to comply with applicable
law. All expenses, disbursements and fees in connection with any action to be
taken hereunder (including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses and fees and expenses of counsel for the Company and its independent
certified public accountants and all reasonable fees and expenses of the
Investor and one Investor's counsel and appropriate local counsel (all such
expenses being herein called "Registration Expenses") will be borne by the
Company; provided that in no event shall Registration Expenses include any
underwriting discounts, sales commissions or similar fees or transfer taxes
attributable to the sale of Registrable Securities.
(e) The rights to cause the Company to register securities granted to
a holder under this Section 15 may be transferred or assigned by a holder only
to (i) an affiliate of such holder or (ii) a transferee or assignee of not less
than 20% of such holder's Registrable Securities (as determined on the date of
this Warrant and subject to subsequent adjustments for
14
<PAGE>
stock splits, stock dividends, reverse stock splits, and the like), provided
that, in either case (A) the Company is given written notice at the time of or
within 30 days after transfer or assignment, stating the name and address of the
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, (B) the transferee or
assignee of such rights assumes in writing the obligations of such holder under
this Section 15 and (C) in the reasonable opinion of the Company, the transferee
is neither a competitor to the Company nor a party who is demonstrably hostile
to the Company.
(f) If requested by the Company and an underwriter of Common Stock (or
other securities) of the Company, an Investor shall not sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Investor (other than those included in the registration) during a
period not to exceed 180 days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
officers and directors of the Company and holders of at least five percent of
the Company's voting securities are bound by and have entered into similar
agreements. The Company may impose stop-transfer instructions with respect to
the shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of such 180 day period.
(g) The holders under this Warrant agree that, upon receipt of any
notice from the Company of the existence of any state of facts or the occurrence
of any event (including, without limitation, pending negotiations relating to,
or the consummation of, a transaction or the occurrence of any event which, in
the reasonable opinion of the Company, might require additional disclosure of
material, non-public information by the Company in any registration statement
provided for in this Warrant as to which the Company believes in good faith that
it has a bona fide business purpose for preserving confidentiality or which
renders the Company unable to comply with the published rules and regulations of
the Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time) which might reasonably result in (A) such
registration statement, any amendment or post-effective amendment thereto, or
any document incorporated therein by reference containing an untrue statement of
a material fact or omitting to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (B) the
prospectus issued under such registration statement, any prospectus supplement,
or any document incorporated therein by reference including an untrue statement
of material fact or omitting to sate a material fact necessary in order the make
the statements therein, in light of the circumstances under which they were
made, not misleading, the holders will forthwith discontinue disposition of the
Registrable Securities pursuant to such registration statement for a period
which is the shorter of (i) 30 calendar days from the Company's notice to such
holders or (ii) until the holders receive copies of prospectus supplements or
amendments prepared by or on behalf of the Company. If so directed by the
Company, the holders will deliver to the Company all copies in their possession
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. The Company shall not be permitted to require the
suspension of the disposition of Registrable Securities for a period in excess
of 90 calendar days in any 12 month period.
(h) The rights to request registration of any Company securities
pursuant to this Section 15 shall terminate as to any holder who holds
Registrable Securities upon the earlier of (i) when a holder holds one percent
or less of the Company's Common Stock
15
<PAGE>
on an as-converted basis; (ii) when all of a holder's Registrable Securities may
be sold during a single three-month period under Rule 144; (iii) when a holder's
Registrable Securities may be transferred under Rule 144(k) unless such holder
later becomes an affiliate of the Company (as defined in Rule 144), in which
case such holder's rights to request registration shall be revived until such
holder's rights otherwise terminate under this subsection (h); and (iv) three
years after the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale of the Company's Common Stock at a price per share
of not less than $10.00 (as adjusted for stock splits, dividends, combinations
and the like) and an aggregate offering price to the public of not less than
$20,000,000. Such three-year period shall not include any period of time during
which adequate current public information, as defined in Rule 144(c) promulgated
under the Securities Act, is not available with respect to the Company.
(i) The Company hereby indemnifies, to the fullest extent permitted by
law, the Investor or each person, if any, who controls Investor within the
meaning of Section 15 of the Act, and the directors, officers, employees, agents
and representatives of each of them, against all losses, claims, damages,
liabilities, costs and expenses (including, without limitation, fees and
expenses of counsel), as incurred, arising out of, relating to, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus (or any amendment
or supplement thereto) or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any untrue statement contained in, or
omission from, information furnished in writing to the Company by Investor
expressly for use therein. In connection with any registration statement in
which Investor is participating, Investor will furnish to the Company in writing
such information as shall reasonably be requested by the Company for use in any
such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person, if
any, who controls the Company within the meaning of the Act against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or necessary to make the statements therein not misleading, but only
to the extent that such untrue statement of a material fact is contained in, or
such material fact is omitted from, information so furnished in writing by such
Investor expressly for use therein.
(j) For purposes of this Section 15, the Investor shall include any
transferee of the Investor if such transfer is made in accordance herewith.
16. Remedies. The Company acknowledges and agrees that irreparable harm,
--------
for which there may be no adequate remedy at law and for which the ascertainment
of damages would be difficult, would occur in the event any of the provisions of
this Warrant were not performed in accordance with its specific terms or were
otherwise breached. The Company accordingly agrees that the holders shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Warrant and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction, in each
instance
16
<PAGE>
without being required to post bond or other security and in addition to, and
without having to prove the inadequacy of other remedies at law.
17. Securities Matters
------------------
At such time as the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and at all times thereafter, the Company agrees to deliver to the
Investor all such reports, information and other documents as it shall be
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act within 15-days after the date it is required to file such reports
with the Commission. Prior to such time as the Company becomes subject to the
reporting requirements of the Exchange Act, and in order to make available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the shares of Common Stock issuable upon exercise of the
Warrant to the public without registration; the Company agrees to deliver to the
Investor all such reports, information and other documents as it may be required
to provide to any lender or other creditor. From and after the time the Company
files a registration statement with die Commission with respect to the Warrants
or the shares of Common Stock issuable thereunder, the Company shall file such
information with the Commission; provided, that the Company shall not be in
default of the provisions of this Section 17 for any failure to file reports
with the Commission solely by refusal by the Commission to accept the same for
filing.
[Remainder of page intentionally left blank]
17
<PAGE>
[Warrant for the Purchase of Shares of Common Stock of Paradigm Genetics Inc.]
PARADIGM GENETICS INC.,
a North Carolina corporation
Address:
104 Alexander Drive By: /s/ Ian Howes
Building 2 ---------------------------
Research Triangle Park, NC 27709 Name: Ian Howes
Title: Vice President
Dated:
ACCEPTED AND AGREED:
ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership,
Its Managing Member
By: ARE-QRS Corp., a Maryland corporation,
Its General Partner
By:
---------------------------
Name:
Title:
Dated:
18
<PAGE>
[Warrant for the Purchase of Shares of Common Stock of Paradigm Genetics Inc.]
PARADIGM GENETICS INC.,
a North Carolina corporation
Address:
104 Alexander Drive By:
Building 2 --------------------------
Research Triangle Park, NC 27709 Name:
Title:
Dated:
ACCEPTED AND AGREED:
ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership,
Its Managing Member
By: ARE-QRS Corp., a Maryland corporation,
Its General Partner
By: /s/ Joel S. Marcus
----------------------------
Name: Joel S. Marcus
Title: Chief Executive Officer
Dated:
19
<PAGE>
SUBSCRIPTION
------------
Paradigm Genetics Inc.
104 Alexander Drive
Building 2
Research Triangle Park, North Carolina 27709
Ladies and Gentlemen:
The undersigned, , hereby elects to purchase, pursuant to the
-------------
provisions of the Warrant dated , 1999 held by the undersigned, shares
-------- ----
of the Common Stock of Paradigm Genetics Inc., a North Carolina corporation, and
tenders herewith payment of the purchase price of such shares in full.
In exercising its rights to purchase such Common Stock, the undersigned
hereby confirms the investment representations made in Section 7.
Dated:
---------------------
--------------------------------------
By
Address:
--------------------------------------
--------------------------------------
20
<PAGE>
[FORM OF ASSIGNMENT]
The undersigned hereby assigns this Warrant to
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
-------------------------------------
and irrevocably appoints as agent to transfer this Warrant on the
-------------
books of the Company. The agent may substitute another to act for him or it.
Dated: Signed:
------------------- --------------------------
- -----------------------------------------------------------------------------
(Sign exactly as name appears on the front of this Warrant)
Dated: Signed:
-------------------- --------------------------
Name:
--------------------------
Title:
--------------------------
(Sign exactly as name appears on the front of this Warrant)
Dated: Signed: Name:
-------------- ---------------- ----------------------
Title:
- ------------------------------------ ----------------------------
21
<PAGE>
EXHIBIT 10.44
-------------
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE, TRANSFER
OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (I)
AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION
IS NOT REQUIRED OR (III) RECEIPT OF OTHER EVIDENCE REASONABLY SATISFACTORY TO
THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
PARADIGM GENETICS INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
------------------------------------------
DATE OF INITIAL ISSUANCE JULY 20, 1999
THIS CERTIFIES THAT, for value received, TBCC Funding Trust II is entitled
to subscribe for and purchase One Hundred Sixteen Thousand Two Hundred Seventy-
Nine (116,279) shares (as adjusted pursuant to the provisions hereof, the
"Shares") of the fully paid and nonassessable Common Stock, $.01 par value, of
Paradigm Genetics Inc., a North Carolina corporation (the "Company"), at a price
per share of Two and 15/100 Dollars ($2.15) (such price and such other price as
shall result, from time to time, from adjustments specified herein is herein
referred to as the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, the term "Common
Stock" shall mean the Company's presently authorized Common Stock, and any stock
into or for which Common Stock may hereafter be converted or exchanged, in
either case pursuant to the Articles of Incorporation of the Company as from
time to time amended as provided by law and in such Articles; and the term,
"Grant Date" shall mean July 20, 1999. This Warrant is issued pursuant to the
Loan and Security Agreement between Paradigm Genetics Inc. and TBCC Funding
Trust II, dated July 20, 1999 (the "Loan Agreement").
1. Term. The purchase right represented by this Warrant is exercisable, in
----
whole or in part, at any time and from time to time from and after the Grant
Date to the seventh annual anniversary date of the Grant Date.
2. Method of Exercise; Net Issue Exercise.
--------------------------------------
2.1 Method of Exercise; Payment: Issuance of New Warrant. The purchase
----------------------------------------------------
right represented by this Warrant may be exercised by the holder hereof, in
whole or in part and from time to time, by either, at the election of the holder
hereof, (a) the surrender of this Warrant (with the notice of exercise form
attached hereto as Exhibit A duly executed) at the principal office of the
Company and by the payment to the Company, by check, of an amount equal to the
then applicable Warrant Price per share multiplied by the number of Shares then
being purchased or (b) if in connection with a registered public offering of the
Company's securities, the surrender
<PAGE>
of this Warrant (with the notice of exercise form attached hereto as Exhibit A-I
duly executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the Company
either by check or from the proceeds of the sale of shares to be sold by the
holder in such public offering of an amount equal to the then applicable Warrant
Price per share multiplied by the number of Shares then being purchased. The
person or persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes as
the record holder(s) of, the shares represented thereby (and such shares shall
be deemed to have been issued) immediately prior to the close of business on the
date or dates upon which this Warrant is exercised. In the event of any exercise
of the rights represented by this Warrant, certificates for the shares of stock
so purchased shall be delivered to the holder hereof as soon as possible and in
any event within thirty (30) days of receipt of such notice and, unless this
Warrant has been fully exercised or expired, a new Warrant representing the
portion of the Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible and in any event within such thirty (30)-day period.
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, the holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
the holder a number of shares of the Company's Common Stock computed using the
following formula:
X=Y(A-B)
------
A
Where:
X = the number of shares of Common Stock to be issued to holder
Y = the number of shares of Common Stock purchasable under this Warrant
A = the fair market value of one share of the Company's Common Stock
B = Warrant Price (as adjusted to the date of such calculations)
(b) For purposes of this Section, fair market value of one share of
the Company's Common Stock shall mean the average of the closing bid and asked
prices of the Company's Common Stock quoted in the Over-The-Counter Market
Summary or the closing price quoted on the Nasdaq National Market or any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Eastern Edition of The Wall Street Journal for the ten trading
days prior to the date of determination of fair market value. If the Common
Stock is not traded Over-The-Counter or on such market or exchange, the fair
market value of the Company's Common Stock will be the price per share which the
Company could obtain from a
2
<PAGE>
willing buyer for shares sold by the Company from authorized but unissued
shares, as determined by the Company's Board of Directors in good faith.
3. Stock Fully Paid: Reservation of Shares. All Shares that may be issued upon
---------------------------------------
the exercise of the rights represented by this Warrant will, upon issuance, be
fully paid and nonassessable. During the period within which the rights
represented by the Warrant may be exercised, the Company will at all times have
authorized and reserved for the purpose of issuance upon exercise of the
purchase rights evidenced by this Warrant, a sufficient number of shares of its
Common Stock to provide for the exercise of the right represented by this
Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
------------------------------------------------
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance reasonably satisfactory to the holder of this
Warrant) providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Common Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Common Stock. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4. The provisions of this paragraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any time
-------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Warrant Price and the number of Shares issuable upon
exercise hereof shall be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this Warrant is
outstanding and unexpired shall pay a dividend payable in shares of Common Stock
or other securities exercisable for or convertible into shares of Common Stock
(except any distribution specifically provided for in the foregoing
subparagraphs (a) and (b)), then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution (assuming the
conversion, exchange or exercise of all securities of the Company
3
<PAGE>
which are convertible, exchangeable or exercisable) ("Fully Diluted Common
Stock"), and (b) the denominator of which shall be the total number of shares of
Fully Diluted Common Stock outstanding immediately after such dividend or
distribution, and the number of Shares subject to this Warrant shall be
proportionately adjusted.
(d) Dilutive Issuances. If and whenever the Company should issue
------------------
shares of its Common Stock or other securities exercisable for or convertible
into shares of Common Stock at a price per share less than the Warrant Price, as
adjusted for stock splits, combinations, dividends and recapitalizations
pursuant to this Section 4, in effect immediately prior to such issuance (other
than shares issued or issuable to the officers or directors of or consultants to
the Company issued pursuant to a stock option or purchase plan or similar
arrangement), then the Warrant Price shall be adjusted to an amount (calculated
to the nearest cent) determined by dividing (1) the sum of (A) the total number
of shares of Fully Diluted Common Stock outstanding immediately prior to such
issuance multiplied by the then effective Warrant Price and (B) the value of the
consideration received by the Company upon such issuance as determined by the
Board of Directors by (2) the total number of shares of Fully Diluted Common
Stock outstanding immediately after such issuance. The holder of the Warrant
shall thereafter be entitled to purchase, at the Warrant Price resulting from
such adjustment, the number of shares of Common Stock (calculated to the nearest
whole share) obtained by multiplying the Warrant Price in effect immediately
prior to such adjustment by the number of shares of Fully Diluted Common Stock
issuable upon the exercise hereof immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment. For the purposes of this paragraph (d), the consideration received
for securities convertible into or exercisable or exchangeable for the Common
Stock shall be deemed to include the minimum aggregate amount payable upon
conversion, exercise or exchange of such securities. In the event the right to
convert, exercise or exchange such securities expires unexercised, the Warrant
Price of shares issuable upon the exercise hereof shall be readjusted
accordingly.
(e) No Impairment. The Company will not, by amendment of its Articles
-------------
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 Company, 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 rights of the holder of this Warrant against
impairment.
