<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACLARA BIOSCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 3826 94-3222727
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1288 PEAR AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH M. LIMBER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACLARA BIOSCIENCES, INC.
1288 PEAR AVENUE
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 210-1200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
<TABLE>
<S> <C>
MICHAEL W. HALL, ESQ. JOHN T. SHERIDAN, ESQ.
LAURA I. BUSHNELL, ESQ. JAY D. HANSEN, ESQ.
CHRISTINA Y. LAI, ESQ. WILSON SONSINI GOODRICH & ROSATI P.C.
LATHAM & WATKINS 650 PAGE MILL ROAD
135 COMMONWEALTH DRIVE PALO ALTO, CALIFORNIA 94304
MENLO PARK, CALIFORNIA 94025 (650) 493-9300
(650) 328-4600
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE CHART
<TABLE>
<S> <C> <C>
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</TABLE>
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE(2)
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<S> <C> <C>
Common Stock, $0.001 par value.............................. $97,750,000 $25,806
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</TABLE>
(1) Includes shares that the Underwriters have the option to
purchase solely to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL 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> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER
TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
Subject to Completion, Dated January 20, 2000
LOGO
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SHARES
COMMON STOCK
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This is the initial public offering of ACLARA BioSciences, Inc., and we are
offering shares of our common stock. We anticipate the initial
public offering price will be between $ and $ per share.
We have applied to list our common stock on the Nasdaq National Market under the
symbol "ACLA."
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PUBLIC OFFERING DISCOUNTS AND PROCEEDS TO
PRICE COMMISSIONS ACLARA
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
We have granted the underwriters the right to purchase up to
additional shares to cover any over-allotments.
Joint Book-Running Managers
DEUTSCHE BANC ALEX. BROWN WARBURG DILLON READ LLC
U.S. BANCORP PIPER JAFFRAY
THE DATE OF THIS PROSPECTUS IS JANUARY , 2000
<PAGE> 3
INSIDE FRONT COVER
[Photograph of ACLARA microfluidic
array chip, held in human hand]
APPLICATIONS
<TABLE>
<CAPTION>
Genomics Drug Discovery
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<S> <C>
- DNA Sequencing - Ultra high throughput screening
- Gene Expression analysis - High throughput screening
- Genotyping/SNP analysis - Assay development
- Secondary screening
</TABLE>
Future
------
- Industrial process control and sensing systems
- Clinical diagnostics
____________________________________________________________________________
INSIDE FOLDOUT PANEL #1
<TABLE>
<S><C>
- ------------------------- -------------------------
[IMAGE] [IMAGE]
- ------------------------- -------------------------
Experimental ACLARA Image of DNA Sequencing
LabCard Chips for Experimental Data Using
DNA Sequencing ACLARA LabCard Chips
</TABLE>
____________________________________________________________________________
INSIDE FOLDOUT PANEL #2
EXPRESSION PROFILING
USING
MICROFLUIDIC ARRAY CHIPS
ACROSS
LARGE SAMPLE SETS
<TABLE>
<S><C>
1 SAMPLE -----> DNA MICROARRAY -----> MULTIPLE GENES
MANY SAMPLES -----> ACLARA -----> MULTIPLE GENES
MICROFLUIDIC PER SAMPLE
ARRAY CHIP
</TABLE>
(Two schematics comparing ACLARA microfluidic array chip to
DNA microarray chip)
____________________________________________________________________________
INSIDE BACK COVER
LabCard Microfluidic Array Chips:
THE PROCESS
- -------------------------
[IMAGE] MICROMACHINING
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|
|
|
V
- -------------------------
[IMAGE] LABCARD CHIPS
(PACKAGED)
- -------------------------
|
|
|
V
- -------------------------
[IMAGE] CARD IN USE
ON SYSTEM
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|
|
|
V
- ------------------------- -----> (DESCRIPTION OF MICROFLUIDIC NETWORK OF ARRAYS)
[IMAGE] BLOW-UP PHOTO
OF LABCARD CHIP
- ------------------------- -----> APPLICATIONS
-
-
-
-
-
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights certain information found in greater detail
elsewhere in this prospectus. This summary is not complete and does not contain
all of the information that you should consider before investing in our common
stock. We urge you to read the entire prospectus carefully, especially the risks
of investing in our common stock discussed under "Risk Factors," before you
decide to buy our common stock.
ACLARA BIOSCIENCES
We believe that we are the only microfluidics, or lab-on-a-chip, company
with access to the wide range of technology and intellectual property required
to broadly address the genomics and pharmaceutical drug screening markets. We
are developing multiple products based on our proprietary microfluidics
technology that allow researchers to rapidly perform large numbers of chemical
and biological measurements in a miniaturized, automated format. In
collaboration with our strategic partners, we are developing dedicated
analytical instruments that will utilize our LabCard chip products. We believe
that these LabCard systems will provide order-of-magnitude increases in
throughput and enhanced accuracy for a wide range of laboratory analyses, at a
lower cost than current analytical systems. We intend to commercially introduce
our initial LabCard product, the Oasis microfluidic array chip, in late 2000.
We have strategically partnered with PE Biosystems, a leading provider of
analytical systems for genomics and pharmaceutical drug screening. We are
combining our proprietary microfluidics technology with their broad platform of
technologies, including reagent chemistries, assay methods, instrumentation and
software. We also plan to use the marketing, sales and distribution strengths of
our current and future partners to successfully commercialize our products.
OUR TARGET MARKETS
Our technologies address several of the fastest-growing markets in the life
sciences industry. In combination, these markets currently total several billion
dollars, and we expect them to grow substantially as a result of the dramatic
advances in genomics and drug discovery. We currently focus on the major
segments of the genomics market -- DNA sequencing, genotyping and gene
expression analysis -- as well as key applications in pharmaceutical drug
screening. We also expect to develop products for industrial process control and
sensing systems as well as clinical diagnostics.
OUR TECHNOLOGY AND PRODUCTS
Our microfluidic chip technology enables us to move various fluids and
materials through microchannel networks, using electric fields to direct the
flow of these materials. We design these networks in a grid or array format,
enabling researchers to perform multiple measurements in parallel on our LabCard
chips. Our microfluidic approach enables the rapid and accurate measurement,
dispensing and mixing of volumes as small as one-millionth the volume of a well
in a standard 96-microwell plate. In this manner, we can precisely manipulate a
variety of fluids, including those that contain whole cells, cell fragments or
magnetizable particles, using computerized controls with no moving parts or
valves.
We are currently developing multiple products for the genomics and
pharmaceutical drug screening markets. We believe that our products will offer
researchers several key benefits:
- Greater Flexibility in Chip Design and Use. We produce most of our chips
using advanced plastic materials and proprietary process technologies. We
believe that our single-use plastic chips offer substantial advantages
over glass chips, including the avoidance of
1
<PAGE> 5
sample or reagent carryover from one measurement to the next and lower
manufacturing costs.
- Higher Throughput and Avoidance of Cross Contamination. We have designed
chips that contain arrays of microfluidic networks, where each network
enables analysis of a different sample. This approach increases
throughput and avoids cross contamination of different reactions on the
same chip.
- Greater Information Content. Our LabCard chips and proprietary assay
chemistries allow researchers to obtain more information from each
measurement than is currently possible with standard microwell plates.
- Faster Analysis. Our LabCard chips allow researchers to perform most
measurements faster than with conventional instrument systems. For
example, we can determine the sequence of a DNA strand in less than 20
minutes on our LabCard chips. A similar experiment often requires over
two hours on a capillary array DNA sequencer.
- Increased Efficiency and Higher Data Quality. Our LabCard chips decrease
the number of human intervention points and reduce the potential for
variability and error.
- Reduced Cost. Several factors combine to reduce the cost of chemical and
biological information obtained from our LabCard chips, including lower
labor, reagent and sample costs.
OUR STRATEGY
Our objective is to be the leading provider of microfluidic chips to large,
fast-growing segments of the genomics and pharmaceutical drug screening markets
where the information sought is of high value to customers. Key elements of our
strategy include:
- Partnering With Industry Leaders for Instrument Development,
Manufacturing and Commercialization. We intend to use the
instrumentation, software, chemistry expertise and distribution strengths
of our partners, such as PE Biosystems, to accelerate the development of
integrated, microfluidics-based systems.
- Leveraging Our Intellectual Property With That of Our Partners. Our broad
patent portfolio includes 76 patents and patent applications. We also
benefit from the intellectual property portfolio of our strategic
partners enabling us to broadly address the genomics and pharmaceutical
drug screening markets.
- Generating Recurring, High Margin Revenue. We expect that most LabCard
systems sold will generate recurring revenue from sales of single-use
disposable LabCard chips. We are developing proprietary processes for the
cost-effective production of these plastic LabCard chips.
- Enhancing the Value of LabCard Systems With Proprietary Chemistries. We
intend to integrate proprietary chemistries developed by us and our
strategic partners to significantly enhance the flexibility and utility
of our LabCard systems.
2
<PAGE> 6
OUR HISTORY
We were formed by a spin-off transaction from Soane Technologies, Inc.,
which was incorporated in 1991 and subsequently changed its name to 2C Optics,
Inc. We were incorporated in Delaware in 1995 under the name Soane BioSciences,
Inc. and changed our name to ACLARA BioSciences, Inc. in 1998. Our principal
executive offices are located at 1288 Pear Avenue, Mountain View, California
94043, and our telephone number is (650) 210-1200. References in this prospectus
to "ACLARA," "we," "our" and "us" refer to ACLARA BioSciences, Inc., a Delaware
corporation. Our website is located at www.aclara.com. Information contained in
our website is not a part of this prospectus. LabCard, ACLARA and eTAGs are
trademarks of ACLARA BioSciences, Inc. All other trademarks used in this
prospectus are the property of their respective owners.
THE OFFERING
Common stock offered by ACLARA..... shares
Common stock to be outstanding
after this offering................ shares
Use of proceeds.................... For research and development activities,
for process development, for financing
possible acquisitions and investments in
technology as well as for working capital
and other general corporate purposes.
Proposed Nasdaq National Market
symbol............................. ACLA
The number of shares of common stock to be outstanding after this offering
is based on shares outstanding on September 30, 1999. This number assumes the
conversion into common stock of all of our preferred stock outstanding on that
date and excludes:
- 3,342,669 shares of common stock reserved for issuance under our 1995 and
1997 stock plans, of which options to purchase 1,803,084 shares were
outstanding as of September 30, 1999 at a weighted average exercise price
of $0.58 per share; and
- 358,981 shares of common stock that may be issued upon exercise of
warrants outstanding as of September 30, 1999 at a weighted average
exercise price of $1.99 per share.
------------------------
Unless otherwise indicated, information in this prospectus assumes the
following:
- the conversion of each outstanding share of our convertible preferred
stock into one share of our common stock upon the upon the closing of
this offering;
- the filing of our amended and restated certificate of incorporation
immediately following the closing of this offering to increase our
authorized common stock and decrease our authorized preferred stock; and
- the underwriters have not exercised their option to purchase additional
shares.
3
<PAGE> 7
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(MAY 5,1995) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------
1995 1996 1997 1998 1998 1999
------------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenue....................... $ 393 $ 1,324 $ 2,649 $ 1,353 $ 882 $ 2,080
Operating expenses.................. 879 2,302 4,649 6,745 4,905 7,194
-------- ------- ------- ------- ------- -------
Loss from operations................ (486) (978) (2,000) (5,392) (4,023) (5,114)
Interest income (expense), net...... 31 22 2 (130) (46) 184
-------- ------- ------- ------- ------- -------
Net loss............................ $ (455) $ (956) $(1,998) $(5,522) $(4,069) $(4,930)
======== ======= ======= ======= ======= =======
Net loss attributable to common
stockholders...................... $ (468) $(1,157) $(2,299) $(6,011) $(4,428) $(9,708)
======== ======= ======= ======= ======= =======
Net loss per common share, basic and
diluted........................... $(468.00) $(33.48) $ (6.03) $ (7.54) $ (5.70) $(10.07)
======== ======= ======= ======= ======= =======
Shares used in computing net loss
per common share, basic and
diluted........................... 1 35 381 797 777 964
======== ======= ======= ======= ======= =======
Pro forma net loss per share, basic
and diluted (unaudited)........... $ (0.63) $ (0.39)
======= =======
Shares used in computing pro forma
net loss per share, basic and
diluted (unaudited)............... 8,731 12,510
======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents and marketable securities......... $ 10,839 $
Working capital............................................. 9,397
Total assets................................................ 17,274
Capital lease obligations, less current portion............. 372
Loans payable, less current portion......................... 2,778
Mandatorily redeemable convertible preferred stock.......... (30,535)
Total stockholders' equity (deficit)........................ (18,654)
</TABLE>
4
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should consider carefully
the risks described below and the other information in this prospectus before
deciding to purchase shares of our common stock. Any of these risk factors could
materially and adversely affect our business, financial condition, results of
operations and future growth prospects. In that case, the trading price of our
common stock could decline, and you could lose all or part of your investment.
Additional risks and uncertainties that we do not currently know about or that
we currently deem immaterial may also impair our business, financial condition,
results of operations and future growth prospects. See "Special Note Regarding
Forward-Looking Statements."
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF OPERATING LOSSES AND AN ACCUMULATED DEFICIT, AND WE MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE.
Since we were founded in May 1995, we have engaged primarily in
organizational and research and development efforts. We have incurred operating
losses every year, and we may never achieve profitability. Net losses for the
years ended December 31, 1997 and 1998 were $2.0 million and $5.5 million,
respectively, and $4.9 million in the first nine months of 1999. As of September
30, 1999, we had an accumulated deficit of $15.1 million. Our losses have
resulted principally from costs incurred in connection with our research and
development activities and from general and administration costs associated with
our operations.
We have not commercially launched any LabCard products to date and do not
expect to do so until late 2000. Our ability to generate revenues from product
sales or to achieve profitability is dependent on our ability, alone or with our
collaborative partners, to successfully and timely design, develop, manufacture
and commercialize our microfluidic systems. Our revenue to date has been
generated principally from collaborative research and development agreements,
technology access fees, interest on cash and investment balances and government
grants. We expect that our costs will continue to exceed our revenues on an
annual basis for at least the next two years. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND ANY FAILURE TO MEET
FINANCIAL EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND
RESULT IN A DECLINE IN OUR STOCK PRICE, CAUSING INVESTOR LOSSES.
Our operating results have fluctuated in the past and are likely to do so
in the future. These fluctuations could cause our stock price to decline. Some
of the factors that could cause our operating results to fluctuate include:
- expiration or termination of research contracts with collaborators or
government research grants, which may not be renewed or replaced;
- the timing and willingness of collaborators to commercialize our
products;
- the timing, release and competitiveness of our products; and
- general and industry-specific economic conditions, which may affect our
customers' research and development expenditures and use of our products.
If revenue declines in a quarter, whether due to a delay in recognizing
expected revenue or otherwise, our earnings will decline because many of our
expenses are relatively fixed in the short-term. In particular, research and
development and general and administrative expenses are not affected directly by
variations in revenue.
5
<PAGE> 9
Due to fluctuations in our revenue and operating expenses, we believe that
period-to-period comparisons of our results of operations are not a good
indication of our future performance. It is possible that in some future quarter
or quarters, our operating results will be below the expectations of securities
analysts or investors. In that case, our stock price could fluctuate
significantly or decline.
OUR PRODUCTS ARE IN THE EARLY STAGE OF DEVELOPMENT AND MAY NEVER BE FULLY
DEVELOPED IN A MANNER SUITABLE FOR COMMERCIAL SUCCESS.
We currently have no commercially available products and we have never
developed, manufactured, distributed or sold commercial systems using our
microfluidics technology. We are developing products that are in many cases part
of complex systems that also have not been fully developed, tested, manufactured
or commercially introduced. For example, we have only produced a working
prototype system that integrates our LabCard chips into a laboratory system that
utilizes automated liquid handling, microfluidic control, fluorescence detection
and software for system control and data analysis. We may not be able to perfect
the design of our products due to the complexity of the systems they are part of
and the demands of the scientific processes that they address. For instance, we
have not yet established the high degrees of accuracy, reliability and ease of
use required for commercial introduction of our products. Even though we have
designed products that function in a prototype system, we cannot assure you that
we will be able adapt the design to allow for large-scale manufacturing and
commercialization. Although we have indicated projected launch periods for
certain of our products elsewhere in this prospectus, we cannot assure you that
we and our collaborative partners will complete development of the systems by
those launch dates, or at all. Our inability or the inability of our
collaborative partners to design commercially viable systems will harm our
business.
COMMERCIALIZATION OF OUR PRODUCTS DEPENDS UPON MARKET ACCEPTANCE OF NEW SYSTEMS
AND TECHNOLOGIES FOR PERFORMING ANALYSES IN GENOMICS AND PHARMACEUTICAL DRUG
SCREENING.
Demand for our LabCard products is substantially dependent upon widespread
market acceptance of systems utilizing our LabCard chips as tools for genomics,
pharmaceutical drug screening and other applications. Because most of our
LabCard chip products will be part of larger analytical systems marketed by our
collaborative partners, our ability to sell LabCard chips in these cases depends
on adoption by researchers of entirely new analytical equipment. We cannot
assure you that LabCard chips and related instrument systems using our
technology will achieve substantial acceptance in our target markets. Market
acceptance will depend on many factors, including:
- our ability and the ability of our collaborative partners to demonstrate
to potential customers the benefits and cost-effectiveness of our LabCard
chips and systems relative to products currently available in the market;
- the extent of our partners' efforts to market, sell and distribute the
LabCard chips and systems; and
- the willingness and ability of customers to adopt new technology
requiring capital investments.
Further, if our initial LabCard systems are not favorably received by the
market, it could undermine our ability to successfully introduce subsequent
LabCard systems as well. If our LabCard chips and systems do not gain market
acceptance, it would materially adversely affect our business, financial
condition, results of operations and future growth prospects.
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<PAGE> 10
WE DEPEND ON COLLABORATIVE PARTNERS TO DEVELOP AND MARKET SYSTEMS THAT UTILIZE
OUR LABCARD CHIPS TO END USERS. IF OUR COLLABORATIVE PARTNERS DO NOT PERFORM AS
EXPECTED OUR BUSINESS WILL SUFFER.
Because our products are components of larger systems, our success depends
on our ability to establish relationships with collaborative partners to create
products to address market needs. For example, our collaborative relationship
with PE Biosystems provides for the joint development of systems for genomics
research and pharmaceutical drug screening. In this relationship, we provide
LabCard chips as one component of systems used by researchers for genomics
analysis and pharmaceutical drug screening applications. Our ability to expand
the applications for our technology rests on our ability to broaden our
relationship with existing partners and identify and enter into similar
relationships with new collaborative partners to address additional customer
needs. If we are unable to broaden our existing collaborative relationships or
enter into relationships with additional collaborative partners our business may
suffer.
Our ability to sell products will also depend on the ability of our
collaborative partners to develop instrument systems that can utilize our
LabCard chips. If the development efforts of our collaborative partners fail or
are significantly delayed, our business could be severely harmed. We cannot
assure you that our collaborative partners will be able to develop products as
planned.
We also intend to rely upon our current and future collaborative partners
to market, sell, distribute and promote our LabCard chips. We do not intend to
develop a large internal marketing and sales organization. Accordingly, we will
be substantially relying on our collaborative partners to fulfill these tasks.
If our collaborative partners do not perform these functions satisfactorily, our
business could be severely harmed.
We generally do not have control over the resources or degree of effort
that any of our existing collaborative partners may devote to our
collaborations. If our collaborators breach or terminate their agreements with
us or otherwise fail to conduct their collaborative activities successfully and
in accordance with agreed upon schedules, our business would be harmed. In
addition, our collaborative partners could cease operations, eliminate relevant
product lines, or offer, design, manufacture or promote competing lines of
products. Any of those occurrences could materially adversely affect our
business, financial condition, results of operations and future growth
prospects.
WE RELY HEAVILY ON PE BIOSYSTEMS TO DEVELOP, MANUFACTURE AND COMMERCIALIZE
SYSTEMS TO BE USED IN CONNECTION WITH OUR LABCARD CHIPS AND TO COMMERCIALIZE
MOST OF OUR LABCARD PRODUCTS, AND PE BIOSYSTEMS' FAILURE TO DO SO SUCCESSFULLY
COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.
As part of our business strategy, we are focusing on the development of our
LabCard chips and related chemistries for genomics and pharmaceutical drug
screening systems and in most cases are relying on PE Biosystems to manufacture
and commercialize the systems, including commercializing our LabCard chips. We
have collaboration agreements with PE Biosystems to jointly develop microfluidic
systems for genomics and pharmaceutical drug screening. In addition to
developing or co-developing the instrumentation, software and reagents, PE
Biosystems will have the exclusive right to market and sell those products
worldwide. We cannot assure you that PE Biosystems will perform its obligations
under the agreements, or that PE Biosystems will successfully commercialize any
products resulting from our joint efforts. Moreover, PE Biosystems has the
discretion, under certain circumstances, to elect not to proceed with the
commercialization of products jointly developed under the agreement. PE
Biosystems' failure to perform under the agreement or to successfully
commercialize our LabCard products and
7
<PAGE> 11
systems could materially adversely affect our business, financial condition,
results of operations and future growth prospects.
IF WE ARE UNABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY, WE WOULD BE
UNABLE TO PREVENT THIRD PARTIES FROM USING OUR TECHNOLOGY, WHICH COULD IMPAIR
OUR ABILITY TO COMPETE IN THE MARKET.
Our success will depend in part on our ability to obtain and maintain
meaningful patent protection for our products, both in the United States and in
other countries. We rely on patents to protect a large part of our intellectual
property and our competitive position. We own over 70 issued patents and pending
patent applications, including both domestic and foreign patents and patent
applications. We cannot assure you that any of the presently pending or future
patent applications will issue as patents, or that any patents issued to us will
not be challenged, invalidated, held unenforceable or circumvented. Please see
the following risk factor for a discussion of currently pending litigation
regarding our patents. Further, we cannot assure you that claims in patents that
have been issued or that may be issued to us in the future will be sufficiently
broad to prevent third parties from producing competing products similar in
design to our products. In addition, laws of foreign countries may not protect
our intellectual property to the same extent as would laws in the United States.
Failure to obtain adequate patent protection for our proprietary technology
could have a material adverse effect on our business, operating results,
financial condition and future growth prospects.
In addition to patent protection, we also rely on copyright protection,
trade secrets, know-how and licensing of certain technology from others. To
maintain the confidentiality of trade secrets and proprietary information, we
generally enter into confidentiality agreements with our employees, consultants
and our collaborative partners upon commencement of a relationship with us.
However, we cannot assure you that these agreements will provide meaningful
protection for our trade secrets or other confidential information in the event
of unauthorized use or disclosure of such information or that adequate remedies
would exist in the event of unauthorized use or disclosure. The loss or exposure
of our trade secrets could have a material adverse effect on our business,
operating results, financial condition and future growth prospects. Further, we
cannot assure you that others have not or will not independently develop
substantially equivalent know-how and technology.
Litigation may also be necessary to enforce any patents assigned or
exclusively licensed to us, to protect our trade secrets or know-how or to
determine the proprietary rights of others. We may also become subject to
additional patent infringement claims and litigation or interference proceedings
conducted in the U.S. Patent and Trademark Office to determine the priority of
inventions. The defense and prosecution, if necessary, of additional
intellectual property suits, USPTO interference proceedings and related legal
and administrative proceedings will result in substantial expense to us and
significant diversion of effort by our technical and management personnel. We
cannot assure you that we would prevail in any of these suits or that the
damages or other remedies awarded, if any, would not be substantive. An adverse
determination in litigation or interference proceedings to which we may become a
party could subject us to significant liabilities to third parties, could put
our patents at risk of being invalidated or interpreted narrowly and could put
our patent applications at risk of not issuing. We might also be required to
seek licenses from third parties, which may not be available on commercially
reasonable terms, if at all, as the result of such litigation or proceedings or
otherwise.
During the course of these suits, there may be public announcements of the
results of hearings, motions and other interim proceedings or developments in
the litigation. If securities analysts or investors perceive any of these
results to be negative, it could cause our stock price to decline.
8
<PAGE> 12
WE ARE INVOLVED WITH INTELLECTUAL PROPERTY LITIGATION WITH CALIPER TECHNOLOGIES
CORP. THAT WILL BE EXPENSIVE, MAY HURT OUR COMPETITIVE POSITION, MAY AFFECT OUR
ABILITY TO ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS AND MAY PREVENT US FROM
SELLING OUR PRODUCTS.
We are currently involved in three significant intellectual property
litigation matters with Caliper.
In March 1999, Caliper sued our former patent law firm, our current general
counsel, and us alleging misappropriation of Caliper's trade secrets. Caliper
claims an outside lawyer who was consulting with both Caliper and us used
Caliper's confidential information in preparing an application for one of our
key patents. The lawyer named in the litigation joined us three years after the
alleged events as our internal general counsel. The patent in question covers
technology used in most of the LabCard chips we are currently developing.
Caliper has asked for an unspecified amount of monetary damages and equitable
relief. We believe that Caliper's suit lacks factual and legal merit and are
defending the case vigorously. However, litigation is unpredictable, and we may
not prevail. If we do not prevail, we could owe Caliper a significant amount of
monetary damages. The court could also grant Caliper various forms of equitable
relief including preventing us from enforcing some of our intellectual property
rights against Caliper. As a result, an outcome adverse to us could cause our
business to suffer materially.
We sued Caliper in April 1999 for patent infringement of U.S. Patent No.
5,750,015, which covers technology used in most of our current LabCard chip
designs. The same patent is the subject of Caliper's trade secret suit. We
believe our case has merit and are pursuing it aggressively. The court could
decide, however, that Caliper does not infringe our patent. The court could also
find our patent to be invalid or unenforceable. These outcomes would reduce the
value of our intellectual property rights, weaken our competitive position and
significantly hurt our financial results. In this case we would not be able to
prevent Caliper and other third parties from using product designs that we view
as protected by our patent.
In January 2000, Caliper sued us alleging infringement of four patents
(U.S. Patent Nos. 5,858,195, 6,001,229, 6,010,607 and 6,010,608) which they
claim to have licensed exclusively. We believe our products, which are still
under development, do not infringe any claims of these patents and intend to
defend our position vigorously. Once again the outcome of any litigation is
uncertain, however, and we may not prevail. Should we be found to infringe any
of the patents asserted, in addition to potential monetary damages, we would
need either to obtain a license from Caliper to commercialize our products or
redesign our products so they do not infringe any of these patents. If we were
unable to obtain a license or adopt a non-infringing product design, we may not
be able to proceed with development, manufacture and sale of some of our
products. In this case our business may not develop as planned, and our results
could materially suffer.
The lawsuits will be expensive to litigate and may be protracted. Whether
or not we are successful in these cases, we expect these matters to consume
substantial amounts of our financial and managerial resources. At any time,
Caliper may file additional claims against us, which could increase the risk,
expense and duration of the litigation. Further, because of the substantial
amount of discovery required in connection with this type of litigation, there
is a risk that some of our confidential information could be compromised by
disclosure. During the course of our lawsuits with Caliper, there may be public
announcements of the results of hearings, motions and other interim proceedings
or developments in the litigation. If securities analysts or investors perceive
these results to be negative, it could have a substantial negative effect on the
trading price of our stock. For more information on our litigation with Caliper,
please see "Business -- Legal Proceedings."
Our commercial success also depends in part on avoiding the infringement of
other parties' patents or proprietary rights and the breach of any licenses that
may relate to our technologies
9
<PAGE> 13
and products. We are aware of several third-party patents that may relate to our
technology. We believe that we do not infringe these patents but cannot assure
you that we will not be found in the future to infringe these or other patents
or proprietary rights of third parties, either with products we are currently
developing or with new products that we may seek to develop in the future. If
third parties assert infringement claims with respect to our current or future
products, we may be forced to enter into license arrangements with them. We
cannot assure you that we could enter into the required licenses on commercially
reasonably terms, if at all. The failure to obtain necessary licenses or to
identify and implement alternative approaches may prevent us from
commercializing products under development and could have a material adverse
effect on our business, operating results, financial condition and future growth
prospects.
WE HAVE LIMITED MANUFACTURING EXPERIENCE, AND IF WE ARE UNABLE TO FIND
THIRD-PARTY MANUFACTURERS TO MANUFACTURE OUR LABCARD CHIPS, WE MAY NOT BE ABLE
TO LAUNCH OUR PRODUCTS IN A TIMELY MANNER, OR AT ALL.
We have no experience manufacturing our products in the volumes that will
be necessary for us to achieve significant commercial sales. To date, we have
limited our manufacturing activities to the manufacturing of prototype LabCard
chips and systems for testing purposes and for internal use by our collaborative
partners. The nature of our products requires the use of sophisticated injection
molding and other manufacturing processes that are not widely available. For
this reason only a limited number of vendors currently have the expertise to
manufacture our products. We have relationships with outside suppliers who are
currently manufacturing limited quantities of our LabCard chips for research and
development purposes. We will need to enter into contractual relationships with
manufacturers for commercial scale production of LabCard chips and systems and
we cannot assure you that we will be able to do so on a timely basis, for
sufficient quantities of chips or on commercially reasonable terms. Accordingly,
we cannot assure you that we can establish or maintain reliable, high-volume
manufacturing at commercially reasonable costs. In addition, the loss of any of
these suppliers may result in a delay or interruption of our supply of LabCard
chips. Any significant delay or interruption would have a material adverse
effect on our ability to supply adequate quantities of our products and,
therefore, on our business, operating results, financial condition and future
growth prospects.
OUR FACILITIES ARE LOCATED NEAR KNOWN EARTHQUAKE FAULT ZONES, AND THE OCCURRENCE
OF AN EARTHQUAKE OR OTHER CATASTROPHIC DISASTER COULD CAUSE DAMAGE TO OUR
FACILITIES AND EQUIPMENT, WHICH COULD REQUIRE US TO CEASE OR CURTAIL OPERATIONS.
Our facilities are located in the San Francisco Bay Area near known
earthquake fault zones and are vulnerable to damage from earthquakes. If an
earthquake or other natural disaster were to occur, our ability to operate our
business at our facilities could be seriously impaired. In addition, the nature
of our research activities and the specialized nature of much of our equipment
could make it time-consuming and costly for us to recover from a disaster. The
insurance we maintain may not be adequate to cover our losses resulting from
disasters or other business interruptions.
WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD IMPAIR OUR ABILITY TO
COMPETE.
Our performance is substantially dependent on the performance of our senior
management and key scientific and technical personnel. We carry key person life
insurance on only two of our senior management personnel. The loss of the
services of any member of our senior management, scientific or technical staff
may significantly delay or prevent the achievement of product development and
other business objectives and could have a material adverse effect on our
business, operating results and financial condition. Our future success will
also depend on our ability to identify, recruit and retain additional qualified
scientific, technical and managerial
10
<PAGE> 14
personnel. There is currently a shortage of skilled executives and intense
competition for such personnel in the areas of our activities, and we cannot
assure you that we will be able to continue to attract and retain personnel with
the advanced qualifications necessary for the development of our business. The
inability to attract and retain the necessary scientific, technical and
managerial personnel could have a material adverse effect upon our business,
operating results, financial condition and future growth prospects.
WE EXPECT INTENSE COMPETITION IN OUR TARGETED MARKETS, WHICH COULD RENDER OUR
PRODUCTS OBSOLETE OR SUBSTANTIALLY LIMIT THE VOLUME OF PRODUCTS THAT WE SELL.
We compete with companies that design, manufacture and market analytical
instruments for genomics and pharmaceutical drug screening using technologies
such as gel electrophoresis, capillary electrophoresis, microwell plates and
robotic liquid handling systems. In addition, a number of companies are
developing new technologies for miniaturizing various laboratory procedures for
genomics and drug screening markets targeted by us using methods such as
hybridization chips and high density microwell plates. Furthermore, we are aware
of other companies that are developing microfluidics technology, including
Orchid Biocomputer, Inc. and Caliper Technologies Corp. We anticipate that we
will face increased competition in the future as new companies enter the market
with new technologies. Rapidly changing technology, evolving industry standards,
changes in customer needs, emerging competition and new product introductions
characterize the markets for our products. One or more of our competitors may
render our technology obsolete or uneconomical by advances in existing
technological approaches or the development of different approaches. Many of
these competitors have greater financial and personnel resources and more
experience in research and development than we have. Furthermore, we cannot
assure you that the pharmaceutical and biotechnology companies which are our
potential customers or our strategic partners will not develop competing
products.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS AND MAY NOT BE ABLE TO OBTAIN
ADEQUATE INSURANCE.
Once we have commercially launched our LabCard products, we will face
exposure to product liability claims. Any product liability claims arising in
the future, regardless of their merit or eventual outcome, could have a material
adverse effect on our business, operating results, financial condition and
future growth prospects. We intend to secure product liability insurance
coverage, but we cannot assure you that we will be able to obtain such insurance
on acceptable terms with adequate coverage, or at reasonable costs. In addition,
potential product liability claims may exceed the amount of our insurance or may
be excluded from coverage under the terms of the policy.
WE MAY BE UNABLE TO RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS.
It might be necessary for us to raise additional capital over the next few
years to continue our research and development efforts and to commercialize our
products. We believe that the proceeds from this offering and projected revenue
from collaborations should be sufficient to fund our anticipated levels of
operations through at least the next 12 months. However, we cannot assure you
that our business or operations will not change in a manner that would consume
available resources more rapidly than anticipated. We also cannot assure you
that we will continue to receive funding under existing collaborative
arrangements or that existing or potential future collaborations will be
adequate to fund our operations. We may need additional funds sooner than
planned to meet operational needs and capital requirements for product
development and commercialization. We cannot assure you that additional funds
will be
11
<PAGE> 15
available when needed or on terms acceptable to us. If adequate funds are not
available, we may have to reduce substantially or eliminate expenditures for the
development and production of certain of our proposed products or obtain funds
through arrangements with collaboration partners that require us to relinquish
rights to certain of our technologies or products. Either of these alternatives
could have a material adverse effect on our business, operating results,
financial condition and future growth prospects.
WE MAY ENCOUNTER DIFFICULTIES IN MANAGING OUR GROWTH, AND THESE DIFFICULTIES
COULD INCREASE OUR LOSSES.
We have recently experienced significant growth in the number of our
employees and scope of operations, which we expect will continue. Continued
growth may place a significant strain on our managerial, operational and
financial resources. To manage our anticipated growth, we must continue to
implement and improve our managerial, operational and financial systems, to
expand our facilities and to continue to recruit and train additional qualified
personnel. We cannot assure you that we will be able to effectively manage the
expansion of our operations or recruit and train additional qualified personnel
and that our systems, procedures or controls will be adequate to support our
operations. Any inability to manage growth, if any, could have a material
adverse effect on our business, operating results, financial condition and
future growth prospects.
RISKS RELATED TO THIS OFFERING
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Following the completion of this offering, our executive officers,
directors and their affiliates will beneficially own or control approximately
of the outstanding shares of common stock after giving effect to the
conversion of all outstanding preferred stock and the exercise of all
outstanding vested and unvested options, warrants and convertible securities.
Accordingly, our current executive officers, directors and their affiliates will
have the ability to control the outcome of corporate actions requiring
stockholder approval, including the election of directors, any merger,
consolidation or sale of all or substantially all of our assets and any other
significant corporate transactions. The concentration of ownership may also
delay or prevent a change of control of our company at a premium price if these
stockholders oppose it. Please see "Management" and "Principal Stockholders" for
details on our stock ownership.
MANAGEMENT MAY INVEST OR SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH
YOU MAY NOT AGREE AND IN WAYS THAT MAY NOT YIELD A RETURN.
Management will retain broad discretion over the use of proceeds from this
offering. Stockholders may not deem such uses desirable, and our use of the
proceeds may not yield a significant return or any return at all. Management
intends to use a majority of the proceeds from this offering for research and
development activities, for process development, for financing possible
acquisitions and investments in technology as well as for working capital and
other general corporate purposes. Because of the number and variability of
factors that determine our use of the net proceeds from this offering, we cannot
assure you that these uses will not vary substantially from our currently
planned uses.
12
<PAGE> 16
IF WE ENGAGE IN ANY ACQUISITION, WE WILL INCUR A VARIETY OF COSTS, AND WE MAY
NEVER REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION.
If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any material acquisitions. If we do undertake any transaction of this
sort, the process of integrating an acquired business, technology, service or
product may result in unforeseen operating difficulties and expenditures and may
absorb significant management attention that would otherwise be available for
ongoing development of our business. Moreover, we may fail to realize the
anticipated benefits of any acquisition. Future acquisitions could reduce your
ownership in us and could cause us to incur debt, expose us to future
liabilities and result in amortization expenses related to goodwill and other
intangible assets.
In addition, recent proposed changes in the Financial Accounting Standards
Board rules for merger accounting may affect the cost of making acquisitions or
of being acquired. For example, if these proposed changes become effective we
would likely have to record goodwill or other intangible assets that we would
amortize to earnings if we merge with another company. This amortization would
adversely impact our future operating results. Further, accounting rule changes
that reduce the availability of write-offs of the value of in-process research
and development in connection with an acquisition could result in the
capitalization and amortization of these amounts which would negatively impact
results of operations in future periods.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE, AND YOU MAY NOT BE
ABLE TO RESELL YOUR SHARES AT OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
There has not been a public market for our common stock. We cannot assure
you that an active trading market for our common stock will develop following
this offering. You may not be able sell your shares quickly or at the market
price if trading in our stock is not active. The initial public offering price
for the shares will be determined by negotiations between us and the
representatives of the underwriters and may not be indicative of prices that
will prevail in the trading market. Please see "Underwriting" for more
information regarding our arrangement with the underwriters and the factors
considered in setting the initial public offering price.
The trading price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in price in response to various factors,
many of which are beyond our control, including:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations by us or our competitors;
- new products or services introduced or announced by us or our
competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the biotechnology, pharmaceutical and genomics
industries;
- changes in the market valuations of other similar companies;
- announcement by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- additions or departures of key personnel;
- developments concerning our collaborations; and
- sales of our common stock.
13
<PAGE> 17
In addition, the stock market in general, and the Nasdaq National Market
and the market for technology companies in particular, have experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. Further, there has been
particular volatility in the market prices of securities of biotechnology and
life sciences companies. These broad market and industry factors may seriously
harm the market price of our common stock, regardless of our operating
performance. In the past, following periods of volatility in the market,
securities class-action litigation has often been instituted against these
companies. Any litigation instituted against us could result in substantial
costs and a diversion of management's attention and resources, which could
seriously harm our business, results of operations, financial condition and
future growth prospects.
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The offering price of the common stock will be substantially higher than
the net tangible book value per share of our existing capital stock. As a
result, if you purchase common stock in this offering you will incur immediate
and substantial dilution of $ in net tangible book value per share of common
stock, based on an assumed public offering price of $ per share. You will
also experience additional dilution upon the exercise of outstanding stock
options and warrants. Please see "Dilution" for a more detailed discussion of
the dilution new investors will incur in this offering. The large number of
shares eligible for sale following this offering may depress the market price of
our common stock.
THE LARGE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE.
The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of our common stock in the
market after this offering or the perception that such sales could occur. These
sales also might make it more difficult for us to sell equity securities in the
future at a time and price that we deem appropriate. Please see "Shares Eligible
for Future Sale" for a description of sales that may occur in the future.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD INHIBIT
ANOTHER COMPANY FROM ACQUIRING US, WHICH COULD LIMIT THE PRICE INVESTORS MIGHT
BE WILLING TO PAY IN THE FUTURE FOR OUR COMMON STOCK.
Certain provisions of our certificate of incorporation and our bylaws could
delay or prevent a third party from acquiring us, even if doing so might be
beneficial to our stockholders. In addition, because we are incorporated in
Delaware, we are governed by the provisions of Section 203 of the Delaware
General Corporation Law. These provisions may prohibit large stockholders, in
particular those owning 15% or more of the outstanding voting stock, from
consummating a merger or combination with us. These provisions could limit the
price that investors might be willing to pay in the future for our common stock.
Please see, "Description of Capital Stock -- Anti-takeover Effects of Certain
Provisions of Delaware Law and Charter Provisions."
14
<PAGE> 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. We have attempted
to identify forward-looking statements by terminology including "anticipates,"
"believes," "can," "continue," "could," "estimates," "expects," "intends,"
"may," "plans," "potential," "predicts," "should" or "will" or the negative of
these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks outlined under "Risk Factors," that may cause our
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels or
activity, performance or achievements expressed or implied by these forward-
looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. We are not under any duty to update any
of the forward-looking statements after the date of this prospectus to conform
these statements to actual results, unless required by law.
15
<PAGE> 19
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock we are offering at the initial public offering price of $ per
share will be approximately $ million, or $ million if the
underwriters' over-allotment option is exercised in full, after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. We anticipate using the proceeds from this offering for research and
development activities, for process development, for financing possible
acquisitions and investments in technology as well as for working capital and
other general corporate purposes.
The amounts that we actually expend on these matters will vary
significantly, depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a result,
we will retain broad discretion in the allocation of the net proceeds of this
offering. We currently have no commitments or agreements and are not involved in
any negotiations with respect to any acquisitions of complementary products,
technologies or businesses. Pending use of the net proceeds of this offering, we
intend to invest the net proceeds in interest bearing, investment-grade
securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our capital stock since
inception. We currently intend to retain future earnings, if any, to finance the
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.
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<PAGE> 20
CAPITALIZATION
The table below presents the following information:
- our actual capitalization as of September 30, 1999;
- our pro forma capitalization as of that date after giving effect to the
conversion of all outstanding shares of convertible preferred stock into
common stock upon completion of this offering; and
- our pro forma capitalization as adjusted to reflect the receipt of the
net proceeds from our sale of shares of common stock at an
assumed initial public offering price of $ per share in this
offering, less underwriting discounts and commissions and estimated
offering expenses payable by us.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Capital lease obligations, less current portion............. $ 372 $ 372 $ 372
Loans payable, less current portion......................... 2,778 2,778 2,778
-------- -------- --------
Total long term debt...................................... 3,150 3,150 3,150
-------- -------- --------
Mandatorily redeemable convertible preferred stock, $0.001
par value; 22,800,000 shares authorized, 12,818,683 share
issued and outstanding; no shares issued and outstanding
pro forma and pro forma as adjusted....................... 30,535 --
Stockholders' equity (deficit):
Common stock $0.001 par value; 40,000,000 shares
authorized, 1,117,646 shares issued and outstanding,
actual; 40,000,000 shares authorized pro forma and pro
forma as adjusted, 13,936,329 shares issued and
outstanding pro forma, shares issued and
outstanding pro forma as adjusted....................... 1 14
Additional paid-in capital.................................. -- 29,264
Unearned stock-based compensation........................... (3,493) (3,493) (3,493)
Notes receivable for common stock........................... (29) (29) (29)
Deficit accumulated during the development stage............ (15,133) (13,875) (13,875)
-------- -------- --------
Total stockholders' equity (deficit)...................... (18,654) 11,881
-------- -------- --------
Total capitalization.................................... $ 15,031 $ 15,031 $
======== ======== ========
</TABLE>
This table does not include:
- 3,342,669 shares of common stock reserved for issuance under our 1995 and
1997 stock plans, of which options to purchase 1,803,084 shares were
outstanding as of September 30, 1999 at a weighted average exercise price
of $0.58 per share;
- 358,981 shares of common stock that may be issued upon exercise of
warrants outstanding as of September 30, 1999 at a weighted average
exercise price of $1.99 per share; and
- the amendment to our certificate of incorporation upon completion of this
offering to increase our authorized common stock and to decrease our
authorized preferred stock.
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<PAGE> 21
DILUTION
Our pro forma net tangible book value as of September 30, 1999 after giving
effect to the conversion of our preferred stock upon the closing of this
offering, was $11.9 million, or $0.85 per share of common stock. Pro forma net
tangible book value per share is equal to the amount of our total tangible
assets (total assets less intangible assets) less total liabilities, divided by
the pro forma number of shares of common stock outstanding at that date.
Assuming our sale of the shares offered by this prospectus at an assumed initial
public offering price of $ per share and after deducting underwriting
discounts and the estimated offering expenses payable, our pro forma net
tangible book value at that date would have been $ , or $ per
share of common stock. This represents an immediate in pro forma net
tangible book value of $ per share to existing stockholders and an immediate
dilution in pro forma net tangible book value of $ per share to new
investors. The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
--------
Pro forma net tangible book value per share as of
September 30, 1999........................................ $0.85
Increase per share attributable to new investors..........
-----
Pro forma net tangible book value per share after this
offering..................................................
--------
Pro forma dilution per share to new investors............. $
========
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1999, the total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by new investors purchasing shares in this offering. We have
assumed an initial public offering price of $ per share, and we have not
deducted estimated underwriting discounts and commissions and estimated offering
expenses in our calculations.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 13,936,329 % $27,520,000 % $
New investors.................
---------- ----- ----------- ----- ----
Total....................... 100.0% 100.0% $
========== ===== =========== ===== ====
</TABLE>
The foregoing discussion and tables assume no exercise of any outstanding
stock options or warrants. The exercise of all options and warrants outstanding
as of September 30, 1999 having an exercise price less than the offering price
would increase the dilutive effect to new investors to $ per share. Please
see "Capitalization," "Management -- Stock Option Plans" and "Description of
Capital Stock."
If the underwriters exercise their over-allotment in full, the following
will occur:
- the number of shares of common stock held by existing stockholders will
decrease to approximately % of the total number of shares of our
common stock outstanding; and
- the number of shares held by new investors will increase to
shares, or approximately % of the total number of our common stock
outstanding after this offering.
18
<PAGE> 22
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The statements of operations data for each of the years ended December 31,
1996, 1997 and 1998, and the balance sheet data as of December 31, 1997 and
1998, have been derived from our audited financial statements included elsewhere
in this prospectus which have been audited by PricewaterhouseCoopers LLP,
independent accountants. The statements of operations data for the nine months
ended September 30, 1998 and 1999, and the balance sheet data as of September
30, 1999, have been derived from our unaudited financial statements included
elsewhere in this prospectus. The balance sheet data as of December 31, 1996
have been derived from our audited financial statements not included in this
prospectus. The statements of operations data for the period from inception (May
5, 1995) through December 31, 1995 and the balance sheet dated at December 31,
1995 have been derived from our unaudited financial statements not included in
this prospectus. Our historical results are not necessarily indicative of
results to be expected for any future period. The data presented below have been
derived from financial statements that have been prepared in accordance with
generally accepted accounting principles and should be read with our financial
statements, including the notes, and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(MAY 5, 1995) NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, --------------------------- -----------------------
1995 1996 1997 1998 1998 1999
------------- ------- ------- ------- ------- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue:
Grant and collaboration............... 393 844 2,231 1,353 882 2,080
License............................... -- 460 400 -- -- --
Product............................... -- 20 18 -- -- --
-------- ------- ------- ------- ------- --------
Total revenue........................... 393 1,324 2,649 1,353 882 2,080
-------- ------- ------- ------- ------- --------
Operating expenses:
Cost of sales......................... -- 90 92 -- -- --
Research and development.............. 729 1,662 3,743 5,423 3,966 4,449
General and administrative............ 150 391 635 1,322 939 2,745
Sales and marketing................... -- 159 179 -- -- --
-------- ------- ------- ------- ------- --------
Total operating expenses................ 879 2,302 4,649 6,745 4,905 7,194
-------- ------- ------- ------- ------- --------
Loss from operations.................... (486) (978) (2,000) (5,392) (4,023) (5,114)
Interest income (expense), net.......... 31 22 2 (130) (46) 184
-------- ------- ------- ------- ------- --------
Net loss................................ $ (455) $ (956) $(1,998) $(5,522) $(4,069) $ (4,930)
======== ======= ======= ======= ======= ========
Net loss attributable to common
stockholders.......................... $ (468) $(1,157) $(2,299) $(6,011) $(4,428) $ (9,708)
======== ======= ======= ======= ======= ========
Net loss per common share, basic and
diluted............................... $(468.00) $(33.48) $ (6.03) $ (7.54) $ (5.70) $ (10.07)
======== ======= ======= ======= ======= ========
Shares used in computing net loss per
common share, basic and diluted....... 1 35 381 797 777 964
======== ======= ======= ======= ======= ========
Pro forma net loss per share, basic and
diluted (unaudited)................... $ (0.63) $ (0.39)
======= ========
Shares used in computing pro forma net
loss per share, basic and diluted
(unaudited)........................... 8,731 12,510
======= ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
------- ------- ------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and marketable securities....... $ 881 $ 1,547 $ 237 $ 1,746 $ 10,839
Working capital........................................ 836 925 (702) (1,402) 9,397
Total assets........................................... 1,114 2,416 1,630 3,361 17,274
Capital lease obligations, less current portion........ 58 241 426 407 372
Loans payable, less current portion.................... -- -- -- -- 2,778
Mandatorily redeemable convertible preferred stock..... 1,425 3,008 3,839 8,819 30,535
Total stockholders' deficit............................ (455) (1,410) (3,935) (9,537) (18,654)
</TABLE>
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<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion of the financial condition and
results of operations in conjunction with our financial statements and the notes
to those statements included elsewhere in this prospectus. This discussion and
analysis contains forward-looking statements that involve risks, uncertainties
and assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors, including but
not limited to those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
We were formed by a spin-off transaction from Soane Technologies, Inc.,
which was incorporated in 1991 and subsequently changed its name to 2C Optics,
Inc. We were incorporated in Delaware in 1995 under the name Soane BioSciences,
Inc. and changed our name to ACLARA BioSciences, Inc. in 1998. Since our
inception we have engaged primarily in organization and research and development
efforts related to the application of microfluidics technology to genomics and
pharmaceutical drug screening. To date, we have generated most of our revenues
from research collaborations and from government grants. Our total revenue was
$2.6 million in the year ended December 31, 1997, $1.4 million in the year ended
December 31, 1998 and $2.1 million in the nine months ended September 30, 1999.
Our collaborators include PE Biosystems, The R.W. Johnson Pharmaceutical
Research Institute, a subsidiary of Johnson & Johnson and Cellomics, Inc. We
have received government grants from the National Institutes of Health, or NIH,
the National Institute of Standards and Technology Advanced Technology Program,
or NIST ATP, and the Defense Advanced Research Projects Agency, or DARPA.
We have invested substantial amounts in establishing our microfluidics
technologies. Since our inception we have spent over $16 million on our research
and development efforts. Over 75% of our 60 employees at December 31, 1999 were
engaged in research and development.
We have incurred significant losses since our inception. As of September
30, 1999, our accumulated deficit was $15.1 million and total stockholders'
deficit was $18.7 million. Operating expenses increased from $2.3 million in
1996 to $4.6 million in 1997, to $6.7 million in 1998 and to $7.2 million for
the nine months ended September 30, 1999. The years 1996 and 1997 included cost
of sales and sales and marketing expenses associated with a gel product that we
discontinued in 1997. We expect to incur additional annual operating losses over
at least the next two years as we continue to expand our research and
development efforts and infrastructure.
Our sources of potential revenue for the next several years are likely to
be payments under existing and possible future collaborative arrangements,
government research grants and collaborations, product revenue from the sale of
LabCards, and royalties from our collaborators based on revenue received from
the sale of equipment and reagents utilizing our technology. We currently intend
to introduce our initial LabCard chip product in late 2000.
We recognize grant and collaboration revenue based on meeting certain
requirements, completing milestones as specified in the grants or contracts,
straight line over the period of certain contracts or as work is performed and
evidenced by time sheets and expense reports for certain grants. Revenue on
product sales is generally recognized upon shipment of product to the customer.
Revenue on license agreements is recognized on a straight line basis over the
life of services to be rendered under the license agreements.
We account for stock-based employee compensation arrangements in accordance
with provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25") and comply with the disclosure
provisions of Statement of
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<PAGE> 24
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123").
Under APB No. 25, compensation expense is based on the difference, if any
on the date of the grant, between the fair value of our stock and the exercise
price. SFAS No. 123 defines a "fair value" based method of accounting for an
employee stock option or similar equity instrument. The pro forma disclosures of
the difference between compensation expense included in net loss and the related
cost measured by the fair value method are presented in the financial statements
included elsewhere in this Prospectus.
We account for equity instruments issued to non-employees in accordance
with the provisions of SFAS 123 and Emerging Issues Task Force Issue No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."
In connection with the grant of stock options to employees, we recorded
deferred stock compensation of approximately $2.6 million in the nine month
period ended September 30, 1999 and $0, $0 and $1.7 million in the fiscal years
ended December 31, 1996, 1997 and 1998 respectively. These amounts were recorded
as a component of stockholders' equity and are being amortized as charges to
operations over the vesting period of the options using the straight line
method. The vesting period of the underlying options is generally four years. We
recorded amortization of deferred compensation of approximately $537,000 for the
nine months ended September 30, 1999 and $0, $0 and $286,000 for the fiscal
years ended December 31, 1996, 1997 and 1998 respectively to the appropriate
operating expense categories. The amortization expense relates to options
awarded to employees in all operating expense categories.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
Total Revenue. Our total revenue increased from $882,000 for the nine
months ended September 30, 1998 to $2.1 million for the nine months ended
September 30, 1999. This increase was due primarily to the addition of new
research collaborations with Johnson & Johnson as well as government grants.
Research and Development. Our research and development expenses consist
primarily of salaries and other personnel-related expenses, facility costs,
supplies and depreciation of facilities and laboratory equipment. Research and
development expenses increased from $4.0 million for the nine months ended
September 30, 1998 to $4.4 million for the nine months ended September 30, 1999.
The increase was due primarily to increased staffing and other project or
personnel-related costs, including an increase of $148,000 in stock-based
compensation expense, to support our additional collaborative and internal
research efforts. We expect to continue to devote substantial resources to
research and development, and we expect that research and development expenses
will continue to increase on an absolute dollar basis.
General and Administrative. Our general and administrative expenses consist
primarily of personnel costs for finance, legal, administration and business
development, as well as professional expenses such as outside legal and
accounting services. General and administrative expenses increased from $939,000
for the nine months ended September 30, 1998 to $2.7 million for the nine months
ended September 30, 1999. The increase was primarily due to our ongoing
litigation, as well as increased staffing and services necessary to manage and
support our growth. In addition, stock-based compensation increased by $191,000.
We expect that our general and administrative expenses will increase in absolute
dollar amounts as we expand our human resources and accounting staff, add
infrastructure and incur additional costs
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<PAGE> 25
related to being a public company, including directors' and officers' insurance,
investor relations programs and increased professional fees.
Interest Income (Expense), Net. Net interest income (expense) represents
income earned on our cash and cash equivalents, interest paid on bridge loans
and capital leases. Net interest expense was $46,000 for the nine months ended
September 30, 1998 and net interest income was $184,000 for the nine months
ended September 30, 1999. This increase was due to higher average cash balances
related to closings of our preferred stock equity financings.
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
Total Revenue. Our total revenue for 1996, 1997 and 1998 was $1.3 million,
$2.6 million and $1.4 million, respectively. The increase from 1996 to 1997 was
primarily due to revenue from an agreement with Johnson & Johnson signed in
1997. The decrease from 1997 to 1998 was due primarily to a decline in revenue
from Johnson & Johnson from $1.2 million in 1997 to $600,000 in 1998.
Research and Development. Research and development expenses increased from
$1.7 million in 1996 to $3.7 million in 1997 and $5.4 million in 1998. The
increase was due primarily to increased staffing and other project and personnel
related costs. Of the increase from 1997 to 1998, $60,000 related to stock-based
compensation expense.
General and Administrative. General and administrative expenses increased
from $391,000 in 1996 to $635,000 in 1997 and $1.3 million in 1998. The
increases were due primarily to increased staffing and personnel related costs
incurred to manage and support our growth. Of the increase from 1997 to 1998,
$101,000 related to stock-based compensation expense.
Cost of Sales and Sales and Marketing. Our cost of sales and sales and
marketing expenses in 1996 and 1997 were related to a gel product which was
discontinued in 1997.
Interest Income (Expense) Net. Net interest income was $22,000 in 1996 and
$2,000 in 1997 and net interest expense was $130,000 in 1998. Changes in net
interest income were due primarily to the timing of interest expense payments on
bridge loans.
Income Taxes. We incurred net operating losses in the nine months ended
September 30, 1998 and 1999, and consequently we did not pay any federal, state
or foreign income taxes. As of September 30, 1999, we had federal net operating
loss carryforwards of approximately $12.9 million and California net operating
loss carryforwards of approximately $8.2 million. We also had federal research
and development tax credit carryforwards of approximately $434,000 and
California research and development tax credit carryforwards of approximately
$341,000. If not utilized, the net operating losses and credit carryforwards
will expire at various dates beginning in 2000 through 2015. Utilization of the
net operating losses and credits may be subject to a substantial annual
limitation due to the change in the ownership provisions of the Internal Revenue
Code of 1986, as amended, and similar state provisions. The annual limitation
may result in the expiration of net operating losses and credits before
utilization. See Note 11 of Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
placements of preferred stock totaling $27.4 million, and research and
development funding from collaborators and government grants. As of September
30, 1999, we had $7.9 million in cash and cash equivalents, $3.0 million in
short term investments, and $1.6 million available under an equipment financing
line of credit.
Financing activities provided cash of $1.3 million, $672,000 and $6.4
million in 1996, 1997 and 1998, respectively, and $6.4 million and $17.4 million
in the nine months ended
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<PAGE> 26
September 30, 1998 and 1999, respectively. These amounts represent the net
proceeds we received from the sale of preferred and common stock.
Our operating activities used cash of $378,000, $1.9 million and $4.8
million in 1996, 1997 and 1998, respectively, and $3.8 million and $3.5 million
in the nine months ended September 30, 1998 and 1999, respectively. Uses of cash
in operating activities were primarily related to our funding of net operating
losses offset by receipt of funding from collaborators and government grants.
Additions of property and equipment were $595,000, $554,000 and $376,000 in
1996, 1997 and 1998, respectively, and $354,000 and $4.2 million in the nine
months ended September 30, 1998 and 1999, respectively. We expect to continue to
make significant investments in the purchase of property and equipment to
support our expanding operations.
We believe that the net proceeds from this offering, together with our
current cash balances and funding received from collaborators and government
grants will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. After that
time, we cannot be certain that additional funding, if required, will be
available in acceptable terms, or at all. We may raise additional funds through
public or private financing, collaborative relationships or other arrangements.
Further, any additional equity financing may be dilutive to stockholders, and
debt financing, if available, may involve restrictive covenants. Our failure to
raise capital when needed may harm our business and operating results.
DISCLOSURE ABOUT MARKET RISK
Our exposure to market risk is currently confined to our cash and cash
equivalents which have maturities of less than three months, and our short-term
investments which have maturities of less than one year. We maintain an
investment portfolio of commercial paper and U.S. Corporate bonds. The
securities in our investment portfolio are not leveraged, are classified as
available-for-sale and are, due to their short-term nature, subject to minimal
interest rate risk. We currently do not hedge interest rate exposure. Because of
the short-term maturities of our investments, we do not believe that an increase
in market rates would have any significant negative impact on the realized value
of our investment portfolio but may negatively impact the interest expense
associated with our long-term debt.
YEAR 2000 ISSUES
We did not experience any significant problems associated with Year 2000
issues, and we are not aware that any of our vendors or suppliers experienced
any such problems.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which will be effective for our fiscal
year 2001. This statement establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded in other contracts, be recorded on the balance sheet as
either an asset or liability measured at its fair value. The statement also
requires that changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. SFAS 133 is not anticipated
to have a significant impact on our operating results or financial condition
when adopted, since we currently do not engage in derivatives or hedging
activities.
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<PAGE> 27
BUSINESS
OVERVIEW
We believe that we are the only microfluidics, or lab-on-a-chip, company
with access to the wide range of technology and intellectual property required
to broadly address the genomics and pharmaceutical drug screening markets. We
are developing multiple products based on our proprietary microfluidics
technology that allow researchers to rapidly perform large numbers of chemical
and biological measurements in a miniaturized, automated format. In
collaboration with our strategic partners, we are developing dedicated
analytical instruments that will utilize our LabCard chip products. We believe
that these LabCard systems will provide order-of-magnitude increases in
throughput and enhanced accuracy for a wide range of laboratory analyses, at a
lower cost than current analytical systems. We intend to commercially introduce
our initial LabCard product, the Oasis microfluidic array chip, in late 2000.
We have strategically partnered with PE Biosystems, a leading provider of
analytical systems for genomics and pharmaceutical drug screening. We are
combining our proprietary microfluidics technology with their broad platform of
technologies, including reagent chemistries, assay methods, instrumentation and
software. We also plan to use the marketing, sales and distribution strengths of
our current and future partners to successfully commercialize our products.
INDUSTRY BACKGROUND
Life science research has been undergoing a transition in recent years to
large-scale experimentation, where a single project can require hundreds or
thousands of measurements. Two fields that exemplify this trend are genomics and
pharmaceutical drug screening. Researchers engaged in these fast growing areas
need new and improved analytical systems that provide order-of-magnitude
increases in the amount of data gathered as well as enhanced accuracy in the
measurement of this data. To gain market acceptance, new products and systems
also need to offer these benefits at attractive cost levels.
GENOMICS
Genomics is the analysis of nucleic acids, which are the fundamental
regulatory molecules of life. Nucleic acids take two forms, DNA and RNA. These
molecules contain and convey the instructions that govern all cellular
activities, including protein manufacture and cell reproduction. DNA and RNA
consist of linear strands of nucleotide bases, commonly known as A's, G's, T's
and C's, the specific sequences of which constitute the genetic information in
the cell. The unique genetic blueprint for all living organisms, from bacteria
to human beings, is encoded in the DNA. The entire DNA content of an organism is
known as its genome, which is organized into functional units called genes. For
a cell to read the genetic blueprint, the genetic information encoded in the DNA
must first be copied to a specific type of RNA called messenger RNA or mRNA. The
mRNA transmits this information throughout the cell and acts as the template for
protein production. Proteins carry out the cellular functions encoded in the RNA
copy of the DNA. Any defect or mutation in the sequence of nucleotide bases in
the DNA or RNA can disrupt cell or protein function and lead to disease.
Genomics has created opportunities to fundamentally alter the field of
human medicine through the discovery and development of novel drugs and an
improved ability to diagnose and manage disease. Interest in understanding the
relationships between genes and disease has generated a worldwide effort to
identify and sequence the genes of many organisms, including the approximately
three billion nucleotide pairs and the estimated 100,000 genes within the human
genome. Once researchers identify the genes and their nucleotide sequences, we
anticipate that an understanding of the specific function of each of these genes
and the role that different genes play in disease will require many years of
additional research. Genomics also has
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<PAGE> 28
applications in fields outside of human health care. For example, an improved
understanding of plant and animal genomes will help to improve yields and
productivity in the agriculture and livestock industries. The analysis of
nucleic acids is also becoming increasingly important for industrial
applications such as the testing of food, water and air.
The methods of analysis in the field of genomics generally fall into one of
three major categories:
- DNA Sequencing. DNA sequencing is the process of determining the linear
order of nucleotide bases in a DNA fragment.
- Genotyping. Genotyping refers to the identification of common variations
in a sequence of DNA within a particular genome.
- Gene Expression Analysis. Gene expression analysis involves measuring the
expression of one or more genes in a specific cell or tissue.
Researchers today are utilizing all of these genomic analysis methods to
understand genes, their function and genetic variability.
DNA SEQUENCING
DNA sequencing is the process of determining the linear order of nucleotide
bases in a strand of DNA and is performed with a laboratory instrument called a
DNA sequencer. The market for DNA sequencers and reagents is one of the largest
and fastest growing segments in genomics.
DNA sequencers use a technique known as electrophoresis, which uses an
electric current to separate DNA molecules by size. This technique is also known
as electrophoretic separation. In a DNA sequencer, the electric current causes
smaller DNA molecules to move rapidly and larger DNA molecules to move more
slowly. This enables the separation and ordering of complex mixtures of DNA
molecules according to size, and thus allows the identification of the order of
nucleotide bases.
Prior to beginning the DNA sequencing process, researchers must prepare the
DNA samples. Preparation of a DNA sample for analysis includes manual and
time-consuming laboratory processes such as centrifugation, filtration,
measuring, mixing and dispensing. We believe that sample preparation currently
represents a major component of the time, labor and cost in sequencing. In
addition, the manual nature of these steps renders sample preparation prone to
human error, which can compromise the quality of information obtained from the
sample. We believe that integration and automation of these complex steps in a
miniaturized format would significantly reduce the costs of sample preparation
and improve data quality.
After sample preparation, researchers analyze samples using one of the two
leading types of DNA sequencers: gel-based sequencers and capillary array
sequencers.
Gel-Based Sequencers. Until recently, all DNA sequencers used thin gels
layered between two glass plates for performing electrophoresis. The throughput
of a DNA sequencer is the number of DNA samples processed by the sequencer in a
given amount of time. Throughput is determined by the time required for the
electrophoretic separation and the number of DNA samples processed at one time.
With early-generation DNA sequencers, the electrophoresis separation required 12
hours or longer and was limited to only 24 samples at a time. Advanced
generations of gel-based sequencers have reduced this separation time to
approximately four hours and have allowed up to 96 samples to be processed at
one time. While the throughput has increased with successive generations of
gel-based sequencers, a significant amount of labor is still required to operate
a gel-based sequencer. The labor involved in gel-based sequencers includes the
time consuming tasks of preparing a new gel for each separation, loading each
DNA sample onto the gel and cleaning the system after each separation.
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<PAGE> 29
Capillary Array Sequencers. In recent years, a number of companies have
introduced a new generation of DNA sequencers, based on capillary
electrophoresis. With capillary electrophoresis, each DNA sample is separated
within a capillary having the diameter of a human hair. In capillary array
sequencers, up to 100 capillaries are bundled together to process many DNA
samples simultaneously. Capillary array sequencers automate many of the labor-
intensive steps in gel electrophoresis and provide significant improvements in
operational efficiency. The time required for electrophoresis in a capillary
array sequencer, however, is similar to that of current gel-based sequencers.
We believe that advances in the performance of DNA sequencers have helped
to rapidly expand the market for sequence information. In particular, the
throughput of DNA sequencers has increased significantly over the last decade.
This increase in throughput, along with improved automation, has substantially
reduced the cost per unit of information obtained from DNA sequencers. These
advances have enabled researchers to undertake large-scale sequencing projects
that otherwise may not have been pursued. These include numerous projects
underway to sequence entire genomes, including the human genome and various
microbial, plant and animal genomes.
Despite these advances in DNA sequencing technology, further improvements
are required. Sequencing all of the DNA in a complex genome is a massive
undertaking and, despite recent increases in throughput, requires up to hundreds
of sequencers running in parallel for months or even years. In addition, the
initial sequence of a genome typically contains errors which then require
additional sequencing to correct. To characterize the genetic diversity of an
organism, researchers will need to sequence the genomes of many individuals and
compare these sequences to identify differences. We also believe that
researchers will want to sequence the genomes of more organisms as the cost of
sequencing decreases. In summary, we believe that the demand for DNA sequencing
will continue to grow.
GENOTYPING
Genotyping is the process of analyzing locations within a genome where
variations in a gene sequence, or genetic polymorphisms, are known to exist.
Genetic polymorphisms play a role in an individual's susceptibility to disease
and response to drugs. One type of polymorphism is a single nucleotide base
variation, commonly referred to as a single nucleotide polymorphism, or SNP.
Other types of variations involve changes in the length of simple repeating
sequences and insertions or deletions of one or more bases at a particular
location.
SNPs are the most common type of genetic variation. There are an estimated
three to ten million SNPs in the human genome. While only a small fraction of
human SNPs have been identified to date, we expect this number to increase
dramatically during the next few years. For example, the SNP Consortium is a
group of drug companies and public entities who are working together to discover
300,000 SNPs and contribute their findings to public databases. Numerous other
individual companies have initiated programs to identify large numbers of human
SNPs.
As more and more SNPs are identified, a new market is emerging for high
throughput SNP genotyping. The simple identification of a SNP does not indicate
whether or how it may relate to human health. To relate SNPs to disease or drug
response, SNPs must be measured, or typed, in hundreds or thousands of people
and correlated with clinical data describing the physical or mental health of
those individuals. The emerging SNP genotyping market includes at least two
segments:
- Disease Association Studies. Disease association studies involve
measuring specific sets of SNPs in healthy and diseased individuals to
identify SNPs as markers for disease susceptibility and resistance. These
studies could help researchers identify individuals who are at risk for
such diseases as cardiovascular disease, hypertension, diabetes and
cancer, and accelerate the discovery of new pharmaceuticals for these
diseases. A single
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<PAGE> 30
association study may involve typing up to 100,000 or more SNPs in
thousands of individuals, requiring hundreds of millions of measurements.
- Pharmacogenomics. Pharmacogenomics is the study of how individual genetic
makeup influences drug response. The benefits of this knowledge include
the potential for streamlining clinical trials by targeting a candidate
drug to a specific responsive genotype, reducing both the cost and time
of drug development. An additional benefit is the potential for tailoring
drug prescriptions by genetic profile to maximize efficacy and minimize
toxic side effects. Similar to disease association studies, a single
clinical trial may require typing up to 100,000 or more SNPs in thousands
of individuals.
Existing genotyping technologies do not provide the throughput, automation
or economy needed for high throughput SNP analysis. Currently, the two leading
techniques for SNP analysis are hybridization microarrays and homogenous enzyme
detection methods.
- Hybridization Microarrays. Hybridization microarrays are flat chips which
have different DNA fragments, or probes, located in known positions on
the chip surface. Microarrays allow many SNPs to be measured at the same
time on one DNA sample, in a process called multiplexed detection.
Researchers can only analyze one DNA sample on each microarray. Thus,
microarrays offer a high degree of multiplexing but provide low sample
throughput.
- Homogenous Enzyme Detection. Homogenous enzyme detection methods involve
mixing a DNA sample with a specific enzyme and a DNA fragment of known
sequence called a probe. There is one probe specific for each SNP to be
typed, and a fluorescent signal generated during this reaction indicates
the presence of a particular SNP. Researchers can perform these
measurements in parallel using microwell plates. One advantage of this
approach is that researchers can analyze different DNA samples in
parallel on the same microwell plate. It is usually possible, however, to
measure only a single SNP in each well. Thus, the overall throughput of
homogeneous methods is relatively low.
Neither microarrays nor homogeneous enzyme methods are ideal for high
throughput SNP genotyping, where researchers need both high sample throughput
and multiplexing capability, or the ability to measure multiple SNPs for each
sample. We believe that new technologies are needed to meet the growing needs of
this emerging market segment.
GENE EXPRESSION ANALYSIS
Gene expression analysis involves measuring the extent to which specific
genes are expressed within a cell. A primary application of this process is
differential gene expression analysis, where researchers compare the genes
expressed in healthy and diseased samples to identify specific genes involved in
a particular disease process. Another common application involves measuring a
change in expression of certain genes when researchers add drug candidates to
cells. As researchers identify more genes from the genome sequencing projects,
we expect the market for expression analysis technologies to grow significantly.
The current leading technologies for gene expression analysis are the same
as those previously described for genotyping. Researchers can use hybridization
microarrays to monitor thousands of genes at the same time, but this approach is
only feasible for relatively small numbers of samples, because only one DNA
sample can be analyzed per individual microarray. Conversely, researchers can
apply homogeneous enzyme detection methods to large sample sets, but with that
approach may measure only a single gene in each well of a microwell plate. We
believe neither of these approaches is suitable for measuring large numbers of
genes over large numbers of DNA samples, as the testing of pharmaceutical drug
candidates requires. We believe that a technology that could provide this
capability would find rapid acceptance in the marketplace.
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PHARMACEUTICAL DRUG SCREENING
Industry sources estimate that pharmaceutical companies spent more than
$1.2 billion in 1999 on instrument systems and reagents used in identifying and
optimizing drug candidates. The genomics revolution is providing pharmaceutical
researchers with a dramatic increase in the number of potential drug targets,
such as a specific protein involved in a disease process, against which to
conduct screens of compound collections, or compound libraries. In addition,
pharmaceutical researchers are vastly expanding the size of compound libraries
they use to screen against new drug targets. As a result, researchers require
new laboratory technologies capable of screening increasingly large compound
libraries against an increasing number of drug targets in a cost-effective,
automated and rapid manner. The market segments related to pharmaceutical drug
screening are:
- Assay Development. During the process of assay development, researchers
develop methods for measuring the interaction of candidate compounds with
specific targets.
- Primary Screening. Primary screening involves testing entire compound
libraries against a drug target to identify "hits," or those compounds
which exhibit activity against a biological target.
- Secondary Screening and Lead Optimization. During secondary screening and
lead optimization, researchers perform follow-up testing to validate hits
identified in primary screening and further characterize their potential
as drug candidates.
ASSAY DEVELOPMENT
To screen a compound collection against a new target, a researcher must
develop a test, or assay, for measuring whether particular compounds in the
library interact with the target in a certain manner. The type of assay selected
depends on the target under investigation and the type of information being
sought. Researchers design some assays to measure whether and how tightly a
compound binds to a target, such as the binding of a drug to a protein. Other
assays are designed to measure whether and to what degree a compound reduces the
biological activity of a target, such as the activity of an enzyme. In other
cases, researchers test compound collections against living cells and measure a
particular cellular response, such as a change in expression level of one or
more genes.
Current assay development methods are time consuming, taking from weeks to
months, and are labor intensive, largely due to the need to measure a particular
molecule within a mixture of many different components. In addition, current
assay technologies provide only a fraction of the information needed for
selecting potential drug candidates. For example, existing technologies only
allow researchers to measure a single gene at one time for the purposes of
monitoring gene expression. Existing assay detection systems also typically
require preparation of reagents in a highly purified form, which requires
additional time and labor.
PRIMARY SCREENING
Primary screening involves performing an identical test on each compound in
a large library to identify hits. Based on the size of most compound libraries
today, primary screening can involve hundreds of thousands of individual
measurements against a single target. The time, expense and labor required to
conduct a primary screen currently limits the number of screens that
pharmaceutical researchers perform, and thereby limits their opportunities for
discovering new drug candidates.