(f) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (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
4
<PAGE>
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
---------------------
pursuant to the provisions hereof, the Company shall within thirty (30) days
after such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment
6. Fractional Shares. No fractional shares of Common Stock will be issued
-----------------
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Stock.
(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, the shares of Common Stock to be
issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant, any shares of
Common Stock to be issued upon exercise hereof, except under circumstances which
will not result in a violation of the Securities Act of 1933, as amended (the
"Act"). This Warrant and all shares of Common Stock issued upon exercise of this
Warrant (unless registered under the Act) shall be stamped or imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR
(iii) RECEIPT OF OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer, sale
---------------------------------
or other disposition of this Warrant, or any shares of Common Stock acquired
pursuant to the exercise of this Warrant prior to registration of such shares,
the holder hereof and each subsequent holder of the Warrant agrees to give
written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such shares of Common Stock and indicating whether or not under the Act
certificates for this Warrant or such shares of Common Stock to be sold or
otherwise
5
<PAGE>
disposed of require any restrictive legend as to applicable restrictions on
transferability in order to insure compliance with the Act. Each certificate
representing this Warrant or the shares of Common Stock thus transferred (except
a transfer pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to insure compliance with the Act,
unless in the aforesaid opinion of counsel for the holder, such legend is not
required in order to insure compliance with the Act. The Company may issue stop
transfer instructions to its transfer agent in connection with the foregoing
restrictions.
8. Rights as Shareholders: Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Common Stock or any other securities of the Company which may at any time be
issuable on the exercise thereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Registration Rights. Upon exercise of this Warrant, the holder shall
-------------------
have and be entitled to exercise, together with all other holders of
Registerable Securities possessing registration rights under that certain
Amended and Restated Registration Rights Agreement dated as of February 12, 1998
and amended and restated as of March 12, 1999 between the Company and the
parties who have executed the counterpart signature pages thereto or are
otherwise bound thereby (the "Registration Rights Agreement"), the rights of
registration granted under the Registration Rights Agreement to Registerable
Securities with respect to the Shares. By its receipt of this Warrant, holder
agrees to be bound by the Registration Rights Agreement.
10. Representations and Warranties. This Warrant is issued and delivered
------------------------------
on the basis of the following:
(a) this Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms; and
(b) the Common Stock issuable upon the exercise of this Warrant have
been duly authorized and reserved for issuance by the Company and, when issued
in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor on the signature page of this Warrant
6
<PAGE>
13. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of North Carolina without reference to conflicts of laws principles.
7
<PAGE>
[signature page to Warrant]
PARADIGM GENETICS INC.
By: /s/ John Ryals
--------------------------------
Name:
Title
Address: 104 Alexander Drive
Building 2
Research Triangle Park, NC 27709-4538
Date: July 20, 1999
8
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
To:
1. The undersigned hereby elects to purchase ______ shares of Common Stock
of Paradigm Genetics Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
--------------------------------------
(Name)
--------------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares.
--------------------------------------
(Signature)
- -------------------
(Date)
9
<PAGE>
EXHIBIT A-1
-----------
NOTICE OF EXERCISE
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-_______, filed _______(month) ______, (day) ______ (year)
the undersigned hereby elects to purchase shares of Common Stock of the Company
(or such lesser number of shares as may be sold on behalf of the undersigned at
the Closing), pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ___ shares of Common Stock.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
---------------------------
(Signature)
____________________
(Date)
10
<PAGE>
Exhibit 10.45
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement"), is entered into and made and
effective as of January 19, 2000 (the "Effective Date"), between Paradigm
Genetics Inc., a North Carolina corporation ("Paradigm"), and ARE-104 Alexander
Road, LLC, a Delaware limited liability company ("ARE").
WHEREAS, Paradigm and ARE have entered into a Lease Agreement dated as of
July 27, 1999 (the "Original Lease") regarding certain facilities to be
constructed on land leased by ARE from Triangle Service Center, Inc., a North
Carolina corporation ("Triangle");
WHEREAS, Paradigm and ARE have agreed to enter into an Amended and Restated
Lease Agreement (Office/Laboratory), to be effective as of July 27, 1999,
amending the Original Lease to eliminate certain greenhouse provisions (such
agreement, the "Amended Lease");
WHEREAS, in connection with the Amended Lease, Paradigm and ARE desire to
enter into a Lease Agreement (Greenhouse) regarding certain greenhouse
facilities (the "Greenhouse Lease");
WHEREAS, in connection with the Amended Lease and the Greenhouse Lease,
Paradigm and ARE desire that ARE and Triangle enter into a certain Agreement
Regarding Allocation of Development Rights (the "Rights Agreement"); and
WHEREAS, as consideration for the foregoing, Paradigm has agreed to issue
and place in escrow a Warrant for the Purchase of Shares of Common Stock
entitling ARE to purchase 60,000 shares of common stock of Paradigm at an
exercise price of $5.00 per share pursuant to the terms thereof (the "Warrant")
to be held in, and released from, escrow as provided in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which the parties hereby
acknowledge, Paradigm and ARE agree as follows:
1. Attached to this Agreement as Exhibit A is a copy of the Warrant. As of the
Effective Date, Paradigm shall issue and hold in escrow the Warrant pursuant to
the terms and conditions of this Agreement.
2. If, on or before July 19, 2000, subject to extension by the mutual written
agreement of Paradigm and ARE (the "Release Date"), the definitive Amended Lease
and a related Memorandum of Lease, Greenhouse Lease and a related Memorandum of
Lease, and Rights Agreement and a related Memorandum of Rights Agreement
(collectively, the "New Agreements") are each duly executed and delivered by the
parties thereto, and such Memoranda are duly recorded in the appropriate real
property records (collectively, the execution and delivery by the parties of all
of the New Agreements and the recordation of such related Memoranda, the
"Triggering Event"), then, as of the date of the last to occur of such
Triggering Event, the Warrant shall be released from escrow and Paradigm shall
promptly deliver the Warrant to ARE.
<PAGE>
3. If the New Agreements are not duly executed, delivered, and (where
applicable) recorded on or before the Release Date, then, as of the Release
Date, the Warrant shall be retained and cancelled by Paradigm and Paradigm shall
have no further obligation to hold in escrow or to deliver the Warrant to ARE.
4. Prior to the occurrence of the Triggering Event, ARE shall not be entitled
to any rights as a holder of, or under the terms of, such Warrant. Upon
occurrence of such Triggering Event (whether or not such Warrant shall have been
delivered by Paradigm to ARE), ARE shall become the record holder of the Warrant
and shall be entitled to all rights as a holder of, or under the terms of, such
Warrant.
5. This Agreement constitutes the full understanding of the parties with
respect to the issuance, escrow, release from escrow, and delivery or
cancellation of the Warrant, and supersedes any prior agreements or
communications of the parties, oral or written relating to the same. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to an original, and all of which taken together shall constitute one and
the same instrument. This Agreement may be executed and delivered by fax and
execution by such manner shall be deemed an original. This Agreement shall not
be assigned by ARE, and any attempted assignment shall be void; provided,
however, that ARE may assign this Agreement to an affiliate of ARE. This
Agreement shall be governed by and construed in accordance with North Carolina
law, without regard to conflict of law provisions.
2
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
PARADIGM GENETICS INC.
By: /s/ Ian Howes
---------------------------
Name: Ian Howes
Title CFO
ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership
Its Managing Member
By: ARE QRS Corp.,
A Maryland corporation
Its General Partner
By:
---------------------------
Dated January 19, 2000
3
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
PARADIGM GENETICS INC.
By:
---------------------------
Name:
Title
ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership
Its Managing Member
By: ARE QRS Corp.,
A Maryland corporation
Its General Partner
By: /s/ Lynn Anne Shapiro
---------------------------
Dated January 19, 2000
4
<PAGE>
EXHIBIT A
(See Warrant Attached)
5
<PAGE>
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION TO SUCH
ACT.
Void After January 19, 2010 (the Tenth Anniversary of the Date Hereof)
WARRANT FOR THE
PURCHASE OP SHARES OF COMMON STOCK
OF
PARADIGM GENETICS INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NORTH CAROLINA
----------------------------------------------------------
THIS CERTIFIES THAT, for value received, ARE-104 Alexander Road, LLC, a
Delaware limited liability company, together with its successors and assigns
(the "Investor"), is initially entitled to purchase up to Sixty Thousand
(60,000) duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock (the "Common Stock") of Paradigm Genetics Inc., a North Carolina
corporation (the "Company"), at the per share purchase price described in
Section 1.3 below, subject to the provisions and upon the terms and conditions
hereinafter set forth.
1. Exercise of Warrant. The terms and conditions upon which this Warrant
-------------------
may be exercised, and the Common Stock covered hereby (the "Warrant Stock") may
be purchased, are as follows:
1.1 Term. The purchase right represented by this Warrant may be
----
exercised in whole or in part at any time and from time to time from and after
the date hereof and on or before the earlier of (i) January 19, 2010 (the tenth
anniversary of the date hereof) or (ii) the fifth anniversary of the date of the
consummation of a bona fide, underwritten initial public offering of Common
Stock, at a public offering price equal to or exceeding $10.00 per share (as
adjusted for any stock dividends, combinations, splits or the like with respect
to such shares) and an aggregate offering price to the public of not less than
$20,000,000; provided that, if the last day on which this Warrant may be
exercised is a Sunday or a legal holiday or a day on which banking institutions
doing business in the State of North Carolina are authorized by law to close,
this Warrant may be exercised prior to 5:00 p.m. local time) on the next
succeeding full business day with the same force and effect as if exercised on
such last day specified herein.
1.2 Number of Shares. This Warrant is initially exercisable for Sixty
----------------
Thousand (60,000) shares of Common Stock, subject to adjustment pursuant to
Section 2 of this Warrant.
<PAGE>
1.3 Purchase Price. The initial per share purchase price for the
--------------
shares of Common Stock to be issued upon exercise of this Warrant shall be
$5.00, subject to adjustment as provided herein (the "Warrant Price").
1.4 Method of Exercise. The exercise of the purchase rights evidenced
------------------
by this Warrant shall be effected by (a) the surrender of the Warrant, together
with a duly executed copy of the form of a subscription attached hereto, to the
Company at its principal offices and (b) the delivery of the purchase price
(i) by check or bank draft payable to the Company's order or by wire transfer to
the Company's account for the number of shares for which the purchase rights
hereunder are being exercised or (ii) pursuant to the procedure set forth in
Section 1.5. Any such exercise of this Warrant may be made contingent upon the
closing of a public offering, merger, recapitalization or similar transaction.
Each exercise of this Warrant shall be deemed to have been effected
immediately prior to the close of business on the day on which this Warrant
shall have been surrendered to the Company as provided herein or at such latter
date as may be specified in the executed form of subscription, and at such time
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such exercise as provided herein
shall be deemed to have become the holder or holders of record thereof.
1.5 Cashless Exercise. In addition to and without limiting the rights
-----------------
of the holder hereof under the terms hereof, at the holders option this Warrant
may be exercised in whole or in part at any time or from time to time prior to
its expiration for a number of shares of Common Stock having an aggregate fair
market value on the date of such exercise equal to the difference between
(a) the fair market value of the number of shares of Common Stock subject to
this Warrant designated for exercise by the holder hereof on the date of the
exercise and (b) the aggregate Warrant Price for such shares in effect at such
time.
The "fair market value" of shares of Common Stock shall be calculated
on the basis of (a) if the Common Stock is then traded on a securities exchange
or the Nasdaq National Market, the average of the closing prices of the Common
Stock on such exchange or marker over the 20 trading day period ending three (3)
trading days prior to the date of exercise, (b) if the Common Stock is then
regularly traded over-the-counter, the average of the sale prices or secondarily
the closing bid of the Common Stock over the 20 trading day period ending three
(3) trading days prior to the date of exercise, or (c) if there is no active
public market for the Common Stock, the fair market value thereof shall be the
price per share that the Company could obtain from a willing buyer for shares
sold by the Company from authorized but unissued shares, as determined in good
faith by the Company's Board of Directors. If the holder of this Warrant
exercises this Warrant contingent upon the closing of a public offering, the
"fair marker value" of a share of Common Stock on the date of exercise shall be
equal to the initial price to the public specified in the final prospectus with
respect to such public offering.
No payment of any cash or other consideration to the Company shall be
required from the holder of this Warrant in connection with any exercise of this
Warrant pursuant to this Section 1.5. Such exercise shall be effective upon the
date of receipt by the Company of the
2
<PAGE>
original Warrant surrendered for cancellation and a written request from the
holder hereof that the exercise pursuant to this Section 1.5 be made, or at such
later date as may be specified in such request.
1.6 Issuance of Shares. As soon as reasonably practicable after each
------------------
exercise of this Warrant, in whole or in part, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, (a) a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock to which such holder shall
be entitled upon such exercise, and (b) in case such exercise is in part only, a
new Warrant or Warrants of like tenor, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock equal (without giving
effect to any adjustment thereof) to the number of such shares called for on the
face of this Warrant minus the Dumber of such shares designated by the holder
upon such exercise as provided herein.
2. Certain Adjustments.
-------------------
2.1 Mergers, Consolidations or Sale of Assets. If after the date
-----------------------------------------
hereof there shall be a capital reorganization (other than a combination or
subdivision of Common Stock otherwise provided for herein), or spin-off, or a
merger or consolidation of the Company with or into another corporation, or the
sale of all or substantially all of the Company's properties and assets to any
other person, then, as a part of such transaction, lawful provision shall be
made so that the Investor shall thereafter be entitled to receive upon exercise
of this Warrant, during the period specified in this Warrant and upon payment of
the purchase price, the number of shares of stock or other securities, cash or
property of the Company or the successor corporation resulting from such
transaction, to which a holder of the Common Stock deliverable upon exercise of
this Warrant would have been entitled under the provisions of the agreement in
such transaction if this Warrant had been exercised immediately before such
transaction. In any such case, appropriate adjustment (as determined reasonably
and in good faith by the Company's Board of Directors) shall be made in the
application of the provisions of this Warrant with respect to the rights and
interests of the Investor after such transaction to the end that the provisions
of this Warrant (including adjustment of the purchase price then in effect and
the number of shares of Common Stock issuable upon exercise hereof) shall be
applicable after that event, as near as reasonably may be, in relation to any
shares or other property deliverable after that event upon exercise of this
Warrant.
2.2 Splits and Subdivisions Dividends. If the Company should effect or
---------------------------------
fix a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of the holders of Common
Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or warrants, options or other 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 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
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such distribution, split or subdivision if no record date is fixed), the per
share purchase price shall be appropriately decreased and the number of shares
of Common Stock issuable upon exercise hereof shall be appropriately increased
in proportion to such increase of outstanding shares.
2.3 Combination of Shares. If the number of shares of Common Stock
---------------------
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share purchase price shall be
appropriately increased and the number of shares of Common Stock issuable upon
exercise hereof shall be appropriately decreased in proportion to such decrease
in outstanding shares.
2.4 Adjustments for Other Distributions. In the event the Company
-----------------------------------
shall declare a distribution payable in securities of the Company (other than
Common Stock Equivalents) or other persons, evidences of indebtedness issued by
the Company or other persons, assets (including cash dividends) or options or
rights not referred to in Section 2.2, then, in each such case for purposes of
this Section 2.4, upon exercise of this Warrant the holder hereof shall be
entitled to a proportionate share of any such distribution as though such holder
was the holder of the number of shares of Common Stock of the Company into which
this Warrant may be exercised as of the record date fixed for the determination
of the holders of Common Stock of the Company entitled to receive such
distribution.