A major element of cost in primary screening comes from the amount of
chemical and biochemical reagents, including the biological target, required to
perform large numbers of assays. The amount of reagents required is related to
the total number of measurements and the volume of each measurement. Because of
the high cost and the limited availability of certain
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reagents, researchers have attempted to reduce the total consumption of reagents
by reducing the volume of each measurement from hundreds of microliters down to
three to five microliters. A microliter is one millionth of a liter. The success
of these efforts, however, has been limited by the effects of evaporation on
small sample volumes, the sensitivity of existing assay detection systems and
the difficulty of delivering small volumes of reagents to microwell plates with
speed and precision. For example, a volume of one microliter can evaporate from
an open well in a few minutes, and even a small amount of evaporation reduces
the reliability and precision of a measurement. Furthermore, the detection
capability of many assay technologies becomes less sensitive as the test volume
is reduced. Researchers can improve sensitivity by increasing the concentration
of reagents. This conflicts, however, with the objective of reducing reagent
consumption. Due to these difficulties in reducing assay volumes, we believe
that researchers still perform most assays in primary screening in volumes
ranging from tens to hundreds of microliters. We believe that a reduction in
assay volumes would allow researchers to investigate more drug targets and
perform primary screens using larger compound libraries.
SECONDARY SCREENING AND LEAD OPTIMIZATION
Secondary screening and lead optimization involve performing a variety of
measurements on each hit identified in a primary screen. While the number of
compounds under investigation is smaller than in primary screening, the number
and diversity of measurements performed on each compound is much larger. The
purpose of these measurements is to verify and further characterize the
biological activity of each hit. For example, researchers may test each hit
against the target at different concentrations to determine its potency. Also,
each hit may be tested against a panel of different enzymes to identify activity
against any of these enzymes. Current technologies typically measure only a
single data point at a time, such as the activity of one compound on a
particular enzyme, limiting the efficiency and economy of secondary screening
and lead optimization, as well as the efficiency of overall pharmaceutical
research.
THE ACLARA SOLUTION
We are developing a family of products for genomics and pharmaceutical drug
screening based on our advanced, lab-on-a-chip technology. We believe that our
designs for microfluidic chips will enable researchers to perform chemical and
biological measurements rapidly in a miniaturized, automated format. Our
approach employs chips produced from plastic materials, in which electric
current is used to move liquids through interconnected channels on the chip
surface. Our microfluidics technology enables the accurate measurement,
dispensing and mixing of volumes as small as one-millionth the volume of a well
in a standard 96-microwell plate. In this manner, we can precisely manipulate a
variety of fluids, including those that contain whole cells, cell fragments or
magnetizable particles, using computerized controls with no moving parts or
valves. As a result, we believe researchers can perform large, complicated
experiments faster and with greater accuracy than with existing systems, and at
a reduced cost.
We enhance the power of our microfluidic chips with proprietary assay
chemistries, which we believe will provide more information content per
measurement, at a higher quality, than currently available technology.
Researchers use our chips and assay chemistries in combination with dedicated
instruments that we co-develop with our partners. These instruments apply
reagents and samples to the chips, control the fluid flow within the chips, make
optical measurements during an experiment and utilize specialized software to
collect data. For high throughput applications, we are designing chips with
arrays of fluidic networks in order to analyze many samples in parallel. We
intend to commercially introduce our initial microfluidic product, the Oasis
LabCard chip, in late 2000.
We believe that we are the only microfluidics company with access to the
wide range of technology and intellectual property needed to address multiple
segments of the genomics market, including DNA sequencing, genotyping and gene
expression analysis. Our technology
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integrates capillary electrophoresis, a high-performance analytical technique,
with microfluidic technology in either plastic or glass chips. We have developed
chips that are capable of processing many samples in parallel, and we are
initially focusing on market opportunities where providing the ability to
perform hundreds or thousands of experiments in parallel on different samples is
a major advantage. These opportunities include high throughput DNA sequencing
and high throughput screening of pharmaceutical drug candidates. We believe that
these applications offer the potential for generating recurring revenues from
microfluidic LabCard chips and assay chemistries.
KEY BENEFITS OF OUR PRODUCTS
- Greater Flexibility in Chip Design and Use. We produce most of our chips
using plastic materials and proprietary process technologies. While we
are able to produce our chips in glass when desirable, we believe that
our plastic chips offer substantial technical, commercial and customer
advantages over glass chips in most applications. For example, we can
make our chips with a broader range of functionality, size, thickness and
format than we believe is possible with glass chips. This design
flexibility provides us with significant latitude in developing chips for
different applications and performance levels. In addition, we believe
that we will be able to manufacture our plastic chips at a significantly
lower cost than possible with glass chips. We expect to provide our chips
as single-use disposables in most applications. When a chip is used only
one time, there is no possibility of carryover of sample or reagents from
one measurement to the next. We believe that this avoidance of carryover
will be a significant advantage of our single-use chips over multi-use
glass chips in applications such as pharmaceutical drug screening.
- Higher Throughput and Avoidance of Cross Contamination. We have designed
chips that contain arrays of fluidic networks, where each network
performs a measurement on a different sample. This parallel processing
approach provides two major advantages. The first advantage is higher
throughput, which results from performing measurements on many samples at
the same time. We believe that the higher throughput provided by our
chips will be a significant benefit in applications such as DNA
sequencing and SNP detection. The second advantage is that each
measurement is performed in a separate fluidic network, thereby avoiding
the potential for cross contamination of different reactions on the same
chip. We believe that avoiding cross contamination will be a key benefit
of our chips in applications such as pharmaceutical drug screening.
- Greater Information Content. In many applications, our LabCard chips and
proprietary assay chemistries allow researchers to obtain more
information from each measurement than is currently possible with
microwell plates. For example, we can detect many different SNPs or genes
in a single reaction, whereas microwell plates typically allow the
detection of only a single SNP or gene in each reaction. Our microfluidic
array chips integrate high-content measurements with parallel processing,
providing an enhanced combination of high throughput and multiplexing in
applications such as gene expression profiling and SNP detection.
- Faster Analysis. Our LabCard chips allow researchers to perform most
measurements faster than with conventional instrument systems. For
example, we can determine the sequence of a DNA strand in less than 20
minutes on our LabCard chips. A similar experiment often requires over
two hours on a capillary array DNA sequencer. In some applications, our
chips allow researchers to perform measurements 100 times faster than
with conventional systems. We can separate a mixture of DNA fragments in
a genotyping application in less than one minute, for example, compared
to two hours on a conventional instrument.
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- Increased Efficiency and Higher Data Quality. Most laboratory analyses
involve a number of instruments and require the movement of fluids and
reaction components from one instrument to the next. The integrated
fluidic circuitry of our chips allows researchers to perform multiple
experimental operations in sequence on a chip. This fluidic
microcircuitry is made up of interconnected microchannels, through which
fluids and other materials are pumped using electric current, monitored
and controlled by computer. By reducing the number of human intervention
points, our LabCard chips reduce the potential for variability and error
and increase the data quality. For example, we are designing microfluidic
chips to miniaturize and integrate the multiple sample preparation steps
required prior to DNA sequencing.
- Reduced Cost. We believe several factors combine to reduce the cost of
chemical and biological information obtained from our LabCard
microfluidic array chips. Because our chips perform measurements on very
small volumes of material, smaller amounts of sample and reagents are
consumed. For example, many of our products are designed to allow
measurements in as small as one-thousandth the volume typically used in a
microwell plate. In addition, we believe the reduced complexity and
higher information content will translate into lower labor and reagent
costs, as well as fewer repeated experiments. Higher throughput also
reduces the labor cost per measurement.
OUR STRATEGY
We believe that we are the only company currently developing microfluidic
systems to address all the major segments of genomics, as well as key
applications in pharmaceutical drug screening. In addition, we believe that our
microfluidic array chips will have other applications, such as for industrial
process control and sensing systems, as well as clinical diagnostics. Our
objective is to be the leading provider of microfluidic chips to large,
fast-growing market segments. Key elements of our strategy include:
- Targeting Our Products Toward High Throughput, High Value
Applications. We have targeted our products to applications that involve
large numbers of tests and where the information sought is of high value
to customers. These applications include DNA sequencing, genotyping, gene
expression analysis and pharmaceutical drug screening.
- Partnering With Industry Leaders For Instrument Development,
Manufacturing and Commercialization. We intend to leverage the
instrumentation, software and chemistry expertise of our partners, such
as PE Biosystems, to accelerate the development of integrated,
microfluidics-based systems. We also plan to use the marketing, sales and
distribution strengths of our partners to successfully commercialize our
products. We plan to focus on our core capabilities, including the
development and manufacture of plastic LabCard chips and related assay
technology. We believe that strategic relationships with partners who
have strong existing market positions and development track records will
speed product adoption, maintain high barriers to entry and reduce our
research and development risk and capital outlay.
- Leveraging Our Intellectual Property With That of Our Partners. As of
December 31, 1999, we had 15 issued U.S. patents, 36 U.S. patent
applications and a total of 76 patents and patent applications owned or
licensed. These patents and applications cover patents and applications
worldwide that relate to our core microfluidics technology, genetic
analysis and biochemical assay methods, instrument system design,
chip-to-system interface and plastic-based LabCard chip technology. In
addition, some of the primary applications for lab-on-a-chip technology
require access to intellectual property owned by other companies. For
example, PE Biosystems controls a significant amount of intellectual
property related to DNA sequencing and other genomic applications. Our
partnership with
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PE Biosystems enables us to develop products for these applications that
benefit from the combined intellectual property of the two companies.
- Generating Recurring, High Margin Revenue. We intend to sell our chips
through our partners, often as part of a dedicated instrument system, and
to generate substantial recurring revenue from the sales of LabCard
systems and proprietary reagents. In most applications for our products,
including pharmaceutical drug screening, we are developing single-use
disposable LabCard chips. We have made significant investments in
developing cost-effective processes for the manufacture of plastic
LabCard chips in order to increase our potential margins. Finally, we
also expect to receive royalties on the sale of certain instruments by
our partners.
- Enhancing the Value of LabCard Systems by Integrating Proprietary
Chemistries. We intend to enhance the value and market position of our
LabCard products with proprietary chemistries and analysis methods
developed by us and by our strategic partners. We believe that our novel
chemistries and methods enhance the benefits of lab-on-a-chip technology
in many applications. In addition, our researchers have demonstrated that
we can dehydrate reagents on the LabCard chips and subsequently
reconstitute them without loss of efficacy, potentially enabling the sale
of chips pre-loaded with reagents. We believe this total solution
approach, combining high value chemistries with LabCard chips and
co-developed instrument systems, will provide additional benefits to
customers and result in greater revenue for us.
OUR TECHNOLOGY
We pioneered the technology for using electric fields to move liquids
through interconnected channels on chips. These liquids may contain various
materials, including chemical reagents, whole cells, cell fragments or
magnetizable particles that researchers manipulate using computerized control
with no moving parts or valves. We are a leading developer of plastic chips for
lab-on-a-chip applications, and we have developed several processes for
producing these plastic chips. The primary elements of our technology platform
are described below.
MICROFLUIDICS
In a patent application filed in February 1990, Dr. David Soane, one of our
co-founders, disclosed the fundamental invention of moving fluids through
interconnected channels on chips using electric currents. This original
microfluidics patent application resulted in a series of issued and pending
patent applications, all of which are assigned to us.
We discovered that using electric currents to move fluids through small
channels provides improved precision, greater flexibility and more functionality
than other more common approaches, such as pressure. By applying electric
currents along channels, we generate two types of flow: electrophoresis and
electro-osmosis. Electrophoresis is the movement of charged molecules through
the bulk fluid in the channels. Electro-osmosis results in the movement of the
bulk fluid itself. Thus, electro-osmosis can act as an electronic pump for
moving all of the fluid in a channel. The direction and speed of the flow is
determined by the nature of the channel material, the bulk fluid and the
magnitude and direction of the electric field.
We have developed chip designs for performing numerous operations using our
proprietary technology for moving fluids through channels with electric
currents. These operations include, at microscopic dimensions, mixing different
fluids, measuring and dispensing small amounts of a particular fluid into a
channel and separating mixtures of different molecules, such as DNA molecules,
into separate fractions. We have also developed chip designs for integrating
many of these individual operations together in a microfluidic circuit.
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We can manipulate extremely small volumes of liquid with high precision
using our microfluidic technology. For example, we can measure and dispense less
than a nanoliter, or one-billionth of a liter, with better than 99% precision.
We have performed biochemical assays, such as enzyme reactions, in nanoliter
volumes with no loss in performance or reproducibility compared to assays
performed in test tubes. We can separate mixtures of different molecules into
individual components up to 1,000 times faster than with conventional
electrophoresis systems, without any loss in performance.
MICROFLUIDIC ARRAYS
We have designed chips that contain arrays of fluidic networks, where each
network performs a measurement on a different sample. In this way, we can
perform measurements on many samples at the same time. In addition, our arrays
keep each sample separated from the other samples, thereby avoiding cross
contamination.
We have developed a variety of microfluidic array designs. These designs
involve variations in the density of fluidic networks in the array, as well as
the functionality and specific layout of channels in each network. This
flexibility allows us to design LabCard products for different applications and
throughput requirements. For our initial products, we expect a single chip, or
microfluidic array, to contain 16 to 96 fluidic networks. We are designing chips
with higher densities of fluidic networks for later-generation products. The
physical dimensions of our chips vary and are designed to optimize the
integration of a particular chip with its corresponding instrument. Many of our
chips have footprints that are similar to microwell plates, which we believe
will accelerate their adoption in the marketplace since many existing laboratory
processes are standardized around microwell plates.
We expect our initial products to use two-dimensional arrays, in which all
of the fluidic networks are on one surface. We are also developing
three-dimensional microfluidic arrays, where multiple two-dimensional arrays are
layered together, with fluid connections between the layers. We expect that
these multilayered, three-dimensional arrays will enable us to further increase
the number and complexity of operations that we perform on a single chip.
ADVANCED MATERIALS AND CHIP FABRICATION TECHNOLOGY
We have developed a substantial base of proprietary technology and
expertise for making microfluidic chips in plastic materials. This proprietary
technology base includes the specific plastic materials used in our chips,
processes we use to make our chips, and processes we use to engineer the surface
properties of our chips. While we are able to produce our chips in glass when
desirable, in most situations we believe that our plastic chips provide
significant technical and commercial advantages over glass chips. For example,
we can make our plastic chips in a broader range of sizes and thicknesses than
possible with glass chips. We can also make our chips in long rolls of flexible
film, which is not possible with glass chips. We believe that the design
flexibility afforded by our plastic chips enables us to better address the needs
of different applications than would be possible with glass chips. In addition,
we believe that we will be able to commercially produce our plastic chips at a
significantly lower unit cost than would be possible with glass chips.
In many applications, our plastic chips will be provided as single-use
disposables. This single-use feature will avoid the potential for carryover,
which can occur when the same well or chamber is re-used from one assay to the
next. We believe that the ability of researchers to avoid carryover using our
single-use chips will be important in applications such as pharmaceutical drug
screening.
We have adapted precision replication techniques from the CD-ROM industry
and further developed these methods for making plastic microfluidic chips. The
first step in making a plastic chip is generating a master mold. One side of
this mold has a surface that contains a pattern of
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interconnected ridges. The next step, called replication, involves imprinting
the pattern of interconnected ridges into a plastic sheet, forming a
corresponding pattern of interconnected channels. A single mold can be used to
replicate the same channel pattern into plastic thousands of times, with no
deviation from the original chip. A cover sheet is then bonded, or laminated, on
top of the base sheet containing the channels. This method of production is
highly precise and cost effective.
We are also developing a proprietary, continuous reel process for precision
replication, which we expect will further reduce costs as our production volumes
grow. In this process, the master surface containing the pattern of ridges is a
thin, flexible sheet of metal that is wrapped around a circular drum. We then
roll a continuous sheet of plastic across this drum to replicate the channel
patterns onto the moving plastic sheet. The continuous sheet can then be cut
into individual chips or used as a continuous roll.
CHEMISTRY AND APPLICATIONS
We believe that we are the leader in developing and demonstrating
biological experiments on plastic microfluidic chips. We have miniaturized and
integrated a wide variety of experiments on our plastic chips, including DNA
sequencing, SNP detection, gene expression analysis, enzyme activity
measurements and immunoassays. We believe that this experience provides us with
a significant competitive advantage that will enable us to rapidly implement new
assays on our plastic chips. We have discovered specific technological
approaches for enhancing the performance of assays on plastic chips, and we have
applied for patent protection on many of these approaches. We believe that our
experience and lead in implementing biological experiments on plastic chips
provides us with a significant competitive advantage.
In addition to using existing assay chemistries with our chips, we have
developed several proprietary assay chemistries and methods designed to expand
the capability and breadth of our LabCard systems. These include proprietary
reagents for monitoring the activity of various enzymes. These reagents enable
us to perform a wide variety of different enzyme assays on our LabCard systems
for pharmaceutical drug screening. We have also developed a proprietary assay
chemistry, called eTAGs, for identifying the presence and quantity of multiple
sequences in a sample simultaneously. We have also developed proprietary assay
chemistries for DNA sample processing, which allow the simultaneous processing
of multiple samples.
For some applications, we may pre-load assay chemistries onto our chips
prior to shipment. We have developed technology for pre-loading, drying and
sealing measured amounts of reagents on our chips. We have demonstrated this
capability with biologically active reagents, such as enzymes, and have shown
that bioactivity is retained when the reagent is used in a final measurement. We
believe that this capability will enable us to provide ready-to-use LabCard
chips in certain applications.
LABCARD PRODUCTS
We believe we are the only microfluidics company that has access to the
wide range of technology and intellectual property to address multiple segments
of the genomics market, including DNA sequencing, genotyping and gene expression
analysis. We are developing a family of LabCard microfluidic products based on
our proprietary designs and assays and are collaborating with our strategic
partners to design instruments to run our LabCard chips. We expect that these
LabCard systems will enable large-scale genomics studies to be performed faster,
at lower cost and with less manual labor than current technologies. We are
currently working with PE Biosystems to jointly develop LabCard systems for DNA
sequencing, gene expression analysis and genotyping. PE Biosystems will be
responsible for marketing and distributing these LabCard systems.
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We also are developing LabCard systems for use in pharmaceutical drug
screening. We are collaborating with PE Biosystems on the development of two
systems for pharmaceutical drug screening, the nMAS HTS and UHTS systems, which
will utilize our LabCard microfluidic array chips. PE Biosystems will be
responsible for commercializing these systems. We expect that these LabCard
systems will allow researchers to identify new drug candidates more rapidly and
at lower cost than with currently available products.
We intend to focus our development efforts on our chips and assay
chemistries, while capitalizing on our partners' strengths for the development
and manufacture of instruments. In addition, our partners will market, sell and
distribute the LabCard systems, including the instruments, LabCard chips, assay
chemistries and software. The following table identifies products we are
currently developing for the genomic analysis and pharmaceutical drug screening
markets.
<TABLE>
<CAPTION>
PRODUCT APPLICATION MARKETING RIGHTS
------- ----------- ----------------
<S> <C> <C>
GeneMate SNP detection and gene expression PE Biosystems
Microsequencer DNA sequencing PE Biosystems
Sample Prep Automated preparation of samples for DNA sequencing PE Biosystems
Oasis Nanovolume, homogeneous assays ACLARA
UHTS Pharmaceutical drug screening -- PE Biosystems
100,000 measurements per day
nMAS HTS Pharmaceutical drug screening -- PE Biosystems
20,000 measurements per day
</TABLE>
GENEMATE SYSTEM
We are co-developing with PE Biosystems a LabCard system known as the
GeneMate system, to be used for high throughput gene expression analysis and SNP
detection. The GeneMate system consists of an instrument, microfluidic array
chips and proprietary assay chemistries. The GeneMate system will process
multiple samples in parallel on each microfluidic array chip. Proprietary
chemistries will be utilized to obtain an enzyme reaction on each sample, which
will generate specific signal molecules for each SNP or gene present in the
sample. The signal molecules from each reaction will be analyzed on the array
chips.
We are designing the GeneMate system to analyze multiple genes or SNPs on
many samples in parallel. We believe there is a large unmet need for a system
that combines high sample throughput with the ability to detect multiple genes
or SNPs in each sample. Current technologies, based on homogeneous enzyme
methods or hybridization microarrays, do not provide this multiplexing
capability. Homogeneous enzyme detection methods allow only a single SNP or gene
to be measured in each well of a microwell plate. Hybridization microarrays
allow many SNPs or genes to be measured at once, but only for a single sample.
We expect the GeneMate system to include the following key features and
benefits:
- high sample throughput;
- identification of multiple SNPs or genes per sample; and
- proprietary assay chemistries.
We currently expect to begin commercialization of the GeneMate system in
2001.
MICROSEQUENCER SYSTEM
We are developing a LabCard system for DNA sequencing, called the
Microsequencer system, in collaboration with PE Biosystems. The Microsequencer
system will include an instrument, microfluidic chips, software and proprietary
assay chemistries. PE Biosystems will
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develop the instrument and will be responsible for worldwide marketing, sales
and distribution of the Microsequencer system, including our LabCard chips.
We are designing the Microsequencer system to provide major performance
advantages over current DNA sequencers, particularly in terms of speed and
throughput. For example, our prototype LabCard chips can enable the sequencing
of a DNA fragment in 20 minutes. This typically requires over two hours using a
conventional capillary array system. PE Biosystems introduced the first
automated DNA sequencer in 1987 and has introduced successive generation
sequencers approximately every three years. Typically, each next generation
system has provided approximately a five-fold increase in throughput compared to
its predecessor and has been met with rapid market acceptance. We believe that
the Microsequencer system will provide a throughput increase over current DNA
sequencers that is comparable to this historical standard. Large scale
sequencing projects require hundreds of DNA sequencers running in parallel for
months or even years. We expect that the enhanced throughput of our
Microsequencer system will significantly reduce the cost and shorten the time of
these projects and enable more large scale projects to be undertaken.
PE Biosystems will commercialize the Microsequencer system. Since
introducing the first automated DNA sequencer in 1987, PE Biosystems has
maintained a significant share of the market for DNA sequencing systems. In
addition to this market leadership, PE Biosystems owns or controls a wide array
of intellectual property and technologies related to DNA sequencing including
assay chemistries, labeling dyes, detection systems and data analysis software.
PE Biosystems will offer proprietary reagent kits and software as part of the
Microsequencer system. We currently expect to begin the commercialization of the
Microsequencer system in 2001.
DNA SAMPLE PREPARATION SYSTEM
We are co-developing with PE Biosystems a LabCard system designed to
integrate and automate certain steps required for preparing DNA samples prior to
analysis on the Microsequencer system. Sample processing currently involves a
series of discrete operations which researchers perform on disparate instrument
systems, such as centrifuges and thermocyclers. In addition to requiring
multiple instruments, sample processing currently requires a relatively large
volume of sample and reagents, is labor intensive and is prone to human errors.
We plan to integrate multiple steps in the sample preparation process onto a
single LabCard chip, offering the following benefits:
- up to 1,000-fold reduction in sample and reagent volumes;
- reduction in the number of user steps;
- collapsing the capability of multiple instruments into a single LabCard
system; and
- fewer errors and improved data quality.
OASIS LABCARD CHIPS
We are developing Oasis LabCard chips for small volume homogeneous assays
in both genomics and pharmaceutical drug screening applications. Our Oasis
LabCard chips will be similar in size and format to existing microwell plates.
However, we are designing the microfluidic channels in these Oasis chips to
enable researchers to conduct assays in volumes as small as one-thousandth the
volume allowed by current microwell plates. Oasis chips are the only products we
are developing that do not require the development and commercialization of a
specialized instrument. The large test volumes required by existing technologies
limit the economies of high throughput experimentation, and therefore the amount
of this experimentation which is performed today. We are designing Oasis chips
to enable researchers to miniaturize assays to a degree previously unattainable,
while leveraging their current
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generation of automation equipment and detection instruments. We believe the key
features and benefits of our Oasis chips will be:
- miniaturization of assays to as small as one-thousandth the volume used
in current methods;
- compatibility with most existing homogeneous assay chemistries in use by
pharmaceutical and genomics researchers; and
- compatibility with existing robotic plate handling and detection
equipment.
Because the Oasis LabCard chip does not require a specialized instrument,
we currently expect that it will be our first product to be commercialized, in
late 2000.
PHARMACEUTICAL DRUG SCREENING -- NMAS HTS AND UHTS SYSTEMS
We are developing LabCard systems that address various stages of
pharmaceutical drug discovery, including assay development, primary screening,
secondary screening and lead optimization. We are currently developing two such
systems in collaboration with PE Biosystems. We are developing the nMAS HTS
system to provide throughput of approximately 20,000 assays per day, while we
are designing the UHTS system for the user who needs the higher throughput of
100,000 assays per day.
We expect that both the nMAS and UHTS systems will employ our single-use
plastic chips, thereby avoiding the potential for carryover from one assay to
the next. In addition, we are designing these chips using our microfluidic array
strategy, where each chip contains an array of fluidic networks and each
measurement is performed in a different fluidic network. Our microfluidic array
chip designs are intended to avoid the potential for cross-contamination from
different samples on the same chip.
Our nMAS and UHTS LabCard systems use capillary electrophoresis for assay
detection. Capillary electrophoresis integrated on microfluidic chips represents
a new and powerful assay detection method for screening potential drug
candidates against targets, and provides numerous benefits over current assay
detection methods. In current assay detection methods, the assay detection
system must identify a particular material within an assay mixture of different
materials. With capillary electrophoresis detection, we physically separate the
various components present in an assay mixture and then measure the signal from
these individual components. The separation step generally adds only a few
seconds to the detection time. We expect the benefits of integrated capillary
electrophoresis detection to include:
- ability to monitor the particular material in a reaction free from
interfering materials, resulting in increased assay reliability and
sensitivity;
- simplification of assay development and fewer requirements for custom
synthesis and purification of reagent; and
- ability to obtain information on other components in the assay mixture,
which is not generally possible with other assay detection methods,
thereby improving assay precision and information content.
Based on our experience, we expect that integrated capillary
electrophoresis detection may reduce the time required to develop assays for
many new targets by weeks or months. In addition, we expect that the reduced
need for preparing and purifying specialized reagents can eliminate significant
labor and cost from the assay development process. In primary screening, we
expect integrated capillary electrophoresis detection to enable increased
measurement precision and reliability. In secondary screening and lead
optimization, we expect to enable tests yielding greater information content
than that provided by current assay technologies, thereby increasing the
efficiency of this step in the drug screening process.
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Our LabCard systems for pharmaceutical drug screening will incorporate
assay chemistries that are proprietary to PE Biosystems or to us. We expect
these assay chemistries to allow the use of our LabCard systems for a wide
variety of drug targets. For example, we are developing assay chemistries for
many classes of protein targets, including different enzymes and receptors. In
addition, we are developing assays for monitoring changes in gene expression
within cells that are induced by a potential drug candidate. We expect our
chemistries for gene expression assays to allow monitoring of multiple genes in
each assay, a capability not readily allowed by current assay technologies. We
anticipate that the assay chemistries under development to provide our customers
a broad menu of assays, with greater or higher quality information than
typically provided by currently existing assay chemistries and detection
methods.
COLLABORATIONS
We have entered into collaboration agreements with market leaders in
various sectors of the life sciences industry. Our objective with these
agreements, as well as those we plan to execute with other leading companies, is
to increase demand for our product family and to speed the commercialization of
our various LabCard products. These collaborations will allow us to focus on the
development of our LabCard chips, assay chemistries and analysis methods. The
collaborations also allow us to take advantage of the resources and capabilities
of our collaborative partners for the co-development, manufacture, marketing,
sales and distribution of instrument systems that will use our LabCard chips.
While we intend to retain manufacturing rights for our chips in most cases, we
plan to outsource the commercial manufacturing of our chips to third party
vendors. We believe this strategy may help to reduce the risks and costs
associated with commercializing our LabCard products while allowing us to
efficiently penetrate our target markets.
STRATEGIC PARTNERSHIPS
We have and plan to continue to enter into strategic partnership agreements
with industry leaders in various fields or markets to jointly develop new
products and instrument systems. We typically seek strategic partners who have
expertise in instrument development as well as marketing, sales and distribution
capabilities.
PE Biosystems
We have entered into collaboration agreements with PE Biosystems for the
purpose of co-developing systems which use our LabCard products in the following
areas:
- genomics; and
- pharmaceutical drug screening.
GENOMICS. In April 1998, we entered into a collaboration agreement
with PE Biosystems to co-develop a DNA sequencer based on our microfluidics
technology. The Microsequencer system will incorporate our microfluidic
LabCard chips with instrumentation, software and reagents developed by PE
Biosystems. Under this agreement we granted PE Biosystems the exclusive
worldwide right to market, sell and distribute LabCard chips for jointly
developed systems. We will manufacture LabCard chips that PE Biosystems
will market, distribute and sell. We will receive a portion of the net
sales revenues for the LabCard chips sold. The agreement contemplates
future supplemental agreements providing additional terms for specific
genomic analysis products. The agreement is for an unspecified period and
may be terminated by our mutual written consent. In addition, either of us
may terminate the agreement if the other party does not fulfill its
obligations under the agreement or becomes insolvent.
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We are in final stages of negotiations with PE Biosystems for a
supplemental agreement to develop the GeneMate system for gene
expression analysis and high throughput SNP detection. We expect that
the general terms of this relationship will be governed by the April
1998 agreement. We anticipate that we will share profits on all LabCard
chips sold by PE Biosystems and also will receive royalty payments for
GeneMate instruments and reagents sold by PE Biosystems. The termination
provisions for the agreement are the same as set forth in the April 1998
agreement.
We are co-developing with PE Biosystems a LabCard system designed
to integrate and automate the steps required for preparing DNA samples
prior to analysis on the Microsequencer System. We have not yet
finalized the commercial terms for this joint product.
PHARMACEUTICAL DRUG SCREENING. In March 1999, we entered into a
collaboration agreement with PE Biosystems to jointly develop systems
for pharmaceutical drug screening employing our microfluidics
technology.
We are developing two systems: the UHTS system, which we are
designing to perform 100,000 assays per day, and the nMAS HTS system,
which we are designing to perform at least 20,000 assays per day. We are
targeting these two systems to broadly address the needs of
pharmaceutical companies in their screening and evaluation of potential
drugs, including assay development, primary screening, secondary
screening and lead optimization. We are developing LabCard microfluidic
array chips for the two systems, PE Biosystems is developing the
instrumentation, and the parties are jointly responsible for developing
reagents.
Under the agreement, PE Biosystems has the exclusive worldwide
right to market and distribute the LabCard products. We will be the
exclusive supplier of the microfluidic chips to PE Biosystems and will
share with PE Biosystems the net revenue from the LabCard products after
recovery of manufacturing costs. We will also receive a royalty on the
sale of pharmaceutical drug screening instrument systems designed to use
the LabCards. The agreement contemplates that third parties will support
the development efforts through technology access partnerships as
described below. Unless terminated earlier, the agreement remains in
effect until the expiration of the last patent subject to the agreement.
As with our other collaboration agreement with PE Biosystems, this
agreement may be terminated upon mutual written consent or due to breach
or insolvency.
TECHNOLOGY ACCESS PARTNERSHIPS
We enter into technology access partnership programs with the
objective of receiving funding for research and development of new products
in exchange for early access to prototypes of those products. The first
program, described below, was designed for the development of the UHTS
system. We are currently negotiating with potential technology access
partners for programs related to the nMAS HTS system.
In February 1997, we entered into a technology access partnership
agreement with The R.W. Johnson Pharmaceutical Research Institute, or PRI,
a subsidiary of Johnson & Johnson, to develop a microfluidics system for
high throughput drug screening. We renegotiated the agreement with PRI to
include PE Biosystems effective as of October 1, 1998 as contemplated in
our pharmaceutical drug screening agreement with PE Biosystems. Under the
partnership PRI provides research funding that we share with PE Biosystems.
We received $1.2 million under the partnership in 1999. We are
co-developing with PE Biosystems an ultra-high throughput screening system
using our LabCard products for PRI's use. The agreement provides that PRI
will receive exclusive early access to prototypes of this UHTS system for a
period of one year following delivery to PRI. The
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partnership may be terminated by PRI if there is a breach by us or PE
Biosystems that is not cured within 30 days. In addition, PRI may terminate
the relationship if we fail to meet contractual milestones.
MARKETING, SALES AND DISTRIBUTION
In addition to our existing relationship with PE Biosystems, we intend to
identify and establish collaborative development and commercialization
relationships with strategic partners for additional applications of our
technology. We have no plans in the foreseeable future to establish our own
marketing, sales or distribution infrastructure. We intend to seek premier
partners that possess strong hardware and software development expertise and
manufacturing capabilities, as well as significant intellectual property and
commercial presence in their respective markets. We believe this model will
allow us to take advantage of our partners' experience and established customer
relationships, thereby enhancing the rapid market acceptance of our products,
while creating high barriers to entry for our competition and reducing the our
risks and working capital requirements.
RESEARCH AND DEVELOPMENT
We began developing our core technologies related to lab-on-a-chip products
in the early 1990s. We continue to advance our core technologies and to pursue
research and development related to new product opportunities. We have targeted
our primary research and development efforts at the following three areas:
- LabCard Manufacturing Processes. We have solved many important
technological challenges relating to the manufacture of microfluidic
chips in plastic and have applied for patent protection on many of these
solutions. We continue to pursue advanced capabilities for manufacturing
LabCard microfluidic array chips in plastic, with the goals of lowering
manufacturing costs and adding new functionality to our LabCard products.
For example, we are developing a continuous reel process for LabCard chip
manufacturing. We are also developing multi-layered LabCard chips to
provide three-dimensional networks of channels, which would enable us to
perform more advanced fluidic protocols for a given size of LabCard
product.
- Nucleic Acid Sample Processing. In 1998, we were awarded a grant from the
Advanced Technology Program of the National Institutes of Standards and
Technology to develop LabCards systems for nucleic acid sample
processing. We are designing these LabCards systems to perform standard
processes, such as DNA amplification and purification, on many samples in
parallel and at small volume. We expect that our sample processing
LabCard systems will reduce the cost and increase the reliability of
sample preparation in nucleic acid analysis.
- Cell Microarrays. In October 1999, we entered into a collaboration with
Cellomics Inc., a company that develops novel products for
fluorescence-based cell analysis. This collaboration is focused on the
development of the CellChip Cassette, a new format for cell analysis.
Under this collaboration, we are integrating our LabCard microfluidic
array technology with Cellomics' CellChip technology, in which living
cells are placed at different spots, called cell domains, on the surface
of a flat chip. The goal of this collaboration is to create an integrated
CellChip Cassette in which the fluid environment around each cell domain
can be individually controlled. This format would allow different
experiments to be performed on each cell domain in parallel. We believe
that the initial commercial opportunities for the CellChip Cassette will
be in pharmaceutical drug discovery, including primary screening and lead
optimization.
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INTELLECTUAL PROPERTY
We seek patent protection on microfluidic chips, liquid transfer
components, reagents and methodologies for their use. As of December 31, 1999,
we had 15 issued U.S. patents, 36 U.S. patent applications and a total of 76
patents and patent applications that we own or have licensed. Our policy is to
file patent applications and to protect technology, inventions and improvements
to inventions that are commercially important to the development of our
business. These patents and applications relate to essential areas of our
technology, including among others, the following items:
- microfluidic devices, modifications for improved performance, and their
uses;
- manufacturing methods for producing the microfluidic devices;
- evaporation control technology;
- methodologies for sample preparation;
- fluid transfer devices for transferring microliter and sub-microliter
volumes;
- signal detection systems;
- methods for detecting single nucleotide polymorphisms, or SNPs; and
- electrophoretic gels.
Our issued patents have expiration dates from 2009 to 2017.
We also rely upon trade secrets, know-how, trademarks, copyright protection
and continuing technological and licensing opportunities to develop and maintain
our competitive position. Our success will depend in part on our ability to
obtain patent protection for our products and processes, to preserve our trade
secrets, trademarks and copyrights, to operate without infringing the
proprietary rights of others, to acquire licenses related to enabling technology
or products and to enforce our intellectual property portfolio.
Our practice is to require our employees, consultants, outside scientific
collaborators and sponsored researchers and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed by or made known to the individual during the course of
the individual's relationship with us is to be kept confidential and not
disclosed to third parties, subject to a right to publish certain information in
the scientific literature in certain circumstances and subject to other specific
exceptions. In the case of employees, the agreements provide that all inventions
conceived by the individual while employed by us will be our exclusive property.
MANUFACTURING
We have developed in-house processes for the rapid prototyping of our
LabCard chips. Collaborative efforts with our suppliers have allowed us to
develop scalable production processes for LabCard chip manufacturing. In order
to more rapidly develop production prototype LabCard chips and the processes to
manufacture them, we are in the process of building out internal pilot
manufacturing capability. While we intend to retain manufacturing rights for our
microfluidic array chips, we plan to transfer the process technology and
outsource commercial scale production to third party vendors. PE Biosystems has
agreed to provide the instrumentation, software and reagents for any products
commercialized under our agreements, including the Microsequencer system, the
GeneMate system and the pharmaceutical drug screening systems.
We will specify the raw materials to be used in the manufacture of our
LabCard products and currently expect that most of our LabCard products will be
manufactured from plastic
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materials. We do not currently depend on any single supplier for the raw
materials necessary for the operation of our business, although we may become
dependent on a single supplier in the future.
COMPETITION
We believe that we are the leader in applying microfluidics technology to a
broad range of applications in genomics and pharmaceutical research. We are
aware that other companies, such as Orchid Biocomputer and Caliper Technologies,
are developing and applying microfluidics technology to certain applications in
life science research. In addition, a number of established companies, such as
Amersham Pharmacia Biotech and Beckman-Coulter, provide technology and products
to the genomics and pharmaceutical research markets. We believe that the
principal competitive factors in our markets are product capability, product
reliability, customer service, supplier reputation and the sales and marketing
strength of the supplier.
The markets for life science research products are highly competitive. Many
of our potential competitors in these markets have substantially greater
financial, technical and personnel resources than we do. We cannot assure you
that they will not succeed in developing technologies and products that would
render our technologies and products or those of our collaborators obsolete and
noncompetitive.
EMPLOYEES
As of December 31, 1999, we had 60 employees, of which 48 are in research
and development including pilot manufacturing, and microfabrication, and 12 are
in administration and finance. Over half of our research and development staff
have Ph.D.s. None of our current employees are covered by collective bargaining
agreements, and we consider relations with our employees to be good.
FACILITIES
We lease approximately 44,000 square feet of office space in Mountain View,
California. Most of this space is currently devoted to research and development
activities and administration. We are subleasing part of this space for the next
six to 18 months, to cover costs while retaining room for expansion. Our lease
expires in July 2009.
LEGAL PROCEEDINGS
On May 12, 1998, the United States Patent and Trademark Office issued U.S.
Patent No. 5,750,015, entitled "Method and Device for Moving Molecules by the
Application of a Plurality of Electrical Fields." We are the assignee of record
of that patent, also called the '015 Patent. Caliper Technologies Corp.
manufactures, uses, offers to sell and/or sells microfluidic devices for genetic
analysis, drug screening and clinical diagnostics. On March 22, 1999, Caliper
filed an action in the Superior Court for the State of California, Santa Clara
County, alleging that the law firm of Flehr Hohbach Test Albritton & Herbert,
and Bertram Rowland (of counsel to Flehr Hohbach at the time, now our general
counsel), who were our patent counsel in 1994 and 1995, had used Caliper's trade
secrets in preparing our patent application that resulted in the '015 Patent.
Caliper's central allegation is that Rowland, while of counsel to Flehr Hohbach,
had performed work for Caliper shortly before the application was filed in early
1996. We believe that the allegations of Caliper's trade secret action lack
factual and legal merit and are defending the case vigorously.
In the normal course of business, we had reviewed statements by Caliper on
its website, at conferences and in various industry publications, and had come
to the opinion that Caliper infringed the '015 Patent through its LabChip
systems. These products were described and/or pictured in various publications,
including Caliper's website. We therefore filed an action against Caliper in the
Federal District Court for the Northern District of California for patent
infringement on April 23, 1999. Caliper has denied infringement of the '015
Patent and has counterclaimed seeking a declaratory judgment that the '015
Patent is invalid and unenforceable. We believe
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that the '015 Patent is valid and enforceable and intend to prosecute the
infringement action vigorously.
On January 12, 2000, Caliper filed its own patent infringement action
against us in the United States District Court for the Northern District of
California. In this lawsuit, Caliper alleges that we infringe one or more claims
of four different U.S. patents (Nos. 6,010,607, 6,010,608, 5,858,195, and
6,001,229). Each of the patents is assigned to Lockheed Martin Energy Research
Corporation in Oak Ridge, Tennessee, but Caliper claims, in each case, to be the
exclusive licensee. We believe that we can successfully defend ourselves against
this lawsuit, because we do not believe we infringe any claim of any of the
patents. If, however, Caliper should prevail on any of its claims, it would
likely be entitled to injunctive relief and might also recover monetary damages.
In that event, we would be required to obtain a license from Caliper or to
redesign our products, neither of which options may be possible.
All three pieces of litigation are in very early stages, however. No court
has made a decision on any substantive issue that could indicate a likely
outcome of the litigation, and litigation results are, in any event,
unpredictable. If Caliper prevails on its trade secret or patent claims or on
some or all of its affirmative defenses of invalidity and unenforceability in
the federal action, it could impair our ability to enforce our intellectual
property rights, not just against Caliper but against other competitors or
others using the technology claimed in the '015 and related patents, which could
adversely affect our business. For a more detailed description of the
litigation, please see "Risk Factors."
SCIENTIFIC ADVISORS
We have established a group of scientists to advise us on scientific,
technical and commercialization issues. These advisors comprise leading
scientists in the areas of microfluidics, micromachining, analytical science,
chemistry and biology. These advisors are:
- Steven Boxer, Ph.D. Professor of Chemistry and Chair of Biophysics
Program at Stanford University.
- Charles Cantor, Ph.D. Professor of Biomedical Engineering and Biophysics
at Boston University, and Member of the National Academy of Sciences.
- Roger Howe, Ph.D. Professor of Electrical Engineering and Computer
Sciences at University of California Berkeley, and Co-Director of the
Berkeley Sensor and Actuator Center.
- Gregory Kovacs, Ph.D. Professor of Electrical Engineering at Stanford
University.
- Eric Kool, Ph.D. Professor of Chemistry at Stanford University.
- Edwin Ullman, Ph.D. Founder of Syva Company (acquired by Behring
Diagnostics) and retired Vice President of Research for Behring
Diagnostics.
- Mark Wrighton, Ph.D. Chancellor of Washington University in St. Louis.
- Edward Yeung, Ph.D. Professor of Chemistry, Iowa State University.
We provide our advisors with consulting fees in the form of cash and stock
options.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth certain information as of January 20, 2000,
about our executive officers and members of our board of directors, as well as
certain other key employees.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Joseph M. Limber.......................... 47 President, Chief Executive Officer and
Member of Board of Directors
Herbert H. Hooper, Ph.D................... 36 Executive Vice President, Chief Technology
Officer and Co-Founder
Wendy R. Hitchcock........................ 45 Vice President Finance/Administration and
Chief Financial Officer
Bertram I. Rowland, Ph.D., J.D............ 69 Vice President and General Counsel
Ian Gibbons, Ph.D......................... 53 Senior Director, Screening Applications
Development
Torleif O. Bjornson....................... 38 Senior Director, Engineering
Maureen T. Cronin, Ph.D................... 46 Director, Genomics Applications
Nancy E. Pecota........................... 39 Director, Finance/Accounting
Antonio J. Ricco, Ph.D.................... 41 Director, Microfabrication Technology
Sharat Singh, Ph.D........................ 40 Director, Advanced Technologies
Dennis J. Slomski......................... 38 Director, Manufacturing and Process
Development
Thomas R. Baruch, J.D..................... 60 Chairman of the Board of Directors
Jean Deleage, Ph.D........................ 59 Member of the Board of Directors
Michael W. Hunkapiller, Ph.D.............. 51 Member of the Board of Directors
David J. Parker........................... 39 Member of the Board of Directors
Eric S. Lander, Ph.D...................... 42 Member-Elect of the Board of Directors
</TABLE>
Joseph M. Limber joined us in April 1998 as President and Chief Executive
Officer and as a director. Prior to joining us, Mr. Limber was President and
Chief Operating Officer at PRAECIS Pharmaceuticals, Inc. from 1996 to 1998.
Previous to that time, he held positions as Executive Vice President of SEQUUS
Pharmaceuticals, Inc. from 1995 to 1996 and Vice President of Marketing and
Sales from 1992 to 1995. Mr. Limber also held management positions in marketing
and sales with Syntex Corporation from 1987 to 1992 and with Ciba-Geigy
Corporation from 1975 to 1987. Mr. Limber holds a B.A. from Duquesne University.
Herbert H. Hooper, Ph.D., co-founded our company and has served as our
Chief Technology Officer since May 1995 and Executive Vice President since 1998.
From 1993 through 1995, Dr. Hooper directed the bioanalytical research and
development activities at Soane Technologies. Soane BioSciences, the predecessor
company to ACLARA, was formed as a spin-off from Soane Technologies in May 1995.
From 1990 through 1992, Dr. Hooper worked as a product and business development
manager at Air Products and Chemicals. Dr. Hooper holds a B.S. in Chemical
Engineering from North Carolina State University and a Ph.D. in Chemical
Engineering from the University of California, Berkeley.
Wendy R. Hitchcock joined us in March 1999 as Vice President
Finance/Administration and Chief Financial Officer. Ms. Hitchcock provided
strategic financing/corporate development consulting to bio medical technology
companies during 1998, including to KeraVision Inc. during its acquisition of
Transcend Therapeutics. She was Chief Financial Officer at SyStemix from 1994
through its 1997 acquisition by Novartis. Prior to her tenure at SyStemix, she
was Chief Executive Officer of an investment management and venture company in
Palo Alto. Ms. Hitchcock has a B.A. from Brown University and an M.B.A. in
Finance from the University of California, Los Angeles.
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Bertram I. Rowland, Ph.D., J.D., joined us in January 1999 as Vice
President, General Counsel after making numerous contributions to the formation
and growth of the biotechnology industry over the last 25 years. Prior to
joining us, Mr. Rowland was a patent attorney of counsel to the firm of Flehr,
Hohback, Test, Albritton & Herbert from 1991 to 1998 and President of Drug Abuse
Sciences, Inc. from 1996 to 1998. In 1974, Dr. Rowland wrote and prosecuted
biotechnology's seminal patent, the Cohen-Boyer patent, for cloning DNA. Dr.
Rowland has participated in the founding of over ten biotechnology and
diagnostic companies, including Biotrack, Calgene, Pharmacopeia and SyStemix,
and developed the patent strategies for numerous additional companies, including
Syva, Cell Genesys, Molecular Devices, Oculex, Sangstat and Syntro. He has
written and prosecuted to issuance several hundred patent applications. Mr.
Rowland has a B.S. from the University of California, Los Angeles, a Ph.D. from
the University of Washington and a J.D. from George Washington University.
Ian Gibbons, Ph.D., joined us in August 1998 as Senior Director, Screening
Applications Development. He has experience managing product development of
point-of-care products used in non-laboratory environments from his tenure as
Senior Development Director at First Medical. As the Director, Therapeutic Cell
Separation at AmCell from 1995 to 1997, he was responsible for the development
of CliniMACS an immunomagnetic cell selection system used to purify
hematopoietic stem cell grafts for support of high-dose chemotherapy patients.
Dr. Gibbons has a B.A. and a Ph.D. from the University of Cambridge in England.
He is the author of 44 scientific papers and 32 patents.
Torleif O. Bjornson joined us in July 1996 as Director, Engineering, and
was named Senior Director, Engineering in 2000. Prior to joining us, he led the
product development and engineering efforts at several start-up companies,
including Microtecnica from 1993 to 1996, Ribogene, Inc. from 1991 to 1993 and
Infinitek, a laboratory robotics-system company sold to Beckman Instruments,
Inc., from 1984 to 1991. Mr. Bjornson received a B.S. in Mechanical Engineering
and an M.S. in Engineering from Rensselaer Polytechnic Institute.
Maureen T. Cronin, Ph.D., joined us in December 1999, as Director, Genomics
Applications, to manage the development of molecular biology and genomic
applications. From 1998 to 1999 Dr. Cronin was Molecular Biology Research
Director at Protogene Laboratories. Before joining Protogene, Dr. Cronin was at
Affymetrix from 1991 through 1997, where she served as a senior research
scientist for DNA microarray technology and as a project manager for sequencing
and genotyping in pharmacogenetics programs. Dr. Cronin has a B.S. in Animal
Physiology from the University of California, Davis and a Ph.D. in Molecular
Pharmacology from the University of California, San Diego.
Nancy E. Pecota joined us in July 1999 as Director, Finance/Accounting.
Prior to joining us, from 1994 to 1999, Ms. Pecota was Corporate Controller for
dpiX, Inc. Ms. Pecota has also held financial management positions with Xerox
Corporation and Westinghouse Corporation. She received a B.S. from San Jose
State University.
Antonio J. Ricco, Ph.D., joined us in November 1998 as Director,
Microfabrication Technology. From 1984 to 1998 Dr. Ricco was a member of the
technical staff of Sandia National Laboratories. He has over one hundred
publications related to chemical microsensors. In addition, Dr. Ricco serves as
a fellow of the Electrochemical Society, a member of the Editorial Advisory
Board of Analytical Chemistry, and a member of the Board of Trustees of the
Transducers Research Foundation. Dr. Ricco holds a B.S. in Chemistry from the
University of California, Berkeley and a Ph.D. in Inorganic Chemistry from
M.I.T.
Sharat Singh, Ph.D., joined us in October 1997 as Director, Advanced
Technologies. He served as a Research Fellow at Dade Behring Diagnostics from
1993 to 1997. Dr. Singh holds a Ph.D. in Chemistry from the Indian Institute of
Science and completed postdoctoral research in the laboratory of Dr. Ronald
Breslow at Columbia University.
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Dennis J. Slomski joined us in March 1999 as Director, Manufacturing and
Process Development. Before joining us, he was project engineer/manager, process
development for medical diagnostic consumables at the BAYER Corporation from
1986. He received a B.S. in Chemical Engineering and a B.S. in Electrical
Engineering from Marquette University.
Thomas R. Baruch, J.D., joined our board of directors as Chairman in April
1995. Since 1988, he has been General Partner of CMEA Ventures, a venture
capital firm. From 1990 to 1996, Mr. Baruch also served as a special partner of
New Enterprise Associates. Prior to forming CMEA in 1990, Mr. Baruch was a
founder of Microwave Technology, Inc., and served as its President and Chief
Executive Officer from 1983 to 1989. Previously, he held senior management and
venture investment positions at Exxon Corporation, including President of the
Materials Division of Exxon Enterprises, Inc. Mr. Baruch also serves as director
of Symyx Technologies, Inc., Netro Corp. and Physiometrix, Inc. Mr. Baruch holds
a B.S. from Rensselaer Polytechnic Institute and received a J.D. from Capital
University.
Jean Deleage, Ph.D., joined our board of directors in December 1998. Mr.
Deleage is one of the founders of Alta Partners, a venture capital firm, which
was formed in January 1996 and is a successor firm of Burr, Egan, Deleage & Co.
Mr. Deleage previously was a founder and President of Sofinnova, Inc. in Paris,
and in 1976 formed and became president of Sofinnova, San Francisco. Mr. Deleage
has been has been on the boards of directors of many private and public
companies. He is presently director of Flamel Technologies and several private
companies. Mr. Deleage received a Baccalaureate in France, a Masters Degree in
Electrical Engineering from Ecole Superieure d'Electricite, and a Ph.D. in
Economics from the Sorbonne. He has received the Ordre National du Merite and
the Legion of Honor from the French government.
Michael W. Hunkapiller, Ph.D., joined our board of directors in June 1999.
Dr. Hunkapiller became president of PE Biosystems, one of two operating groups
within PE Corporation, in 1998. He was elected Senior Vice President of PE
Biosystems in 1997 and also became President of its Applied Biosystems Division
at that time. He has served as Vice President of PE Corporation and General
Manager of PEBio Applied Biosystems since June 1995. Dr. Hunkapiller served in
various positions at Applied Biosystems, Inc. from 1983 to 1995. Dr. Hunkapiller
received a B.S. in Chemistry from Oklahoma Baptist University and a Ph.D. in
Chemical Biology from the California Institute of Technology.
David J. Parker joined our board of directors in April 1995 and is a
Partner of Ampersand Ventures. In 1997, he served as Chief Financial Officer and
Vice President of Corporate Development of Novel Experimental Technology, or
NOVEX, the leading provider of precast electrophoresis systems for protein and
DNA separations and now a subsidiary of Invitrogen Corporation. Prior to joining
Ampersand in 1994, Mr. Parker was a management consultant at Bain & Company from
1992 to 1994 and at Mercer Management Consulting from 1989 to 1992. Mr. Parker
received a B.A. degree from Dartmouth College and an M.B.A. from The Wharton
School at the University of Pennsylvania.
Eric S. Lander, Ph.D., has agreed to join our board of directors, subject
to approval by our stockholders of an increase in the size of the board. From
1993 to the present, Dr. Lander has served as Director of the Whitehead/MIT
Center for Genome Research and as a member of the Whitehead Institute for
Biomedical Research. From 1989 to the present, Dr. Lander has also held the
positions of Associate Professor and Professor in the Department of Biology at
the Massachusetts Institute of Technology. In addition, Dr. Lander is a founder
and director of Millennium Pharmaceuticals, Inc., a publicly traded company. Dr.
Lander received an A.B. in Mathematics from Princeton University and a Ph.D. in
Mathematics from Oxford University, which he attended as a Rhodes Scholar.
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BOARD COMPOSITION
We currently have five authorized directors and, subject to stockholder
approval, we will increase the authorized number of directors to seven.
Effective upon the closing of this offering, the terms of office of the
directors will be divided into three classes:
- Class I, whose term will expire at the annual meeting of stockholders to
be held in 2001;
- Class II, whose term will expire at the annual meeting of stockholders to
be held in 2002; and
- Class III, whose term will expire at the annual meeting of stockholders
to be held in 2003.
We intend to appoint additional directors and determine their
classification upon the closing of the offering. At each annual meeting of
stockholders after the initial classification or special meeting in lieu
thereof, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election or special meeting held in lieu thereof and
until their successors are duly elected and qualified. In addition, the
authorized number of directors may be changed only by resolution of the board of
directors. Any additional directorships resulting from an increase in the number
of directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of one third of the directors. This
classification of the board of directors may have the effect of delaying or
preventing changes in control or management of our company.
BOARD COMMITTEES
In December 1999, our board of directors established an audit committee and
a compensation committee. The audit committee consists of Messrs. Deleage and
Parker, both of whom are outside directors. The audit committee recommends
engagement of our independent auditors, approves the services performed by such
auditors and reviews and evaluates our accounting policies and systems of
internal accounting controls. The compensation committee consists of Messrs.
Baruch and Hunkapiller, both of whom are outside directors. The compensation
committee administers our 1997 Stock Option Plan and makes recommendations to
the board of directors in connection with matters of compensation, including
determining the compensation of our executive officers.
COMPENSATION COMMITTEE INTERLOCKS
Until our compensation committee was formed in December 1999, the full
board of directors made all decisions regarding executive compensation. No
member of our board of directors or of our compensation committee serves as a
member of the board of directors or compensation committee of an entity that has
one or more executive officers serving as members of our board of directors or
compensation committee.
DIRECTOR COMPENSATION
We reimburse our nonemployee directors for expenses incurred in connection
with attending board and committee meetings but do not compensate them for their
services as board or committee members. Our board has the discretion to grant
options to new nonemployee directors.
LIMITATION OF DIRECTORS' AND OFFICERS' LIABILITY
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be
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personally liable for monetary damages for breach of their fiduciary duties as
directors, except for any liability arising with respect to
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law; or
- any transaction from which the director derived an improper personal
benefit.
Our certificates of incorporation further provides that we are authorized
to indemnify our directors and executive officers and may indemnify our other
officers and employees and agents to the fullest extent permitted by Delaware
law. We believe that indemnification under our certificate of incorporation
covers negligence and gross negligence on the part of indemnified parties.
Prior to the closing of the offering, we intend to enter into agreements to
indemnify our directors and officers. These agreements, among other things,
require us to indemnify these directors and officers for certain expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of our company, arising out of that person's services as a director or
officer of our company, any subsidiary of ours or any other company or
enterprise to which the person provides services at our request.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to our Chief Executive Officer and our other most highly compensated
executive officers whose annual salary and bonus exceeded $100,000 for services
rendered in all capacities to us during the year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
COMPENSATION FOR 1999 SHARES
---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
--------------------------- ---------- --------- -------------
<S> <C> <C> <C>
Joseph M. Limber....................................... $240,000 $90,000 655,000
President and Chief Executive Officer
Herbert H. Hooper, Ph.D. .............................. $175,000 $43,750 175,000
Executive Vice President and Chief Technology Officer
Wendy R. Hitchcock..................................... $133,280 $32,813 140,000
Vice President, Finance/Administration and
Chief Financial Officer
Bertram I. Rowland, Ph.D., J.D. ....................... $ 96,440 $22,905 110,000
Vice President and General Counsel
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted to
each of the officers listed in the Summary Compensation Table during the year
ended December 31, 1999.
The information regarding stock options granted to named executive officers
as a percentage of total options granted to employees in the fiscal year, as
disclosed in the table is based upon options to purchase an aggregate of
1,017,069 shares of common stock that were granted to all employees and
consultants as a group, including the named executive officers, in the fiscal
year ended December 31, 1999.
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<PAGE> 52
The 5% and 10% assumed annual rates of compounded stock appreciation are
mandated by the rules of the Securities and Exchange Commission based on the
deemed value of the common stock used by us for accounting purposes and do not
represent our estimate or projection of our future stock prices.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM
OPTIONS EMPLOYEES PRICE EXPIRATION -----------------------
NAME GRANTED IN FISCAL YEAR PER SHARE DATE 5% 10%
---- ------------ ---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Limber........ 100,000 9.8% $0.60 3/19/09 $ $
155,000 15.2% $0.95 12/01/09 $ $
Herbert H. Hooper,
Ph.D.................. 75,000 7.4% $0.60 3/19/09 $ $
Wendy R. Hitchcock...... 140,000 13.8% $0.60 3/29/09 $ $
Bertram I. Rowland,
Ph.D., J.D. .......... 105,000 10.3% $0.60 1/11/09 $ $
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information concerning option exercises and
unexercised options for the fiscal year ended December 31, 1999 with respect to
each of the named executive officers.
The value realized represents the difference between the deemed value of
the common stock on the date of exercise used by us for accounting purposes and
the exercise price of the option.
The value of unexercised in-the-money options was calculated by determining
the difference between $ , the assumed initial public offering price
and the exercise price of the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph M. Limber.............. -- $ 238,282 416,718 $ $
Herbert H. Hooper, Ph.D. ..... 277,178 $ 48,014 126,986 $ $
Wendy R. Hitchcock............ -- $ -- 140,000 $ $
Bertram I. Rowland, Ph.D.,
J.D. ....................... 5,000 $ -- 105,000 $ $
</TABLE>
CHANGE OF CONTROL AGREEMENTS
We have entered into change of control agreements with Joseph Limber,
Herbert Hooper and Wendy Hitchcock. Pursuant to each of these agreements, if the
employment relationship is terminated involuntarily other than for cause within
12 months following a change of control, the vesting of all unvested shares held
by that person as of the date of termination shall be accelerated such that 100%
of the unvested shares will become vested as of that date.
STOCK OPTION PLANS
1995 STOCK OPTION PLAN.
The 1995 Stock Option Plan was adopted by our board of directors and
approved by our stockholders in May 1995. We reserved 991,920 shares of common
stock for issuance under the plan. As of December 31, 1999, options to purchase
843,397 shares of common stock had been exercised and options to purchase 93,750
shares of common stock with a weighted average exercise price $0.06 per share
were outstanding. No additional options will be granted under the plan.
The plan provides for grants of incentive stock options, as defined in
Section 422 of the Internal Revenue Code of 1986, to our employees, as well as
nonstatutory stock options and stock purchase rights to our employees and
consultants. The plan authorizes separate
49
<PAGE> 53
administrative bodies with respect to directors, officers who are not directors
and employees who are neither directors nor officers. Under the plan, the
administrators have the power to determine the terms of the options, including
the exercise price of the options, the number of shares subject to each option,
the exercisability thereof, and the form of consideration payable on such
exercise. The plan, however, limits the number of options and stock purchase
rights that may be granted to any employee, in one fiscal year, to no more than
400,000 shares of common stock.
The term of each option is determined by the specific option agreement. The
term of incentive stock options, may not, in any event, exceed ten years from
the date of the grant. Moreover, incentive stock options granted to any holder
of 10% or more of the combined voting power of all classes of stock may not have
a term exceeding five years from the date of the grant. The vesting schedule is
determined by the specific option agreement, but generally one-fourth of the
shares subject to the option vest on the one-year anniversary of the vesting
commencement date and one-forty-eighth of the shares subject to the option vest
at the end of every month thereafter.
For incentive stock options, the option exercise price may not be less than
100% of the fair market value of a share of common stock on the date of the
grant; provided, however, that incentive stock options granted to any holder of
10% or more of the combined voting power of all classes of stock must have an
exercise price of not less than 110% of the fair market value of a share of
common stock on the date of the grant. For nonstatutory stock options, the
option exercise price may not be less than the par value of the common stock.
Upon termination of an optionee's status as our employee or consultant, the
optionee may exercise his or her options within the period of time specified in
the option grant, to the extent that the options were vested at the time of
termination. If no time period was specified in the notice of grant, the option
shall remain exercisable for 30 days following the optionee's termination of
status as an employee or consultant, or for 90 days in the case of an incentive
stock option. Options granted under the plan must generally be exercised within
six or 12 months if the optionee's employment ends due to disability, and within
12 months of the optionee's death. Any shares not exercisable or exercised
within those time periods reverts to the plan.
Stock purchase rights may be issued alone, in addition to, or in tandem
with other awards granted under the plan. The rights will be evidenced by
execution of a restricted stock purchase agreement. Unless the administrator
determines otherwise, the restricted stock purchase agreement will grant us a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or consulting relationship with us for any reason,
including death or disability. The purchase price for shares repurchased
pursuant to the restricted stock purchase agreement must be the original price
paid by the purchaser. The repurchase option shall lapse at a rate determined by
the administrator.
In the event of a sale of substantially all of our assets, or the merger of
our company with or into another corporation, each outstanding option and stock
purchase right may be assumed or an equivalent option or right may be
substituted by the successor corporation or a parent or subsidiary of the
successor corporation. In the alternative, the administrator also has the power,
but not the obligation, to accelerate the vesting of each outstanding option and
other award.
1997 STOCK OPTION PLAN.
The 1997 Stock Option Plan was adopted by the board of directors in
December 1996 and approved by the stockholders in March 1997. We reserved
2,350,749 shares of common stock for issuance under the plan. As of December 31,
1999, options to purchase 244,704 shares of common stock had been exercised, and
options to purchase 1,815,292 shares of common stock were outstanding under the
plan. The plan is currently being administered by the compensation committee of
our board of directors and will terminate in March 2007. The 1997 Stock Option
Plan is identical in all other material respects to the 1995 Stock Option Plan.
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<PAGE> 54
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows:
- an aggregate of 3,014,313 shares of Series A preferred stock at $0.5972
per share in May 1995, which we repurchased in March 1999 at a price of
$0.90 per share;
- an aggregate of 2,344,466 shares of Series B preferred stock at $0.5972
per share in May 1995;
- an aggregate of 1,076,923 shares of Series C preferred stock at $1.30 per
share in November 1996;
- an aggregate of 307,692 shares of Series D preferred stock at $1.625 per
share in April 1997;
- an aggregate of 1,666,667 shares of Series E preferred stock at $2.70 per
share in March 1998 and April 1998;
- an aggregate of 6,676,666 shares of Series F preferred stock at $2.70 per
share in January, February and March 1999;
- an aggregate of 746,269 shares of Series G preferred stock at $4.02 per
share in April 1999; and
- an aggregate of 827,815 shares of Series H preferred stock at $6.04 per
share in December 1999.
Each outstanding share of preferred stock will be converted into one share
of common stock upon the closing of this offering. The following table
summarizes the shares of preferred stock purchased by officers, directors and
principal stockholders and their immediate family members and related entities:
<TABLE>
<CAPTION>
SERIES B SERIES C SERIES D SERIES E SERIES F SERIES G SERIES H
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK STOCK STOCK STOCK STOCK
-------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Entities affiliated with Alta
Partners......................... -- -- -- -- 1,481,482 -- --
Entities affiliated with
Ampersand Ventures............. 1,925,811 387,020 -- -- 503,200 -- --
Burrill & Company................ -- -- -- -- 1,111,111 --
Entities affiliated with CMEA
Ventures....................... 418,655 227,885 -- -- 546,649 -- --
Wendy R. Hitchcock............... -- -- -- -- 5,000 --
Johnson & Johnson Development
Corporation.................... -- -- 307,692 740,741 392,987 -- --
PE Corporation................... -- -- -- 925,926 -- 746,269 --
Bertram I. Rowland, Ph.D.,
J.D............................ 19,231
Asea Brown Boveri, Inc........... -- -- -- -- -- -- 827,815
</TABLE>
Our director Mr. Deleage, is a founder of Alta Partners. Our director, Mr.
Parker, is a partner of Ampersand Ventures. Our Chairman of our board of
directors, Mr. Baruch, is a partner of CMEA Ventures. Our director, Dr.
Hunkapiller, is an executive officer of PE Corporation.
In private placement transactions completed in December 1997 and February
1998, we issued convertible promissory notes in the aggregate principal amount
of $337,000 and $500,000, respectively, as well as warrants to purchase 41,500
shares and 61,638 shares, respectively, of Series D preferred stock at an
exercise price of $1.625 per share. In September 1998, we issued additional
convertible promissory notes in the aggregate principal amount of
51
<PAGE> 55
$1,650,000. The investors in these transactions included the following greater
than 5% stockholders and entities affiliated with our directors:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SERIES D
INVESTOR OF NOTES WARRANT SHARES
-------- ---------------- --------------
<S> <C> <C>
Entities affiliated with Ampersand Ventures................ $1,010,000 62,768
Entities affiliated with CMEA Ventures..................... 307,528 19,388
Johnson & Johnson Development Corporation.................. 1,027,377 3,370
</TABLE>
The entire principal amount of and accrued interest on the convertible
promissory notes was subsequently paid in full or converted in January 1999 into
shares of Series F preferred stock at a conversion price of $2.70 per share.
We have entered into the following agreements with our executive officers,
directors and holders of more than 5% of our voting securities:
AMENDED AND RESTATED INVESTORS RIGHTS AGREEMENT.
We have entered into an agreement with the preferred stockholders described
above, pursuant to which these and other preferred stockholders will have
registration rights with respect to their shares of common stock following this
offering. Please see "Description of Capital Stock Registration Rights" for a
further description of the terms of this agreement.
ISSUANCE OF STOCK OPTIONS
In May and January 1998, respectively, we granted options to purchase
400,000 and 100,000 shares of common stock, each at an exercise price of $0.60
per share to Mr. Limber, our President and Chief Executive Officer and Dr.
Hooper, our Executive Vice President, Chief Technology Officer and Co-Founder,
respectively. In January 1999, we granted an option to purchase 105,000 shares
of common stock at an exercise price of $0.60 per share to Dr. Rowland, our Vice
President and General Counsel. In March 1999, we granted options to purchase
100,000, 75,000 and 140,000 shares of common stock, each at an exercise price of
$0.60 per share, to Mr. Limber, Mr. Hooper, and Ms. Hitchcock, our Vice
President Finance/ Administration and Chief Financial Officer, respectively. In
December 1999, we granted options to purchase 155,000 shares of common stock at
an exercise price of $0.95 per share to Mr. Limber.
JOHNSON & JOHNSON DEVELOPMENT CORPORATION
In February 1997, we entered into an agreement with PRI, an affiliate of
Johnson & Johnson Development Corporation. This agreement was amended and
restated in March 1998. In connection with this agreement, PRI paid us research
and development fees in the aggregate amount of $1,100,000 and $900,000 in our
1997 and 1998 fiscal years, respectively. Through its affiliate Johnson &
Johnson Development Corporation, PRI also purchased shares of our preferred
stock for an aggregate purchase price of $2.5 million. This total purchase price
represents two separate equity investments. In April 1997, PRI purchased 307,692
shares of our Series D preferred stock at a purchase price of $1.625 per share.
In March 1998, PRI made an additional purchase of 740,741 shares of our Series E
preferred stock at a purchase price of $2.70 per share. This agreement was
subsequently superseded in March 1999 by the joint agreement described below.
Please see, "Business Collaborations."
PE CORPORATION
In April 1998, we entered into an agreement with PE Biosystems, an
affiliate of PE Corporation, to jointly develop genetic analysis systems that
use our microfluidics technology. In conjunction with this agreement, PE
Corporation purchased 925,926 shares of Series E
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<PAGE> 56
preferred stock at a purchase price of $2.70 per share for an aggregate amount
of $2.5 million. Please see, "Business -- Collaborations."
In March 1999, we entered into another agreement with PE Biosystems to
jointly develop systems for pharmaceutical drug screening that use our
microfluidics technology. In conjunction with this agreement, PE Corporation
purchased 746,269 shares of Series G preferred stock at a purchase price of
$4.02 per share for an aggregate amount of $3 million. Please see,
"Business -- Collaborations."
JOINT AGREEMENT WITH PRI AND PE BIOSYSTEMS
In March 1999, we entered into a joint agreement with PRI and PE Biosystems
to jointly develop and commercialize a high throughput screening system using
our LabCard technology. As mentioned above, this agreement superseded our March
1998 agreement with PRI. Under this agreement, PRI has agreed to fund our joint
development efforts with PE Biosystems. Under the terms of a side agreement with
PE Biosystems, we received $1.2 million from the 1999 PRI funding for our
development efforts under this program. Please see "Business -- Collaborations."
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<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of December 31, 1999 and as adjusted
to reflect the sale of the our common stock offered by this prospectus by
- each person, or group of affiliated persons, who is known by us to own
beneficially more than 5% of our common stock; and
- each of our directors;
- each of the individuals listed in the "Summary Compensation Table" above;
- all of our directors and officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock under options held by that person that are currently
exercisable or exercisable within 60 days of December 31, 1999 are considered
outstanding. These shares, however, are not considered outstanding when
computing the percentage ownership of each other person.
Except as indicated in the footnotes to this table and pursuant to state
community property laws, each stockholder named in the table has sole voting and
investment power for the shares shown as beneficially owned by them. Percentage
of ownership is based on 15,140,975 shares of common stock outstanding on
December 31, 1999 and shares of common stock outstanding after completion
of this offering assuming conversion of all preferred stock into common stock.
This table assumes no exercise of the underwriters' over-allotment option.
Unless otherwise indicated in the footnotes, the address of each of the
individuals named below is: c/o ACLARA BioSciences, Inc., 1288 Pear Avenue,
Mountain View, California 94043.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING
--------------------
NAME AND ADDRESS NUMBER OF SHARES BEFORE AFTER
OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------- ------------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Alta Partners(1).............. 1,481,482 10.0% %
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Entities affiliated with Ampersand Ventures(2)......... 2,878,799 19.5% %
55 William Street, Suite 240
Wellesley, MA 02181
Asea Brown Boveri, Inc................................. 827,815 5.6% %
19 Clifford Avenue
Tolland, CT 06804
Burrill & Company...................................... 1,111,111 7.5% %
120 Montgomery Street, Suite 1370
San Francisco, CA 94104
Johnson & Johnson Development Corporation.............. 1,444,790 9.8% %
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
PE Corporation......................................... 1,672,195 11.3% %
50 Danbury Road
Wilton, CT 06897
Entities affiliated with CMEA Ventures(3).............. 1,212,577 8.2% %
235 Montgomery Street, Suite 920
San Francisco, CA 94104
Joseph M. Limber(4).................................... 252,083 1.7% %
Herbert H. Hooper(5)................................... 329,261 2.2% %
Wendy R. Hitchcock..................................... 5,000 *
</TABLE>
54
<PAGE> 58
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OUTSTANDING
--------------------
NAME AND ADDRESS NUMBER OF SHARES BEFORE AFTER
OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------- ------------------ -------- --------
<S> <C> <C> <C>
Thomas R. Baruch(6).................................... 1,212,577 8.2% %
c/o CMEA Ventures
235 Montgomery Street, Suite 920
San Francisco, CA 94104
Jean Deleage(7)........................................ 1,481,482 10.0% %
c/o Alta Partners
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
Michael W. Hunkapiller(8).............................. 1,672,195 11.3% %
c/o PE Corporation
850 Lincoln Centre Drive
Foster City, CA 94404
David J. Parker(3)(9).................................. 2,878,799 19.5% %
c/o Ampersand Ventures
55 William Street, Suite 240
Wellesley, MA 02481
All directors and officers as a group (9
persons)(10)......................................... 7,845,461 34.7% %
</TABLE>
- -------------------------
* Represents beneficial ownership of less than 1%
(1) Includes 1,468,495 shares held by Alta California Partners II, L.P. and
12,987 shares held by Alta Embarcadero Partners II, L.P.
(2) Includes 873,695 shares held by Laboratory Partners I Limited Partnership,
375,250 shares held by Laboratory Partners Companion Fund Limited
Partnership and 1,629,854 shares held by Ampersand Specialty Materials and
Chemicals II, L.P.
(3) Includes 842,207 shares held by Chemicals & Materials Enterprise
Associates, L.P. and 370,370 shares held by CMEA Life Sciences Fund, L.P.
(4) Includes 252,083 shares issuable upon the exercise of stock options
exercisable within 60 days of December 31, 1999.
(5) Includes 52,083 shares issuable upon the exercise of stock options
exercisable within 60 days of December 31, 1999.
(6) Includes 842,207 shares held by Chemicals & Materials Enterprise
Associates, L.P. and 370,370 shares held by CMEA Life Sciences Fund, L.P.
Mr. Baruch disclaims beneficial ownership of the shares held by the funds
affiliated with CMEA Ventures, except to the extent of his pecuniary
interests therein.
(7) Includes 1,468,495 shares held by Alta California Partners II, L.P. and
12,987 shares held by Alta Embarcadero Partners II, L.P. Mr. Deleage
disclaims beneficial ownership of the shares held by funds affiliated with
Alta Partners, except to the extent of his pecuniary interests therein.