2.5 Issuance of Additional Common Stock
-----------------------------------
(a) If, after the date hereof, the Company shall issue or sell
(i) Additional Shares (defined below) without consideration or
for a consideration per share less than the Warrant Price, or
(ii) Common Stock Equivalents exercisable for Additional
Shares with a minimum exercise or exchange price less than the
Warrant Price,
then, and in each such case, the Warrant Price shall be reduced, concurrently
with such issue or sale, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction:
(i) the numerator of which shall be (A) the number of shares
of Common Stock outstanding immediately prior to such issue or
sale plus (B) the number of shares of Common Stock that the
aggregate consideration received by the Company upon such
issuance or sale (or, in the case of Common Stock Equivalents
exercisable for Additional Shares, receivable by the Company
upon exercise or exchange) would purchase at such Warrant
Price, and
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(ii) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale
(or, in the case of Common Stock Equivalents exercisable for
Additional Shares, assuming exercise or exchange thereof).
(b) For the purposes of this Section 2.5, the consideration for
the issue or sale of Additional Shares shall, irrespective of the accounting
treatment of such consideration, (i) insofar as it consists of cash, be computed
at the net amount of cash received by the Company, and (ii) insofar as it
consists of property (including securities) other than cash, be computed at the
fair value thereof at the time of such issue or sale as determined in good faith
by the Board of Directors.
(c) Notwithstanding anything contained herein to the contrary, the
consideration for any Common Stock Equivalents shall be the total amount of
consideration received by the Company for the issuance of such Common Stock
Equivalents plus the minimum amount of consideration payable to the Company upon
exercise, conversion or exchange of Common Stock Equivalents (the "Net
Consideration") determined as of the date of issuance of such Common Stock
Equivalents. Any obligation, agreement or understanding to issue Common Stock
Equivalents at any time in the future shall be deemed to be an issuance at the
time such obligation or agreement is made or arises. No adjustment of the
Warrant Price shall be made under this Section 2.5 upon the issuance of any
shares of Common Stock which are issued pursuant to the exercise, conversion or
exchange of any Common Stock Equivalents if any adjustment shall previously have
been made upon the issuance of any such Common Stock Equivalents.
Should the Net Consideration for any such Common Stock Equivalents
be increased or decreased from time to time, then, upon the effectiveness of
such change, the Warrant Price will be that which would have been obtained
(i) had the adjustments made upon the issuance of such Common Stock Equivalents
been made upon the basis of the actual Net Consideration (as so increased or
decreased) of such Common Stock Equivalents, and (ii) had adjustments to such
Warrant Price since the date of issuance of such Common Stock Equivalents been
made to such Warrant Price as adjusted pursuant to (i) above. Any adjustment of
the Warrant Price with respect to this paragraph which relates to Common Stock
Equivalents shall be disregarded if, as, and when all of such Common Stock
Equivalents expire or are canceled without being exercised, so that the Warrant
Price effective immediately upon cancellation or expiration shall be equal to
the Warrant Price in effect at the time of the issuance of the expired or
canceled Common Stock Equivalents, with such additional adjustments as would
have been made to such Warrant Price had the expired or canceled Common Stock
Equivalents not been issued.
(d) "Additional Shares" means all shares of Common Stock, whether
or not subsequently reacquired or retired by the Company other than shares of
Common Stock issued or to be issued to directors, officers, employees and
consultants of the Company or any subsidiary pursuant to any bona fide qualified
or non-qualified stock option plan or agreement, stock purchase plan or
agreement, stock restriction agreement, employee stock ownership plan (ESOP) or
other stock incentive plans or arrangements.
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<PAGE>
(e) The number of shares of Common Stock that the holder of this
Warrant shall be entitled to receive upon each exercise hereof after any
adjustment pursuant to this Section 2.5 shall be determined by multiplying
(i) the number of shares of Common Stock that were issuable immediately prior to
such adjustment, by (ii) the fraction of which (A) the numerator is the Warrant
Price immediately prior to such adjustment and (B) the denominator is the
Warrant Price immediately following such adjustment.
2.6 Certificate as to Adjustments. In the case of each adjustment or
-----------------------------
readjustment of the Warrant Price pursuant to this Section 2, the Company at its
expense will promptly Compute such adjustment or readjustment in accordance with
the terms hereof and cause a certificate, signed by the Company's Chief
Financial Officer, setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based to be
delivered to the holder of this Warrant. The Company will furnish or cause to be
furnished to such holder a certificate setting forth (a) such adjustments and
readjustments, (b) the Warrant Price at the time in effect and how it was
calculated and (c) the number of shares of Common Stock issuable upon exercise
hereof and the amount, if any, of other property at the time receivable upon the
exercise of the Warrant.
2.7 Other Dilutive Events. If any event shall occur as to which the
---------------------
provisions of Section 2 are not strictly applicable but the failure to make any
adjustment would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of such sections,
then, in each such case, the Board of Directors of the Company shall make such
adjustment, if any, on a basis consistent with the essential intent and
principles established in Section 2, necessary to preserve, without dilution,
the purchase rights represented by this Warrant. The Company will promptly
notify the Investor of any such adjustments and shall make the suggested
adjustments.
2.8 No Dilution or Impairment. The Company will not, by amendment of
-------------------------
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, 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 of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will
not permit the par value of any shares of stock receivable upon the exercise of
this Warrant to exceed the amount payable therefor upon such exercise, (b) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of the Warrants from time to time outstanding; and
(c) will not take any action which results in any adjustments of the Warrant
Price if the total number of shares of Common Stock issuable after the action
upon the exercise of all of the Warrants would exceed the total number of shares
of Common Stock then authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such exercise.
6
<PAGE>
2.9 Notices of Record Date etc. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any
class of securities of the Company for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus at the same rate as that of the last such cash
dividend thereto paid) or other distribution, or 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;
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all of the assets of the Company to any other
person or any consolidation or merger involving the Company; or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to the holder of this Warrant at least thirty (30) days
prior to the earliest date specified below, a notice specifying: (i) 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; and (ii) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding-up is expected to become effective and the record date for determining
stockholders entitled to vote thereon and the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up.
3. Fractional Shares. No fractional shares shall be issued in connection
-----------------
with any exercise of this Warrant. In lieu of the issuance of such fractional
share, the Company shall make a cash payment equal to the then fair market value
of such fractional share as determined in accordance with Section 1.5 hereof.
4. Representations and Warranties of the Company.
---------------------------------------------
4.1 Authorization. The Company has full power arid authority to enter
-------------
into this Warrant. This Warrant has been duly authorized, executed and delivered
by the Company and constitutes its valid and legally binding obligation,
enforceable in accordance with its terms.
4.2 Reservation of Common Stock. The Company shall at all times
---------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the exercise of this Warrant, such
number of its shares of Common Stock, free from preemptive rights, as shall from
time to time be sufficient to effect the exercise of this Warrant, and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the exercise of the entire Warrant, in addition to such
other remedies as shall be available to the holder of this Warrant, the Company
will take such action as may be
7
<PAGE>
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes. If any shares of its
Common Stock to be reserved for the purpose of issuance upon exercise of the
Warrants require registration with or approval of any governmental authority
under any applicable law (other than registration of the Common Stock under the
Act) before such shares of Common Stock may be validly issued or delivered, then
it shall secure such registration or approval, as the case may be, and maintain
such registration or approval in effect so long as so required.
4.3 Adjustment in Number of Shares Issuable and Purchase Price.
----------------------------------------------------------
There has not been nor will there be any adjustment to the number of shares
issuable or the purchase price payable upon the exercise of any securities of
the Company convertible into or exchangeable for shares of Common Stock
resulting from the issuance or exercise of this Warrant.
4.4 Valid Issuance. This Warrant, when issued and delivered in
--------------
accordance with the terms hereof will be duly authorized and validly issued, and
the Common Stock issuable upon the exercise hereof, when issued pursuant to the
terms hereof and upon payment of the exercise price shall, upon such issuance,
be duly authorized, validly issued, fully paid and nonassessable.
5. Privilege of Stock Ownership. Prior to the exercise of this Warrant,
----------------------------
the Investor shall not be entitled, by virtue of holding this Warrant, to any
rights of a stockholder of the Company, including (without limitation) the right
to vote, receive dividends or other distributions, exercise preemptive rights or
be notified of stockholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company. Nothing in this Section 5, however, shall limit the right of the
Investor to be provided the notices described in Section 2 hereof or to
participate in distributions described in Section 2 hereof if the Investor
ultimately exercises this Warrant.
6. Limitation of Liability. Except as otherwise provided herein, in the
-----------------------
absence of affirmative action by the holder hereof to purchase the Common Stock
in accordance herewith, no mere enumeration herein of the rights or privileges
of the holder hereof shall give rise to an obligation on such holder to purchase
any securities or any liability of such holder for the purchase price or as a
stockholder of the Company, whether such obligation or liability is asserted by
the Company or by creditors of the Company.
7. Representations and Warranties of the Investor. The Investor represents
----------------------------------------------
and warrants to the Company as follows;
7.1 Investment Experience. The Investor represents that it can bear
---------------------
the economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Warrant and the Common Stock issuable upon
exercise hereof. The Investor also represents it has not been organized solely
for the purpose of acquiring the Warrant or the Common Stack issuable upon
exercise hereof.
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<PAGE>
7.2 Restricted Securities. The Investor understands that the Warrant
---------------------
being issued hereunder and the Common Stock issuable upon exercise hereof are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and have not been registered under the Act nor
qualified under applicable state securities laws and that under such laws and
applicable regulations such securities may not be resold without registration
under the Act, except in certain limited circumstances. In this connection, the
Investor represents that it is familiar with Rule 144 promulgated under the Act
("Rule 144"), as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
7.3 Accredited Investor. The Investor is an "accredited investor"
-------------------
within the meaning of Rule 501 of Regulation D promulgated under the Act.
7.4 Legends. It is understood that the certificates evidencing the
-------
Common Stock issuable upon exercise hereof may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN EXEMPTION TO SUCH ACT"
8. Transfers and Exchanges.
-----------------------
8.1 The Investor agrees not to sell, hypothecate, pledge or otherwise
dispose of any interest in the Warrant or the Common Stock issuable upon
exercise hereof in the United States, its territories, possessions or any area
subject to its jurisdiction, or to any person who is a national thereof or
resident therein (including any estate of such person), or any corporation,
partnership or other entity created or organized therein, other than in
accordance with the Act. With respect to any offer, sale or other disposition of
this Warrant, or any shares of Common Stock acquired pursuant to the exercise of
this Warrant prior to registration of such shares, the holder hereof and each
subsequent holder of the Warrant agrees to give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written
opinion of such holder's counsel, if reasonably requested by the Company, to the
effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state law then in effect) of this Warrant or such shares of Common Stock and
indicating whether or nor under the Act certificates for this Warrant or such
shares of Common Stock to be sold or otherwise disposed of require any
restrictive legend as to applicable restrictions on transferability in order to
insure compliance with the Act; provided, however, that the holder may transfer
or assign this Warrant, or any shares of Common Stock acquired pursuant to the
exercise of this Warrant prior to registration of such shares to Alexandria Real
Estate Equities, Inc., a Maryland corporation ("Alexandria") or to another
wholly-owned subsidiary of Alexandria without written notice to the Company or
an opinion of holder's
9
<PAGE>
counsel. Each certificate representing this Warrant or the shares of Common
Stock thus transferred (except a transfer pursuant to Rule 144) shall bear a
legend as to the applicable restrictions on transferability in order to insure
compliance with the Act, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to insure compliance with the Act.
The Company may issue stop transfer instructions to its transfer agent in
connection with the foregoing restrictions.
8.2 Upon presentation to the Company of the form of Assignment
attached hereto, a new Warrant shall be issued to the new holder hereof. New
Warrants issued in connection with transfers or exchanges shall not require the
signature of the new holder hereof and shall be identical in form and provision
to this Warrant except as to the number of shares.
8.3 Each certificate evidencing the shares of Common Stock issued upon
exercise of this Warrant, or upon any transfer of such shares (other than a
transfer registered under the Act or any subsequent transfer of shares so
registered) shall, at the option of the Company, contain a legend, in form and
substance reasonably satisfactory to the Company and its counsel, restricting
the transfer of such shares to sales or other dispositions exempt from the
requirements of the Act.
8.4 Ownership of Warrants. The Company may treat the person in whose
---------------------
name any Warrant is registered on the register kept at the office of the Company
as the owner and holder thereof for all purposes, notwithstanding any notice to
the contrary, except that, if and when any Warrant is properly assigned in
blank, the Company may (but shall not be obligated to) treat the bearer thereof
as the owner of such Warrant for all purposes, notwithstanding any notice to the
contrary. A Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
8.5 Transfer and Exchange of Warrants. Upon the surrender of any
---------------------
Warrant, properly endorsed, for registration of transfer or for exchange, the
Company at its expense will execute and deliver to or upon the order of the
holder thereof a new Warrant or Warrants of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the Warrant
or Warrants so surrendered.
9. Successors and Assigns. The terms and provisions of this Warrant shall
----------------------
be binding upon the Company and the Investor and their respective successors and
assigns, subject at all times to the restrictions set forth herein.
10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to the Company,
and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new warrant of like tenor and dated as of such
cancellation, in lieu of this Warrant.
10
<PAGE>
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for
----------------------------------
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday or Sunday or shall be a legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
12. Amendments and Waivers. Any term of this Warrant may be amended and
----------------------
the observance of any term of this Warrant 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 Investor. Any such amendment or waiver
shall be binding on the parties.
13. Governing Law. The terms and conditions of this Warrant shall be
-------------
governed by and construed in accordance with North Carolina law, without regard
to conflict of law provisions.
14. Notices. Except as otherwise provided in this Warrant, any requirement
-------
for a notice, demand or request under this Warrant will be satisfied by a
writing (a) hand delivered with receipt; (b) mailed by United States registered
or certified mail or Express Mail, return receipt requested, postage prepaid; or
(c) sent by Federal Express or any other nationally recognized overnight courier
service, and addressed as follows: if to the holder, at its address as shown on
the books of the Company; and if to the Company, at the address indicated on the
signature page of this Warrant, Attn: Chief Financial Officer, with a copy to
Gerald F. Roach, Esq., Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan,
L.L.P., 2500 First Union Capital Center, Raleigh, North Carolina 27601. All
notices that are sent in accordance with this Section 14 will be deemed received
by the holder or the Company on the earliest of the following applicable time
periods: (i) the date the return receipt is executed; or (ii) the date delivered
as documented by the overnight courier service or the hand delivery receipt.
Either the holder or the Company may designate a change of address by written
notice to the other party.
15. Registration Rights.
-------------------
(a) The shares of Common Stock issued or issuable upon the exercise
hereof shall constitute "Registrable Securities" for purposes of this Warrant;
provided, that Registrable Securities shall not include any shares of Common
Stock that have been sold to the public either pursuant to a registration
statement or the exemption from registration under the Securities Act provided
by Rule 144.
(b) if at any time the Company proposes to file a registration
statement under the Act with respect to an offering of equity securities by the
Company for its own account or for the account of any securityholders of any
class of its equity securities (other than (i) a registration statement on Form
S-4 or S-8 (or any substitute form that may be adopted by the Securities and
Exchange Commission (the "Commission") or (ii) a registration statement filed in
connection with an exchange offer or offering of securities solely to the
Company's existing securityholders) or a registration on any registration form
that does not permit secondary sales, then the Company shall give written notice
of such proposed filing to the Investor as soon as practicable (but in no event
less than 20 days before the anticipated filing date), and such notice
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<PAGE>
shall offer such Investor the opportunity to register such number of shares of
Registrable Securities as each such Investor may request in writing within 15
days after such notice from the Company (which request shall specify the
Registrable Securities intended to be disposed of and the intended method of
distribution thereof) (a "Piggy-Back Registration").