(8) Includes 1,672,195 shares held by PE Corporation. Mr. Hunkapiller disclaims
beneficial ownership of the shares held by PE Corp. except to the extent of
his pecuniary interests therein.
(9) Includes 873,695 shares held by Laboratory Partners I Limited Partnership,
375,250 shares held by Laboratory Partners Companion Fund Limited
Partnership and 1,629,854 shares held by Ampersand Specialty Materials and
Chemicals II, Limited Partnership. Mr. Parker disclaims beneficial
ownership of the shares held by Ampersand Ventures, except to the extent of
his pecuniary interests therein.
(10) Includes an aggregate of 311,295 shares issuable upon the exercise of stock
options exercisable within 60 days of December 31, 1999.
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<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of this offering and subject to stockholder approval, our
authorized capital stock will consist of 100,000,000 shares of common stock, par
value $0.001 per share, and 10,000,000 shares of preferred stock, par value
$0.001 per share. Immediately after the offering, based on shares outstanding as
of December 31, 1999, we estimated there will be approximately
shares of common stock issued and outstanding and no shares of preferred stock
issued and outstanding. Assuming that there are no additional option grants
after December 31, 1999, a total of 1,949,032 shares of our common stock will be
issuable upon exercise of stock options.
COMMON STOCK
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by stockholders and are not entitled to cumulate their
votes in the election of directors. All shares of common stock rank equally as
to voting and all other matters. Subject to the prior rights of holders of
preferred stock, the holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the board of
directors out of funds legally available for payment. Dividends may be paid in
cash, property, or shares of common stock. The shares of common stock have no
preemptive or conversion rights, no redemption or sinking fund provisions and
are not liable for further call or assessment. Outstanding shares common stock
are, and all shares of common stock to be outstanding upon completion of this
offering will be, validly issued fully paid and non-assessable.
PREFERRED STOCK
Upon the closing of this offering and subject to stockholder approval, the
board of directors will be authorized, without further stockholder approval, to
issue from time to time up to an aggregate of 10,000,000 shares of preferred
stock in one or more series. The board of directors will also be authorized to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption including sinking fund provisions, redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of such series. The issuance of preferred stock could have the
effect of delaying, deferring or preventing a change in control of our company.
We have no present plans to issue any shares of preferred stock.
WARRANTS
As of December 31, 1999 the following warrants for the purchase of our
equity securities were outstanding:
<TABLE>
<CAPTION>
TYPE OF SECURITY NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
---------------- ---------------- -------------- -----------------------------------------
<S> <C> <C> <C>
Common stock.............. 30,000 $ 1.00 Later of November 2005 or five years
following completion of this offering.
Common stock.............. 33,350 $ 2.00 Later of February 2007 or five years
following completion of this offering.
Common stock.............. 100,000 $ 2.00 Earlier of December 2003 or the
occurrence of a corporate reorganization.
Common stock.............. 92,593 $ 2.70 May 2006.
Series D preferred
stock................... 103,038 $1.625 Upon completion of this offering.
</TABLE>
Each warrant provides for adjustment of the exercise price and the number
of securities issuable upon exercise of the warrant in the event of a
reorganization of our capital structure of
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<PAGE> 60
a stock split. In addition, the exercise price and number of shares issuable
upon exercise of the warrants for the purchase of 30,000 and 33,350 shares of
common stock will be adjusted if we issue stock at prices below the exercise
price of such warrants. Finally, we have granted the holders of the warrants for
the purchase of 30,000 and 33,350 shares of common stock rights to register the
common stock issuable upon exercise of the warrants.
REGISTRATION RIGHTS
After the completion of this offering, the holders of 13,749,536 shares of
common stock held by purchasers of our preferred stock and 63,350 shares of
common stock issuable upon conversion of outstanding warrants will be entitled
to rights to register these shares under the Securities Act of 1933. Under the
terms of the Amended and Restated Investor Rights Agreement dated December 30,
1999, whenever we propose to file a registration statement under the Securities
Act, the holders of registrable securities are entitled to notice of the
registration and have the right, subject to limitations that the underwriters
may impose on the number of shares included in the registration, to include
their registrable shares in the registration.
Additionally, beginning six months following the closing of our initial
public offering, the holders of a specified percentage of any series of
registrable securities have the right to require us to file a registration
statement on Form S-1 or Form S-2. Each series of registrable shares can require
us to register their shares if the market value of those requesting registration
is at least $200,000. Further, the holders of each series can also request
registration if they sell at least 80% of that series of registrable shares. We
may, however, defer the requested registration of shares up to 120 days if our
board of directors determines that a registration at the requested time would be
detrimental to our company or our stockholders. We will pay expenses for the
first demand registration and the first two registrations on Form S-3 for each
registrable series, and for the first two incidental registrations for
purchasers of Series F preferred stock.
The agreement provides that in connection with any public offering, each
stockholder agrees not to sell or otherwise dispose of any securities without
the prior written consent of us or the underwriters for a period up to 180 days.
The rights of the holders of registrable shares terminate when all registrable
shares have been registered under the Securities Act or sold in reliance on Rule
144 of the Securities Act.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND CHARTER
PROVISIONS
Delaware Law. In general, Section 203 of the Delaware General Corporation
Law prohibits a publicly held Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that the stockholder became an interested stockholder unless:
- prior to the date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholders
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held under the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by
57
<PAGE> 61
written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines "business combination" to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
- in general, any transaction that results in the issuance or transfer by
the corporation of any stock of the corporation to the interested
stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% of more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Charter Provisions. Our certificate of incorporation and bylaws include the
following provisions that will become effective upon the closing of this
offering and that may have the effect of deterring hostile takeovers or delaying
or preventing changes in control or management:
- that all stockholder actions upon completion of this offering must be
effected at a duly called meeting of holders and not by a consent in
writing;
- that special meetings of the holders may be called only by the chairman
of the board of directors, the chief executive officer, or our board of
directors pursuant to a resolution adopted by a majority of the total
number of authorized directors;
- that our board of directors can issue up to 10,000,000 shares of
preferred stock, as described under "-- Preferred Stock" above;
- that there will be three classes of directors, approximately one-third of
whom would be elected each year, thus requiring any potential acquiror to
successfully complete two proxy contests in order to take control of the
board of directors; and
- that advance notice must be given regarding the nomination of candidates
for election as directors and the presentation of stockholder proposals.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services, L.L.C.
NATIONAL MARKET LISTING
We have applied for listing of our common stock on the Nasdaq Stock
Market's National Market under the symbol "ACLA."
58
<PAGE> 62
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 from time to time. For a
period of 180 days or more following this offering a large number of shares of
our common stock will not be freely tradable due to contractual and legal
restrictions as described below. Sales of substantial amounts of our common
stock in the public market after these restrictions lapse could depress the
prevailing market price and limit our ability to raise equity capital in the
future.
Upon the closing of this offering and based on shares outstanding as of
December 31, 1999, we will have an aggregate of shares of common stock
outstanding, assuming no exercise of the underwriters' over-allotment option and
no exercise of outstanding options or warrants. Of the outstanding shares, the
shares sold in this offering will be freely tradable, except that any shares
held by our "affiliates", as that term is defined in Rule 144 promulgated under
the Securities Act, may only be sold in compliance with the limitations
described below. The remaining 15,165,976 shares of common stock held by
existing stockholders will be deemed restricted securities as defined under Rule
144. Restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rules 144, 144(k) or
701 promulgated under the Securities Act, which are summarized below. Subject to
the lock-up agreements described below and the provisions of Rules 144, 144(k)
and 701, additional shares will be available for sale in the public market at
the following times:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<C> <S>
After the date of this prospectus
13,163 At various times after 90 days from the date of this
prospectus, pursuant to Rule 144
11,389,288 After 180 days from the date of this prospectus, subject, in
some cases, to volume limitations
1,970,543 At various times after 180 days from the date of this
prospectus, pursuant to Rule 144
</TABLE>
In general, under Rule 144, as currently in effect, a person, or persons
whose shares are aggregated, including an affiliate, who has beneficially owned
shares for at least one year is entitled to sell, within any three-month period
commencing 90 days after the date of this prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock, which will equal approximately shares immediately after this
offering or the average weekly trading volume in the common stock during the
four calendar weeks preceding the date on which notice of such sale is filed,
subject to certain restrictions. In addition, a person who is not deemed to have
been an affiliate of ours at any time during the 90 days preceding a sale and
who has beneficially owned the shares proposed to be sold for at least two years
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, the person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Lock-Up Agreements. Our directors and officers and certain stockholders who
hold approximately 14,714,308 shares in the aggregate, have agreed that they
will not offer, sell or agree to sell, directly or indirectly, or otherwise
dispose of any shares of common stock without the prior written consent of
Deutsche Bank Securities Inc. for a period of 180 days from the date of this
prospectus. Please see "Underwriting."
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 1997
Stock Option Plan. In addition, we may issue shares of common stock in
connection with any acquisition of another company if the
59
<PAGE> 63
terms of such issuance provide that such common stock shall not be resold prior
to the expiration of the 180-day period referenced in the preceding sentence.
Registration Rights. Following this offering, some of our stockholders will
have registration rights. Please see, "Description of Capital
Stock -- Registration Rights."
Stock Options. Subsequent to this offering, we intend to file a
registration statement under the Securities Act covering approximately 3,346,036
shares of common stock reserved for issuance under our stock option plans. The
registration statement is expected to be filed and become effective subsequent
to the closing of this offering. Accordingly, shares registered under the
registration statements will be available for sale in the open market, beginning
180 days after the effective date of the registration statement of which this
prospectus is a part.
60
<PAGE> 64
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., Warburg Dillon Read LLC and U.S. Bancorp Piper Jaffray Inc., have
severally agreed to purchase from us the following respective number of shares
of common stock at a public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Deutsche Bank Securities Inc................................
Warburg Dillon Read LLC.....................................
U.S. Bancorp Piper Jaffray Inc..............................
---------
Total.....................................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares of common stock offered hereby are subject
to certain conditions precedent and that the underwriters will purchase all
shares of the common stock offered hereby, other than those covered by the
over-allotment option described below, if any of these shares are purchased.
The underwriters propose to offer the shares of common stock to the public
at the public offering price set forth on the cover of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and other selling terms.
We have granted to the underwriters an option, exercisable not later than
30 days after the date of this prospectus, to purchase up to additional
shares of common stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option only to cover over-allotments made in
connection with the sale of the common stock offered hereby. To the extent that
the underwriters exercise this option, each of the underwriters will become
obligated, subject to conditions, to purchase approximately the same percentage
of additional shares of common stock as the number of shares of common stock to
be purchased by it in the above table bears to the total number of shares of
common stock offered hereby. We will be obligated, pursuant to the option, to
sell these additional shares of common stock to the underwriters to the extent
the option is exercised. If any additional shares of common stock are purchased,
the underwriters will offer the additional shares on the same terms as those on
which the shares are being offered.
The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is currently expected to be approximately 7% of the
initial public offering price. We have agreed to pay the underwriters the
following fees, assuming either no exercise or full exercise by the underwriters
of the underwriters' over-allotment option:
<TABLE>
<CAPTION>
TOTAL FEES
----------------------------------------------
WITHOUT EXERCISE OF WITH FULL EXERCISE OF
FEE PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
------------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by ACLARA............... $ $ $
</TABLE>
In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .
61
<PAGE> 65
We have agreed to indemnify the underwriters against some specified types
of liabilities, including liabilities under the Securities Act, and to
contribute to payments the underwriters may be required to make in respect of
any of these liabilities.
Each of our officers and directors, and substantially all of our
stockholders and holders of options and warrants to purchase our stock, have
agreed not to offer, sell, contract to sell or otherwise dispose of, or enter
into any transaction that is designed to, or could be expected to, result in the
disposition of any shares of our common stock or other securities convertible
into or exchangeable or exercisable for shares of our common stock or
derivatives of our common stock owned by these persons prior to this offering or
common stock issuable upon exercise of options or warrants held by these persons
for a period of 180 days after the effective date of the registration statement
of which this prospectus is a part without the prior written consent of Deutsche
Bank Securities Inc. This consent may be given at any time without public
notice. We have entered into a similar agreement with the representatives of the
underwriters. There are no agreements between the representatives and any of our
stockholders or affiliates releasing them from these lock-up agreements prior to
the expiration of the 180-day period.
The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In order to facilitate the offering of our common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of our common stock. Specifically, the underwriters may over-allot
shares of our common stock in connection with this offering, thus creating a
short position in our common stock for their own account. A short position
results when an underwriter sells more shares of common stock than that
underwriter is committed to purchase. Additionally, to cover these
over-allotments or to stabilize the market price of our common stock, the
underwriters may bid for, and purchase, shares of our common stock in the open
market. Finally, the representatives, on behalf of the underwriters, may also
reclaim selling concessions allowed to an underwriter or dealer if the
underwriting syndicate repurchases shares distributed by that underwriter or
dealer. Any of these activities may maintain the market price of our common
stock at a level above that which might otherwise prevail in the open market.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and, if
commenced, may end any of these activities at any time.
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for our vendors, employees, family
members of employees, customers and other third parties. The number of shares of
our common stock available for sale to the general public will be reduced to the
extent these reserved shares are purchased. Any reserved shares that are not
purchased by these persons will be offered by the underwriters to the general
public on the same basis as the other shares in this offering.
PRICING OF THIS OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:
- prevailing market conditions;
- our results of operations in recent periods;
- the present stage of our development;
- the market capitalization and stage of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and
- estimates of our business potential.
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<PAGE> 66
The estimated initial public offering price range set forth on the cover of
this preliminary prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Latham & Watkins, Menlo Park, California. Certain legal matters
in connection with this offering will be passed upon for the underwriters by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. At the close of this offering, attorneys at Latham & Watkins will
own an aggregate of 5,000 shares of our common stock.
EXPERTS
The financial statements for ACLARA BioSciences, Inc. as of December 31,
1997 and 1998 and for each of the three years in the period ended December 31,
1998 and for the period from May 5, 1995 (date of inception) to December 31,
1998, included in this Prospectus, have been so included in reliance on the
report of PricewaterhouseCoopers, LLP, independent accountants, given on their
authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock.
This prospectus does not contain all the information set forth in the
registration statement. For further information regarding us and our common
stock, please refer to the registration statement and exhibits and schedules
filed as part of the registration statement. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. Each statement in this prospectus
referring to a contract, agreement or other document filed as an exhibit to the
registration statement is qualified in all respects by the filed exhibit.
You may read and copy all or any portion of the registration statement or
any other information that we file at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the SEC. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our
Securities and Exchange Commission filings, including the registration
statement, are also available to you on the Securities and Exchange Commission's
website (http://www.sec.gov).
Upon completion of this offering, we will become subject to the information
and reporting requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. Upon approval of the common stock for the
quotation on the Nasdaq National Market, such reports, proxy and information
statements and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.
63
<PAGE> 67
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Deficit......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 68
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of ACLARA BioSciences, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' deficit and of cash flows present fairly, in all
material respects, the financial position of ACLARA BioSciences, Inc. (a company
in the development stage) at December 31, 1998 and 1997 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 and for the cumulative period from May 5, 1995 (date of
inception) through December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with 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.
PricewaterhouseCoopers LLP
San Jose, California
March 12, 1999
F-2
<PAGE> 69
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
------------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
----------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............................ $ 237,360 $ 1,746,387 $ 7,862,910
Short-term investments............................. -- -- 2,976,061
Accounts receivable................................ 326,751 207,127 455,129
Prepaid expenses and other current assets.......... 33,765 316,958 346,361
----------- ----------- ------------
Total current assets......................... 597,876 2,270,472 11,640,461
Property and equipment, net.......................... 1,016,385 1,060,922 4,908,576
Restricted cash...................................... -- -- 625,000
Other assets, net.................................... 15,532 29,966 100,000
----------- ----------- ------------
Total assets................................. $ 1,629,793 $ 3,361,360 $ 17,274,037
=========== =========== ============
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable................................... $ 436,640 $ 378,492 $ 1,323,996
Accrued payroll and related expenses............... 64,513 57,878 96,727
Accrued expenses................................... 15,632 304,837 182,575
Notes payable to related parties................... 337,187 2,418,592 --
Current portion of capital lease obligations....... 231,883 312,919 111,464
Current portion of loans payable................... -- -- 513,707
Deferred revenue................................... 214,286 200,000 15,000
----------- ----------- ------------
Total current liabilities.................... 1,300,141 3,672,718 2,243,469
Capital lease obligations, less current portion...... 425,624 407,187 371,675
Loans payable debt, less current portion............. -- -- 2,777,976
----------- ----------- ------------
Total liabilities............................ 1,725,765 4,079,905 5,393,120
Commitments and Contingencies (Notes 4 and 12)
Mandatorily redeemable convertible preferred stock
(Liquidation value: $5,542,630 at December 31,
1997; $10,634,324 at December 31, 1998 and
$30,712,885 at September 30, 1999)............... 3,839,412 8,818,543 30,534,587 $ --
----------- ----------- ------------ ------------
Stockholders' deficit:
Common stock, $0.001 par value:
Authorized: 40,000,000 shares;
Issued and outstanding: 898,424 shares at
December 31, 1997; 1,062,462 shares at December
31, 1998; 1,117,646 shares at September 30,
1999 and 13,936,329 shares pro forma........... 898 1,062 1,117 13,936
Additional paid-in capital........................... -- 1,305,766 -- 29,263,695
Unearned stock-based compensation.................... -- (1,385,473) (3,492,237) (3,492,237)
Notes receivable for common stock.................... (44,427) (44,366) (29,235) (29,235)
Deficit accumulated during the development stage..... (3,891,855) (9,414,077) (15,133,315) (13,875,243)
----------- ----------- ------------ ------------
Total stockholders' deficit.................. (3,935,384) (9,537,088) (18,653,670) $ 11,880,916
----------- ----------- ------------ ============
Total liabilities, mandatorily redeemable
convertible stock and stockholders'
deficit.................................... $ 1,629,793 $ 3,361,360 $ 17,274,037
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 70
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM
MAY 5,
NINE MONTHS ENDED 1995
YEAR ENDED DECEMBER 31, SEPTEMBER 30, (INCEPTION) TO
--------------------------------------- ------------------------- SEPTEMBER 30,
1996 1997 1998 1998 1999 1999
----------- ----------- ----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Grant and collaboration...... $ 843,222 $ 2,230,948 $ 1,353,116 $ 882,356 $ 2,080,245 $ 6,901,101
License.................... 460,000 400,000 -- -- -- 860,000
Product.................... 20,280 18,100 -- -- -- 38,380
----------- ----------- ----------- ----------- ----------- ------------
Total revenue....... 1,323,502 2,649,048 1,353,116 882,356 2,080,245 7,799,481
----------- ----------- ----------- ----------- ----------- ------------
OPERATING EXPENSES:
Cost of sales.............. 90,311 92,404 -- -- -- 182,715
Research and development... 1,661,521 3,742,488 5,423,656 3,966,785 4,449,513 16,007,213
General and
administrative........... 391,187 635,406 1,321,953 938,547 2,744,634 5,242,705
Sales and marketing........ 158,581 179,002 -- -- -- 337,583
----------- ----------- ----------- ----------- ----------- ------------
Total operating
expenses.......... 2,301,600 4,649,300 6,745,609 4,905,332 7,194,147 21,770,216
----------- ----------- ----------- ----------- ----------- ------------
Loss from operations......... (978,098) (2,000,252) (5,392,493) (4,022,976) (5,113,902) (13,970,735)
Interest income.............. 35,013 51,462 86,805 53,109 297,918 507,209
Interest expense............. (13,267) (49,068) (216,534) (99,548) (113,650) (397,223)
----------- ----------- ----------- ----------- ----------- ------------
Net loss..................... (956,352) (1,997,858) (5,522,222) (4,069,415) (4,929,634) (13,860,749)
Accretion to redemption value
and accrued dividends on
mandatorily redeemable
convertible preferred
stock...................... (200,274) (300,942) (488,466) (358,466) (4,778,668) (5,782,843)
----------- ----------- ----------- ----------- ----------- ------------
Net loss attributable to
common stockholders........ $(1,156,626) $(2,298,800) $(6,010,688) $(4,427,881) $(9,708,302) $(19,643,592)
=========== =========== =========== =========== =========== ============
Net loss per common share,
basic and diluted.......... $ (33.48) $ (6.03) $ (7.54) $ (5.70) $ (10.07)
=========== =========== =========== =========== ===========
Shares used in computing net
loss per share, basic and
diluted.................... 34,546 381,445 796,895 777,272 963,959
=========== =========== =========== =========== ===========
Pro forma net loss per share,
basic and diluted
(unaudited)................ $ (0.63) $ (0.39)
=========== ===========
Shares used in computing pro
forma net loss per share,
basic and diluted
(unaudited)................ 8,731,132 12,509,601
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 71
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MAY 5, 1995 (DATE OF INCEPTION) TO SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
NOTES DEFICIT
RECEIVABLE ACCUMULATED
COMMON STOCK ADDITIONAL UNEARNED FOR DURING THE
------------------ PAID-IN STOCK-BASED COMMON DEVELOPMENT
SHARES AMOUNT CAPITAL COMPENSATION STOCK STAGE TOTAL
--------- ------ ---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock and Series A mandatorily
redeemable convertible preferred
stock issued in May 1995 to parent
company for tangible and intangible
assets and liabilities............... 1 $ -- $ -- $ -- $ -- $ -- $ --
Accretion of redeemable convertible
preferred stock....................... -- -- -- -- -- (14,493) (14,493)
Net loss.............................. -- -- -- -- -- (454,683) (454,683)
--------- ------ ---------- ----------- -------- ------------ ------------
Balances, December 31, 1995........... 1 -- -- -- -- (469,176) (469,176)
Stock option exercise................. 391,267 391 23,085 -- (22,696) -- 780
Accretion of redeemable convertible
preferred stock...................... -- -- (23,085) -- -- (177,189) (200,274)
Net loss.............................. -- -- -- -- -- (956,352) (956,352)
--------- ------ ---------- ----------- -------- ------------ ------------
Balances, December 31, 1996........... 391,268 391 -- -- (22,696) (1,602,717) (1,625,022)
Stock option exercise................. 500,956 501 38,862 -- (21,731) -- 17,632
Common stock issued in February 1997
at $0.13 per share in exchange for
equipment............................ 6,200 6 800 -- -- -- 806
Accretion of redeemable convertible
preferred stock...................... -- -- (39,662) -- -- (291,280) (330,942)
Net loss.............................. -- -- -- -- -- (1,997,858) (1,997,858)
--------- ------ ---------- ----------- -------- ------------ ------------
Balances, December 31, 1997........... 898,424 898 -- -- (44,427) (3,891,855) (3,935,384)
Warrants issued in February 1998...... -- -- 84,534 -- -- -- 84,534
Stock option exercise................. 164,038 164 38,139 -- (22,635) -- 15,668
Repayment of notes receivable from
stockholders......................... -- -- -- -- 22,696 -- 22,696
Unearned stock-based compensation..... -- -- 1,671,559 (1,671,559) -- -- --
Amortization of unearned stock-based
compensation......................... -- -- -- 286,086 -- -- 286,086
Accretion of redeemable convertible
preferred stock...................... -- -- (488,466) -- -- -- (488,466)
Net loss.............................. -- -- -- -- -- (5,522,222) (5,522,222)
--------- ------ ---------- ----------- -------- ------------ ------------
Balances, December 31, 1998........... 1,062,462 1,062 1,305,766 (1,385,473) (44,366) (9,414,077) (9,537,088)
Warrants issued in May 1999
(unaudited).......................... -- -- 20,610 -- -- -- 20,610
Repurchase of common stock
(unaudited).......................... (1) -- -- -- -- -- --
Repurchase of Series A mandatorily
redeemable convertible preferred
stock and accretion of Series A in
March 1999 (unaudited)............... -- -- (2,529,395) -- -- -- (2,529,395)
Stock option exercise (unaudited)..... 55,185 55 18,684 -- -- -- 18,739
Repayment of note receivable from
stockholders (unaudited)............. -- -- -- -- 15,131 -- 15,131
Unearned stock-based compensation
(unaudited).......................... -- -- 2,644,004 (2,644,004) -- -- --
Amortization of unearned stock-based
compensation (unaudited)............. -- -- -- 537,240 -- -- 537,240
Accretion of redeemable convertible
preferred stock (unaudited).......... -- -- (1,459,669) -- -- (789,604) (2,249,273)
Net loss (unaudited).................. -- -- -- -- -- (4,929,634) (4,929,634)
--------- ------ ---------- ----------- -------- ------------ ------------
Balances, September 30, 1999
(unaudited).......................... 1,117,646 $1,117 $ -- $(3,492,237) $(29,235) $(15,133,315) $(18,653,670)
========= ====== ========== =========== ======== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 72
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM
NINE MONTHS ENDED MAY 5, 1995
YEARS ENDED DECEMBER 31, SEPTEMBER 30, (INCEPTION) TO
-------------------------------------- ------------------------- SEPTEMBER 30,
1996 1997 1998 1998 1999 1999
---------- ----------- ----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................... $ (956,352) $(1,997,858) $(5,522,222) $(4,069,415) $(4,929,634) $(13,860,749)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization............ 84,319 222,126 331,587 310,836 392,057 1,050,761
Amortization of note and long-term debt
discount............................... -- -- 15,939 -- 70,558 86,497
Amortization of deferred compensation.... -- -- 286,086 161,023 537,240 823,326
Changes in assets and liabilities:
Accounts receivable.................... (68,647) (217,577) 119,624 211,447 (248,002) (455,129)
Prepaid expenses and other current
assets............................... (45,828) 27,456 (283,193) (216,179) (29,403) (346,360)
Accounts payable....................... 302,562 95,001 (58,148) (145,051) 945,504 1,323,996
Accrued payroll and related expenses... 10,223 33,232 (6,635) 15,480 38,849 96,727
Accrued expenses....................... 96,122 (95,166) 289,205 108,704 (122,262) 172,002
Deferred revenue....................... 200,000 14,286 (14,286) (214,286) (185,000) 15,000
---------- ----------- ----------- ----------- ----------- ------------
Net cash used in operating
activities.......................... (377,601) (1,918,500) (4,842,043) (3,837,441) (3,530,093) (11,093,929)
---------- ----------- ----------- ----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment...... (232,355) (62,302) (21,481) -- (4,032,871) (4,411,741)
Restricted cash............................ -- -- -- -- (625,000) (625,000)
Purchase of short-term investments......... -- -- -- -- (5,126,061) (5,126,061)
Maturities of short-term investments....... -- -- -- -- 2,150,000 2,150,000
Change in other assets..................... (11,400) (100) (14,434) 12,751 (70,034) (96,690)
---------- ----------- ----------- ----------- ----------- ------------
Net cash provided by (used in)
investing activities................ (243,755) (62,402) (35,915) 12,751 (7,703,966) (8,109,492)
---------- ----------- ----------- ----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease
obligations.............................. (97,686) (183,109) (292,044) (213,428) (443,807) (1,020,026)
Proceeds from issuance of notes payable to
related
parties.................................. -- 337,187 2,150,000 2,150,000 -- 2,418,592
Proceeds from issuance of loans payable.... -- -- -- -- 3,426,887 3,426,887
Repayment of loans payable................. -- -- -- -- (137,167) (137,167)
Proceeds from issuance of preferred stock,
net of issuance costs.................... 1,383,340 500,000 4,490,665 4,490,665 17,302,781 25,050,786
Repayment of notes payable to related
parties.................................. -- -- -- -- (119,099) (119,099)
Repurchase of Series A preferred stock and
one share of common stock................ -- -- -- -- (2,712,883) (2,712,883)
Proceeds from notes receivable from
stockholders............................. -- -- 22,696 -- 15,131 37,827
Proceeds from issuance of common stock..... 780 17,632 15,668 11,252 18,739 121,414
---------- ----------- ----------- ----------- ----------- ------------
Net cash provided by financing
activities.......................... 1,286,434 671,710 6,386,985 6,438,489 17,350,582 27,066,331
---------- ----------- ----------- ----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents................................ 665,078 (1,309,192) 1,509,027 2,613,799 6,116,523 7,862,910
Cash and cash equivalents, beginning of
period..................................... 881,474 1,546,552 237,360 237,360 1,746,387 --
---------- ----------- ----------- ----------- ----------- ------------
Cash and cash equivalents, end of period.... $1,546,552 $ 237,360 $ 1,746,387 $ 2,851,159 $ 7,862,910 $ 7,862,910
========== =========== =========== =========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for
interest............................... $ 13,267 $ 49,068 $ 79,867 $ 59,900 $ 111,687 $ 145,376
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Additions to property and equipment
acquired under capital lease
obligations............................ $ 363,010 $ 491,512 $ 354,643 $ 354,643 $ 206,840 $ 1,506,704
Issuance of notes receivable in exchange
for common stock....................... $ 22,696 $ 21,731 $ 22,635 $ 22,635 $ -- $ 67,602
Net assets obtained in exchange for
Series A preferred stock............... $ -- $ -- $ -- $ -- $ -- $ 36,363
Equipment obtained in exchange for common
stock.................................. $ -- $ 806 $ -- $ -- $ -- $ 806
Issuance of warrants in connection with
notes payable.......................... $ -- $ -- $ 84,534 $ 84,534 $ 20,610 $ 105,144
Deferred compensation.................... $ -- $ -- $ 1,671,559 $ 1,463,109 $ 2,644,004 $ 4,315,563
Accretion of mandatorily redeemable
preferred stock and accrued
dividends.............................. $ 200,274 $ 330,942 $ 488,466 $ 358,466 $ 4,778,668 $ 5,267,134
Conversion of notes payable into
preferred stock........................ $ -- $ -- $ -- $ -- $ 2,495,978 $ 2,487,187
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 73
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. FORMATION AND BUSINESS OF THE COMPANY
ACLARA BioSciences, Inc. (the "Company"), formerly Soane BioSciences, Inc.,
a Delaware corporation, was incorporated on May 5, 1995 for the purpose of
providing miniaturized microfluidic tools for biochemical analysis and
synthesis. The Company's technology has applicability in many markets including
drug discovery, genomics, life science research and diagnostics. The Company's
revenue is currently generated primarily through various grants and contracts
with both governmental and private organizations. The Company is in the
development stage and since inception has devoted substantially all of its
efforts to research and development, raising capital, and recruiting personnel.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM RESULTS
The accompanying balance sheet as of September 30, 1999, the statements of
operations and of cash flows for the nine months ended September 30, 1998 and
1999 and the statement of stockholders' deficit for the nine months ended
September 30, 1999 are unaudited. The unaudited interim financial statements
have been prepared on the same basis as the annual financial statements and, in
the opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Company's financial
position and its results of operations and its cash flows for the nine months
ended September 30, 1998 and 1999. The financial data and other information
disclosed in these notes to financial statements related to these periods are
unaudited. The results for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999 or any other interim period.
UNAUDITED PRO FORMA INFORMATION
If the Company's initial public offering as described in Note 12 is
consummated, all of the preferred stock outstanding will automatically be
converted into common stock. The unaudited pro forma mandatorily redeemable
convertible preferred stock and stockholders' deficit at September 30, 1999 has
been adjusted for the assumed conversion of mandatorily redeemable convertible
preferred stock based on the shares of mandatorily redeemable convertible
preferred stock outstanding at September 30, 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 expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with original
or remaining maturities of three months or less to be cash equivalents.
F-7
<PAGE> 74
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts receivable, accounts payable,
accrued expenses and other liabilities approximate fair value due to their short
maturities. Based upon borrowing rates currently available to the Company for
leases with similar terms, the carrying value of capital lease obligations
approximate fair value.
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
Cash and cash equivalents are invested in deposits with a major local
financial institution. The Company has not experienced any losses on its
deposits of cash and cash equivalents. Management believes that this financial
institution is financially sound and, accordingly, minimal credit risk exists.
The Company's receivables relate to grants and contracts, and accordingly, there
is no collateral required for these receivables.
At December 31, 1996, 1997 and 1998 and September 30, 1999, one government
agency accounted for 46%, 96%, 95% and 79% of accounts receivable, respectively.
In addition at December 31, 1996, one collaborator accounted for 53% of accounts
receivable and at September 30, 1999, one government agency accounted for 18% of
accounts receivable.
In 1996, two customers (collaborative partners) individually accounted for
39% and 28%, respectively, of the Company's total revenue. In 1997, three
customers individually accounted for 45%, 24% and 12%, respectively, of the
Company's total revenue. In 1998, three customers (collaborative partners)
individually accounted for 44% and 22% and 16%, respectively, of the Company's
total revenue. For the nine month period ended September 30, 1999, three
customers (collaborative partners) individually accounted for 49%, 23% and 20%,
respectively, of the Company's total revenue.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation and
amortization. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, three years for computer equipment and
software and five years for machinery, equipment and furniture. Amortization of
leasehold improvements and property and equipment acquired under capital lease
obligations is computed using a straight-line basis over the shorter of the
remaining lease term or the estimated useful life of the related assets,
typically five years.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets in accordance
with Statement of Financial Accounting Standards No. ("SFAS") 121. "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of". 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.
F-8
<PAGE> 75
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized.
RESEARCH AND DEVELOPMENT COSTS
Research and development expenditures are charged to operations as
incurred.
REVENUE RECOGNITION
The Company recognizes grant and collaboration revenue based on meeting
certain requirements, completing milestones as specified in the grants or
collaborations, straight line over the period of certain collaborations or as
work is performed and evidenced by time sheets and expense reports for certain
grants. Revenue on product sales is generally recognized upon shipment of
product to the customer. Revenue on license agreements are recognized on a
straight line basis over the life of services to be rendered under the license
agreements (see Note 5).
CERTAIN RISKS AND UNCERTAINTIES
The Company's products and services are concentrated in rapidly changing,
highly competitive markets which are characterized by rapid technological
advances, changes in customer requirements and evolving regulatory requirements
and industry standards. Any failure by the Company to anticipate or to respond
adequately to technological developments in its industry, changes in customer
requirements or changes in regulatory requirements or industry standards, or any
significant delays in the development or introduction of products or services,
could have a material adverse effect on the Company's business and operating
results.
SEGMENTS
The Company follows Statement of Financial Accounting Standards No. 131, or
SFAS 131, "Disclosures about Segments of an Enterprise and Related Information."
The Company operates in one segment, using one measurement of profitability to
manage its business. All long-lived assets are maintained in the United States.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock issued to Employees" ("APB No. 25") and complies with the
disclosure provisions of Statements of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123").
Under APB No. 25, compensation expense is based on the difference, if any
on the date of the grant, between the fair value of the Company's stock and the
exercise price. SFAS No. 123
F-9
<PAGE> 76
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
defines a "fair value" based method of accounting for and employee stock option
or similar equity instrument. The pro forma disclosures of the difference
between compensation expense included in net loss and the related cost measured
by the fair value method are presented in Note 8.
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and Emerging Issues Task Force Issue
No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services."
COMPREHENSIVE INCOME
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. Through December 31, 1998, the Company has not had any
transactions that are required to be reported in other comprehensive income
other than its net loss.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
No. 133 requires that all derivatives be recognized at fair value in the
statement of financial position, and that the corresponding gains or losses be
reported either in the statement of operations or as a component of
comprehensive income, depending on the type of relationship that exists. The
Company, to date, has not engaged in derivative or hedging activities. The
Company will adopt SFAS No. 133, as required, in fiscal year 2000.
NET LOSS PER SHARE
Basic earnings per share is calculated based on the weighted-average number
of common shares outstanding during the period. Diluted earnings per share would
give effect to the dilutive effect of common stock equivalents consisting of
stock options and warrants (calculated using the treasury stock method).
Potentially dilutive securities have been excluded form the diluted earnings per
share computations as they have an antidilutive effect due to the Company's net
loss.
The computation of pro forma net loss per share includes shares issuable
upon the conversion of outstanding shares of convertible preferred stock (using
the as-if converted method) from the original date of issuance.
F-10
<PAGE> 77
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of shares used in the calculations is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Net loss...................... $ (956,352) $(1,997,858) $(5,522,222) $(4,069,415) $ (4,929,634)
=========== =========== =========== =========== ============
Accretion of mandatorily
redeemable preferred stock.... (200,274) (300,942) (488,466) (358,466) (4,778,668)
----------- ----------- ----------- ----------- ------------
Net loss attributable to common
stockholders.................. $(1,156,626) $(2,298,800) $(6,010,688) $(4,427,881) $ (9,708,302)
=========== =========== =========== =========== ============
Weighted-average shares of
common stock outstanding...... 227,717 557,226 942,140 929,851 1,029,576
Less: weighted-average shares
subject to repurchase......... (193,171) (175,781) (145,245) (152,579) (65,617)
----------- ----------- ----------- ----------- ------------
Weighted-average shares used in
basic and diluted net loss per
share......................... 34,546 381,445 796,895 777,272 963,959
=========== =========== =========== =========== ============
Pro forma basic and diluted :
Net loss...................... $(5,522,222) $ (4,929,634)
----------- ------------
Shares used above
Adjustment to reflect weighted-
average effect of assumed
conversion of preferred stock
(unaudited)................... 7,934,237 11,545,642
=========== ============
Weighted-average shares used in
pro forma basic and diluted
net loss per share
(unaudited)................... 8,731,132 12,509,601
=========== ============
</TABLE>
The following outstanding options and warrants (prior to the application of
the treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- -----------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Options and
warrants............. 756,528 634,559 1,488,347 1,451,244 2,162,065
Convertible preferred
stock.............. 6,435,702 6,743,394 8,410,061 8,410,061 12,818,683
</TABLE>
F-11
<PAGE> 78
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Machinery and equipment................................ $ 893,742 $1,168,050
Furniture and fixtures................................. 73,423 83,174
Computer equipment and software........................ 238,738 330,803
Leasehold improvements................................. 133,287 133,287
---------- ----------
1,339,190 1,715,314
Less: accumulated depreciation and amortization........ (322,805) (654,392)
---------- ----------
$1,016,385 $1,060,922
========== ==========
</TABLE>
As of December 31, 1998 and 1997, property and equipment includes amounts
for machinery and equipment, furniture and fixtures, and computer equipment
acquired under capital leases of $1,299,864 and $945,221 with related
accumulated amortization of approximately $479,000 and $234,000, respectively.
4. COMMITMENTS
OPERATING LEASE
On July 31, 1996, the Company entered into a seven year operating lease for
office space which expires in November 2003. The lease includes an option to
extend the term for an additional five years. Rent expense for the years ended
December 31, 1998 and 1997 and for the cumulative period from May 3, 1995 (date
of inception) to December 31, 1998 was $173,038 and $172,905 and $434,369,
respectively.
The future annual minimum lease payments under the lease as at December 31,
1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1999........................................................ $159,600
2000........................................................ 166,800
2001........................................................ 174,000
2002........................................................ 181,200
2003........................................................ 156,000
--------
Total minimum lease payments...................... $837,600
========
</TABLE>
5. RESEARCH AND DEVELOPMENT COLLABORATIONS AND LICENSE AGREEMENTS
The Company has entered into several research and development
collaborations. Research payments are nonrefundable and the Company performs
research under these agreements on a "best effort" basis.
In January 1, 1995, the Company entered into a $120,740 research and
development subcontract with Molecular Dynamics, Inc. for a nine month period to
develop a polymer suitable for microfluidic analysis of DNA. Under this
subcontract, the Company granted to
F-12
<PAGE> 79
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Molecular Dynamics the exclusive option for a supply arrangement and a worldwide
license to use, prepare for packaging, package, market, sell and distribute the
product developed under the subcontract. The Company agreed for a period ending
December 31, 1999, not to grant such rights to any third party so long that
Molecular Dynamics has the rights to exercise its option or has exercised it.
In August 1996, the Company and Hitachi entered into a License Agreement
under which the Company granted Hitachi certain intellectual property rights in
return for an $800,000 license fee and an agreement to fund up to $480,000 of
research and development at the Company.
In February 1997, the Company entered into an agreement with the R.W.
Johnson Pharmaceutical Research Institute, a Division of Ortho Pharmaceutical
Corporation or "PRI" and the Johnson and Johnson Development Corporation or
"J&J". Under this agreement, the Company developed and delivered to PRI a
prototype microfluidic system intended to demonstrate the feasibility of the
Company's technology for pharmaceutical drug screening.
In March 1998, the Company entered into an amended and restated agreement
with PRI and J&J to develop a prototype microfluidic system having a higher
throughput than the prototype developed under the initial agreement. Under these
agreements, PRI provided the Company with $1,100,000 and $900,000 in 1997 and
1998, respectively. In addition, J&J made an aggregate $2,500,000 equity
investment in the Company (see Note 10 -- Related Party Transactions).
In April 1998, the Company and PE Biosystems entered into a collaboration
agreement under which the Company will jointly develop and, sell to PE
Biosystems units of microfluidic electrophoresis devices under a transfer price
to be determined by a joint committee. In the event that the Company is unable
or unwilling to supply microfluidic devices, the Company will receive a royalty
on net sales by PE Biosystems of the microfluidic electrophoresis devices.
During 1998 and for the nine month period ended September 30, 1999, the Company
has not received any revenue, related to this agreement, from PE Biosystems.
In March 1999, the Company entered into an agreement with PRI and PE
Biosystems, with an effective date of October 1998, which superseded the
Company's previous agreements with PRI. Under this agreement, the Company and PE
Biosystems agreed to develop and provide to PRI advanced prototype microfluidic
systems for pharmaceutical drug screenings. The Company received $1,200,000 in
1999 under this agreement. PE Biosystems and the Company must use reasonable
effort to adhere to certain milestones. Under a side agreement between the
Company and PE Biosystems, any royalty received from PRI for manufacturing or
selling of microfluidic electrophoresis devices will be split between PE
Biosystems and the Company. PRI has the right to terminate this agreement on not
less than 45 days prior written notice to PE Biosystems and the Company if any
milestone is not achieved prior to the end of the 90 day period following the
originally scheduled date for the achievement of a milestone.
F-13
<PAGE> 80
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. CAPITAL LEASES
In November 1995 and January 1997, the Company entered into capital lease
agreements which provide for up to $1,450,000 of equipment financing through
November 2001 and bear interest between 6.64% - 11.32% per year. Eligible
equipment includes various computer equipment, office furniture and equipment,
and machinery and equipment. Upon the termination of the lease agreements, the
Company is required to renew them or purchase the leased equipment at the then
existing fair market value but not less than 10% or more than 25% of the
original purchase price.
At December 31, 1998, future minimum lease payments under capital leases
are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1999........................................................ $ 381,651
2000........................................................ 259,861
2001........................................................ 165,256
2002........................................................ 27,097
---------
833,865
Less: amount representing interest.......................... (113,759)
---------
Present value of minimum lease payments..................... 720,106
Less: current portion....................................... (312,919)
---------
Non-current portion......................................... $ 407,187
=========
</TABLE>
7. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
Under the Company's Certificate of Incorporation, as amended, the Company's
convertible redeemable preferred stock is issuable in series. The Company's
Board of Directors is authorized to determine the rights, preferences and terms
of each series.
At December 31, 1997, the amounts, terms and liquidation value of Series A,
Series B, Series C and Series D mandatorily redeemable convertible preferred
stock were as follows:
<TABLE>
<CAPTION>
SHARES PREFERENTIAL
CARRYING SHARES ISSUED AND LIQUIDATION
AMOUNT AUTHORIZED OUTSTANDING VALUE
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
A................................. $ 225,321 3,014,313 3,014,313 $2,038,479
B................................. 1,602,433 2,344,466 2,344,466 1,585,484
C................................. 1,488,619 1,076,923 1,076,923 1,418,667
D................................. 523,039 307,692 307,692 500,000
---------- --------- --------- ----------
Balances, December 31, 1997....... $3,839,412 6,743,394 6,743,394 $5,542,630
========== ========= ========= ==========
</TABLE>
F-14
<PAGE> 81
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1998, the amounts, terms and liquidation value of Series A,
Series B, Series C, Series D and Series E mandatorily redeemable convertible
preferred stock were as follows:
<TABLE>
<CAPTION>
SHARES PREFERENTIAL
CARRYING SHARES ISSUED AND LIQUIDATION
AMOUNT AUTHORIZED OUTSTANDING VALUE
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
A................................ $ 280,004 3,014,313 3,014,313 $ 2,377,193
B................................ 1,691,818 2,344,466 2,344,466 1,698,139
C................................ 1,572,803 1,076,923 1,076,923 1,530,718
D................................ 552,092 307,692 307,692 528,274
E................................ 4,721,826 1,666,667 1,666,667 4,500,000
Undesignated..................... -- 110,769 -- --
---------- --------- --------- -----------
Balances, December 31, 1998...... $8,818,543 8,520,830 8,410,061 $10,634,324
========== ========= ========= ===========
</TABLE>
At September 30, 1999, the amounts, terms and liquidation value of Series
A, Series B, Series C, Series D, Series E, Series F, Series F-1 and Series G
mandatorily redeemable convertible preferred stock are as follows:
<TABLE>
<CAPTION>
SHARES PREFERENTIAL
CARRYING SHARES ISSUED AND LIQUIDATION
AMOUNT AUTHORIZED OUTSTANDING VALUE
----------- ---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
A............................ $ -- -- -- $ --
B............................ 1,724,571 2,344,466 2,344,466 1,782,107
C............................ 1,582,581 1,076,923 1,076,923 1,614,667
D............................ 581,757 307,692 307,692 598,111
E............................ 4,670,120 1,666,667 1,666,667 4,686,001
F............................ 18,975,557 7,222,221 6,676,666 19,031,998
F-1.......................... -- 7,222,221 -- --
G............................ 3,000,001 2,750,000 746,269 3,000,001
Undesignated................. -- 209,810 -- --
----------- ---------- ---------- -----------
Balances, September 30,
1999....................... $30,534,587 22,800,000 12,818,683 $30,712,885
=========== ========== ========== ===========
</TABLE>
DIVIDENDS
The holders of shares of Series B, Series C, Series D, Series E, Series F,
and Series G preferred stock are entitled to receive dividends, out of any
assets legally available prior and in preference to any declaration or payment
of dividends on common stock or any other shares of capital stock at the rate of
$0.048, $0.104, $0.13, $0.216, $0.216 and $0.322 per share per annum,
respectively, when and as declared by the Board of Directors. As of December 31,
1999, no dividends have been declared. Commencing on May 8, 1996, October 31,
1997, April 17, 1998, March 24, 1999, January 12, 1999 and April 28, 2000,
dividends on Series B, Series C, Series D, Series E, Series F and Series G
preferred stock, respectively, shall accrue from day to day whether or not
earned or declared and are cumulative. At December 31, 1997 and 1998 and at
September 30, 1999, preferred dividends accrued and unpaid were $442,367,
$879,811 and $1,912,769 respectively.
F-15
<PAGE> 82
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the holders of Series F mandatorily redeemable
convertible preferred stock shall be entitled to receive, prior and in
preference to any distribution of any assets of the Company to the holders of
Series B, Series C, Series D, Series E or Series G mandatorily redeemable
convertible preferred stock and common stock, an amount per share equal to the
sum of $2.70 plus all accrued and unpaid dividends. The holders of Series B,
Series C, Series D, Series E and Series G preferred stock shall be entitled to
receive, prior and in preference to any distribution of any assets of the
Company to the holders of common stock, an amount per share equal to the sum of
$0.5972, $1.30, $1.6250, $2.70 and $4.02 plus all accrued and unpaid dividends
on such shares, respectively.
After payment has been made to the holders of the Series B, Series C,
Series D, Series E, Series F and Series G mandatorily redeemable convertible
preferred stock, the holders of the Series F and common stock shall be entitled
to share ratably in the remaining assets of the Company available for
distribution to its stockholders.
CONVERSION
Each share of Series B, Series C, Series D, Series E, Series F and Series G
mandatorily redeemable convertible preferred stock is convertible, at the option
of the holder, into such number of fully paid and nonassessable shares of common
stock as determined by dividing the applicable original issue price by the
conversion price applicable to such share in effect at the date of conversion.
Each share of preferred stock shall automatically be converted into shares of
common stock immediately upon the closing of a firm commitment underwritten
public offering in which the aggregate proceeds raised equal or exceed
$15,000,000 and the per share offering price is not less than $8.91 per share
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization). At September 30, 1999, each share of preferred stock can be
converted to one share of common stock, subject to adjustments under specific
circumstances. The Company has reserved a total of 12,818,683 shares of common
stock for issuance upon the conversion of the outstanding mandatorily redeemable
convertible preferred stock.
REDEMPTION
On March 24, 2005 and 2006, each holder of Series B, Series C, Series D,
Series E, Series F and Series G mandatorily redeemable convertible preferred
stock will have the right to require the Company to redeem up to 50% and 100%
respectively of such shares of preferred stock held by such holder on each of
those dates. The redemption price to be paid by the Company upon such
redemption's is $0.5972 per share of Series B preferred stock, $1.30 per share
for Series C preferred stock, $1.625 per share for Series D preferred stock,
$2.70 per share of Series E and Series F preferred stock and $4.02 per share of
Series G preferred stock, plus all accrued but unpaid dividends. The carrying
value of redeemable convertible preferred stock is increased by periodic
accretions using the straight line method so that the carrying amount will equal
the redemption amount at the redemption date.
F-16
<PAGE> 83
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At September 30, 1999, future minimum accretion to redemption values of
mandatorily redeemable convertible preferred stock, which includes preferred
dividends, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
(UNAUDITED)
<S> <C>
2000........................................................ $ 1,889,572
2001........................................................ 2,115,975
2002........................................................ 2,254,147
2003........................................................ 2,401,346
2004 and thereafter......................................... 4,959,510
-----------
$13,620,550
===========
</TABLE>
VOTING RIGHTS
The holder of each share of Series B, Series C, Series D, Series E, Series
F and Series G preferred stock is entitled to one vote for each share of common
stock into which such share of the preferred stock is convertible. The Board of
Directors of the Company consists of five members. One member of the Board of
Directors shall be elected by the holders of record of the Series B preferred
stock voting separately as a class. Two members of the Board of Directors shall
be elected by the holders of record of the Series F preferred stock, voting
separately as a class. One member of the Board of Directors shall be elected by
the holders of record of a majority of the outstanding shares of common stock
and Series B, Series C, Series D, Series E, Series F and Series G preferred
stock voting together as a single class on an if-converted basis. Lastly, one
member of the Board of Directors shall be either the President or the Chief
Executive Officer of the Company.
REPURCHASE OF SERIES A MANDATORILY REDEEMABLE PREFERRED STOCK
The Company has a right of first refusal to repurchase any outstanding
shares of common stock or Series A mandatorily redeemable convertible preferred
stock held by certain stockholders of the Company in the event the holder of
such shares receives and accepts an offer from a third party to purchase the
stockholder's Series A mandatorily redeemable convertible stock. In March 1999,
the Company repurchased 3,014,313 shares of Series A mandatorily redeemable
convertible preferred stock and one share of common stock from an investor in
the Company for $2,712,883.
8. STOCKHOLDERS' EQUITY
COMMON STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 40,000,000 shares of $0.001 par value common stock. A portion
of the shares sold are subject to a right of repurchase by the Company over the
vesting period, which is generally over a four year period. At December 31,
1996, 1997, 1998 and September 30, 1999, 193,171, 175,781, 145,245 and 65,617
shares of common stock were subject to repurchase, respectively.
F-17
<PAGE> 84
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WARRANTS
During 1995, in conjunction with a capital lease agreement, the Company
issued warrants to purchase 30,000 shares of its common stock at a price of
$1.00 per share. The warrants will expire upon the later of November 15, 2005 or
five years subsequent to the closing of an initial public offering of the
Company's common stock.
In December 1996, the Company issued warrants to purchase 100,000 shares of
common stock at a price of $2.00 per share to the lessor of the Company's new
facility. The warrants will expire upon the earliest of December 6, 2003, the
closing of an acquisition of the Company, or five years subsequent to the
closing of an initial public offering of the Company's common stock.
In February 1997, in conjunction with an additional $1,000,000 capital
lease agreement, the Company issued warrants to purchase 33,350 shares of common
stock at $2.00 per share. The warrants will expire upon the later of February
15, 2007 or five years subsequent to the closing of an initial public offering
of the Company's common stock.
In December 1997 and February 1998, in conjunction with the issuance of
$337,187 and $500,000 of promissory notes to related parties, the Company issued
warrants to purchase 41,500 and 61,538 shares of Series D preferred stock at
$1.625 per share, respectively. The warrants will expire at the earliest of 10
years from the date of issuance, the sale or acquisition of the Company or the
effective date of the Company's registration statement.
The value of the warrants was calculated using the Black-Scholes pricing
model and have been allocated to stockholders' deficit and amortized to interest
expense or rent expense as appropriate over the life of the notes. Valuation of
warrants granted in 1995, 1996 and 1997 was immaterial and so not allocated to
stockholders' deficit. The valuation of warrants granted in 1998 was $84,534 and
in the period ended September 30, 1999 was $20,610.
STOCK OPTION PLANS
As of September 30, 1999, the Board of Directors has reserved 3,342,669
shares of common stock under its 1995 and 1997 Stock Plans (the "Plans") for
issuance to employees, directors and consultants of the Company.
Under the Plans, options granted under the Plans may be incentive stock
options or nonstatutory stock options. Stock purchase rights may also be granted
under the Plans. The Board of Directors determines the period over which options
become exercisable, but they generally vest at a rate of 25% after completing
one year of service and an additional 1/48 of such shares becoming exercisable
each month thereafter and options expire ten years from their vesting start
dates. The exercise price of incentive stock options shall be no less than 100%
of the fair market value per share of the Company's common stock on the grant
date as determined by the Company's Board of Directors. The exercise price of
nonstatutory stock options shall be no less than par value of the Company's
common stock. The term of the options is no longer than five years for incentive
options for which the grantee owns greater than 10% of the voting power of all
classes of stock and no longer than ten years for all other options.
F-18
<PAGE> 85
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Activity under the Plans is as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
---------------------------------
WEIGHTED
SHARES AVERAGE
AVAILABLE NUMBER AGGREGATE EXERCISE
FOR GRANT OF SHARES PRICE PRICE
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Options reserved at Plan inception...... 945,667 -- $ --
Options granted......................... (834,945) 834,945 50,097 $0.06
---------- --------- ---------- -----
Balances, December 31, 1995............. 110,722 834,945 50,097 0.06
Additional shares reserved............ 350,000 -- --
Options granted....................... (232,850) 232,850 15,476 0.07
Options exercised..................... -- (391,267) (23,476) 0.06
Options canceled...................... 50,000 (50,000) (3,000) 0.06
---------- --------- ---------- -----
Balances, December 31, 1996............. 277,872 626,528 39,097 0.06
Additional shares reserved............ 500,000 -- --
Options granted....................... (392,012) 392,012 101,126 0.26
Options exercised..................... -- (500,956) (39,363) 0.08
Options canceled...................... 87,875 (87,875) (9,238) 0.11
---------- --------- ---------- -----
Balances, December 31, 1997............. 473,735 429,709 91,622 0.21
Additional shares reserved............ 1,000,000
Options granted....................... (1,055,418) 1,055,418 606,971 0.58
Options exercised..................... -- (164,038) (38,303) 0.23
Options canceled...................... 99,130 (99,130) (47,019) 0.47
---------- --------- ---------- -----
Balances, December 31, 1998............. 517,447 1,221,959 613,271 0.50
Additional shares reserved
(unaudited)........................ 547,002 -- --
Options granted (unaudited)........... (712,000) 712,000 492,475 0.69
Options exercised (unaudited)......... -- (55,185) (18,739) 0.34
Options cancelled (unaudited)......... 75,690 (75,690) (38,497) 0.51
---------- --------- ---------- -----
Balances, September 30, 1999
(unaudited)........................... 428,139 1,803,084 $1,048,510 $0.58
========== ========= ========== =====
</TABLE>
The fair value of each option grant to employees is estimated on the date
of grant using the minimum value method with the following weighted average
assumptions:
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- --------------
1996 1997 1998 1998 1999
---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Expected dividend yield.............................. -- -- -- -- --
Risk-free interest rate.............................. 6.2% 6.2% 5.5% 5.4% 5.1%
Expected life (in years)............................. 5.0 5.0 5.0 5.0 5.0
</TABLE>
The expected life is based on the assumption that stock options on average
are exercised one year after they are fully vested. The risk free interest rate
was calculated in accordance with the grant date and expected life calculated.
F-19
<PAGE> 86
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The weighted average estimated fair value of employee stock options granted
during 1996, 1997, 1998, and during the nine month period ended September 30,
1999 were $0.02, $0.07, $1.96 and $3.78, respectively.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the Plans. Had compensation cost for the Plans been
determined based on the fair value at the date of the awards consistent with the
provisions of SFAS No. 123, the impact on the Company's net loss would be as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss attributable to
common stockholders:
As reported................. $(1,156,626) $(2,298,800) $(6,010,688) $(4,427,881) $ (9,708,302)
Pro forma................. (1,160,212) (2,304,949) (6,278,709) (4,582,587) (10,254,435)
=========== =========== =========== =========== ============
Basic and diluted net loss
per common share:
As reported............... $ (33.48) $ (6.03) $ (7.54) $ (5.70) $ (10.07)
=========== =========== =========== =========== ============
Pro forma................. $ (33.58) $ (6.04) $ (7.88) $ (5.90) $ (10.64)
=========== =========== =========== =========== ============
</TABLE>
The options outstanding and currently exercisable by exercise price at
September 30, 1999 are as follows (unaudited):
<TABLE>
<CAPTION>
OPTIONS CURRENTLY
OPTIONS OUTSTANDING EXERCISABLE
--------------------------------------- -----------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
-------- ----------- ------------ -------- ----------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
$0.06...................... 93,750 6.50 $ 0.06 78,459 $ 0.06
$0.13...................... 25,500 7.05 $ 0.13 18,764 $ 0.13
$0.1625.................... 75,959 7.78 $0.1625 42,153 $0.1625
$0.60...................... 1,428,875 8.87 $ 0.60 904,871 $ 0.60
$0.95...................... 179,000 9.87 $ 0.95 1,007 $ 0.95
--------- ---- ---------
1,803,084 8.78 1,045,254
========= ==== =========
</TABLE>
As of December 31, 1996, 1997 and 1998, options to purchase 188,250,
109,092 and 840,424 shares of common stock were exercisable under the Plans,
respectively.
DEFERRED STOCK COMPENSATION
During 1998 and 1999, the Company issued stock options to certain employees
under the 1995 and 1997 Plan with exercise prices below the deemed fair value of
the Company's common stock at the date of grant. In accordance with the
requirements of APB 25, the Company has recorded deferred stock compensation for
the difference between the exercise price of the stock options and the deemed
fair value of the Company's common stock at the
F-20
<PAGE> 87
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
date of grant. This deferred stock compensation is amortized to expense over the
period during which the options or common stock subject to repurchase vest,
generally four years, using the straight line method. As of December 31, 1998,
the Company has recorded deferred stock compensation related to these options in
the total amount of $1,671,599, of which $286,086 has been amortized to expense
during 1998. For the nine months ended September 30, 1999, the Company has
recorded deferred stock compensation of $2,644,004 of which $537,240 has been
amortized to expense during the period.
9. EMPLOYEE BENEFIT PLAN
The Company established a 401(k) Plan (the "Plan") to provide tax deferred
salary deductions for all eligible employees. Participants may make voluntary
contributions to the Plan up to 20% of their compensation, limited by certain
Internal Revenue Service restrictions. The Company's matching contribution is
discretionary as determined by the Board of Directors. The Company has not
contributed to the Plan since its inception.
10. RELATED PARTY TRANSACTIONS
During December 1997 and February 1998, the Company issued a total of
$837,187 of promissory notes to executives and stockholders. The notes bear
interest at 9% per year. Principal and accrued interest are due and payable upon
demand by the holder at the earlier of February 15, 1998 or the closing of the
sale of preferred stock to institutional investors with aggregate proceeds of at
least $500,000. The notes and accrued interest are convertible into shares of
the Company's preferred stock in the event of a venture capital financing.
During September 1998, the Company issued $1,650,000 of promissory notes to
executives and stockholders. The notes bear interest at 9% per year. Principal
and accrued interest are due and payable upon demand by the holder at the
earlier of January 31, 1999 or the closing of the sale of preferred stock with
aggregate proceeds of at least $5,000,000. The notes and accrued interest are
convertible into shares of the Company's preferred stock in the event of a
venture capital financing.
All of the above promissory notes and accrued interest were converted into
$2,495,978 of preferred stock in March 1999 or paid as cash of $119,099.
In February 1997, the Company entered into a research collaboration
(extended in March 1998) with the R.W. Johnson Pharmaceutical Research
Institute, which owns shares of Series D, Series E and Series F mandatorily
redeemable convertible preferred stock.
In the nine month period ended September 30, 1999, the Company entered into
a research collaboration with PE Biosystems, whose parent PE Corporation owns
shares of Series E and Series G mandatorily redeemable convertible preferred
stock, and the R.W. Johnson Pharmaceutical Research Institute.
Revenue from the above collaborations totalled $1,200,000, $600,000 and
$1,215,373 for the years ended December 31, 1997, 1998 and for the nine months
ended September 30, 1999, respectively.
F-21
<PAGE> 88
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In addition in April 1998 the Company entered into a collaboration with PE
Biosystems whose parent Corporation is a series F investor. This agreement is
described in Note 5. No revenue has been received or recognized on this
collaboration.
11. INCOME TAXES
The net deferred tax assets comprise:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Net operating loss carryforwards....................... $1,320,000 $3,294,000
Tax credit carryforwards............................... 148,000 542,000
Other.................................................. (45,000) (14,000)
---------- ----------
1,423,000 3,822,000
Less: valuation allowance.............................. (1,423,000) (3,822,000)
---------- ----------
Net deferred tax assets................................ $ -- $ --
========== ==========
</TABLE>
Due to uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against its net deferred tax assets.
At December 31, 1998, the Company had federal and state net operating loss
carryforwards of approximately $8,651,000 and $6,041,000, respectively, and
federal and state tax credits of approximately $349,000 and $193,000,
respectively, available to offset future regular and alternative minimum taxable
income. The Company's net operating loss carryforwards and tax credits expire
between 2003 and 2013 if not utilized.
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. If the Company should have an ownership change, as
defined by the tax law, utilization of the carryforwards could be restricted.
12. SUBSEQUENT EVENTS (UNAUDITED)
LEGAL MATTERS
On March 22, 1999, Caliper Technologies Corporation ("Caliper") filed suit
in Superior Court of California, naming as defendants Bertram Rowland
("Rowland"), Flehr, Hohback, Test, Albritton & Herbert ("Flehr") and the
Company. The suit alleges that Rowland and Flehr, as former counsel to Caliper,
learned trade secrets of Caliper which were then improperly used by Rowland and
Plehr as counsel to the Company, and by the Company, in a patent application by
the Company that resulted in an issued patent, and for other unspecified
purposes. The suit seeks actual and exemplary damages and equitable relief.
On April 26, 1999, the Company filed a patent infringement action in the
U.S. District Court in Northern California alleging infringement of the
Company's patent (the "015 patent") which concerns methods and devices for
moving molecules by the application of electrical fields.
On January 18, 2000, Caliper filed a complaint against the Company in the
U.S. District Court of the Northern District of California. The complaint
alleges infringement of four
F-22
<PAGE> 89
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
U.S. patents licensed the Caliper (the "Oak Ridge patents"). The earliest of the
Oak Ridge patents was issued in January 1999.
Management of the Company is currently unable to predict the final outcome
of these matters and the ultimate effect, if any, on the Company's financial
condition, cashflows and results of operations.
LEASING ARRANGEMENT
In March 1999, the Company entered into a ten year building lease agreement
for a total commitment of $12,136,344. In conjunction with this lease agreement,
cash balances of approximately $625,000 were restricted from withdrawal and held
by a bank that issued a letter of credit for the same amount to the landlord.
The cash will be released for withdrawal in three increments of $125,000 every
30 months from lease inception. In July 1999 the Company entered into three
sublease agreements for a period commencing August 1, 1999 and ending between
one to two years later, varying by contract.
ISSUANCE OF SERIES H MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 1999, the Company issued 827,815 shares of Series H mandatorily
redeemable convertible preferred stock at $6.04 per share for proceeds of
approximately $5,000,000. The Company amended its Certificate of Incorporation
to increase the number of shares of preferred stock authorized to 22,800,000
shares of which 850,000 shares were designated Series H.
INVESTMENTS
During the nine month period ended September 30, 1999, the Company invested
in securities with maturities greater than three months but less than one year,
which are included in short-term investments. At September 30, 1999 short-term
investments, which comprised issuances of commercial paper and U.S. corporate
bonds, were classified as available-for-sale and are carried at amortized cost
which approximated market value.
OPTION GRANTS
In the three months ended December 31, 1999, the Company issued options to
employees and non-employees to purchase 155,750 shares of common stock at $0.95
per share. The Company recorded deferred stock compensation totalling
approximately $2,057,674 during these time periods which represents the
difference between the deemed fair market value of the Company's common stock
for accounting purposes and the exercise price of the options at the date of
grant. The deferred stock compensation will be presented as an increase in
shareholders' deficit and will be amortized over the four year vesting period of
the options.
REGISTRATION
In January 2000, the Company's board of directors authorized management to
file a registration statement with the Securities and Exchange Commission to
permit the Company to
F-23
<PAGE> 90
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
sell its common stock to the public. Upon completion of the Company's initial
public offering, all of the outstanding preferred stock will be converted into
shares of common stock.
LOAN AGREEMENTS
In May 1999, the Company entered into a loan agreement with a financial
institution to obtain borrowings of up to $5,000,000 in the aggregate, of which
no more than $3,000,000 can be used for leasehold improvement and $2,000,000 can
be used for the purchase of equipment. In the period ended September 30, 1999,
the Company received $360,043 to purchase equipment and $2,913,240 for leasehold
improvement. The loans bear interest of 13.4% to 13.6% and are repaid in 42 to
48 monthly installments. If the Company were to default in the payment of
principal or interest on any indebtedness of $50,000, the performance of any
agreement related to such loan the Company would default on this loan agreement.
In conjunction with this loan agreement, the Company issued a warrant to
purchase 92,593 shares of common stock at an exercise price of $2.70 per share.
The warrant has a ten year term ending in May 2009. The value of the warrant was
calculated using the Black-Scholes pricing model and has been allocated to
stockholders' deficit and will be amortized to interest expense over the life of
the loan.
In March 1999, the Company entered into a loan agreement with its landlord
to borrow $663,150 for leasehold improvement at an interest rate of 8.5%. The
Company received the proceeds of this loan in December 1999. If the Company were
to default on the payment of the lease for its facilities, the Company would
default on its loan agreement with its landlord.
COLLABORATIONS
In March 1999, the Company and PE Biosystems, entered into a product
development collaboration in the field of high throughput screening. The
agreement covers a collaboration on technological feasibility studies and on
future commercialization of products jointly developed, including manufacturing,
marketing, sales and support programs for such collaboration product. The
collaboration product will be exclusively marketed, sold and supported by PE
Biosystems, who will be responsible for all expenses for marketing, sales and
support of such product. As part of this collaboration, the Company will sell to
PE Biosystems microfluidic electrophoresis devices. Upon expiration of an
exclusive period, the Company will have three months to evaluate any written
development proposal from PE Biosystems; in the event that the Company elects
not to pursue a new development agreement, fails to notify PE Biosystems of its
election to develop and supply such microfluidic electrophoresis devices within
the three month period, the development or manufacture of such devices may be
performed by PE Biosystems pursuant to a non-exclusive license. If, after a
first commercial sale of a microfluidic device, the net sales do not meet or
exceed a specified minimum value, the Company's obligation to exclusively supply
that particular device will immediately terminate, but PE Biosystems' obligation
to exclusively purchase such device will remain in effect. During the nine month
period ended September 30, 1999, the Company has not recognized any revenue
under this agreement.
In October 1999, the Company and Cellomics, Inc. ("Cellomics") entered into
a three year collaboration for an exclusive alliance to develop, manufacture and
market a chip-based screening system for cell analysis. Under this
collaboration, Cellomics agreed to provide funding to support the Company's
research for the first year of the program. During the development and
commercialization phase, the money obtained from third parties shall be divided
between
F-24
<PAGE> 91
ACLARA BIOSCIENCES, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Cellomics and the Company to ensure that each party's expenditure of its own
money on a jointly approved plan is minimized. No later than the end of the
second year of collaboration, the Company will receive from Cellomics the
reasonable cost of manufacturing the microfluidic plates jointly developed and a
reasonable profit margin for items manufactured and supplied by the Company. The
division of any remaining income will be determined by the financial
contribution of each party, net of reimbursed portions, the novelty of their
contributions, the value of the intellectual property that protects components
of the screening systems, the competitive advantages provided by the
contributions of the two parties, their respective responsibilities in
manufacturing, marketing and supporting other on-going expenditures and other
risks. The exact mechanism for the division of any remaining income will be
defined as the collaboration proceeds toward commercialization. For the period
ended September 30, 1999, the Company has not recognized any revenue under this
collaboration.
F-25
<PAGE> 92
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE INFORMATION DIFFERENT FROM THAT CONTAINED IN THE
PROSPECTUS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR SALE OF COMMON STOCK
MEANS THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AFTER THE DATE OF
THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR SOLICITATION OF AN
OFFER TO BUY THESE SHARES IN ANY CIRCUMSTANCES UNDER WHICH THE OFFER OR
SOLICITATION IS UNLAWFUL.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Special Note Regarding Forward-
Looking Statements.................. 15
Use of Proceeds....................... 16
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Financial Data............... 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 24
Management............................ 44
Certain Relationships and Related
Party Transactions.................. 51
Principal Stockholders................ 54
Description of Capital Stock.......... 56
Shares Eligible for Future Sale....... 59
Underwriting.......................... 61
Legal Matters......................... 63
Experts............................... 63
Where You Can Find More Information... 63
Index to Financial Statements......... F-1
</TABLE>
DEALER PROSPECTUS DELIVERY OBLIGATIONS:
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE IN THESE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. DEALERS
ARE ALSO OBLIGATED TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ---------------------------------------------------------
LOGO
SHARES
COMMON STOCK
DEUTSCHE BANC ALEX. BROWN
WARBURG DILLON READ LLC
U.S. BANCORP PIPER JAFFRAY
PROSPECTUS
, 2000
<PAGE> 93
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than the
underwriting discount and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All amounts are estimates
except the SEC registration fee, the NASD filing fees and the Nasdaq National
Market listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC registration fee........................................ $ 25,800
NASD filing fee............................................. 10,275
Nasdaq National Market listing fee.......................... 90,000
Legal fees and expenses..................................... 400,000
Accounting fees and expenses................................ 250,000
Printing and engraving...................................... 150,000
Blue sky fees and expenses (including legal fees)........... 5,000
Transfer agent fees......................................... 10,000
Miscellaneous............................................... 48,950
--------
Total..................................................... $990,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Restated Certificate of Incorporation in effect as of the date hereof,
and our Restated Certificate of Incorporation to be in effect upon the closing
of this offering (collectively, the "Certificate") provide that, except to the
extent prohibited by the Delaware General Corporation Law, as amended (the
"DGCL"), the Registrant's directors shall not be personally liable to the
Registrant or its stockholders for monetary damages for any breach of fiduciary
duty as directors of the Registrant. Under the DGCL, the directors have a
fiduciary duty to the Registrant which is not eliminated by this provision of
the Certificate and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in good
faith or involving intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and for payment of
dividends or approval of stock repurchases or redemptions that are prohibited by
the DGCL. This provision also does not affect the directors' responsibilities
under any other laws, such as the Federal securities laws or state or Federal
environmental laws. The Registrant has applied for liability insurance for its
officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (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) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the
II-1
<PAGE> 94
corporation's bylaws, any agreement, a vote of stockholders or otherwise. The
Certificate eliminates the personal liability of directors to the fullest extent
permitted by Section 102(b)(7) of the DGCL and provides that the Registrant may
fully 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) by reason of the fact
that such person is or was a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate. The Registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.
Prior to the closing of the offering, we intend to enter into agreements to
indemnify our directors and officers. These agreements, among other things,
require us to indemnify these directors and officers for certain expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by or in the
right of our company, arising out of that person's services as a director or
officer of our company, any subsidiary of ours or any other company or
enterprise to which the person provides services at our request.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The registrant has sold and issued the following securities since January
1, 1997:
(1) In February 1997, we issued a warrant to purchase 33,350 shares of our
common stock at an exercise price of $2.00 per share to Phoenix Leasing
Incorporated.
(2) On April 17, 1997 we issued and sold an aggregate of 307,692 Series D
Redeemable Preferred Stock to Johnson and Johnson Development
Corporation for an aggregate purchase price of $500,000.
(3) From December 1997 to February 1998, we entered into a Note and Warrant
Purchase Agreement with Mark A. Medearis, Charles Crocker, Matthew J.
Franklin, Johnson and Johnson Development Corporation, Laboratory
Partners I, L.P., Laboratory Partners Companion Fund, L.P., Ampersand
Specialty Materials and Chemicals II, L.P., Chemicals and Materials
Enterprise Associates, L.P., S&A Biotech Investments, LLC, and David
Soane. Pursuant to this agreement, we issued warrants to purchase
103,000 shares of our Series D Redeemable Preferred Stock and issued
and sold Subordinated Promissory Notes in the aggregate principal
amount of $837,187 to the entities listed above.
(4) From March through April 1998, we issued an aggregate of 1,666,667
shares of Series E Redeemable Preferred Stock to Johnson and Johnson
Development Corporation and PE Corporation for an aggregate purchase
price of $4,500,000.
(5) On September 3, 1998, we issued and sold Convertible Subordinated
Promissory Notes in the aggregate principal amount of $1,650,000 to
Johnson & Johnson Development Corporation, Lab Partners I, L.P., Lab
Partners Companion Fund, L.P., Ampersand Specialty Materials and
Chemicals II, L.P., Chemicals and Materials Enterprise Associates, L.P.