The Company shall use its best efforts to cause the managing Underwriter or
Underwriters of a proposed underwritten public offering to permit the
Registrable Securities requested by the Investor thereof to be included in a
Piggy-Back Registration on the same terms and conditions as any similar
securities of the Company or any other securityholder included therein and to
permit the sale or other disposition of such Registrable Securities in
accordance with the intended method of distribution thereof. The Investor shall
have the right to withdraw its request for inclusion of its Registrable
Securities in any registration statement pursuant to this Section 15 by giving
written notice to the Company of its request to withdraw. The Company may
withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective; provided that the Company shall reimburse the Investor for all
reasonable out-of-pocket expenses (including counsel fees and expenses) incurred
prior to such withdrawal. Notwithstanding the foregoing, if the representative
of the underwriters advises the Company in writing that market factors require a
limitation on the number of shares to be underwritten, the representative may
reduce the number of Registrable Securities to be included in the registration
and underwriting (to zero, if necessary) on a pro rata basis (based on number of
shares owned) with all other secondary shares sought to be included therein.
No failure to effect a registration under Section 15(b) and to complete the
sale of Registrable Securities in connection therewith shall relieve the Company
of any other obligation under this Agreement (including, without limitation, the
Company's obligations under Sections 15(d) and 15(e)).
(c) In the case of a Piggy-Back Registration:
(1) The Company will, as expeditiously as possible:
(A) prepare and file with the Commission such amendments and
post-effective amendments to the applicable registration statement as may be
necessary to keep the registration statement effective for as long as such
registration is required to remain effective pursuant to the terms hereof, cause
the prospectus to be supplemented by any required prospectus supplement, and, as
so supplemented, to be filed pursuant to Rule 424 under the Act;
(B) furnish to the Investor at least one signed copy of the
registration statement and any post-effective amendment thereto, as soon as such
documents become available to the Company, and such number of conformed copies
thereof and such number of copies of the prospectus (including each preliminary
prospectus) and any amendments or supplements thereto, and any documents
incorporated by reference therein, as the Investor may reasonably request as
soon as such documents become available to the Company;
12
<PAGE>
(C) on or prior to the date on which the registration
statement is declared effective, quality such Registrable Securities requested
to be included under such other securities or blue sky laws of such
jurisdictions as the Investor reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable time
Investor to consummate the disposition in such jurisdictions of such Registrable
Securities; provided, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify, (ii) subject itself to general taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(D) notify the Investor at any time when a prospectus relating
to such Registrable Securities 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 contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading;
(E) notify the Investor of any stop order or other suspension
of effectiveness of the registration statement; and obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the earliest
possible time;
(F) enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions in connection therewith (including
those requested by the managing underwriters, if any, or the Investor) in order
to expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration, (i) make such
representations and warranties to the Investor and the underwriters, if any,
with respect to the business of the Company and its subsidiaries, the
registration statement, prospectus and documents incorporated by reference or
deemed incorporated by reference, if any, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and the Investor addressed to the Investor and each of the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such holders and underwriters, including without limitation the
matters referred to clause (i) above; (iii) obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of the Company
(and, if necessary, any other certified public accountants of any subsidiary of
the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
registration statement), addressed to the Investor and each of the underwriters,
if any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in
13
<PAGE>
connection with underwritten offerings; and (iv) deliver such documents and
certificates as may be requested by the Investor, its counsel and the managing
underwriters, if any, to evidence the continued validity of the representations
and warranties of the Company and its subsidiaries made pursuant to clause
(i) above and to evidence compliance with any customary conditions contained in
the underwriting agreement or other agreement entered into by the Company; and
notify the Investor promptly of the receipt by the Company of any notification
with respect to the suspension of the qualification of the Warrant and/or Common
Stock for sale in any jurisdiction; and
(G) take all other steps reasonably necessary to effect the
registration of the Registrable Securities contemplated hereby.
(2) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(3) The Company will use its best efforts (i) to cause any class
of Registrable Securities to be listed on a national securities exchange (if
such shares are not already so listed) and on each additional national
securities exchange on which similar securities issued by the Company are then
listed (if any), if the listing of such Registrable Securities is then permitted
under the rules of such exchange or (ii) to secure designation of all such
Registrable Securities covered by such registration statement as a NASDAQ
"national market system Security" within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such Registrable
Securities.
(d) The Company shall keep effective and maintain any registration,
qualification, approval or listing specified in this Section 15 for a period of
180 days plus the term of any lock-up or until the holders have completed the
distribution described in the registration statement, whichever occurs first,
and from time to time shall amend or supplement the prospectus used in
connection therewith to the extent necessary in order to comply with applicable
law. All expenses, disbursements and fees in connection with any action to be
taken hereunder (including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses and fees and expenses of counsel for the Company and its independent
certified public accountants and all reasonable fees and expenses of the
Investor and one Investor's counsel and appropriate local counsel (all such
expenses being herein called "Registration Expenses") will be borne by the
Company; provided that in no event shall Registration Expenses include any
underwriting discounts, sales commissions or similar fees or transfer taxes
attributable to the sale of Registrable Securities.
(e) The rights to cause the Company to register securities granted to
a holder under this Section 15 may be transferred or assigned by a holder only
to (i) an affiliate of such holder or (ii) a transferee or assignee of not less
than 20% of such holder's Registrable Securities (as determined on the date of
this Warrant and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like), provided that, in either case
14
<PAGE>
(A) the Company is given written notice at the time of or within 30 days after
transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, (B) the transferee or assignee of such
rights assumes in writing the obligations of such holder under this Section 15
and (C) in the reasonable opinion of the Company, the transferee is neither a
competitor to the Company nor a party who is demonstrably hostile to the
Company.
(f) If requested by the Company and an underwriter of Common Stock (or
other securities) of the Company, an Investor shall not sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by such Investor (other than those included in the registration) during a
period not to exceed 180 days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that all
officers and directors of the Company and holders of at least five percent of
the Company's voting securities are bound by and have entered into similar
agreements. The Company may impose stop-transfer instructions with respect to
the shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of such 180 day period.
(g) The holders under this Warrant agree that, upon receipt of any
notice from the Company of the existence of any state of facts or the occurrence
of any event (including, without limitation, pending negotiations relating to,
or the consummation of, a transaction or the occurrence of any event which, in
the reasonable opinion of the Company, might require additional disclosure of
material, non-public information by the Company in any registration statement
provided for in this Warrant as to which the Company believes in good faith that
it has a bona fide business purpose for preserving confidentiality or which
renders the Company unable to comply with the published rules and regulations of
the Commission promulgated under the Securities Act or the Exchange Act, as in
effect at any relevant time) which might reasonably result in (A) such
registration statement, any amendment or post-effective amendment thereto, or
any document incorporated therein by reference containing an untrue statement of
a material fact or omitting to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (B) the
prospectus issued under such registration statement, any prospectus supplement,
or any document incorporated therein by reference including an untrue statement
of material fact or omitting to sate a material fact necessary in order the make
the statements therein, in light of the circumstances under which they were
made, nor misleading, the holders will forthwith discontinue disposition of the
Registrable Securities pursuant to such registration statement for a period
which is the shorter of (i) 30 calendar days from the Company's notice to such
holders or (ii) until the holders receive copies of prospectus supplements or
amendments prepared by or on behalf of the Company. If so directed by the
Company, the holders will deliver to the Company all copies in their possession
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. The Company shall not be permitted to require the
suspension of the disposition of Registrable Securities far a period in excess
of 90 calendar days in any 12 month period.
(h) The rights to request registration of any Company securities
pursuant to this Section 15 shall terminate as to any bolder who holds
Registrable Securities upon the earlier of (i) when a holder holds one percent
or less of the Company's Common Stock on an as-converted basis; (ii) when all of
a holder's Registrable Securities may be sold during a
15
<PAGE>
single three-month period under Rule 144; (iii) when a holders Registrable
Securities may be transferred under Rule 144(k) unless such holder later becomes
an affiliate of the Company (as defined in Rule 144), in which case such
holder's rights to request registration shall be revived until such holder's
rights otherwise terminate under this subsection (h); and (iv) three years after
the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offer and
sale of the Company's Common Stock at a price per share of not less than $10.00
(as adjusted for stock splits, dividends, combinations and the like) and an
aggregate offering price to the public of not less than $20,000,000. Such three-
year period shall not include any period of time during which adequate current
public information, as defined in Rule 144(c) promulgated under the Securities
Act, is not available with respect to the Company.
(i) The Company hereby indemnifies, to the fullest extent permitted by
law, the Investor or each person, if any, who controls Investor within the
meaning of Section 15 of the Act, and the directors, officers, employees, agents
and representatives of each of them, against all losses, claims, damages,
liabilities, costs and expenses (including, without limitation, fees and
expenses of counsel), as incurred, arising out of, relating to, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement, prospectus or preliminary prospectus (or any amendment
or supplement thereto) or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by any untrue statement contained in, or
omission from, information furnished in writing to the Company by Investor
expressly for use therein. In connection with any registration statement in
which Investor is participating, Investor will furnish to the Company in writing
such information as shall reasonably be requested by the Company for use in any
such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person, if
any, who controls the Company within the meaning of the Act against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement
or, alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the registration statement
or prospectus or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement of a material fact is contained
in, or such material fact is omitted from, information so furnished in writing
by such Investor expressly for use therein.
(j) For purposes of this Section 15, the Investor shall include any
transferee of the Investor if such transfer is made in accordance herewith.
16. Remedies. The Company acknowledges and agrees that irreparable harm,
--------
for which there may be no adequate remedy at law and for which the ascertainment
of damages would be difficult, would occur in the event any of the provisions of
this Warrant were not performed in accordance with its specific terms or were
otherwise breached. The Company accordingly agrees that the holders shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Warrant and to enforce specifically the terms and provisions hereof in
any court of the United States or any state thereof having jurisdiction, in each
instance
16
<PAGE>
without being required to post bond or other security and in addition to, and
without having to prove the inadequacy of other remedies at law.
17. Securities Matters
------------------
At such time as the Company becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and at
all times thereafter, the Company agrees to deliver to the Investor all such
reports, information and other documents as it shall be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act within 15-
days after the date it is required to file such reports with the Commission.
Prior to such time as the Company becomes subject to the reporting requirements
of the Exchange Act, and in order to make available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the shares of Common Stock issuable upon exercise of the Warrant to the public
without registration, the Company agrees to deliver to the Investor all such
reports, information and other documents as it may be required to provide to any
lender or other creditor. From and after the time the Company files a
registration statement with the Commission with respect to the Warrants or the
shares of Common Stock issuable thereunder, the Company shall file such
information with the Commission; provided, that the Company shall not be in
default of the provisions of this Section 17 for any failure to file reports
with the Commission solely by refusal by the Commission to accept the same for
filing.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE>
[Warrant for the Purchase of Shares of Common Stock of Paradigm Genetics Inc.]
PARADIGM GENETICS INC.,
a North Carolina corporation
Address: 104 Alexander Drive By: _____________________________
Building 2 Name: Ian Howes
Research Triangle Park, NC 27709 Title: CFO
Dated: January 19, 2000
ACCEPTED AND AGREED:
ARE-104 ALEXANDER ROAD, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L. P.,
a Delaware limited partnership,
Its Managing Member
By: ARE-QRS Corp.,
________________________________
a Maryland corporation,
Its General Partner
By: ________________________________
Name:
Title:
Dated: January ___, 2000
18
<PAGE>
SUBSCRIPTION
------------
Paradigm Generics Inc.
104 Alexander Drive
Building 2
Research Triangle Park, North Carolina 27709
Ladies and Gentlemen:
The undersigned, _____________________, hereby elects to purchase, pursuant to
the provisions of the Warrant dated, January __, 2000 held by the undersigned,
________ shares of the Common Stock of Paradigm Genetics Inc., a North Carolina
corporation, and renders herewith payment of the purchase price of such shares
in full.
In exercising its rights to purchase such Common Stock, the undersigned hereby
confirms the investment representations made in Section 7.
Dated: ____________, ___.
_______________________________________
By ____________________________________
Address: _______________________________________
_______________________________________
19
<PAGE>
[FORM OF ASSIGNMENT]
The undersigned hereby assigns this Warrant to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other
identifying number of assignee
- ------------------------------
and irrevocably appoints ___________________ as agent to transfer this Warrant
on the books of the Company. The agent may substitute another to act far him or
it.
Dated: _____________ Signed: __________________________
(Sign exactly as name appears on the front of this Warrant)
Dated: _____________ Signed: ______________________________
Name: ________________________________
Title: _______________________________
20
<PAGE>
EXHIBIT 10.46
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
PARADIGM GENETICS INC.
WARRANT TO PURCHASE
SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
----------------------------------------------
Expires February 12, 2008
THIS CERTIFIES THAT, for value received, Intersouth Partners III, L.P. is
entitled to subscribe for and purchase One Hundred Eighty-Seven Thousand Five
Hundred (187,500) shares (as adjusted pursuant to the provisions hereof, the
"Shares") of the fully paid and nonassessable Series A Preferred Stock, $.01 par
value, of Paradigm Genetics Inc., a North Carolina corporation (the "Company"),
at a price per share of $0.80 (such price and such other price as shall result,
from time to time, from adjustments specified herein is herein referred to as
the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term "Preferred Stock"
shall mean the Company's presently authorized Series A Preferred Stock, and any
stock into or for which such Preferred Stock may hereafter be converted; the
term "Common Stock" shall mean the Company's presently authorized Common Stock,
and any stock into or for which Common Stock may hereafter be converted or
exchanged, in either case pursuant to the Articles of Incorporation of the
Company as from time to time amended as provided by law and in such Articles;
and the term "Grant Date" shall mean February 12, 1998.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from and after the Grant
Date and prior to the earlier of the tenth annual anniversary date of the Grant
Date or the fifth annual anniversary of the consummation of the Company's
initial public of its Common Stock, at a public offering price equal to or
exceeding $10.00 per share (as adjusted for any stock dividends, combinations,
splits or the like with respect to such shares) and the aggregate gross proceeds
to the Company and/or any selling stockholders of which equal or exceed
$20,000,000.
<PAGE>
2. Method of Exercise; Net Issue Exercise.
--------------------------------------
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
-----------------------------------------------
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
---------
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
-----------
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days of receipt of such notice and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
------------------
(a) In lieu of exercising this Warrant, the holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
the holder a number of shares of the Company's Preferred Stock computed using
the following formula:
X=Y(A-B)
------
A
Where:
X = the number of shares of Preferred Stock to be issued to holder
Y = the number of shares of Preferred Stock purchasable under this
Warrant
A = the fair market value of one share of the Company's Preferred
Stock
B = Warrant Price (as adjusted to the date of such calculations)
2
<PAGE>
(b) For purposes of this Section, fair market value of one share
of the Company's Preferred Stock shall mean the fair market value of the number
of shares of Common Stock into which such share of Preferred Stock could then be
converted, based on the average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on the Nasdaq National Market or any exchange on which the
Common Stock is listed, whichever is applicable, as published in the Eastern
Edition of The Wall Street Journal for the ten trading days prior to the date of
-----------------------
determination of fair market value. If the Common Stock is not traded Over-The-
Counter or on such market or exchange, the fair market value of the Company's
Preferred Stock will be the price per share which the Company could obtain from
a willing buyer for shares sold by the Company from authorized but unissued
shares, as determined by the Company's Board of Directors in good faith.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
--------------------------------------
upon the exercise of the rights represented by this Warrant and Preferred Stock,
and the Common Stock issued upon conversion of the Preferred Stock (the
"Conversion Shares") will, upon issuance, be fully paid and nonassessable.