II-2
<PAGE> 95
(6) From January through March 1999, we issued and sold an aggregate of
6,676,666 shares of Series F Preferred Stock in a private placement to
Alta California Partners II, L.P., Alta Embarcadero Partners II, L.P.,
TECHAMP International, L.P., Singapore Bio-Innovations Pte. Ltd.,
Johnson & Johnson Development Corporation, Laboratory Partners I, L.P.,
Laboratory Partners Companion Fund, L.P., Ampersand Specialty Materials
and Chemicals II, L.P., Chemicals and Materials Enterprise Associates,
L.P., CMEA Life Sciences Fund, L.P., Matthew J. Franklin, Mark
Medearis, GIMV, N.V., H. Gill Sawhney, Lion Investments Ltd., Westpool
Investment Trust, plc., Weber Family Trust dated 1/6/89, Burrill AgBio
Capital Fund, L.P., Wendy R. Hitchcock, and Michael W. Hall for an
aggregate purchase price of $18,027,000. $2.5 million of this price was
paid for by the conversion of outstanding Convertible Subordinated
Promissory Notes we previously issued on December 15, 1997, February 6,
1998, and September 3, 1998 to Johnson and Johnson Development
Corporation, Laboratory Partners I, L.P., Laboratory Partners Companion
Fund, L.P., Ampersand Specialty Materials and Chemicals II, Limited
Partnership, Chemicals and Materials Enterprise Associates, L.P.,
Matthew Franklin, and Mark A. Medearis. At this time, we also paid the
entire principal amount and interest accrued on Subordinated Promissory
Notes previously issued to David Soane, Charles Crocker, and S&A
Biotech Investments, LLC.
(7) On April 29, 1999, we issued and sold an aggregate of 746,269 shares of
Series G Redeemable Preferred Stock to PE Corporation for an aggregate
purchase price of $3,000,000.
(8) On May 28, 1999, we issued a warrant to purchase 92,593 shares of our
common stock at an exercise price of $2.70 per share to TBCC Funding
Trust in connection with a Master Loan and Security Agreement between
Transamerica Business Credit Corporation and us.
(9) On December 30, 1999, we issued and sold an aggregate of 827,815 shares
of Series H Redeemable Preferred Stock to Asea Brown Boveri Inc. for an
aggregate purchase price of $5,000,000.
The sale of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or, with respect to issuances to employees
and consultants, Rule 701 promulgated under Section 3(b) of the Securities Act
as transactions by an issuer not involving a public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under such Rule 701. The recipients of securities in each such
transaction represented their intentions to acquire the securities for
investment purposes only and not with a view to or for sale in connection with
any distribution thereof and appropriate legends were affixed to the instruments
representing such securities issued in such transactions. All recipients either
received adequate information about ACLARA BioSciences, Inc. or had adequate
access, through their relationships with ACLARA BioSciences, to such
information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
II-3
<PAGE> 96
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of ACLARA BioSciences,
Inc. as currently in effect
3.2 Bylaws of ACLARA BioSciences, Inc., as currently in effect
*3.3 Form of Amended and Restated Certificate of Incorporation to
be filed after the closing of the offering made under this
registration statement
*3.4 Form of Amended and Restated Bylaws of ACLARA BioSciences,
Inc., to be in effect after the closing of the offering made
under this registration statement
*4.1 Specimen Common Stock certificate
*5.1 Opinion of Latham & Watkins
10.1 Form of Indemnification Agreement between ACLARA and each of
our directors and officers
10.2 1995 Stock Option Plan
10.3 1997 Stock Option Plan
10.4 Amended and Restated Investors' Rights Agreement, dated as
of December 30, 1999
10.5 Change of Control Agreement by and between Joseph M. Limber
and ACLARA BioSciences, Inc., effective as of January 19,
2000
10.6 Change of Control Agreement by and between Herbert H. Hooper
and ACLARA BioSciences, Inc., effective as of January 19,
2000
10.7 Change of Control Agreement by and between Wendy R.
Hitchcock and ACLARA BioSciences, Inc., effective as of
January 19, 2000
10.8 Lease Agreement between ACLARA BioSciences, Inc. and The
Pear Avenue Group, dated March 1, 1999
10.9 Master Equipment Lease between Phoenix Leasing and Soane
BioSciences, Inc., dated as of November 15, 1995
+10.10 Agreement for an Exclusive Alliance to Develop, Manufacture
and Market a Chip-Based Screening System for Cell Analysis
between Cellomics, Inc. and ACLARA BioSciences, Inc, dated
as of October 26, 1999
+10.11 Collaboration Agreement between ACLARA BioSciences, Inc. and
The Perkin-Elmer Corporation, dated as of March 19, 1999
+10.12 Side Agreement between ACLARA BioSciences, Inc. and The
Perkin-Elmer Corporation, dated as of March 19, 1999
+10.13 Custom Instrument Development and Commercialization
Agreement between the The R.W. Johnson Pharmaceutical
Research Initiative, The Perkin-Elmer Corporation and ACLARA
BioSciences, Inc., signed in March 1999
+10.14 Collaboration Agreement between Soane BioSciences, Inc. and
The Perkin-Elmer Corporation, dated as of April 25, 1998
10.15 Master Loan and Security Agreement by and between ACLARA
BioSciences, Inc. and Transamerica Business Credit
Corporation, dated as of May 27, 1999
23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Latham & Watkins (included in Exhibit 5.1)
23.3 Consent of Member-Elect of the Board of Directors
24.1 Powers of Attorney (See Signature Page on Page II-6)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be supplied by amendment.
+ Confidential treatment has been requested for portions of this agreement.
(b) FINANCIAL STATEMENT SCHEDULES.
II-4
<PAGE> 97
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act of 1933, 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 this offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 98
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Mountain
View, State of California, on this 20th day of January, 2000.
ACLARA BioSciences, Inc.
By: /s/ JOSEPH M. LIMBER
------------------------------------
Name: Joseph M. Limber
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Joseph
M. Limber and Wendy R. Hitchcock, and each of them individually, as
attorney-in-fact, with the power of substitution, for him or her in any and all
capacities, to sign any amendment to this registration statement (including
post-effective amendments and registration statements filed pursuant to Rule 462
and otherwise), and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
to said attorneys-in-fact, and each of the individually, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as her
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact or each of them individually, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOSEPH M. LIMBER President, Chief Executive January 20, 2000
- ----------------------------------------------------- Officer and Director
Joseph M. Limber (Principal Executive
Officer)
/s/ WENDY R. HITCHCOCK Chief Financial Officer January 20, 2000
- ----------------------------------------------------- (Principal Financial and
Wendy R. Hitchcock Accounting Officer)
/s/ THOMAS R. BARUCH Director January 20, 2000
- -----------------------------------------------------
Thomas R. Baruch
/s/ JEAN DELEAGE Director January 20, 2000
- -----------------------------------------------------
Jean Deleage
/s/ MICHAEL W. HUNKAPILLER Director January 20, 2000
- -----------------------------------------------------
Michael W. Hunkapiller
/s/ DAVID J. PARKER Director January 20, 2000
- -----------------------------------------------------
David J. Parker
</TABLE>
II-6
<PAGE> 99
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
*1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of ACLARA BioSciences,
Inc. as currently in effect
3.2 Bylaws of ACLARA BioSciences, Inc., as currently in effect
*3.3 Form of Amended and Restated Certificate of Incorporation to
be filed after the closing of the offering made under this
registration statement
*3.4 Form of Amended and Restated Bylaws of ACLARA BioSciences,
Inc., to be in effect after the closing of the offering made
under this registration statement
*4.1 Specimen Common Stock certificate
*5.1 Opinion of Latham & Watkins
10.1 Form of Indemnification Agreement between ACLARA and each of
our directors and officers
10.2 1995 Stock Option Plan
10.3 1997 Stock Option Plan
10.4 Amended and Restated Investors' Rights Agreement, dated as
of December 30, 1999
10.5 Change of Control Agreement by and between Joseph M. Limber
and ACLARA BioSciences, Inc., effective as of January 19,
2000
10.6 Change of Control Agreement by and between Herbert H. Hooper
and ACLARA BioSciences, Inc., effective as of January 19,
2000
10.7 Change of Control Agreement by and between Wendy R.
Hitchcock and ACLARA BioSciences, Inc., effective as of
January 19, 2000
10.8 Lease Agreement between ACLARA BioSciences, Inc. and The
Pear Avenue Group, dated March 1, 1999
10.9 Master Equipment Lease between Phoenix Leasing and Soane
BioSciences, Inc., dated as of November 15, 1995
+10.10 Agreement for an Exclusive Alliance to Develop, Manufacture
and Market a Chip-Based Screening System for Cell Analysis
between Cellomics, Inc. and ACLARA BioSciences, Inc, dated
as of October 26, 1999
+10.11 Collaboration Agreement between ACLARA BioSciences, Inc. and
The Perkin-Elmer Corporation, dated as of March 19, 1999
+10.12 Side Agreement between ACLARA BioSciences, Inc. and The
Perkin-Elmer Corporation, dated as of March 19, 1999
+10.13 Custom Instrument Development and Commercialization
Agreement between the The R.W. Johnson Pharmaceutical
Research Initiative, The Perkin-Elmer Corporation and ACLARA
BioSciences, Inc., signed in March 1999
+10.14 Collaboration Agreement between Soane BioSciences, Inc. and
The Perkin-Elmer Corporation, dated as of April 25, 1998
10.15 Master Loan and Security Agreement by and between ACLARA
BioSciences, Inc. and Transamerica Business Credit
Corporation, dated as of May 27, 1999
23.1 Consent of PricewaterhouseCoopers LLP
*23.2 Consent of Latham & Watkins (included in Exhibit 5.1)
23.3 Consent of Member-Elect of the Board of Directors
24.1 Powers of Attorney (See Signature Page on Page II-6)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be supplied by amendment.
+ Confidential treatment has been requested for portions of this agreement.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ACLARA BIOSCIENCES, INC.
The undersigned, Joseph M. Limber, hereby certifies that:
1. He is the duly elected and acting President and Secretary of ACLARA
BioSciences, Inc., a Delaware corporation.
2. This corporation was originally incorporated under the name "Soane
BioSciences, Inc.," and the Certificate of Incorporation of this corporation was
originally filed with the Secretary of State of Delaware on April 12, 1995 and
was amended on May 4, 1995, on November 30, 1995, on October 30, 1996, on April
15, 1997, on December 15, 1997, on March 24, 1998, on July 1, 1998, on January
11, 1999, on March 19, 1999, on April 28, 1999, and on September 27, 1999.
3. This Amended and Restated Certificate of Incorporation has been duly
adopted by this corporation's Board of Directors and stockholders in accordance
with the applicable provisions of Section 242 and 245 of the General Corporation
Law of the State of Delaware, and the corporation's stockholders have given
their written consent in accordance with Section 228 of the General Corporation
Law of the State of Delaware.
4. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this corporation is ACLARA BioSciences, Inc. (the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 15 East North Street, Dover, County of Kent, Delaware 19901. The
name of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
<PAGE> 2
ARTICLE IV
This Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and Preferred Stock. The total number of
shares of Common Stock this Corporation shall have authority to issue is
40,000,000, par value $0.001 per share, and the total number of shares of
Preferred Stock this Corporation shall have authority to issue is 22,800,000,
par value $0.001 per share. The first series of Preferred Stock shall consist of
2,344,466 shares designated Series B Redeemable Preferred Stock (the "Series B
Preferred Stock"); the second series of Preferred Stock shall consist of
1,076,923 shares designated Series C Redeemable Preferred Stock (the "Series C
Preferred Stock"); the third series of Preferred Stock shall consist of 418,461
shares designated Series D Redeemable Preferred Stock (the "Series D Preferred
Stock"); the fourth series of Preferred Stock shall consist of 1,666,667 shares
designated Series E Redeemable Preferred Stock (the "Series E Preferred Stock");
the fifth series of Preferred Stock shall consist of 7,222,221 shares designated
Series F Redeemable Preferred Stock (the "Series F Preferred Stock"); the sixth
series of Preferred Stock shall consist of 7,222,221 shares designated Series
F-1 Redeemable Preferred Stock (the "Series F-1 Preferred Stock"); the seventh
series of Preferred Stock shall consist of 746,269 shares designated Series G
Redeemable Preferred Stock (the "Series G Preferred Stock"); and the eighth
series of Preferred Stock shall consist of 850,000 shares designated Series H
Redeemable Preferred Stock (the "Series H Preferred Stock") and together with
the Series B, Series C, Series D, Series E, Series F, Series F-1 and Series G
Preferred Stock, (the "Preferred Stock").
The Corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences and rights, and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, granted to or imposed on the respective classes and series
of the shares of capital stock or the holders thereof are as follows:
1. DIVIDENDS.
1.1 Preferred Stock. The holders of the Series B, Series C,
Series D, Series E, Series F, Series F-1, Series G and Series H Preferred Stock
shall be entitled to receive, out of any funds legally available therefor,
dividends in an amount equal to $.048, $.104, $.13, $.216, $.216, $.216, $.322
and $.483 per annum per share (each a "Preferential Dividend Amount"),
respectively (subject to equitable adjustment in the event of any stock
dividend, stock split, combination, reorganization, recapitalization,
reclassification or other similar event affecting such shares (hereinafter
referred to as "Appropriately Adjusted"), and no more, payable in preference and
priority to any payment of any cash dividend on Common Stock or any other shares
of capital stock of the Corporation, when and as declared by the Board of
Directors of the Corporation during any fiscal year. Commencing on May 8, 1996,
dividends on the Series B Preferred Stock shall accrue, commencing on October
31, 1997, dividends on the Series C
2
<PAGE> 3
Preferred Stock shall accrue, commencing on April 17, 1998, dividends on the
Series D Preferred Stock shall accrue, commencing on March 24, 1999, dividends
on the Series E Preferred Stock shall accrue, commencing on January 12, 1999,
dividends on the Series F Preferred Stock shall accrue, commencing on January
12, 1999, dividends on the Series F-1 Preferred Stock shall accrue, commencing
on April 28, 2000, dividends on the Series G Preferred Stock shall accrue, and
commending on December 30, 2000, dividends on the Series H Preferred Stock shall
accrue, and such dividends shall be deemed to accrue from day to day whether or
not earned or declared and shall be cumulative so that if at any time after such
dates such dividends on the Series B, Series C, Series D, Series E, Series F,
Series F-1, Series G and Series H Preferred Stock shall not all have been paid,
or declared and set apart for payment, the deficiency shall be fully paid on or
declared and set apart for payment in accordance with the terms of this Section
1.1 before any dividend shall be paid on or declared or set apart for any other
shares of capital stock of the Corporation and before any purchase or
acquisition of any other shares of capital stock of the Corporation is made by
the Corporation, except the repurchase of the shares of capital stock of the
Corporation from employees or consultants of this Corporation upon termination
of employment or consulting services. Any accumulation of dividends on the
Series B, Series C, Series D, Series E, Series F Series F-1, Series G and Series
H Preferred Stock shall not bear interest.
1.2 Partial Payments. If the Board of Directors shall declare a
dividend on the outstanding shares of Series B, Series C, Series D, Series E,
Series F, Series F-1, Series G or Series H Preferred Stock (collectively, the
"Prior Dividend Preferred Stock"), and, in such case, the amount available for
payment thereof during any fiscal year is insufficient to permit the payment of
the full Preferential Dividend Amount required to be paid to the holders of the
outstanding shares of Prior Dividend Preferred Stock, then the amount available
for such dividend payment shall be distributed ratably among the holders of the
outstanding shares of Prior Dividend Preferred Stock in proportion to the
amounts that would be payable if the full amount of such Preferential Dividend
Amount was then paid. The Corporation shall not declare, pay or set aside for
payment any dividend or other distribution on any Common Stock or any other
stock of the Corporation ranking junior to the Prior Dividend Preferred Stock as
to dividend rights and rights on liquidation, dissolution and winding up in any
fiscal year unless the Prior Dividend Preferred Stock for such fiscal year and
prior years shall have been paid in full.
1.3 Participating Dividends after Preferential Payments. After
the holders of Prior Dividend Preferred Stock receive their Preferential
Dividend Amount for any fiscal year and prior years, the holders of the Prior
Dividend Preferred Stock shall participate ratably with the Common Stock in any
other dividends during such fiscal year, as if all such holders had converted
their Preferred Stock into the number of shares of Common Stock into which such
outstanding shares of Preferred Stock are convertible pursuant to Article IV
below, as of the record date of the dividend.
1.4 Common Stock. Subject to the preferences and other rights of
the Preferred Stock set forth in Section 1.1, 1.2 and 1.3, the holders of Common
Stock shall be entitled to receive dividends when, as and if declared by the
Board of Directors out of funds
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legally available therefor, on a basis in accordance with the number of shares
of Common Stock held by each such holder.
2. LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution,
or winding up of the Corporation, either voluntary or involuntary, distributions
to the stockholders of the Corporation shall be made in the following manner:
(a) The holders of shares of Series F and Series F-1 Preferred
Stock then outstanding shall be entitled to be paid out of the assets of the
Corporation available for distribution to its stockholders, but before any
payment shall be made to the holders of Series B, Series C, Series D, Series E,
Series G or Series H Preferred Stock or Common Stock by reason of their
ownership thereof, an amount equal to $2.70 per share (Appropriately Adjusted),
plus all accrued but unpaid dividends on such Series F or Series F-1 Preferred
Stock (as applicable), and no more (the "Liquidation Preference Amount" for such
Series F and Series F-1 Preferred Stock). If upon any such liquidation,
dissolution or winding up of the Corporation, the remaining assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Series F and Series F-1 Preferred Stock the
Series F and Series F-1 Liquidation Preference Amount, respectively, the holders
of shares of Series F and Series F-1 Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the product of the Liquidation Preference Amount multiplied by the number of
shares of Series F and Series F-1 Preferred Stock held by them.
(b) After payment has been made to the holders of the Series F
and Series F-1 Preferred Stock of the Series F and Series F-1 Liquidation
Preference Amount, the holders of shares of Series B, Series C, Series D, Series
E, Series G and Series H Preferred Stock then outstanding shall be entitled on a
pari passu basis to be paid out of the assets of the Corporation available for
distribution to its stockholders, but before any payment shall be made to the
holders of Common Stock by reason of their ownership thereof, an amount equal to
$.5972, $1.30, $1.625, $2.70, $4.02 and $6.04 per share, respectively
(Appropriately Adjusted), plus all accrued but unpaid dividends on such shares,
and no more (the "Liquidation Preference Amount" for each such series). If upon
any such liquidation, dissolution or winding up of the Corporation, the
remaining assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series B,
Series C, Series D, Series E, Series G and Series H Preferred Stock the full
amount to which they shall be entitled, the holders of shares of Series B,
Series C, Series D, Series E, Series G and Series H Preferred Stock shall share
ratably in any distribution of the remaining assets and funds of the Corporation
in proportion to the product of the appropriate Liquidation Preference Amount
multiplied by the number of shares of Series B, Series C, Series D, Series E,
Series G and Series H Preferred Stock held by them.
(c) After payment has been made to the holders of the Series B,
Series C, Series D, Series E, Series F, Series F-1, Series G and Series H
Preferred Stock of the full Liquidation Preference Amounts to which they shall
be entitled as aforesaid, the holders of the Series F and Series F-1 Preferred
Stock and Common Stock shall be entitled to share ratably in the remaining
assets of the Corporation available for distribution to its stockholders, based
on the
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number of shares of Common Stock held by them (or issuable upon conversion of
the Series F or Series F-1 Preferred Stock, as applicable) at the time of such
distribution.
(d) The merger or consolidation of the Corporation into or with
another corporation (other than any merger or consolidation in which
stockholders of the Corporation immediately prior to such merger or
consolidation beneficially own a majority of the voting shares of the surviving
corporation immediately following such merger or consolidation), or the sale of
all or substantially all the assets of the Corporation (a "Liquidation Event"),
shall be deemed to be a liquidation, dissolution or winding up of the
Corporation for purposes of this Section 2, unless either:
(i) the holders of at least 66 2/3% of the then
outstanding shares of Series F and Series F-1 Preferred Stock, voting together
as a single class, elect to have such events not deemed to be a liquidation,
dissolution or winding up of the Corporation by giving written notice thereof to
the Corporation at least 15 days before the effective date of such event; or
(ii) the aggregate consideration that would be received by
the holders of the then outstanding shares of Common Stock and Series B, Series
C, Series D, Series E, Series F, Series F-1, Series G and Series H Preferred
Stock pursuant to such merger, consolidation or sale of assets, assuming the
conversion of all outstanding shares of Preferred Stock into Common Stock, would
be equal to at least $8.10 per share (Appropriately Adjusted) solely in cash
and/or marketable securities.
If notice is given pursuant to Subsection 2(d)(i) above, the provisions of
Subsection 4.1(i) below shall apply.
(e) Notice of Liquidation Event. The Corporation shall provide
each holder of Preferred Stock prior written notice of a Liquidation Event at
least 30 days prior to the closing of such Liquidation Event.
3. VOTING RIGHTS.
(a) Each holder of outstanding shares of Preferred Stock shall be
entitled to the number of votes equal to the number of whole shares of Common
Stock into which the shares of Preferred Stock held by such holder are
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law or otherwise provided in this Article IV, holders of Series
B, Series C, Series D, Series E, Series F, Series F-1, Series G and Series H
Preferred Stock shall vote together with the holders of Common Stock as a single
class. Each holder of outstanding shares of Common Stock shall be entitled to
one vote for each share held at all meetings of stockholders of the Corporation
(and written actions in lieu of meetings). There shall be no cumulative voting.
Fractional votes by the holders of Preferred Stock shall not, however, be
permitted, and any fractional voting rights shall (after aggregating
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all shares into which shares of Preferred Stock held by each holder could be
converted) be rounded to the nearest whole number.
(b) The Board of Directors of the Corporation shall consist of
five members to be elected as follows:
(i) One member of the Board of Directors of the
Corporation shall be elected by the holders of record of the Series B Preferred
Stock, voting separately as a class.
(ii) One member of the Board of Directors shall be either
the President or the Chief Executive Officer of the Corporation.
(iii) Two members of the Board of Directors of the
Corporation shall be elected by the holders of record of the Series F and Series
F-1 Preferred Stock, voting together as a separate class (each a "Series F
Designee").
(iv) One member of the Board of Directors of the
Corporation shall be elected by the holders of record of a majority of the
outstanding shares of Common Stock and Series B, Series C, Series D, Series E,
Series F, Series F-1, Series G and Series H Preferred Stock, voting together as
a single class on an as-converted basis; provided, however, that such member
shall also be approved by the holders of record of a majority of the outstanding
Series F and Series F-1 Preferred Stock, voting together as a single class.
At any meeting held for the purpose of electing directors, the presence in
person or by proxy of the holders of the majority of the shares of each of the
Series B Preferred Stock and Series F and Series F-1 Preferred Stock then
outstanding shall constitute a quorum of the Series B Preferred Stock and Series
F and Series F-1 Preferred Stock, respectively, for the purpose of electing
directors by holders of such series of Preferred Stock. A vacancy in any
directorship elected by the holders of the Series B Preferred Stock or Series F
and Series F-1 Preferred Stock shall be filled only by vote or written consent
in lieu of a meeting of the holders of the series of Preferred Stock which
elected such director. A director elected by the holders of the Series B
Preferred Stock or Series F and Series F-1 Preferred Stock shall be removed only
by vote or written consent in lieu of a meeting of the holders of the series of
Preferred Stock which elected such director.
(c) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of a series of Preferred Stock so as
to affect adversely such series of Preferred Stock without the written consent
or affirmative vote of the holders of a majority of the then outstanding shares
of such series of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class. For this
purpose, without limiting the generality of the foregoing, the authorization or
issuance of any series of Preferred Stock with preference or priority over an
existing series of Preferred Stock as to the right to receive either dividends
or amounts distributable upon liquidation, dissolution or winding up of the
Corporation shall be deemed to affect adversely such series of Preferred Stock,
and the authorization or issuance of any series of Preferred Stock on a parity
with an existing
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series of Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall not be deemed to affect adversely such series of Preferred Stock.
4. CONVERSION.
4.1 Optional Conversion. The holders of the Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing Original Issue Price for such series of Preferred
Stock (as defined below) by the Conversion Price (as defined below) for such
series of Preferred Stock in effect at the time of conversion. The Original
Issue Price for the Series B Preferred Stock is $.5972, the Original Issue Price
for the Series C Preferred Stock is $1.30, the Original Issue Price for the
Series D Preferred Stock is $1.625, the Original Issue Price for the Series E
Preferred Stock is $2.70, the Original Issue Price for the Series F Preferred
Stock is $2.70, the Original Issue Price for the Series F-1 Preferred Stock is
$2.70, the Original Issue Price for the Series G Preferred Stock is $4.02 and
the Original Issue Price for the Series H Preferred Stock is $6.04. The
conversion price at which shares of Common Stock shall be deliverable upon
conversion of Preferred Stock without the payment of additional consideration by
the holder thereof (the "Conversion Price") shall initially be $.5972 for the
Series B Preferred Stock, $1.30 for the Series C Preferred Stock, $1.625 for the
Series D Preferred Stock, $2.70 for the Series E Preferred Stock, $2.70 for the
Series F Preferred Stock, $4.02 for the Series G Preferred Stock and $6.04 for
the Series H Preferred Stock; provided, however, that the initial Conversion
Price of the Series H Preferred Stock shall be subject to adjustment in
accordance with Section 4.1(p). The initial Conversion Price for the Series F-1
Preferred Stock shall be determined in accordance with Section 4.1(o). Such
initial Conversion Prices, and the rate at which shares of Preferred Stock may
be converted into shares of Common Stock, shall be subject to adjustment as
provided below.
In the event of a notice of redemption of any shares of Series B,
Series C, Series D, Series E, Series F, Series F-1, Series G or Series H
Preferred Stock pursuant to Section 5 hereof, the Conversion Rights of the
shares designated for redemption shall terminate at the close of business on the
fifth full day preceding the date fixed for redemption, unless the redemption
price is not paid when due, in which case the Conversion Rights for such shares
shall continue until such price is paid in full. In the event of a Liquidation
Event, the Conversion Rights shall terminate at the close of business on the
first full day preceding the date fixed for the payment of any amounts
distributable on the occurrence of a Liquidation Event to the holders of Series
B, Series C, Series D, Series E, Series F, Series F-1, Series G or Series H
Preferred Stock, unless such distributions are not paid on the date fixed for
such payment. The Corporation shall give the holders of Preferred Stock 30 days'
prior notice of the date fixed for such payment and the amount of such
distribution.
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(b) Fractional Shares. No fractional shares of Common Stock shall
be issued upon conversion of the Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
(after aggregating all shares into which shares of Preferred Stock held by each
holder could be converted) pay cash equal to such fraction multiplied by the
then fair market value of one share of Common Stock.
(c) Mechanics of Conversion.
(i) Before any holder of Preferred Stock shall be entitled
to convert shares of Preferred Stock into shares of Common Stock and to receive
certificates therefor, such holder shall surrender the certificate or
certificates for such shares of Preferred Stock, at the office of the transfer
agent for the Preferred Stock (or at the principal office of the Corporation if
the Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
The certificate or certificates for the shares of Preferred Stock surrendered
for conversion shall be endorsed or accompanied by a written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or his or its attorney duly authorized in writing. The
date of receipt of notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date (or such later date as the transfer agent receives such
certificates or reasonable indemnification if such certificates have been lost,
stolen or destroyed), issue and deliver to such holder of Preferred Stock, or to
his or its nominees, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled, together with cash in lieu
of any fraction of a share, and all accrued but unpaid dividends.
(ii) The Corporation shall at all times when the Preferred
Stock is outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Preferred
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Preferred
Stock. Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Common Stock issuable
upon conversion of the Preferred Stock, the Corporation will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any accrued and unpaid dividends on the
Preferred Stock surrendered for conversion or on the Common Stock delivered upon
conversion, which dividends shall be paid in accordance with clause (iv) below.
(iv) All shares of Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with
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respect to such shares, including the rights if any, to receive notices and to
vote, shall immediately cease and terminate on the Conversion Date, except only
the right of the holders thereof to receive shares of Common Stock in exchange
therefor and payment of any accrued and unpaid dividends thereon. Any shares of
Preferred Stock so converted shall be retired and canceled and shall not be
reissued and the Corporation may from time to time take such appropriate action
as may be necessary to reduce the authorized Preferred Stock accordingly.
(d) Adjustment for Diluting Issues.
(i) Special Definitions. For purposes of this Subsection
4.1(d), the following definitions shall apply:
(A) Option shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, excluding options granted to employees, directors or consultants of
the Corporation pursuant to the Corporation's 1995 or 1997 Stock Option Plan, to
acquire up to a maximum of 3,342,669 shares of Common Stock (Appropriately
Adjusted), and excluding options or shares of Common Stock issued to employees,
directors or consultants of the Corporation pursuant to a plan or agreement
approved by the Board of Directors and each of the two Series F Designees, if
such Series F Designees have been appointed to the Board of Directors at such
time.
(B) Original Issue Date shall mean the date on
which the first share of Series H Preferred Stock was first issued.
(C) Convertible Securities shall mean any evidences
of indebtedness, shares or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(D) Additional Shares of Common Stock shall mean
all shares of Common Stock issued (or, pursuant to Subsection 4.1(d)(iii) below,
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:
(I) upon conversion of shares of Preferred
Stock outstanding on the Original Issue Date:
(II) as a dividend or distribution on
Preferred Stock;
(III) by reason of a dividend or
distribution covered by Subsection 4.1(f) hereof, a stock split, or subdivision
of shares of Common Stock covered by Subsection 4.1(e) hereof, or by reason of a
dividend, stock split, subdivision or other distribution on shares of Common
Stock excluded from the definition of Additional Shares of Common Stock by the
foregoing clauses (I) and (II) or this clause (III); or
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(IV) upon the exercise of options excluded
from the definition of "Option" in Subsection 4.1(d)(i)(A).
(ii) No Adjustment of Conversion Price. No adjustment in
the number of shares of Common Stock into which shares of a series of Preferred
Stock is convertible shall be made by adjustment in the applicable Conversion
Price thereof: (a) unless the consideration per share (determined pursuant to
Subsection 4.1(d)(v)) for an Additional Share of Common Stock issued or deemed
to be issued by the Corporation is less than the applicable Conversion Price for
such series of Preferred Stock in effect on the date of, and immediately prior
to, the issue of such Additional Shares, or (b) if prior to such issuance, the
Corporation receives written notice from the holders of at least 67% of the then
outstanding shares of such series of Preferred Stock agreeing that no such
adjustment shall be made as the result of the issuance of Additional Shares of
Common Stock.
(iii) Issue of Options and Convertible Securities Deemed
Issue of Additional Shares of Common Stock.
If 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 entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) 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, 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
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Subsection 4.1(d)(v) hereof)
of such Additional Shares of Common Stock would be less than the applicable
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Conversion Price
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;
(B) 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 applicable Conversion Price computed upon the
initial issue thereof and any subsequent adjustments based thereon, shall, upon
such expiration, be recomputed as if:
(1) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of
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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 conversion or exchange, if any, and
(2) 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 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 such Options, whether or not exercised, plus
the consideration deemed to have been received by the Corporation upon the issue
of the Convertible Securities with respect to which such Options were actually
exercised;
(C) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of any
Option or Convertible Security, including, but not limited to, a change
resulting from the antidilution provisions thereof, the Conversion Price then in
effect shall forth with be readjusted to such Conversion Price as would have
obtained had the adjustment which was made upon the issuance of such Option or
Convertible Security (prior to such change) been made upon the basis of such
change, but no further adjustment shall be made for the actual issuance of
Common Stock upon the exercise or conversion of any such Option or Convertible
Security; and
(D) No readjustment pursuant to clause (B) and (C)
above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (i) the Conversion Price on the original adjustment
date, or (ii) 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.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock.
In the event the Corporation shall issue, at any time or from time to
time after the Original Issue Date, Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Subsection
4.1(d)(iii), but excluding shares issued as a dividend or distribution as
provided in Subsection 4.1(f) or upon a stock split as provided in Subsection
4.1(e)), without consideration or for a consideration per share less than the
applicable Conversion Price for a series of Preferred Stock (other than the
Series F-1 Preferred Stock) in effect on the date of and 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 dividing (x) an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue multiplied by
the then effective Conversion Price for such series of Preferred Stock and (2)
the aggregate consideration, if any, deemed received by the Corporation upon
such issue by (y) the total number of shares of Common Stock deemed to be
outstanding immediately after such issue; provided that for the purpose of this
Subsection 4.1(d)(iv), all shares of Common Stock issuable
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upon conversion of shares of Preferred Stock outstanding immediately prior to
such issue shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Subsection
4.1(d)(iii), such Additional Shares of Common Stock shall be deemed to be
outstanding.
Notwithstanding the foregoing, the applicable Conversion Price shall not
be so reduced at such time if the amount of such reduction would be an amount
less than $.01, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
which, together with such amount and any other amount or amounts so carried
forward, shall aggregate $.01 or more.
(v) Determination of Consideration. For purposes of this
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(I) insofar as it consists of cash, be
computed at the aggregate of cash received by the Corporation, excluding amounts
paid or payable for accrued interest or accrued dividends;
(II) insofar as it consists of property
other than cash, be computed at the fair market value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and
(III) 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 (I) and (II)
above, as determined in good faith by the Board of Directors.
(B) 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 Subsection 4.1(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(I) 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 for a subsequent adjustment of such
consideration) 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
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(II) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(e) Adjustment for Stock Splits and Combinations. If the
Corporation shall, at any time or from time to time after the Original Issue
Date, effect a subdivision of the outstanding Common Stock, the Conversion Price
for each series of Preferred Stock then in effect immediately before that
subdivision shall be proportionately decreased. If the Corporation shall, at any
time or from time to time while there are any shares of Preferred Stock
outstanding, combine the outstanding shares of Common Stock, the Conversion
Price for each series of Preferred Stock then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(f) Adjustment for Certain Dividends and Distributions. In the
event the Corporation at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price for each series of Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date shall have been
fixed, as of the close of business on such record date, by multiplying the
Conversion Price for each series of Preferred Stock then in effect by a
fraction:
(i) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(ii) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Price shall be recomputed accordingly as of the close
of business on such record date and thereafter the Conversion Price shall be
adjusted pursuant to this paragraph as of the time of actual payment of such
dividends or distributions.
(g) Adjustments for Other Dividends and Distributions. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Preferred Stock
shall receive upon conversion thereof in addition to the number of shares of
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Common Stock receivable thereupon, the amount of securities of the Corporation
that they would have received had the Preferred Stock been converted into Common
Stock on the date of such event and had thereafter, during the period from the
date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period giving application
to all adjustments called for during such period, under this Section 4 with
respect to the rights of the holders of the Preferred Stock.
(h) Adjustments for Reclassification, Exchange, or Substitution.
If the Common Stock issuable upon the conversion of the Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification, or otherwise (other
than a subdivision or combination of shares or stock dividend provided for
above, or a reorganization, merger, consolidation, or sale of assets provided
for below), then and in each such event the holder of each such share of
Preferred Stock shall have the right thereafter to convert such share into the
kind and amount of shares of stocks and other securities and property receivable
upon such reorganization, reclassification, or other change, by holders of the
number of shares of Common Stock into which such shares of Preferred Stock might
have been converted immediately prior to such reorganization, reclassification,
or change, all subject to further adjustment as provided herein.
(i) Adjustment for Merger or Reorganization, etc. Subject to
Section 2 hereof, in case of any consolidation or merger of the Corporation with
or into another corporation or the sale of all or substantially all of the
assets of the Corporation to another corporation, each share of Preferred Stock
shall thereafter be convertible into the kind and amount of shares of stocks or
other securities or property to which a holder of the number of shares of Common
Stock of the Corporation deliverable upon conversion of such Preferred Stock
would have been entitled upon such consolidation, merger or sale; and, in such
case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions set forth in this
Section 4 with respects to the rights and interest thereafter of the holders of
the Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the conversion of the Preferred Stock.
(j) No Impairment. The Corporation will not, by amendment of its
certificate of incorporation or bylaws 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 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 Preferred Stock against impairment.
(k) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price for a series of Preferred
Stock pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in
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<PAGE> 15
accordance with the terms hereof and furnish to each holder of such series of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which then would be received upon the
conversion of Preferred Stock.
(l) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Corporation;
(ii) that the Corporation splits, subdivides or combines
its outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a stock split, subdivision or combination of its
outstanding shares of Common Stock or a stock dividend or stock distribution
thereon), or of any consolidation or merger of the Corporation into or with
another corporation, or of the sale of all or substantially all of the assets of
the Corporation; or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Preferred Stock, and shall cause to be
mailed to the holders of the Preferred Stock at their last addresses as shown on
the records of the Corporation or such transfer agent, at least ten days prior
to the record date specified in (A) below or thirty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
stock split, subdivision or combination, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, stock split, subdivision or combination are to be
determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
(m) Taxes. The Corporation will pay all taxes and other
governmental charges that may be imposed in respect of the issue or delivery of
shares of Common Stock upon conversion of the Preferred Stock by the record
holder thereof.
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<PAGE> 16
(n) Other Dilutive Events. If any other transaction or event
shall occur (excluding any transaction or event expressly referred to in this
Section 4.1) as to which the other provisions of this Section 4.1 are not
strictly applicable but the failure to make any adjustment to the applicable
Conversion Price or to any of the other terms of any series of Preferred Stock
would not fairly protect the conversion rights and other rights of the holders
of such series of Preferred Stock in accordance with the essential intent and
principles hereof, then, and as a condition to consummation of any such
transaction or event, and in each such case, the Corporation shall appoint a
firm of independent certified public accountants of recognized national standing
(which may be the regular auditors of the Corporation), which firm shall give
its opinion as to the adjustment, if any, on a basis consistent with the
essential intent and principles established in this Section 4.1, necessary to
preserve, without dilution, the conversion rights and other rights of the
holders of such series of Preferred Stock. The certificate of any such firm of
accountants shall be conclusive evidence of the correctness of any computation
made under this Section 4.1(n). The Corporation shall pay the fees and expenses
of such firm of accountants in connection with any such opinion. Upon receipt of
such opinion, the Corporation shall promptly deliver a copy thereof to each
holder of Preferred Stock and, unless the holders of at least 67% of the then
outstanding shares of such series of Preferred Stock agree otherwise, such
adjustment shall be thereupon effective.