During the period within which the rights represented by the Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of issuance upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Preferred Stock to provide for the
exercise of the right represented by this Warrant, and the number of Conversion
Shares to provide for the conversion of the Preferred Stock into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant, including without limitation conversion of Preferred Stock to Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance reasonably satisfactory to the holder of this
Warrant) providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Preferred Stock. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this paragraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any time
-------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Preferred Stock,
3
<PAGE>
the Warrant Price and the number of Shares issuable upon exercise hereof shall
be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this Warrant
---------------
is outstanding and unexpired shall pay a dividend payable in shares of Preferred
Stock or Common Stock or other securities exercisable for or convertible into
shares of Common Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
(assuming the conversion, exchange or exercise of all securities of the Company
which are convertible, exchangeable or exercisable) ("Fully Diluted Common
Stock"), and (b) the denominator of which shall be the total number of shares of
Fully Diluted Common Stock outstanding immediately after such dividend or
distribution, and the number of Shares subject to this Warrant shall be
proportionately adjusted. Notwithstanding the foregoing, there shall be no
adjustment, pursuant to this Section, to the Warrant Price, or the number of
shares for which this Warrant is exercisable, if the holder shall have been
afforded an antidilution adjustment, in respect of the issuance of securities,
pursuant to the Preferred Stock provisions of the Company's Articles of
Incorporation; it being the intent of the parties that the holder shall not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(d) Dilutive Issuances. If and whenever the Company should issue
------------------
shares of its Preferred Stock or Common Stock or other securities exercisable
for or convertible into shares of Common Stock at a price per share less than
the Warrant Price, as adjusted for stock splits, combinations, dividends and
recapitalizations pursuant to this Section 4, in effect immediately prior to
such issuance (other than shares issued or issuable to the officers or directors
of or consultants to the Company issued pursuant to a stock option or purchase
plan or similar arrangement), then the Warrant Price shall be adjusted to an
amount (calculated to the nearest cent) determined by dividing (1) the sum of
(A) the total number of shares of Fully Diluted Common Stock outstanding
immediately prior to such issuance multiplied by the then effective Warrant
Price and (B) the value of the consideration received by the Company upon such
issuance as determined by the Board of Directors by (2) the total number of
shares of Fully Diluted Common Stock outstanding immediately after such
issuance. The holder of the Warrant shall thereafter be entitled to purchase, at
the Warrant Price resulting from such adjustment, the number of shares of
Preferred Stock (calculated to the nearest whole share) obtained by multiplying
the Warrant Price in effect immediately prior to such adjustment by the number
of shares of Fully Diluted Common Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment. For the purposes of this paragraph
(d), the consideration received for securities convertible into or exercisable
or exchangeable for the Common Stock shall be deemed to include the minimum
aggregate amount payable upon conversion, exercise or exchange of such
securities. In the event the right to convert, exercise or exchange such
securities expires unexercised, the Warrant Price of shares issuable upon the
exercise hereof shall be readjusted accordingly. Notwithstanding the foregoing,
there shall be no adjustment, pursuant to this Section, to the Warrant Price, or
the number of shares for which this Warrant is exercisable, if the holder shall
have been afforded an antidilution adjustment, in respect of the issuance of
securities, pursuant to the Preferred Stock provisions of the Company's Articles
of
4
<PAGE>
Incorporation; it being the intent of the parties that the holder not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(e) No Impairment. The Company will not, by amendment of its Articles
-------------
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 Company, 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 rights of the holder of this Warrant against
impairment.
(f) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (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.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
---------------------
pursuant to the provisions hereof, the Company shall within thirty (30) days
after such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
-------------------------------------------------------------------
Stock.
- -----
(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, the shares of Preferred Stock to be
issued upon exercise hereof and the Conversion Shares are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant, any shares of Preferred Stock to be issued upon exercise hereof,
or any Conversion Shares except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). This Warrant
and all shares of Common Stock issued upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
5
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO SALE, TRANSFER
OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED OR (iii) RECEIPT OF OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer,
---------------------------------
sale or other disposition of this Warrant, or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant or any Conversion Shares prior
to registration of such shares, the holder hereof and each subsequent holder of
the Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Act as then in effect or any federal or state law then
in effect) of this Warrant or such shares of Preferred Stock or such Conversion
Shares and indicating whether or not under the Act certificates for this Warrant
or such shares of Preferred Stock or the Conversion Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to insure compliance with the Act. Each
certificate representing this Warrant or the shares of Preferred Stock or
Conversion Shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Act, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to insure
compliance with the Act. The Company may issue stop transfer instructions to its
transfer agent in connection with the foregoing restrictions.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise thereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Registration Rights. Upon exercise of this Warrant the holder shall
-------------------
have and be entitled to exercise, together with all other holders of Registrable
Securities possessing registration rights under that certain Registration Rights
Agreement, of even date herewith, between the Company and the parties who have
executed the counterpart signature pages thereto or are otherwise bound thereby
(the "Registration Rights Agreement"), the rights of registration granted under
the Registration Rights Agreement to Registrable Securities with respect to the
shares of common stock issuable upon conversion of the Series A Preferred Stock
issuable upon exercise of this Warrant. By its receipt of this Warrant, holder
agrees to be bound by the Registration Rights Agreement.
6
<PAGE>
10. Representations and Warranties. This Warrant is issued and delivered
------------------------------
on the basis of the following:
(a) this Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms; and
(b) the Preferred Stock issuable upon the exercise of this Warrant
and the Conversion Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor on the signature page of this Warrant.
13. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of North Carolina
PARADIGM GENETICS INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
Date: February ____, 1998
7
<PAGE>
EXHIBIT A
---------
Notice of Exercise
To:
1. The undersigned hereby elects to purchase _________ shares of Series A
Preferred Stock of Paradigm Genetics Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
____________________________
(Name)
____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
__________________________________
(Signature)
_________________
(Date)
8
<PAGE>
EXHIBIT A-1
-----------
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-______, filed _____________, 19___, the undersigned hereby
elects to purchase _____________ shares of Series A Preferred Stock of the
Company (or such lesser number of shares as may be sold on behalf of the
undersigned at the Closing), and to convert such shares into ______ shares of
Common Stock pursuant to the terms of the attached Warrant and of the Articles
of Incorporation of the Company.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____ shares of Common Stock.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $______________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
_________________________________
(Signature)
______________________
(Date)
9
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION OF
THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
PARADIGM GENETICS INC.
WARRANT TO PURCHASE
SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
----------------------------------------------
Expires February 12, 2008
THIS CERTIFIES THAT, for value received, Intersouth Partners III, L.P. is
entitled to subscribe for and purchase Thirty-One Thousand Two Hundred and Fifty
(31,250) shares (as adjusted pursuant to the provisions hereof, the "Shares") of
the fully paid and nonassessable Series A Preferred Stock, $.01 par value, of
Paradigm Genetics Inc., a North Carolina corporation (the "Company"), at a price
per share of $0.80 (such price and such other price as shall result, from time
to time, from adjustments specified herein is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, the term "Preferred Stock" shall mean the Company's
presently authorized Series A Preferred Stock, and any stock into or for which
such Preferred Stock may hereafter be converted; the term "Common Stock" shall
mean the Company's presently authorized Common Stock, and any stock into or for
which Common Stock may hereafter be converted or exchanged, in either case
pursuant to the Articles of Incorporation of the Company as from time to time
amended as provided by law and in such Articles; and the term "Grant Date" shall
mean February 12, 1998.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from and after the Grant
Date and prior to the earlier of the tenth annual anniversary date of the Grant
Date or the fifth annual anniversary of the consummation of the Company's
initial public of its Common Stock, at a public offering price equal to or
exceeding $10.00 per share (as adjusted for any stock dividends, combinations,
splits or the like with respect to such shares) and the aggregate gross proceeds
to the Company and/or any selling stockholders of which equal or exceed
$20,000,000.
<PAGE>
2. Method of Exercise; Net Issue Exercise.
--------------------------------------
2.1 Method of Exercise; Payment; Issuance of New Warrant. The
----------------------------------------------------
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
---------
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
-----------
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days of receipt of such notice and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
------------------
(a) In lieu of exercising this Warrant, the holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
the holder a number of shares of the Company's Preferred Stock computed using
the following formula:
X=Y(A-B)
------
A
Where:
X = the number of shares of Preferred Stock to be issued to holder
Y = the number of shares of Preferred Stock purchasable under this
Warrant
A = the fair market value of one share of the Company's Preferred
Stock
B = Warrant Price (as adjusted to the date of such calculations)
2
<PAGE>
(b) For purposes of this Section, fair market value of one share
of the Company's Preferred Stock shall mean the fair market value of the number
of shares of Common Stock into which such share of Preferred Stock could then be
converted, based on the average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on the Nasdaq National Market or any exchange on which the
Common Stock is listed, whichever is applicable, as published in the Eastern
Edition of The Wall Street Journal for the ten trading days prior to the date of
-----------------------
determination of fair market value. If the Common Stock is not traded Over-The-
Counter or on such market or exchange, the fair market value of the Company's
Preferred Stock will be the price per share which the Company could obtain from
a willing buyer for shares sold by the Company from authorized but unissued
shares, as determined by the Company's Board of Directors in good faith.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
---------------------------------------
upon the exercise of the rights represented by this Warrant and Preferred Stock,
and the Common Stock issued upon conversion of the Preferred Stock (the
"Conversion Shares") will, upon issuance, be fully paid and nonassessable.
During the period within which the rights represented by the Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of issuance upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Preferred Stock to provide for the
exercise of the right represented by this Warrant, and the number of Conversion
Shares to provide for the conversion of the Preferred Stock into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant, including without limitation conversion of Preferred Stock to Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance reasonably satisfactory to the holder of this
Warrant) providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Preferred Stock. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this paragraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any time
-------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Preferred Stock,
3
<PAGE>
the Warrant Price and the number of Shares issuable upon exercise hereof shall
be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall pay a dividend payable in shares of Preferred
Stock or Common Stock or other securities exercisable for or convertible into
shares of Common Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
(assuming the conversion, exchange or exercise of all securities of the Company
which are convertible, exchangeable or exercisable) ("Fully Diluted Common
Stock"), and (b) the denominator of which shall be the total number of shares of
Fully Diluted Common Stock outstanding immediately after such dividend or
distribution, and the number of Shares subject to this Warrant shall be
proportionately adjusted. Notwithstanding the foregoing, there shall be no
adjustment, pursuant to this Section, to the Warrant Price, or the number of
shares for which this Warrant is exercisable, if the holder shall have been
afforded an antidilution adjustment, in respect of the issuance of securities,
pursuant to the Preferred Stock provisions of the Company's Articles of
Incorporation; it being the intent of the parties that the holder shall not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(d) Dilutive Issuances. If and whenever the Company should issue
------------------
shares of its Preferred Stock or Common Stock or other securities exercisable
for or convertible into shares of Common Stock at a price per share less than
the Warrant Price, as adjusted for stock splits, combinations, dividends and
recapitalizations pursuant to this Section 4, in effect immediately prior to
such issuance (other than shares issued or issuable to the officers or directors
of or consultants to the Company issued pursuant to a stock option or purchase
plan or similar arrangement), then the Warrant Price shall be adjusted to an
amount (calculated to the nearest cent) determined by dividing (1) the sum of
(A) the total number of shares of Fully Diluted Common Stock outstanding
immediately prior to such issuance multiplied by the then effective Warrant
Price and (B) the value of the consideration received by the Company upon such
issuance as determined by the Board of Directors by (2) the total number of
shares of Fully Diluted Common Stock outstanding immediately after such
issuance. The holder of the Warrant shall thereafter be entitled to purchase, at
the Warrant Price resulting from such adjustment, the number of shares of
Preferred Stock (calculated to the nearest whole share) obtained by multiplying
the Warrant Price in effect immediately prior to such adjustment by the number
of shares of Fully Diluted Common Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment. For the purposes of this paragraph
(d), the consideration received for securities convertible into or exercisable
or exchangeable for the Common Stock shall be deemed to include the minimum
aggregate amount payable upon conversion, exercise or exchange of such
securities. In the event the right to convert, exercise or exchange such
securities expires unexercised, the Warrant Price of shares issuable upon the
exercise hereof shall be readjusted accordingly. Notwithstanding the foregoing,
there shall be no adjustment, pursuant to this Section, to the Warrant Price, or
the number of shares for which this Warrant is exercisable, if the holder shall
have been afforded an antidilution adjustment, in respect of the issuance of
securities, pursuant to the Preferred Stock provisions of the Company's Articles
of
4
<PAGE>
Incorporation; it being the intent of the parties that the holder not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(e) No Impairment. The Company will not, by amendment of its Articles
-------------
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 Company, 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 rights of the holder of this Warrant against
impairment.
(f) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (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.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
---------------------
pursuant to the provisions hereof, the Company shall within thirty (30) days
after such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
-------------------------------------------------------------------
Stock.
- -----
(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, the shares of Preferred Stock to be
issued upon exercise hereof and the Conversion Shares are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant, any shares of Preferred Stock to be issued upon exercise hereof,
or any Conversion Shares except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). This Warrant
and all shares of Common Stock issued upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
5
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO SALE, TRANSFER
OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED OR (iii) RECEIPT OF OTHER EVIDENCE
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer,
---------------------------------
sale or other disposition of this Warrant, or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant or any Conversion Shares prior
to registration of such shares, the holder hereof and each subsequent holder of
the Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Act as then in effect or any federal or state law then
in effect) of this Warrant or such shares of Preferred Stock or such Conversion
Shares and indicating whether or not under the Act certificates for this Warrant
or such shares of Preferred Stock or the Conversion Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to insure compliance with the Act. Each
certificate representing this Warrant or the shares of Preferred Stock or
Conversion Shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Act, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to insure
compliance with the Act. The Company may issue stop transfer instructions to its
transfer agent in connection with the foregoing restrictions.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise thereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Registration Rights. Upon exercise of this Warrant the holder shall
-------------------
have and be entitled to exercise, together with all other holders of Registrable
Securities possessing registration rights under that certain Registration Rights
Agreement, of even date herewith, between the Company and the parties who have
executed the counterpart signature pages thereto or are otherwise bound thereby
(the "Registration Rights Agreement"), the rights of registration granted under
the Registration Rights Agreement to Registrable Securities with respect to the
shares of common stock issuable upon conversion of the Series A Preferred Stock
issuable upon exercise of this Warrant. By its receipt of this Warrant, holder
agrees to be bound by the Registration Rights Agreement.
6
<PAGE>
10. Representations and Warranties. This Warrant is issued and delivered
------------------------------
on the basis of the following:
(a) this Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms; and
(b) the Preferred Stock issuable upon the exercise of this Warrant
and the Conversion Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor on the signature page of this Warrant.
13. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of North Carolina
PARADIGM GENETICS INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
Date: February ____, 1998
7
<PAGE>
EXHIBIT A
---------
Notice of Exercise
To:
1. The undersigned hereby elects to purchase _________ shares of Series A
Preferred Stock of Paradigm Genetics Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
____________________________
(Name)
____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
__________________________________
(Signature)
_________________
(Date)
8
<PAGE>
EXHIBIT A-1
-----------
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-______, filed _____________, 19___, the undersigned hereby
elects to purchase _____________ shares of Series A Preferred Stock of the
Company (or such lesser number of shares as may be sold on behalf of the
undersigned at the Closing), and to convert such shares into ______ shares of
Common Stock pursuant to the terms of the attached Warrant and of the Articles
of Incorporation of the Company.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____ shares of Common Stock.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $______________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
_________________________________
(Signature)
______________________
(Date)
9
<PAGE>
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION OF
THIS WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii) AN
OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
PARADIGM GENETICS INC.
WARRANT TO PURCHASE
SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
----------------------------------------------
Expires February 12, 2008
THIS CERTIFIES THAT, for value received, Intersouth Partners IV, L.P. is
entitled to subscribe for and purchase Thirty-One Thousand Two Hundred and Fifty
(31,250) shares (as adjusted pursuant to the provisions hereof, the "Shares") of
the fully paid and nonassessable Series A Preferred Stock, $.01 par value, of
Paradigm Genetics Inc., a North Carolina corporation (the "Company"), at a price
per share of $0.80 (such price and such other price as shall result, from time
to time, from adjustments specified herein is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, the term "Preferred Stock" shall mean the Company's
presently authorized Series A Preferred Stock, and any stock into or for which
such Preferred Stock may hereafter be converted; the term "Common Stock" shall
mean the Company's presently authorized Common Stock, and any stock into or for
which Common Stock may hereafter be converted or exchanged, in either case
pursuant to the Articles of Incorporation of the Company as from time to time
amended as provided by law and in such Articles; and the term "Grant Date" shall
mean February 12, 1998.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from and after the Grant
Date and prior to the earlier of the tenth annual anniversary date of the Grant
Date or the fifth annual anniversary of the consummation of the Company's
initial public of its Common Stock, at a public offering price equal to or
exceeding $10.00 per share (as adjusted for any stock dividends, combinations,
splits or the like with respect to such shares) and the aggregate gross proceeds
to the Company and/or any selling stockholders of which equal or exceed
$20,000,000.
<PAGE>
2. Method of Exercise; Net Issue Exercise.
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2.1 Method of Exercise; Payment; Issuance of New Warrant. The
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purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
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office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
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principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days of receipt of such notice and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
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(a) In lieu of exercising this Warrant, the holder may elect to
receive shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election in which event the Company shall issue to
the holder a number of shares of the Company's Preferred Stock computed using
the following formula:
X=Y(A-B)
------
A
Where:
X = the number of shares of Preferred Stock to be issued to holder
Y = the number of shares of Preferred Stock purchasable under this
Warrant
A = the fair market value of one share of the Company's Preferred
Stock
B = Warrant Price (as adjusted to the date of such calculations)
2
<PAGE>
(b) For purposes of this Section, fair market value of one share
of the Company's Preferred Stock shall mean the fair market value of the number
of shares of Common Stock into which such share of Preferred Stock could then be
converted, based on the average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on the Nasdaq National Market or any exchange on which the
Common Stock is listed, whichever is applicable, as published in the Eastern
Edition of The Wall Street Journal for the ten trading days prior to the date of
-----------------------
determination of fair market value. If the Common Stock is not traded Over-The-
Counter or on such market or exchange, the fair market value of the Company's
Preferred Stock will be the price per share which the Company could obtain from
a willing buyer for shares sold by the Company from authorized but unissued
shares, as determined by the Company's Board of Directors in good faith.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
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upon the exercise of the rights represented by this Warrant and Preferred Stock,
and the Common Stock issued upon conversion of the Preferred Stock (the
"Conversion Shares") will, upon issuance, be fully paid and nonassessable.
During the period within which the rights represented by the Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of issuance upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Preferred Stock to provide for the
exercise of the right represented by this Warrant, and the number of Conversion
Shares to provide for the conversion of the Preferred Stock into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
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of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant, including without limitation conversion of Preferred Stock to Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance reasonably satisfactory to the holder of this
Warrant) providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Preferred Stock. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this paragraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any time
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while this Warrant remains outstanding and unexpired shall subdivide or combine
its Preferred Stock,
3
<PAGE>
the Warrant Price and the number of Shares issuable upon exercise hereof shall
be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this Warrant
---------------
is outstanding and unexpired shall pay a dividend payable in shares of Preferred
Stock or Common Stock or other securities exercisable for or convertible into
shares of Common Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
(assuming the conversion, exchange or exercise of all securities of the Company
which are convertible, exchangeable or exercisable) ("Fully Diluted Common
Stock"), and (b) the denominator of which shall be the total number of shares of
Fully Diluted Common Stock outstanding immediately after such dividend or
distribution, and the number of Shares subject to this Warrant shall be
proportionately adjusted. Notwithstanding the foregoing, there shall be no
adjustment, pursuant to this Section, to the Warrant Price, or the number of
shares for which this Warrant is exercisable, if the holder shall have been
afforded an antidilution adjustment, in respect of the issuance of securities,
pursuant to the Preferred Stock provisions of the Company's Articles of
Incorporation; it being the intent of the parties that the holder shall not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(d) Dilutive Issuances. If and whenever the Company should issue
------------------
shares of its Preferred Stock or Common Stock or other securities exercisable
for or convertible into shares of Common Stock at a price per share less than
the Warrant Price, as adjusted for stock splits, combinations, dividends and
recapitalizations pursuant to this Section 4, in effect immediately prior to
such issuance (other than shares issued or issuable to the officers or directors
of or consultants to the Company issued pursuant to a stock option or purchase
plan or similar arrangement), then the Warrant Price shall be adjusted to an
amount (calculated to the nearest cent) determined by dividing (1) the sum of
(A) the total number of shares of Fully Diluted Common Stock outstanding
immediately prior to such issuance multiplied by the then effective Warrant
Price and (B) the value of the consideration received by the Company upon such
issuance as determined by the Board of Directors by (2) the total number of
shares of Fully Diluted Common Stock outstanding immediately after such
issuance. The holder of the Warrant shall thereafter be entitled to purchase, at
the Warrant Price resulting from such adjustment, the number of shares of
Preferred Stock (calculated to the nearest whole share) obtained by multiplying
the Warrant Price in effect immediately prior to such adjustment by the number
of shares of Fully Diluted Common Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment. For the purposes of this paragraph
(d), the consideration received for securities convertible into or exercisable
or exchangeable for the Common Stock shall be deemed to include the minimum
aggregate amount payable upon conversion, exercise or exchange of such
securities. In the event the right to convert, exercise or exchange such
securities expires unexercised, the Warrant Price of shares issuable upon the
exercise hereof shall be readjusted accordingly. Notwithstanding the foregoing,
there shall be no adjustment, pursuant to this Section, to the Warrant Price, or
the number of shares for which this Warrant is exercisable, if the holder shall
have been afforded an antidilution adjustment, in respect of the issuance of
securities, pursuant to the Preferred Stock provisions of the Company's Articles
of
4
<PAGE>
Incorporation; it being the intent of the parties that the holder not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(e) No Impairment. The Company will not, by amendment of its Articles
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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 Company, 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 rights of the holder of this Warrant against
impairment.
(f) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (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.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
---------------------
pursuant to the provisions hereof, the Company shall within thirty (30) days
after such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
-------------------------------------------------------------------
Stock.
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(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, the shares of Preferred Stock to be
issued upon exercise hereof and the Conversion Shares are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant, any shares of Preferred Stock to be issued upon exercise hereof,
or any Conversion Shares except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). This Warrant
and all shares of Common Stock issued upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
5
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NO SALE,
TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED
WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE
HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF
OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY
AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer,
---------------------------------
sale or other disposition of this Warrant, or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant or any Conversion Shares prior
to registration of such shares, the holder hereof and each subsequent holder of
the Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Act as then in effect or any federal or state law then
in effect) of this Warrant or such shares of Preferred Stock or such Conversion
Shares and indicating whether or not under the Act certificates for this Warrant
or such shares of Preferred Stock or the Conversion Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to insure compliance with the Act. Each
certificate representing this Warrant or the shares of Preferred Stock or
Conversion Shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Act, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to insure
compliance with the Act. The Company may issue stop transfer instructions to its
transfer agent in connection with the foregoing restrictions.
8. Rights as Shareholders; Information. No holder of this Warrant, as
----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise thereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Registration Rights. Upon exercise of this Warrant the holder shall
-------------------
have and be entitled to exercise, together with all other holders of Registrable
Securities possessing registration rights under that certain Registration Rights
Agreement, of even date herewith, between the Company and the parties who have
executed the counterpart signature pages thereto or are otherwise bound thereby
(the "Registration Rights Agreement"), the rights of registration granted under
the Registration Rights Agreement to Registrable Securities with respect to the
shares of common stock issuable upon conversion of the Series A Preferred Stock
issuable upon exercise of this Warrant. By its receipt of this Warrant, holder
agrees to be bound by the Registration Rights Agreement.
6
<PAGE>
10. Representations and Warranties. This Warrant is issued and delivered
------------------------------
on the basis of the following:
(a) this Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms; and
(b) the Preferred Stock issuable upon the exercise of this Warrant
and the Conversion Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
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to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor on the signature page of this Warrant.
13. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. Governing Law. This Warrant shall be construed and enforced in
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accordance with, and the rights of the parties shall be governed by, the laws of
the State of North Carolina
PARADIGM GENETICS INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
Date: February ____, 1998
7
<PAGE>
EXHIBIT A
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Notice of Exercise
To:
1. The undersigned hereby elects to purchase _________ shares of Series A
Preferred Stock of Paradigm Genetics Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
____________________________
(Name)
____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
__________________________________
(Signature)
_________________
(Date)
8
<PAGE>
EXHIBIT A-1
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Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-______, filed _____________, 19___, the undersigned hereby
elects to purchase _____________ shares of Series A Preferred Stock of the
Company (or such lesser number of shares as may be sold on behalf of the
undersigned at the Closing), and to convert such shares into ______ shares of
Common Stock pursuant to the terms of the attached Warrant and of the Articles
of Incorporation of the Company.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____ shares of Common Stock.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $______________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
_________________________________
(Signature)
______________________
(Date)
9
<PAGE>
EXHIBIT 10.47
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS
WARRANT OR SAID SHARES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii) RECEIPT OF OTHER
EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
PARADIGM GENETICS INC.
WARRANT TO PURCHASE
SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
----------------------------------------------
Expires February 12, 2008
THIS CERTIFIES THAT, for value received, Innotech Investments Limited is
entitled to subscribe for and purchase One Hundred Eighty-Seven Thousand Five
Hundred (187,500) shares (as adjusted pursuant to the provisions hereof, the
"Shares") of the fully paid and nonassessable Series A Preferred Stock, $.01 par
value, of Paradigm Genetics Inc., a North Carolina corporation (the "Company"),
at a price per share of $0.80 (such price and such other price as shall result,
from time to time, from adjustments specified herein is herein referred to as
the "Warrant Price"), subject to the provisions and upon the terms and
conditions hereinafter set forth. As used herein, the term "Preferred Stock"
shall mean the Company's presently authorized Series A Preferred Stock, and any
stock into or for which such Preferred Stock may hereafter be converted; the
term "Common Stock" shall mean the Company's presently authorized Common Stock,
and any stock into or for which Common Stock may hereafter be converted or
exchanged, in either case pursuant to the Articles of Incorporation of the
Company as from time to time amended as provided by law and in such Articles;
and the term "Grant Date" shall mean February 12, 1998.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from and after the Grant
Date and prior to the earlier of the tenth annual anniversary date of the Grant
Date or the fifth annual anniversary of the consummation of the Company's
initial public of its Common Stock, at a public offering price equal to or
exceeding $10.00 per share (as adjusted for any stock dividends, combinations,
splits or the like with respect to such shares) and the aggregate gross proceeds
to the Company and/or any selling stockholders of which equal or exceed
$20,000,000.
<PAGE>
2. Method of Exercise; Net Issue Exercise.
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2.1 Method of Exercise; Payment; Issuance of New Warrant. The
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purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, by either, at the election of
the holder hereof, (a) the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A duly executed) at the principal
---------
office of the Company and by the payment to the Company, by check, of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
-----------
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Common Stock shall be
issuable upon exercise of this Warrant shall be deemed to have become the
holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days of receipt of such notice and, unless this Warrant has
been fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
2.2 Net Issue Exercise.
------------------
(a) In lieu of exercising this Warrant, the holder may
elect to receive shares equal to the value of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with notice of such election in which event the Company
shall issue to the holder a number of shares of the Company's Preferred Stock
computed using the following formula:
X=Y(A-B)
------
A
Where:
X = the number of shares of Preferred Stock to be issued to holder
Y = the number of shares of Preferred Stock purchasable under this
Warrant
A = the fair market value of one share of the Company's Preferred
Stock
B = Warrant Price (as adjusted to the date of such calculations)
2
<PAGE>
(b) For purposes of this Section, fair market value of one share
of the Company's Preferred Stock shall mean the fair market value of the number
of shares of Common Stock into which such share of Preferred Stock could then be
converted, based on the average of the closing bid and asked prices of the
Company's Common Stock quoted in the Over-The-Counter Market Summary or the
closing price quoted on the Nasdaq National Market or any exchange on which the
Common Stock is listed, whichever is applicable, as published in the Eastern
Edition of The Wall Street Journal for the ten trading days prior to the date of
-----------------------
determination of fair market value. If the Common Stock is not traded Over-The-
Counter or on such market or exchange, the fair market value of the Company's
Preferred Stock will be the price per share which the Company could obtain from
a willing buyer for shares sold by the Company from authorized but unissued
shares, as determined by the Company's Board of Directors in good faith.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
---------------------------------------
upon the exercise of the rights represented by this Warrant and Preferred Stock,
and the Common Stock issued upon conversion of the Preferred Stock (the
"Conversion Shares") will, upon issuance, be fully paid and nonassessable.
During the period within which the rights represented by the Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of issuance upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Preferred Stock to provide for the
exercise of the right represented by this Warrant, and the number of Conversion
Shares to provide for the conversion of the Preferred Stock into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant, including without limitation conversion of Preferred Stock to Common
Stock (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant (in form and substance reasonably satisfactory to the holder of this
Warrant) providing that the holder of this Warrant shall have the right to
exercise such new Warrant and upon such exercise to receive, in lieu of each
share of Preferred Stock theretofore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Preferred Stock. Such new Warrant shall provide for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this paragraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.
(b) Subdivisions or Combination of Shares. If the Company at any time
-------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Preferred Stock,
3
<PAGE>
the Warrant Price and the number of Shares issuable upon exercise hereof shall
be proportionately adjusted.
(c) Stock Dividends. If the Company at any time while this Warrant
---------------
is outstanding and unexpired shall pay a dividend payable in shares of Preferred
Stock or Common Stock or other securities exercisable for or convertible into
shares of Common Stock (except any distribution specifically provided for in the
foregoing subparagraphs (a) and (b)), then the Warrant Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Warrant Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution
(assuming the conversion, exchange or exercise of all securities of the Company
which are convertible, exchangeable or exercisable) ("Fully Diluted Common
Stock"), and (b) the denominator of which shall be the total number of shares of
Fully Diluted Common Stock outstanding immediately after such dividend or
distribution, and the number of Shares subject to this Warrant shall be
proportionately adjusted. Notwithstanding the foregoing, there shall be no
adjustment, pursuant to this Section, to the Warrant Price, or the number of
shares for which this Warrant is exercisable, if the holder shall have been
afforded an antidilution adjustment, in respect of the issuance of securities,
pursuant to the Preferred Stock provisions of the Company's Articles of
Incorporation; it being the intent of the parties that the holder shall not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(d) Dilutive Issuances. If and whenever the Company should issue
------------------
shares of its Preferred Stock or Common Stock or other securities exercisable
for or convertible into shares of Common Stock at a price per share less than
the Warrant Price, as adjusted for stock splits, combinations, dividends and
recapitalizations pursuant to this Section 4, in effect immediately prior to
such issuance (other than shares issued or issuable to the officers or directors
of or consultants to the Company issued pursuant to a stock option or purchase
plan or similar arrangement), then the Warrant Price shall be adjusted to an
amount (calculated to the nearest cent) determined by dividing (1) the sum of
(A) the total number of shares of Fully Diluted Common Stock outstanding
immediately prior to such issuance multiplied by the then effective Warrant
Price and (B) the value of the consideration received by the Company upon such
issuance as determined by the Board of Directors by (2) the total number of
shares of Fully Diluted Common Stock outstanding immediately after such
issuance. The holder of the Warrant shall thereafter be entitled to purchase, at
the Warrant Price resulting from such adjustment, the number of shares of
Preferred Stock (calculated to the nearest whole share) obtained by multiplying
the Warrant Price in effect immediately prior to such adjustment by the number
of shares of Fully Diluted Common Stock issuable upon the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment. For the purposes of this paragraph
(d), the consideration received for securities convertible into or exercisable
or exchangeable for the Common Stock shall be deemed to include the minimum
aggregate amount payable upon conversion, exercise or exchange of such
securities. In the event the right to convert, exercise or exchange such
securities expires unexercised, the Warrant Price of shares issuable upon the
exercise hereof shall be readjusted accordingly. Notwithstanding the foregoing,
there shall be no adjustment, pursuant to this Section, to the Warrant Price, or
the number of shares for which this Warrant is exercisable, if the holder shall
have been afforded an antidilution adjustment, in respect of the issuance of
securities, pursuant to the Preferred Stock provisions of the Company's Articles
of
4
<PAGE>
Incorporation; it being the intent of the parties that the holder not be
afforded an antidilution adjustment under both this Warrant and the Articles of
Incorporation in respect of the same issuance of securities.