(o) Conversion Price of Series F-1 Preferred Stock. From and
after such time as any shares of Series F-1 Preferred Stock are issued and
outstanding, the Conversion Price for the Series F-1 Preferred Stock shall be
the Conversion Price for the Series F Preferred Stock in effect immediately
prior to such issuance and shall not thereafter be subject to adjustment
pursuant to Section 4.1(d) above.
(p) Special Adjustment to Initial Conversion Price of Series H
Preferred Stock. The initial Conversion Price for the Series H Preferred Stock
set forth in Section 4.1(a) hereof shall be subject to adjustment as follows:
(A) if the Corporation fails to file with the Securities and Exchange Commission
within 180 days of the date of the Original Issue Date of the Series H Preferred
Stock a registration statement covering shares of the Corporation's Common Stock
to be issued in a Qualifying IPO or (B) if the Corporation completes such
initial public offering at a price to the public of less than $6.04 per share,
then the initial Conversion Price of the Series H Preferred Stock shall be $4.83
per share.
4.2 Mandatory Conversion
(a) Each share of Preferred Stock shall be converted
automatically into shares of Common Stock, at the then applicable Conversion
Price for such series of Preferred Stock upon the occurrence of either of the
following:
(i) immediately prior to the closing of an underwritten
public offering of Common Stock of the Corporation pursuant to a registration
statement filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock to the
public at a price of at least $8.91 per share (Appropriately
16
<PAGE> 17
Adjusted), resulting in the receipt by the Corporation of gross proceeds from
such sale of not less than $15,000,000 (a "Qualifying IPO"), provided that all
declared and unpaid dividends have been paid; provided, however, that the
holders of at least 51% of the outstanding shares of Series F and Series F-1
Preferred Stock, voting together as a single class, may elect to waive or amend
the foregoing requirements with respect to the minimum offering price per share
and aggregate gross proceeds, or
(ii) immediately prior to the closing of a merger or
consolidation of the Corporation into or with another corporation (other than
any merger or consolidation in which stockholders of the Corporation immediately
prior to such merger or consolidation beneficially own a majority of the voting
shares of the surviving corporation immediately following such merger or
consolidation), or the sale of all or substantially all the assets of the
Corporation, in which the aggregate consideration that would be received by the
holders of the then outstanding shares of Common Stock and Series B, Series C,
Series D, Series E, Series F, Series F-1, Series G and Series H Preferred Stock
pursuant to such merger, consolidation or sale of assets, assuming the
conversion of all outstanding shares of Preferred Stock into Common Stock, would
be equal to at least $8.10 per share (Appropriately Adjusted) in cash and/or
marketable securities (a "Qualifying Reorganization").
(b) All holders of record of shares of Preferred Stock will be
given written notice prior to the closing of a Qualifying IPO or Qualifying
Reorganization that is expected to result in mandatory conversion of all of such
shares of Preferred Stock pursuant to this Section 4. Such notice will be sent
by first class or registered mail, postage prepaid, to each record holder of
Preferred Stock at such holder's address appearing on the stock register. In the
event of mandatory conversion of all of such shares of Preferred Stock pursuant
to this Section 4, conversion shall be deemed to have been effected immediately
prior to the closing of the Qualifying IPO or Qualifying Reorganization. As
promptly as practicable after the date of such mandatory conversion, each holder
of shares of Preferred Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 4. On
the date of such mandatory conversion, all rights with respect to the Preferred
Stock so converted will terminate, except only the rights of the holders
thereof, upon surrender of their certificate or certificates therefor, to
receive certificates for the number of shares of Common Stock into which such
Preferred Stock has been converted. If so requested by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. All certificates evidencing shares of Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and canceled and the
shares of Preferred Stock represented thereby converted into Common Stock for
all purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. As soon as practicable
after the date of such mandatory conversion and the surrender of the certificate
or certificates for Preferred Stock, the Corporation shall cause to be issued
and delivered to such holder, or on his or its written order, a
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<PAGE> 18
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
5. Redemption of Preferred Stock of Holder.
(a) Subject to the provisions of Section 5(b) below, on the 24th
day of March in each of years 2005 and 2006 (collectively, the "Redemption
Dates" and individually, a "Redemption Date"), each holder of Series B, Series
C, Series D, Series E, Series F, Series F-1, Series G and Series H Preferred
Stock shall have the right to require the Corporation to redeem up to 50% and
100% of the shares of such Preferred Stock held by such holder on each of those
dates, respectively, or such lesser number of shares of such Preferred Stock as
the holder may determine. Any holder desiring to exercise the redemption right
granted herein (a "Requesting Holder") shall provide written notice to the
Corporation not less than 30 days before the applicable Redemption Date setting
forth the number of shares to be redeemed on such Redemption Date. Subject to
the provisions of Section 5(b) below, on the Redemption Date and upon a holder's
surrender, in accordance with this Section 5(a), of such holder's certificates
representing shares to be redeemed, the redemption price shall be paid by the
Corporation in cash in an amount equal to the Liquidation Preference Amount for
each of the Series B, Series C, Series D, Series E, Series F, Series F-1, Series
G and Series H Preferred Stock on the applicable Redemption Date (Appropriately
Adjusted), payable in accordance with Section 1 hereof on each share of
Preferred Stock to be redeemed (the "Redemption Price").
(b) Within five days following its receipt from a Requesting
Holder of a notice of intent to exercises redemption rights pursuant to
Subsection (a) hereof, the Corporation shall provide each holder of Preferred
Stock, other than the Requesting Holder, with a written notice (addressed to the
holder at its address as it appears on the stock transfer books of the
Corporation) containing an offer to redeem shares of Preferred Stock as provided
above, which notice shall specify the applicable Redemption Price. Each holder
of Preferred Stock, other than the Requesting Holder, will have until 30 days
prior to the Redemption Date to provide the Corporation with written notice of
such holder's acceptance of the redemption offer, which notice shall specify the
number of shares to be redeemed. All notices or offers hereunder shall be sent
by first class or registered mail, postage prepaid, and shall be deemed to have
been provided when mailed.
(c) In the event that any holder of Preferred Stock, other than
the Requesting Holder, does not provide the Corporation with written notice of
the holder's acceptance of the redemption offer on or before the date 30 days
prior to the applicable Redemption Date, the Corporation shall have no
obligation to redeem any shares of Preferred Stock of such holder on the
Redemption Date specified in its notice to such holder.
(d) If, with respect to any Redemption Date, a holder of
Preferred Stock does not request, pursuant to Subsection (a) or Subsection (b)
hereof, the redemption of all of the shares of Preferred Stock which such holder
may request to be redeemed as provided above, such holder may request that such
shares of Preferred Stock be redeemed on any subsequent
18
<PAGE> 19
Redemption Date in addition to the shares of Preferred Stock for which the
holder would otherwise be permitted to request the redemption by the
Corporation; provided, that, no holder may require the Corporation to redeem any
shares of Preferred Stock after March 24, 2006.
(e) Notwithstanding the foregoing, the Corporation's obligation
to redeem shares of a series of Preferred Stock on the Redemption Date shall be
waived if the holders of at least 51% of the then outstanding shares of such
series of Preferred Stock shall request such waiver by written notice given to
the Corporation at least ten days prior to such Redemption Date. The Corporation
shall immediately notify all holders of such series of Preferred Stock of any
such waiver and shall not be required to redeem the shares of such series of
Preferred Stock on such Redemption Date. Any waiver with respect to the
Corporation's obligation to redeem shares of a series of Preferred Stock
pursuant to this subsection shall not affect the Corporation's obligation to
redeem shares of any other series of Preferred Stock pursuant to this Section 5.
(f) On or prior to the Redemption Date, unless waived pursuant to
Subsection (e) above, the Requesting Holder and each other holder of Preferred
Stock accepting the Corporation's redemption offer shall surrender his or its
certificate or certificates representing the shares to be redeemed, in the
manner and at the place designated in the Corporation's redemption offer. If
less than all shares represented by such certificate or certificates are
redeemed, the Corporation shall issue a new certificate for the unredeemed
shares. From and after the Redemption Date, unless there shall be a default in
payment of the Redemption Price, all rights of each holder with respect to
shares of Preferred Stock redeemed on the Redemption Date shall cease (except
the right to receive the Redemption Price without interest upon surrender of the
certificate or certificates therefor), and such shares shall not be deemed to be
outstanding for any purpose whatsoever. Such shares of Preferred Stock shall not
be reissued, and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Preferred Stock accordingly.
Nothing herein shall prevent or restrict the purchase by the Corporation, from
time to time, of the whole or any part of the Preferred Stock at such price or
prices as the Corporation may determine subject to the provisions of applicable
law.
(g) For the purpose of determining whether funds are legally
available for redemption of shares of Preferred Stock as provided herein, the
Corporation shall value its assets as the highest amount permissible under
applicable law. Notwithstanding any other provision of this Section 5, if, on
the Redemption Date, funds of the Corporation legally available therefor shall
be insufficient to redeem all the shares of Preferred Stock required to be
redeemed as provided herein, funds to the extent legally available shall be used
for such purpose and the Corporation shall effect such redemption ratably
according to the number of shares of Preferred Stock held by each holder
accepting the Corporation's redemption offer, the number of shares held by the
Requesting Holder and their respective Redemption Prices. The redemption
requirements provided hereby shall be continuous, so that if on the Redemption
Date such requirements shall not be fully discharged, without further action by
any holder of Preferred Stock, funds legally available shall be applied therefor
until such requirements are fully discharged.
19
<PAGE> 20
6. PROTECTIVE PROVISIONS.
(a) Except as set forth herein, so long as an aggregate of at
least 500,000 shares of Series F and Series F-1 Preferred Stock remain
outstanding, the Corporation will not, without the prior written consent of the
holders of at least 67% of the total number of outstanding shares of Series F
and Series F-1 Preferred Stock (voting together as a single class), take any
action which:
(i) alters, changes, or amends the rights, preferences or
privileges of any series of Preferred Stock (other than the requirements for a
Qualifying IPO, which may be waived or amended with the consent of holders of at
least 51% of the then outstanding shares of Series F and Series F-1 Preferred
Stock, voting together as a single class);
(ii) increases the authorized number of shares of Series F
or Series F-1 Preferred Stock or the Preferred Stock;
(iii) creates any new class or series of shares having any
right, preference or privilege over or on a parity with the Series F or Series
F-1 Preferred Stock;
(iv) involves a Liquidation Event (other than a Qualifying
Reorganization);
(v) involves any transaction which would result in a
dividend or other distribution upon any of the Corporation's equity securities;
(vi) causes the Corporation to repurchase or otherwise
acquire shares other than pursuant to (A) its 1995 or 1997 Stock Option Plan or
other restricted stock purchase agreements approved by the Board of Directors at
the original issue price, or (B) redemption of Preferred Stock pursuant to this
Certificate of Incorporation; or
(vii) increases or decreases the authorized number of
directors constituting the Corporation's board of directors.
7. AMENDMENTS AND WAIVERS.
Any action, approval, request, consent, notice or waiver which is
required or permitted under this Article IV with respect to a series of
Preferred Stock shall become effective and binding upon all holders of such
series of Preferred Stock if the same is approved by the vote or written consent
of the holders of at least sixty-seven percent (67%) of such series of Preferred
Stock then issued and outstanding.
8. Special Mandatory Conversion.
(a) At any time following the Original Issue Date, if:
20
<PAGE> 21
(i) any holder of shares of Series F Preferred Stock is
entitled to exercise the right of first offer (the "Right of First Offer") as
set forth in Section 1(k) of that certain Amended and Restated Investors' Rights
Agreement among the Corporation and the certain holders of its Preferred Stock
and other equity securities, as such agreement may from time to time be amended
(the "Agreement") with respect to an equity financing of the Corporation at a
price per share which is less than the Conversion Price then in effect for the
Series F Preferred Stock (an "Equity Financing"),
(ii) the Corporation has complied with its obligations
under the Agreement with respect to the Right of First Offer, and
(iii) such holder does not by exercise of such holder's
Right of First Offer acquire the amount of securities offered in such Equity
Financing to which such holder is entitled pursuant to Section 1(k) of the
Agreement,
then all of such holder's shares of Series F Preferred Stock shall automatically
and without further action on the part of such holder be converted into an
equivalent number of shares of Series F-1 Preferred Stock effective immediately
prior to the closing of such Equity Financing; provided, however, that no such
conversion shall occur in connection with a particular Equity Financing if,
pursuant to the written request of the Corporation, the Right of First Offer
with respect to such Equity Financing is waived by the holders of the Series F
Preferred Stock in accordance with the terms of the Agreement; and provided,
further, that no such conversion shall occur in connection with a particular
Equity Financing with respect to a particular holder of Series F Preferred Stock
if, pursuant to the written request of the Corporation, (i) such holder agrees
in writing to waive such holder's Right of First Offer with respect to such
Equity Financing and (ii) each other holder of shares of Series F Preferred
Stock agrees in writing that such particular holder of shares of Series F
Preferred Stock may waive such particular holder's Right of First Offer with
respect to such Equity Financing. Upon conversion pursuant to this Section 8,
the shares of Series F Preferred Stock so converted shall be canceled and not
subject to reissuance.
(b) The holder of any shares of Series F Preferred Stock
converted pursuant to this Section 8 shall deliver to the Corporation during
regular business hours at the office of any transfer agent of the Corporation
for such Preferred Stock, or at such other place as may be designated by the
Corporation, the certificate or certificates representing the shares so
converted, duly endorsed or assigned in blank or to the Corporation. As promptly
thereafter as is practicable, the Corporation shall issue and deliver to such
holder, at the place designated by such holder, a certificate or certificates
for the number of full shares of the Series F-1 Preferred Stock to which such
holder is entitled. The person in whose name the certificate for such shares of
Series F-1 Preferred Stock is to be issued shall be deemed to have become a
stockholder on the effective date of the conversion of the Series F Preferred
Stock, unless the transfer books of the Corporation are closed on that date, in
which case such person shall be deemed to have become a stockholder of record on
the next succeeding date on which the transfer books are open.
21
<PAGE> 22
(c) In the event that any shares of Series F-1 Preferred Stock
are issued, concurrently with such issuance, the Corporation shall use its best
efforts to take all such action as may be required, including amending its
Certificate of Incorporation, (i) to cancel all authorized shares of Series F-1
Preferred Stock that remain unissued after such issuance, (ii) to create and
reserve for issuance a new series of Preferred Stock equal in number to the
number of Shares of Series F-1 Preferred Stock so canceled and designated
"Series F-2 Preferred Stock," with the designations, powers, preferences and
rights and the qualifications, limitations and restrictions identical to those
then applicable to the Series F Preferred Stock, except that the conversion
price for such shares of Series F-2 Preferred Stock once initially issued shall
be the Conversion Price in effect immediately prior to such issuance and shall
not after such issuance be subject to adjustment under Section 4.1(d)(iv)
hereof, and (iii) to amend the provisions of this Section 8 to provide that any
subsequent special mandatory conversion pursuant hereto will be into shares of
Series F-2 Preferred Stock rather than Series F-1 Preferred Stock. The
corporation shall take the same actions with respect to the Series F-2 Preferred
Stock and each series of Preferred Stock subsequently authorized pursuant to
this Section 8 upon initial issuance of shares of the last such series to be so
authorized.
ARTICLE V
In furtherance and not in limitation of the powers conferred by statute,
subject to any restrictions set forth herein, the Board of Directors of the
Corporation is expressly authorized to make, alter or repeal Bylaws of the
Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins or unless otherwise provided in the Bylaws of the Corporation.
ARTICLE VII
A. To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation, or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article VII,
22
<PAGE> 23
shall eliminate or reduce the effect of this Article VII in respect of any
matter occurring, or any action or proceeding accruing or arising or that, but
for this Article VII, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE VIII
The Corporation is to have perpetual existence.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors in
the Bylaws of the Corporation."
* * *
23
<PAGE> 24
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Mountain View, California on December 30, 1999.
/s/ Joseph M. Limber
--------------------------------------
Joseph M. Limber
President
/s/ Wendy R. Hitchcock
--------------------------------------
Wendy R. Hitchcock
Secretary
24
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF BYLAWS
OF
ACLARA BIOSCIENCES, INC.
The undersigned, being the duly acting and appointed Secretary of ACLARA
BioSciences, Inc., a Delaware corporation, hereby certifies that Section 3.2 of
the Bylaws of this corporation was amended by a resolution duly adopted by the
Board of Directors by written consent on December 17, 1998, to read in its
entirety as follows:
3.2 NUMBER OF DIRECTORS. The authorized number of directors shall be as
set forth in the Company's certificate of incorporation.
Dated: December 17, 1998 /s/ JOSEPH M. LIMBER
-----------------------------------
Secretary
<PAGE> 2
BYLAWS
OF
SOANE BIOSCIENCES, INC.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I - CORPORATE OFFICES............................................ 1
1.1 REGISTERED OFFICE............................................ 1
1.2 OTHER OFFICES................................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................... 1
2.1 PLACE OF MEETINGS............................................ 1
2.2 ANNUAL MEETING............................................... 1
2.3 SPECIAL MEETING.............................................. 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................. 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................. 2
2.6 QUORUM....................................................... 2
2.7 ADJOURNED MEETING; NOTICE.................................... 3
2.8 VOTING....................................................... 3
2.9 WAIVER OF NOTICE............................................. 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...... 3
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.. 4
2.12 PROXIES...................................................... 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE........................ 5
ARTICLE III - DIRECTORS.................................................. 5
3.1 POWERS....................................................... 5
3.2 NUMBER OF DIRECTORS.......................................... 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...... 6
3.4 RESIGNATION AND VACANCIES.................................... 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..................... 7
3.6 FIRST MEETINGS............................................... 7
3.7 REGULAR MEETINGS............................................. 7
3.8 SPECIAL MEETINGS; NOTICE..................................... 8
3.9 QUORUM....................................................... 8
3.10 WAIVER OF NOTICE............................................. 8
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............ 8
3.12 FEES AND COMPENSATION OF DIRECTORS........................... 8
3.13 REMOVAL OF DIRECTORS......................................... 9
3.14 APPROVAL OF LOANS TO OFFICERS................................ 9
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE IV - COMMITTEES.................................................. 9
4.1 COMMITTEES OF DIRECTORS...................................... 9
4.2 COMMITTEE MINUTES............................................ 10
4.3 MEETINGS AND ACTION OF COMMITTEES............................ 10
ARTICLE V - OFFICERS..................................................... 10
5.1 OFFICERS..................................................... 10
5.2 ELECTION OF OFFICERS......................................... 11
5.3 SUBORDINATE OFFICERS......................................... 11
5.4 REMOVAL AND RESIGNATION OF OFFICERS.......................... 11
5.5 VACANCIES IN OFFICES......................................... 11
5.6 CHAIRMAN OF THE BOARD........................................ 11
5.7 PRESIDENT.................................................... 12
5.8 VICE PRESIDENT............................................... 12
5.9 SECRETARY.................................................... 12
5.10 TREASURER.................................................... 13
5.11 ASSISTANT SECRETARY.......................................... 13
5.12 ASSISTANT TREASURER.......................................... 13
5.13 AUTHORITY AND DUTIES OF OFFICERS............................. 13
ARTICLE VI - INDEMNITY................................................... 14
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.................... 14
6.2 INDEMNIFICATION OF OTHERS.................................... 14
6.3 INSURANCE.................................................... 14
ARTICLE VII - RECORDS AND REPORTS........................................ 15
7.1 MAINTENANCE AND INSPECTION OF RECORDS........................ 15
7.2 INSPECTION BY DIRECTORS...................................... 15
7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................. 16
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............... 16
</TABLE>
-ii-
<PAGE> 5
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE VIII - GENERAL MATTERS........................................... 16
8.1 CHECKS....................................................... 16
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS............. 16
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES....................... 16
8.4 SPECIAL DESIGNATION ON CERTIFICATES.......................... 17
8.5 LOST CERTIFICATES............................................ 17
8.6 CONSTRUCTION; DEFINITIONS.................................... 18
8.7 DIVIDENDS.................................................... 18
8.8 FISCAL YEAR.................................................. 18
8.9 SEAL......................................................... 18
8.10 TRANSFER OF STOCK............................................ 18
8.11 STOCK TRANSFER AGREEMENTS.................................... 19
8.12 REGISTERED STOCKHOLDERS...................................... 19
ARTICLE IX - AMENDMENTS.................................................. 19
ARTICLE X - DISSOLUTION.................................................. 19
ARTICLE XI - CUSTODIAN................................................... 20
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES.................. 20
11.2 DUTIES OF CUSTODIAN.......................................... 21
</TABLE>
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BYLAWS
OF
SOANE BIOSCIENCES, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of Dover,
County of Kent, State of Delaware. The name of the registered agent of the
corporation at such location is Incorporating Services, Ltd.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected and
any other proper business may be transacted.
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2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these
bylaws, that a meeting will be held at the time requested by the person or
persons calling the meeting, so long as that time is not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after receipt of the request, then
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 2.3 shall be construed as limiting,
fixing or affecting the time when a meeting of stockholders called by action of
the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETING
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.5 of these bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by
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proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING: NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgers
and joint owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the certificate of incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless so required by the certificate of incorporation or
these bylaws.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a
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meeting, without prior notice, and without a vote if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such
section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determined the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) 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.
(ii) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(iii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
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2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed
by the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, 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 list shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
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3.2 NUMBER OF DIRECTORS
The authorized number of directors shall be three (3). This number may be
changed by a duly adopted amendment to the certificate of incorporation or by
an amendment to this bylaw adopted by the vote or written consent of the
holders of a majority of the stock issued and outstanding and entitled to vote
or by resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
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If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these bylaws, members of the board of directors, or any committee designated by
the board of directors, may participate in a meeting of the board of directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of
directors, or in the event such meeting is not held at the time and place so
fixed by the stockholders, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the board of directors, or as shall be specified in a written
waiver signed by all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
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3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board may be called by the president on three (3)
days' notice to each director, either personally or by mail, telegram, telex,
or telephone; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two (2) directors
unless the board consists of only one (1) director, in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the certificate of incorporation or these bylaws.
3.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto
in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.12 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have authority to fix the compensation of
directors.
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3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers that may
require it; but no such committee shall have the power or authority to (i)
amend the certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance
of shares of stock adopted by the board of directors as provided in Section
151(a) of the General Corporation Law of Delaware, fix any of the preferences
or rights
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of such shares relating to dividends, redemption, dissolution, any distribution
of assets of the corporation or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other series of the
same or any other class or classes of stock of the corporation), (ii) adopt an
agreement of merger or consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware, (iii) recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, (iv) recommend to the stockholders a dissolution of the corporation or
a revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to section
253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the board of directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
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5.2 ELECTION OF OFFICERS
The officers of the corporation except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
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5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there can be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
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5.10. TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained
earnings, and shares. The books of account shall at all reasonable times be
open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
5.11. ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12. ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13. AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
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ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the corporation would have the power to indemnify him against such liability
under the provisions of the General Corporation Law of Delaware.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder or record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, 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 list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
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7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to
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<PAGE> 22
shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the board
of directors, every holder of stock represented by certificates and upon
request of every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of the corporation by the chairman or
vice-chairman of the board of directors, or the president or vice-president,
and by the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the
designations, the preferences, and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may
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be made against it on account of the alleged loss, theft or destruction of any
such certificate or the issuance of such new certificate or uncertificated
shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The seal of the corporation shall be such as from time to time may be
approved by the board of directors.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
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8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to
adopt, amend or repeal bylaws upon the directors. The fact that such power has
been so conferred upon the directors shall not divest the stockholders of the
power, nor limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall
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become effective in accordance with Section 103 of the General Corporation Law
of Delaware. Upon such certificate's becoming effective in accordance with
Section 103 of the General Corporation Law of Delaware, the corporation shall be
dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders
are so divided that they have failed to elect successors to directors whose
terms have expired or would have expired upon qualification of their successors;
or
(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed within a
reasonable time to take steps to dissolve, liquidate or distribute its assets.
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11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not
to liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
SOANE BIOSCIENCES, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of Soane BioSciences, Inc. hereby adopts the foregoing
bylaws, comprising twenty-one (21) pages, as the Bylaws of the corporation.
Executed this 12th day of April 1995.
/s/ SUZETTE M. CLAY
-------------------------------
Suzette M. Clay, Incorporator
Certificate of Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Soane BioSciences, Inc. and that the foregoing Bylaws,
comprising twenty-one (21) pages, were adopted as the Bylaws of the corporation
on April 12, 1995, by the person appointed in the Certificate of Incorporation
to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 13 day of April 1995.
/s/ ROGER NOVESKY
-------------------------------
Roger Novesky, Secretary
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<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of <<Date>>
by and between ACLARA BioSciences, Inc., a Delaware corporation (the "Company"),
and <<Indemnitee>> (the "Indemnitee").
RECITALS
The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Company and Indemnitee further recognize
the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and agents of the Company may
not be willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them with the maximum protection
permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee
<PAGE> 2
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably withheld), in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company and its stockholders, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of Indemnitee's duty to
the Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referred to in Section l(a) or Section 1(b) hereof (including amounts actually
paid in settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby. Any advances to be made under this
Agreement shall be paid by the Company to Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the Company.
<PAGE> 3
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Officer of the Company and shall be given in accordance with the provisions of
Section 12(d) below. In addition, Indemnitee shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 11 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Section 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties' intention that if the Company contests Indemnitee's
right to indemnification, the question of Indemnitee's right to indemnification
shall be for the court to decide, and neither the failure of the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination that indemnification of Indemnitee is proper in the circumstances
because Indemnitee has met the applicable standard of conduct required by
applicable law, nor an actual determination by the Company (including its Board
of Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) that Indemnitee has not met such applicable
standard of conduct, shall create a presumption that Indemnitee has or has not
met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by
<PAGE> 4
Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested members of the Company's
Board of Directors, the General Corporation Law of the State of Delaware, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though he or she may have
ceased to serve in any such capacity at the time of any action, suit or other
covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
<PAGE> 5
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a
<PAGE> 6
right to indemnification under this Agreement or any other statute or law or
otherwise as required under Section 145 of the Delaware General Corporation Law,
but such indemnification or advancement of expenses may be provided by the
Company in specific cases if the Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
<PAGE> 7
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) NOTICES. Any notice, demand or request required or permitted
to be given under this Agreement shall be in writing and shall be deemed
sufficient when delivered personally or sent by telegram or forty-eight (48)
hours after being deposited in the U.S. mail, as certified or registered mail,
with postage prepaid, and addressed to the party to be notified at such party's
address as set forth below or as subsequently modified by written notice.
(e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns, and inure to the benefit of
Indemnitee and Indemnitee's heirs, legal representatives and assigns.
<PAGE> 8
(g) SUBROGATION. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Indemnitee, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Company to effectively bring suit to enforce such rights.
[Signature Page Follows]
<PAGE> 9
The parties hereto have executed this Agreement as of the day and year
set forth on the first page of this Agreement.
ACLARA BioSciences, Inc.
By:
---------------------------------------
Title:
------------------------------------
Address: 1288 Pear Avenue
Mountain View, California 94043
AGREED TO AND ACCEPTED:
<<Indemnitee>>
- -------------------------------------
(Signature)
Address:
- -------------------------------------
- -------------------------------------
<PAGE> 1
EXHIBIT 10.2
SOANE BIOSCIENCES, INC.
1995 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for positions
of substantial responsibility,
- to provide additional incentive to Employees and Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply.
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Soane BioSciences, Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services. The term "Consultant" shall not include Directors who are
paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the
<PAGE> 2
Company. For purposes of Incentive Stock Options, no such leave may exceed 90
days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave
any incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(1) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
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<PAGE> 3
(q) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option or Stock Purchase Right grant. The
Notice of Grant is part of the Option Agreement in the case of an Option and is
accompanied by a Restricted Stock Purchase Agreement in the case of a Stock
Purchase Right.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase Right.
(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1995 Stock Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written agreement
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
(ab) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(ac) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ad) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ae) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
-3-
<PAGE> 4
3. Stock Subject to the Plan. Subject to the provisions of Section
13 of the Plan, the maximum aggregate number of Shares which may be sold or
optioned and sold under the Plan is 945,667 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the Plan (unless
the Plan has terminated); provided, however, that Shares that have actually
been issued under the Plan, whether upon exercise of an Option or Right, shall
not be returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted Stock are
repurchased by the Company at their original purchase price, and the original
purchaser of such Shares did not receive any benefits of ownership of such
Shares, such Shares shall become available for future grant under the Plan. For
purposes of the preceding sentence, voting rights shall not be considered a
benefit of Share ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and
Officers Subject to Section 16(b). With respect to Option or Stock Purchase
Right grants made to Employees who are also Officers or Directors subject to
Section 16(b) of the Exchange Act, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in compliance with the rules
governing a plan intended to qualify as a discretionary plan under Rule 16b-3,
or (B) a committee designated by the Board to administer the Plan, which
committee shall be constituted to comply with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase the
size of the Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however caused), and
remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3.
(iii) Administration With Respect to Other Persons.
With respect to Option or Stock Purchase Right grants made to Employees or
Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or without
cause) and substitute new members, fill vacancies (however caused), and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by Applicable Laws.
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<PAGE> 5
(b) Powers of the Administrator. Subject to provisions of the Plan,
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator, in its sole discretion,
shall determine;
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value
of the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority
to extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
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<PAGE> 6
(xiii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has been
granted an Option or Stock Purchase Right may be granted additional Options or
Stock Purchase Rights.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
(i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during any calendar
year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 400,000 Shares.
(ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
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<PAGE> 7
(iii) If an Option or Stock Purchase Right is canceled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the canceled Option or
Stock Purchase Right will be counted against the limit set forth in Section
6(c)(i). For this purpose, if the exercise price of an Option or Stock Purchase
Right is reduced, the transaction will be treated as a cancellation of the
Option or Stock Purchase Right and the grant of a new Option or Stock Purchase
Right.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 19 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator, but shall in no event
be less than the par value per Share.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
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<PAGE> 8
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) money order;
(iv) promissory note;
(v) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(vi) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, share require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vii) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(viii) any combination of the foregoing methods of payment; or
(ix) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such
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<PAGE> 9
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant (but
not in the event of a change of status from Employee to Consultant (in which
case an Employee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the ninety-first (91st) day following such change
of status) or from Consultant to Employee), other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option, but only within such
period of time as is specified in the Notice of Grant, and only to the extent
that the Optionee was entitled to exercise it at the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Notice Grant). In the absence of a specified time in the Notice of Grant,
the Option shall remain exercisable for thirty (30) days following the
Optionee's termination of Continuous Status as an Employee or Consultant. In the
case of an Incentive Stock Option, such period of time shall not exceed ninety
(90) days from the date of termination. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Consulting relationship
or Continuous Status as an Employee as a result of his disability then the
period during which each outstanding option held by the Optionee is to remain
exercisable shall be limited to the six (6)-month period following the date of
such cessation of service. However, should such Disability be deemed to
constitute Permanent Disability, then the period during which each outstanding
option held by the Optionee is to remain exercisable shall be extended by an
additional six (6) months so that the exercise period shall be limited to the
twelve (12)-month period following the date of he Optionee's cessation of
Service by reason of such Permanent Disability. For the purposes of the Plan,
Disability shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute Permanent Disability in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of not less than twelve (12)
months.
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(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months (or such other
period of time as is determined by the Administrator, with such determination in
the case of an Incentive Stock Option being made at the time of grant of the
Option) following the date of death (but in no event later than the expiration
of the term of such Option as set forth in the Notice of Grant), by the
Optionee's estate or by person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option revert to the Plan.
(e) Rule 16b-3. Options granted to individuals subject to Section 16
of the Exchange Act ("Insiders") must comply with the applicable provisions of
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan.
After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing, by means of a Notice of
Grant, of the terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to purchase, the price
to be paid, and the time within which the offeree must accept such offer, which
shall in no event exceed thirty (30) days from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's Continuous Status as an Employee or Consultant with the Company for
any reason (including death or Disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and Shares
purchased by Insiders in connection with Stock Purchase Rights, shall be subject
to any
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restrictions applicable thereto in compliance with Rule 16b-3. An Insider may
only purchase Shares pursuant to the grant of a Stock Purchase Right, and may
only sell Shares purchased pursuant to the grant of a Stock Purchase Right,
during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion
including but not limited to the per Share purchase price, which shall in no
event be less than the par value per Share. In addition, the provisions of
Restricted Stock Purchase Agreements need not be the same with respect to each
purchaser.
(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued in connection with the
Stock Purchase Right, if any, that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the
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<PAGE> 12
Code,the Optionee shall receive the full number of Shares with respect to which
the Option or Stock Purchase Right is exercised but such Optionee shall be
unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.
13. Non-Transferability of Options and Stock Purchase Rights. An Option
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Option and Stock Purchase Right may be
assumed or an equivalent option or right may be substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. The
Administrator may, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option or Stock Purchase Right as to
all or a portion of the Optioned stock, including Shares as to which it would
not otherwise be exercisable. If the Administrator makes an Option or Stock
Purchase Right exercisable in lieu of assumption or substitution in the event
of a merger or sale of assets, the Administrator shall notify the Optionee
that the Option or Stock Purchase Right shall be fully exercisable for a period
of fifteen (15) days from the date of such notice, and the Option or Stock
Purchase Right will terminate upon the
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expiration of such period. For the purposes of this paragraph, the Option or
Stock Purchase Right shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option or
Stock Purchase Right, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received
by holders of Common Stock in the merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, Applicable Laws, and the requirements
of any stock
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<PAGE> 14
exchange or quotation system upon which the Shares may then be listed or
quoted, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
18. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Stock Purchase Right exceeds, as of the date of grant,
the number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
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<PAGE> 1
EXHIBIT 10.3
ACLARA BIOSCIENCES, INC.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees and
Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities laws
and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means ACLARA BioSciences, Inc., a Delaware
corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services. The term "Consultant" shall not include Directors who are
paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
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<PAGE> 2
(i) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(1) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, the Fair Market Value of a Share of
Common Stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the last market
trading day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
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<PAGE> 3
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option or Stock Purchase Right grant. The
Notice of Grant is part of the Option Agreement in the case of an Option and is
accompanied by a Restricted Stock Purchase Agreement in the case of a Stock
Purchase Right.
(r) "Office" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(u) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option or
Stock Purchase Right.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase Right.
(x) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1997 Stock Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
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<PAGE> 4
(aa) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(ab) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(ac) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ad) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ae) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be sold or optioned
and sold under the Plan is 3,342,669 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
Subject to Section 16(b). With respect to Option or Stock Purchase Right grants
made to Employees who are also Officers or Directors subject to Section 16(b) of
the Exchange Act, the Plan shall be administered by (A) the Board, if the Board
may administer the Plan in compliance with the rules governing a plan intended
to qualify as a discretionary plan under Rule 16b-3, or (B) a
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<PAGE> 5
committee designated by the Board to administer the Plan, which committee shall
be constituted to comply with the rules governing a plan intended to qualify as
a discretionary plan under Rule 16b-3. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules governing a plan intended to qualify as a discretionary
plan under Rule 16b-3.
(iii) Administration With Respect to Other Persons. With
respect to Option or Stock Purchase Right grants made to Employees or
Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which may be based
on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
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<PAGE> 6
(vii) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan:
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options and Stock Purchase Rights and any Restricted Stock; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. If otherwise eligible, an Employee or Consultant who has been
granted an Option or Stock Purchase Right may be granted additional Options or
Stock Purchase Rights.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
(i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which
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<PAGE> 7
(ii) become exercisable for the first time during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 6(a), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time of grant.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
employment or consulting relationship with the Company, nor shall they interfere
in any way with the Optionee's right or the Company's right to terminate such
employment or consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 400,000 Shares.
(ii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 13.
(iii) If an Option or Stock Purchase Right is canceled in the
same fiscal year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the canceled Option or
Stock Purchase Right will be counted against the limit set forth in Section
6(c)(i). For this purpose, if the exercise price of an Option or Stock Purchase
Right is reduced, the transaction will be treated as a cancellation of the
Option or Stock Purchase Right and the grant of a new Option or Stock Purchase
Right.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 19 of the Plan. It
shall continue in effect for a term of ten (10) years unless terminated earlier
under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may vided in the Notice of Grant.
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<PAGE> 8
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than I 10% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator, but shall in
no event be less than the par value per Share.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) money order;
(iv) promissory note;
(v) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
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<PAGE> 9
(vi) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vii) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(viii) any combination of the foregoing methods of payment; or
(ix) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise: Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship.Upon
termination of an Optionee's Continuous Status as an Employee or Consultant (but
not in the event of a change of status from Employee to Consultant (in which
case an Employee's Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the ninety-first
-9-
<PAGE> 10
(91st) day following such change of status) or from Consultant to