(e) No Impairment. The Company will not, by amendment of its Articles
-------------
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 Company, 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 rights of the holder of this Warrant against
impairment.
(f) Notices of Record Date. In the event of any taking by the Company
----------------------
of a record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any share of any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are entitled to
vote in connection with any proposed merger or consolidation of the Company with
or into any other corporation, or any proposed sale, lease or conveyance of all
or substantially all of the assets of the Company, or any proposed liquidation,
dissolution or winding up of the Company, the Company shall mail to the holder
of the Warrant, at least twenty (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.
5. Notice of Adjustments. Whenever the Warrant Price shall be adjusted
---------------------
pursuant to the provisions hereof, the Company shall within thirty (30) days
after such adjustment deliver a certificate signed by its chief financial
officer to the registered holder(s) hereof setting forth, in reasonable detail,
the event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the Warrant Price after giving effect
to such adjustment.
6. Fractional Shares. No fractional shares of Preferred Stock will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor upon the basis of the
Warrant Price then in effect.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
-------------------------------------------------------------------
Stock.
- -----
(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, the shares of Preferred Stock to be
issued upon exercise hereof and the Conversion Shares are being acquired for
investment and that such holder will not offer, sell or otherwise dispose of
this Warrant, any shares of Preferred Stock to be issued upon exercise hereof,
or any Conversion Shares except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). This Warrant
and all shares of Common Stock issued upon exercise of this Warrant (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
5
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. NO SALE, TRANSFER OR OTHER
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.
(b) Disposition of Warrant and Shares. With respect to any offer,
---------------------------------
sale or other disposition of this Warrant, or any shares of Preferred Stock
acquired pursuant to the exercise of this Warrant or any Conversion Shares prior
to registration of such shares, the holder hereof and each subsequent holder of
the Warrant agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition may be effected without registration or
qualification (under the Act as then in effect or any federal or state law then
in effect) of this Warrant or such shares of Preferred Stock or such Conversion
Shares and indicating whether or not under the Act certificates for this Warrant
or such shares of Preferred Stock or the Conversion Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to insure compliance with the Act. Each
certificate representing this Warrant or the shares of Preferred Stock or
Conversion Shares thus transferred (except a transfer pursuant to Rule 144)
shall bear a legend as to the applicable restrictions on transferability in
order to insure compliance with the Act, unless in the aforesaid opinion of
counsel for the holder, such legend is not required in order to insure
compliance with the Act. The Company may issue stop transfer instructions to its
transfer agent in connection with the foregoing restrictions.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise thereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Registration Rights. Upon exercise of this Warrant the holder shall
-------------------
have and be entitled to exercise, together with all other holders of Registrable
Securities possessing registration rights under that certain Registration Rights
Agreement, of even date herewith, between the Company and the parties who have
executed the counterpart signature pages thereto or are otherwise bound thereby
(the "Registration Rights Agreement"), the rights of registration granted under
the Registration Rights Agreement to Registrable Securities with respect to the
shares of common stock issuable upon conversion of the Series A Preferred Stock
issuable upon exercise of this Warrant. By its receipt of this Warrant, holder
agrees to be bound by the Registration Rights Agreement.
6
<PAGE>
10. Representations and Warranties. This Warrant is issued and delivered
------------------------------
on the basis of the following:
(a) this Warrant has been duly authorized and executed by the Company
and when delivered will be the valid and binding obligation of the Company
enforceable in accordance with its terms; and
(b) the Preferred Stock issuable upon the exercise of this Warrant
and the Conversion Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable.
11. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. Notices. Any notice, request or other document required or permitted
-------
to be given or delivered to the holder hereof or the Company shall be delivered,
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor on the signature page of this Warrant.
13. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
14. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of North Carolina
PARADIGM GENETICS INC.
By:__________________________________
Name:________________________________
Title:_______________________________
Address: 85 Alexander Drive
Suite 100
Research Triangle Park, NC 27709
Date: February ____, 1998
7
<PAGE>
EXHIBIT A
---------
Notice of Exercise
To:
1. The undersigned hereby elects to purchase _________ shares of Series A
Preferred Stock of Paradigm Genetics Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
____________________________
(Name)
____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
__________________________________
(Signature)
_________________
(Date)
8
<PAGE>
EXHIBIT A-1
-----------
Notice of Exercise
To:
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-______, filed _____________, 19___, the undersigned hereby
elects to purchase _____________ shares of Series A Preferred Stock of the
Company (or such lesser number of shares as may be sold on behalf of the
undersigned at the Closing), and to convert such shares into ______ shares of
Common Stock pursuant to the terms of the attached Warrant and of the Articles
of Incorporation of the Company.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such _____ shares of Common Stock.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $______________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
_________________________________
(Signature)
______________________
(Date)
9
<PAGE>
EXHIBIT 10.48
-------------
PARADIGM GENETICS, INC.
2000 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK OPTION PLAN
1. DEFINITIONS.
-----------
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this PARADIGM GENETICS, INC. 2000 EMPLOYEE,
DIRECTOR AND CONSULTANT STOCK OPTION PLAN, have the following meanings:
Administrator means the Board of Directors, unless it has delegated
-------------
power to act on its behalf to the Committee, in which case the
Administrator means the Committee.
Affiliate means a corporation which, for purposes of Section 424 of the
---------
Code, is a parent or subsidiary of the Company, direct or indirect.
Board of Directors means the Board of Directors of the Company.
------------------
Code means the United States Internal Revenue Code of 1986, as amended.
----
Committee means the committee of the Board of Directors to which the Board
---------
of Directors has delegated power to act under or pursuant to the provisions
of the Plan.
Common Stock means shares of the Company's common stock, $.01 par value per
------------
share.
Company means PARADIGM GENETICS, INC., a North Carolina corporation.
-------
Disability or Disabled means permanent and total disability as defined in
---------- --------
Section 22(e)(3) of the Code.
Fair Market Value of a Share of Common Stock means:
-----------------
(1) If the Common Stock is listed on a national securities exchange or
traded in the over-the-counter market and sales prices are regularly
reported for the Common Stock, the closing or last price of the Common
Stock on the Composite Tape or other comparable reporting system for
the trading day immediately preceding the applicable date;
(2) If the Common Stock is not traded on a national securities exchange
but is traded on the over-the-counter market, if sales prices are not
regularly reported for the Common Stock for the trading day referred
to in clause (1), and if bid and asked prices for the Common Stock are
regularly reported, the mean between the
<PAGE>
bid and the asked price for the Common Stock at the close of trading in the
over-the-counter market for the trading day on which Common Stock was
traded immediately preceding the applicable date; and
(3) If the Common Stock is neither listed on a national securities
exchange nor traded in the over-the-counter market, such value as the
Administrator, in good faith, shall determine.
ISO means an option meant to qualify as an incentive stock option under
---
Section 422 of the Code.
Key Employee means an employee of the Company or of an Affiliate
------------
(including, without limitation, an employee who is also serving as an
officer or director of the Company or of an Affiliate), designated by
the Administrator to be eligible to be granted one or more Options
under the Plan.
Non-Qualified Option means an option which is not intended to qualify as an
--------------------
ISO.
Option means an ISO or Non-Qualified Option granted under the Plan.
------
Option Agreement means an agreement between the Company and a Participant
----------------
delivered pursuant to the Plan, in such form as the Administrator shall
approve.
Participant means a Key Employee, director or consultant to whom one or
-----------
more Options are granted under the Plan. As used herein, "Participant"
shall include "Participant's Survivors" where the context requires.
Plan means this PARADIGM GENETICS, INC. 2000 Employee, Director and
----
Consultant Stock Option Plan.
Shares means shares of the Common Stock as to which Options have been or
------
may be granted under the Plan or any shares of capital stock into which the
Shares are changed or for which they are exchanged within the provisions of
Paragraph 3 of the Plan. The Shares issued upon exercise of Options granted
under the Plan may be authorized and unissued shares or shares held by the
Company in its treasury, or both.
Survivors means a deceased Participant's legal representatives and/or any
---------
person or persons who acquired the Participant's rights to an Option by
will or by the laws of descent and distribution.
2. PURPOSES OF THE PLAN.
--------------------
The Plan is intended to encourage ownership of Shares by Key Employees and
directors of and certain consultants to the Company in order to attract such
people, to induce them to work
2
<PAGE>
for the benefit of the Company or of an Affiliate and to provide additional
incentive for them to promote the success of the Company or of an Affiliate. The
Plan provides for the granting of ISOs and Non-Qualified Options.
3. SHARES SUBJECT TO THE PLAN.
--------------------------
The number of Shares which may be issued from time to time pursuant to this
Plan shall be 1,800,000, or the equivalent of such number of Shares after the
Administrator, in its sole discretion, has interpreted the effect of any stock
split, stock dividend, combination, recapitalization or similar transaction in
accordance with Paragraph 16 of the Plan.
If an Option ceases to be "outstanding", in whole or in part, the Shares
which were subject to such Option shall be available for the granting of other
Options under the Plan. Any Option shall be treated as "outstanding" until such
Option is exercised in full, or terminates or expires under the provisions of
the Plan, or by agreement of the parties to the pertinent Option Agreement.
4. ADMINISTRATION OF THE PLAN.
--------------------------
The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to the Committee, in which
case the Committee shall be the Administrator. Subject to the provisions of the
Plan, the Administrator is authorized to:
a. Interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems
necessary or advisable for the administration of the Plan;
b. Determine which employees of the Company or of an Affiliate shall be
designated as Key Employees and which of the Key Employees, directors
and consultants shall be granted Options;
c. Determine the number of Shares for which an Option or Options shall be
granted, provided, however, that in no event shall Options to purchase
more than 500,000 Shares be granted to any Participant in any fiscal
year; and
d. Specify the terms and conditions upon which an Option or Options may
be granted;
provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs. Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Option granted under it
shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.
3
<PAGE>
5. ELIGIBILITY FOR PARTICIPATION.
-----------------------------
The Administrator will, in its sole discretion, name the Participants in the
Plan, provided, however, that each Participant must be a Key Employee, director
or consultant of the Company or of an Affiliate at the time an Option is
granted. Notwithstanding the foregoing, the Administrator may authorize the
grant of an Option to a person not then an employee, director or consultant of
the Company or of an Affiliate; provided, however, that the actual grant of such
Option shall be conditioned upon such person becoming eligible to become a
Participant at or prior to the time of the delivery of the Option Agreement
evidencing such Option. ISOs may be granted only to Key Employees. Non-
Qualified Options may be granted to any Key Employee, director or consultant of
the Company or an Affiliate. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him or her from,
participation in any other grant of Options.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant. The Administrator may provide that Options be
granted subject to such terms and conditions, consistent with the terms and
conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.
A. Non-Qualified Options: Each Option intended to be a Non-Qualified
---------------------
Option shall be subject to the terms and conditions which the
Administrator determines to be appropriate and in the best interest of
the Company, subject to the following minimum standards for any such
Non-Qualified Option:
a. Option Price: Each Option Agreement shall state the option price
(per share) of the Shares covered by each Option, which option
price shall be determined by the Administrator but shall not be
less than the par value per share of Common Stock;
b. Each Option Agreement shall state the number of Shares to which
it pertains;
c. Each Option Agreement shall state the date or dates on which it
first is exercisable and the date after which it may no longer be
exercised, and may provide that the Option rights accrue or
become exercisable in installments over a period of months or
years, or upon the occurrence of certain conditions or the
attainment of stated goals or events; and
4
<PAGE>
d. Exercise of any Option may be conditioned upon the Participant's
execution of a Share purchase agreement in form satisfactory to
the Administrator providing for certain protections for the
Company and its other shareholders, including requirements that:
i. The Participant's or the Participant's Survivors' right to
sell or transfer the Shares may be restricted; and
ii. The Participant or the Participant's Survivors may be
required to execute letters of investment intent and must
also acknowledge that the Shares will bear legends noting
any applicable restrictions.
B. ISOs: Each Option intended to be an ISO shall be issued only to a Key
----
Employee and be subject to the following terms and conditions, with
such additional restrictions or changes as the Administrator
determines are appropriate but not in conflict with Section 422 of the
Code and relevant regulations and rulings of the Internal Revenue
Service:
a. Minimum standards: The ISO shall meet the minimum standards
required of Non-Qualified Options, as described in Paragraph 6(A)
above, except clause (a) thereunder.
b. Option Price: Immediately before the Option is granted, if the
Participant owns, directly or by reason of the applicable
attribution rules in Section 424(d) of the Code:
i. Ten percent (10%) or less of the total combined voting power
-------
of all classes of share capital of the Company or an
Affiliate, the Option price per share of the Shares covered
by each Option shall not be less than one hundred percent
(100%) of the Fair Market Value per share of the Shares on
the date of the grant of the Option.
ii. More than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an
Affiliate, the Option price per share of the Shares covered
by each Option shall not be less than one hundred ten
percent (110%) of the said Fair Market Value on the date of
grant.
c. Term of Option: For Participants who own
i. Ten percent (10%) or less of the total combined voting power
-------
of all classes of share capital of the Company or an
Affiliate, each Option shall terminate not more than ten
(10) years from the date of the grant or at such earlier
time as the Option Agreement may provide.
5
<PAGE>
ii. More than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or an
Affiliate, each Option shall terminate not more than five
(5) years from the date of the grant or at such earlier time
as the Option Agreement may provide.
d. Limitation on Yearly Exercise: The Option Agreements shall
restrict the amount of Options which may be exercisable in any
calendar year (under this or any other ISO plan of the Company or
an Affiliate) so that the aggregate Fair Market Value (determined
at the time each ISO is granted) of the stock with respect to
which ISOs are exercisable for the first time by the Participant
in any calendar year does not exceed one hundred thousand dollars
($100,000), provided that this subparagraph (d) shall have no
force or effect if its inclusion in the Plan is not necessary for
Options issued as ISOs to qualify as ISOs pursuant to Section
422(d) of the Code.
7. EXERCISE OF OPTIONS AND ISSUE OF SHARES.
---------------------------------------
An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is being exercised,
and upon compliance with any other condition(s) set forth in the Option
Agreement. Such written notice shall be signed by the person exercising the
Option, shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the Plan or the
Option Agreement. Payment of the purchase price for the Shares as to which such
Option is being exercised shall be made (a) in United States dollars in cash or
by check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock having a Fair Market Value equal as of the date of the
exercise to the cash exercise price of the Option, or (c) at the discretion of
the Administrator, by having the Company retain from the shares otherwise
issuable upon exercise of the Option, a number of shares having a Fair Market
Value equal as of the date of exercise to the exercise price of the Option, or
(d) at the discretion of the Administrator, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the applicable Federal rate, as defined in Section 1274(d) of
the Code, or (e) at the discretion of the Administrator, in accordance with a
cashless exercise program established with a securities brokerage firm, and
approved by the Administrator, or (f) at the discretion of the Administrator, by
any combination of (a), (b), (c), (d) and (e) above. Notwithstanding the
foregoing, the Administrator shall accept only such payment on exercise of an
ISO as is permitted by Section 422 of the Code.
The Company shall then reasonably promptly deliver the Shares as to which
such Option was exercised to the Participant (or to the Participant's Survivors,
as the case may be). In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the Shares may be delayed by the
Company in order to comply with any law or regulation (including, without
limitation, state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance. The Shares
shall, upon
6
<PAGE>
delivery, be evidenced by an appropriate certificate or certificates for fully
paid, non-assessable Shares.
The Administrator shall have the right to accelerate the date of exercise of
any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 19) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as described in Paragraph
6.B.d.
The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse to the
Participant, and (iii) any such amendment of any ISO shall be made only after
the Administrator, after consulting the counsel for the Company, determines
whether such amendment would constitute a "modification" of any Option which is
an ISO (as that term is defined in Section 424(h) of the Code) or would cause
any adverse tax consequences for the holder of such ISO.
8. RIGHTS AS A SHAREHOLDER.
-----------------------
No Participant to whom an Option has been granted shall have rights as a
shareholder with respect to any Shares covered by such Option, except after due
exercise of the Option and tender of the full purchase price for the Shares
being purchased pursuant to such exercise and registration of the Shares in the
Company's share register in the name of the Participant.
9. ASSIGNABILITY AND TRANSFERABILITY OF OPTIONS.
--------------------------------------------
By its terms, an Option granted to a Participant shall not be transferable by
the Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as otherwise determined by the Administrator and set forth
in the applicable Option Agreement. The designation of a beneficiary of an
Option by a Participant shall not be deemed a transfer prohibited by this
Paragraph. Except as provided above, an Option shall be exercisable, during the
Participant's lifetime, only by such Participant (or by his or her legal
representative) and shall not be assigned, pledged or hypothecated in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process. Any attempted transfer, assignment,
pledge, hypothecation or other disposition of any Option or of any rights
granted thereunder contrary to the provisions of this Plan, or the levy of any
attachment or similar process upon an Option, shall be null and void.
7
<PAGE>
10. EFFECT OF TERMINATION OF SERVICE OTHER THAN "FOR CAUSE" OR DEATH OR
-------------------------------------------------------------------
DISABILITY.
----------
Except as otherwise provided in the pertinent Option Agreement, in the
event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate before the Participant has
exercised all Options, the following rules apply:
a. A Participant who ceases to be an employee, director or consultant of
the Company or of an Affiliate (for any reason other than termination
"for cause", Disability, or death for which events there are special
rules in Paragraphs 11, 12, and 13, respectively), may exercise any
Option granted to him or her to the extent that the Option is
exercisable on the date of such termination of service, but only
within such term as the Administrator has designated in the pertinent
Option Agreement.
b. Except as provided in Subparagraph (c) below, or Paragraph 12 or 13,
in no event may an Option Agreement provide, if the Option is intended
to be an ISO, that the time for exercise be later than three (3)
months after the Participant's termination of employment.
c. The provisions of this Paragraph, and not the provisions of Paragraph
12 or 13, shall apply to a Participant who subsequently becomes
Disabled or dies after the termination of employment, director status
or consultancy, provided, however, in the case of a Participant's
Disability or death within three (3) months after the termination of
employment, director status or consultancy, the Participant or the
Participant's Survivors may exercise the Option within one (1) year
after the date of the Participant's termination of employment, but in
no event after the date of expiration of the term of the Option.
d. Notwithstanding anything herein to the contrary, if subsequent to a
Participant's termination of employment, termination of director
status or termination of consultancy, but prior to the exercise of an
Option, the Board of Directors determines that, either prior or
subsequent to the Participant's termination, the Participant engaged
in conduct which would constitute "cause", then such Participant shall
forthwith cease to have any right to exercise any Option.
e. A Participant to whom an Option has been granted under the Plan who is
absent from work with the Company or with an Affiliate because of
temporary disability (any disability other than a permanent and total
Disability as defined in Paragraph 1 hereof), or who is on leave of
absence for any purpose, shall not, during the period of any such
absence, be deemed, by virtue of such absence alone, to have
terminated such Participant's employment, director status or
consultancy with the Company or with an Affiliate, except as the
Administrator may otherwise expressly provide.
8
<PAGE>
f. Except as required by law or as set forth in the pertinent Option
Agreement, Options granted under the Plan shall not be affected by any
change of a Participant's status within or among the Company and any
Affiliates, so long as the Participant continues to be an employee,
director or consultant of the Company or any Affiliate.
11. EFFECT OF TERMINATION OF SERVICE "FOR CAUSE".
--------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated "for
cause" prior to the time that all his or her outstanding Options have been
exercised:
a. All outstanding and unexercised Options as of the time the Participant
is notified his or her service is terminated "for cause" will
immediately be forfeited.
b. For purposes of this Plan, "cause" shall include (and is not limited
to) dishonesty with respect to the Company or any Affiliate,
insubordination, substantial malfeasance or non-feasance of duty,
unauthorized disclosure of confidential information, and conduct
substantially prejudicial to the business of the Company or any
Affiliate. The determination of the Administrator as to the existence
of "cause" will be conclusive on the Participant and the Company.
c. "Cause" is not limited to events which have occurred prior to a
Participant's termination of service, nor is it necessary that the
Administrator's finding of "cause" occur prior to termination. If the
Administrator determines, subsequent to a Participant's termination of
service but prior to the exercise of an Option, that either prior or
subsequent to the Participant's termination the Participant engaged in
conduct which would constitute "cause," then the right to exercise any
Option is forfeited.
d. Any definition in an agreement between the Participant and the Company
or an Affiliate, which contains a conflicting definition of "cause"
for termination and which is in effect at the time of such
termination, shall supersede the definition in this Plan with respect
to such Participant.
12. EFFECT OF TERMINATION OF SERVICE FOR DISABILITY.
-----------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, a
Participant who ceases to be an employee, director or consultant of the Company
or of an Affiliate by reason of Disability may exercise any Option granted to
such Participant:
a. To the extent exercisable but not exercised on the date of Disability;
and
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<PAGE>
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights as would have
accrued had the Participant not become Disabled prior to the end of
the accrual period which next ends following the date of Disability.
The proration shall be based upon the number of days of such accrual
period prior to the date of Disability.
A Disabled Participant may exercise such rights only within the period
ending one (1) year after the date of the Participant's termination of
employment, directorship or consultancy, as the case may be, notwithstanding
that the Participant might have been able to exercise the Option as to some or
all of the Shares on a later date if the Participant had not become disabled and
had continued to be an employee, director or consultant or, if earlier, within
the originally prescribed term of the Option.
The Administrator shall make the determination both of whether Disability
has occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.
13. EFFECT OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
---------------------------------------------------------
Except as otherwise provided in the pertinent Option Agreement, in the
event of the death of a Participant while the Participant is an employee,
director or consultant of the Company or of an Affiliate, such Option may be
exercised by the Participant's Survivors:
a. To the extent exercisable but not exercised on the date of death; and
b. In the event rights to exercise the Option accrue periodically, to the
extent of a pro rata portion of any additional rights which would have
accrued had the Participant not died prior to the end of the accrual
period which next ends following the date of death. The proration
shall be based upon the number of days of such accrual period prior to
the Participant's death.
If the Participant's Survivors wish to exercise the Option, they must take
all necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.
14. PURCHASE FOR INVESTMENT.
-----------------------
Unless the offering and sale of the Shares to be issued upon the particular
exercise of an Option shall have been effectively registered under the
Securities Act of 1933, as now in force or
10
<PAGE>
hereafter amended (the "1933 Act"), the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled:
a. The person(s) who exercise(s) such Option shall warrant to the
Company, prior to the receipt of such Shares, that such person(s) are
acquiring such Shares for their own respective accounts, for
investment, and not with a view to, or for sale in connection with,
the distribution of any such Shares, in which event the person(s)
acquiring such Shares shall be bound by the provisions of the
following legend which shall be endorsed upon the certificate(s)
evidencing their Shares issued pursuant to such exercise or such
grant:
"The shares represented by this certificate have been taken for
investment and they may not be sold or otherwise transferred by
any person, including a pledgee, unless (1) either (a) a
Registration Statement with respect to such shares shall be
effective under the Securities Act of 1933, as amended, or (b)
the Company shall have received an opinion of counsel
satisfactory to it that an exemption from registration under such
Act is then available, and (2) there shall have been compliance
with all applicable state securities laws."
b. At the discretion of the Administrator, the Company shall have
received an opinion of its counsel that the Shares may be issued upon
such particular exercise in compliance with the 1933 Act without
registration thereunder.
15. DISSOLUTION OR LIQUIDATION OF THE COMPANY.
-----------------------------------------
Upon the dissolution or liquidation of the Company, all Options granted
under this Plan which as of such date shall not have been exercised will
terminate and become null and void; provided, however, that if the rights of a
Participant or a Participant's Survivors have not otherwise terminated and
expired, the Participant or the Participant's Survivors will have the right
immediately prior to such dissolution or liquidation to exercise any Option to
the extent that the Option is exercisable as of the date immediately prior to
such dissolution or liquidation.
16. ADJUSTMENTS.
-----------
Upon the occurrence of any of the following events, a Participant's rights
with respect to any Option granted to him or her hereunder which has not
previously been exercised in full shall be adjusted as hereinafter provided,
unless otherwise specifically provided in the pertinent Option Agreement:
A. Stock Dividends and Stock Splits. If (i) the shares of Common Stock
--------------------------------
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or (ii) additional shares or new or different shares
or other securities of the Company or other
11
<PAGE>
non-cash assets are distributed with respect to such shares of Common Stock, the
number of shares of Common Stock deliverable upon the exercise of such Option
may be appropriately increased or decreased proportionately, and appropriate
adjustments may be made in the purchase price per share to reflect such events.
The number of Shares subject to the limitation in Paragraph 4(c) shall also be
proportionately adjusted upon the occurrence of such events.
B. Consolidations or Mergers. If the Company is to be consolidated with or
-------------------------
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Administrator or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph), within a specified number of days of the date of
such notice, at the end of which period the Options shall terminate; or (iii)
terminate all Options in exchange for a cash payment equal to the excess of the
Fair Market Value of the shares subject to such Options (either to the extent
then exercisable or, at the discretion of the Administrator, all Options being
made fully exercisable for purposes of this Subparagraph) over the exercise
price thereof.
C. Recapitalization or Reorganization. In the event of a recapitalization
----------------------------------
or reorganization of the Company (other than a transaction described in
Subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising an Option shall be entitled to receive for the
purchase price paid upon such exercise the securities which would have been
received if such Option had been exercised prior to such recapitalization or
reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
--------------------
made pursuant to Subparagraph A, B or C with respect to ISOs shall be made only
after the Administrator, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424(h) of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Administrator
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, it may refrain from making such adjustments, unless
the holder of an ISO specifically requests in writing that such adjustment be
made and such writing indicates that the holder has full knowledge of the
consequences of such "modification" on his or her income tax treatment with
respect to the ISO.
17. ISSUANCES OF SECURITIES.
-----------------------
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
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<PAGE>
adjustment by reason thereof shall be made with respect to, the number or price
of shares subject to Options. Except as expressly provided herein, no
adjustments shall be made for dividends paid in cash or in property (including
without limitation, securities) of the Company.
18. FRACTIONAL SHARES.
-----------------
No fractional shares shall be issued under the Plan and the person
exercising such right shall receive from the Company cash in lieu of such
fractional shares equal to the Fair Market Value thereof.
19. CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
------------------------------------------------------------------
The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion. Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options. At the time of such
conversion, the Administrator (with the consent of the Participant) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan. Nothing in the Plan shall be deemed
to give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action. The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.
20. WITHHOLDING.
-----------
In the event that any federal, state, or local income taxes, employment
taxes, Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other
amounts are required by applicable law or governmental regulation to be withheld
from the Participant's salary, wages or other remuneration in connection with
the exercise of an Option or a Disqualifying Disposition (as defined in
Paragraph 21), the Company may withhold from the Participant's compensation, if
any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the
statutory minimum amount of such withholdings unless a different withholding
arrangement, including the use of shares of the Company's Common Stock or a
promissory note, is authorized by the Administrator (and permitted by law). For
purposes hereof, the fair market value of the shares withheld for purposes of
payroll withholding shall be determined in the manner provided in Paragraph 1
above, as of the most recent practicable date prior to the date of exercise. If
the fair market value of the shares withheld is less than the amount of payroll
withholdings required, the Participant may be
13
<PAGE>
required to advance the difference in cash to the Company or the Affiliate
employer. The Administrator in its discretion may condition the exercise of an
Option for less than the then Fair Market Value on the Participant's payment of
such additional withholding.
21. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
----------------------------------------------
Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO. A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO. If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
22. TERMINATION OF THE PLAN.
-----------------------
The Plan will terminate on February 28, 2010, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
-------
by the shareholders of the Company. The Plan may be terminated at an earlier
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination shall not affect any Option Agreements executed prior
to the effective date of such termination.
23. AMENDMENT OF THE PLAN AND AGREEMENTS.
------------------------------------
The Plan may be amended by the shareholders of the Company. The Plan may
also be amended by the Administrator, including, without limitation, to the
extent necessary to qualify any or all outstanding Options granted under the
Plan or Options to be granted under the Plan for favorable federal income tax
treatment (including deferral of taxation upon exercise) as may be afforded
incentive stock options under Section 422 of the Code, and to the extent
necessary to qualify the shares issuable upon exercise of any outstanding
Options granted, or Options to be granted, under the Plan for listing on any
national securities exchange or quotation in any national automated quotation
system of securities dealers. Any amendment approved by the Administrator which
the Administrator determines is of a scope that requires shareholder approval
shall be subject to obtaining such shareholder approval. Any modification or
amendment of the Plan shall not, without the consent of a Participant, adversely
affect his or her rights under an Option previously granted to him or her. With
the consent of the Participant affected, the Administrator may amend outstanding
Option Agreements in a manner which may be adverse to the Participant but which
is not inconsistent with the Plan. In the discretion of the Administrator,
outstanding Option Agreements may be amended by the Administrator in a manner
which is not adverse to the Participant.
14
<PAGE>
24. EMPLOYMENT OR OTHER RELATIONSHIP.
--------------------------------
Nothing in this Plan or any Option Agreement shall be deemed to prevent the
Company or an Affiliate from terminating the employment, consultancy or director
status of a Participant, nor to prevent a Participant from terminating his or
her own employment, consultancy or director status or to give any Participant a
right to be retained in employment or other service by the Company or any
Affiliate for any period of time.
25. GOVERNING LAW.
-------------
This Plan shall be construed and enforced in accordance with the law of the
State of North Carolina.
15
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 2 to the Registration
Statement on Form S-1 of Paradigm Genetics, Inc. of our report dated February
17, 2000, relating to the financial statements of Paradigm Genetics, Inc. which
appear in such Registration Statement. We also consent to the references to us
under the heading "Experts" in such Registration Statements.
/s/ PricewaterhouseCoopers LLP
Raleigh, North Carolina
March 27, 2000
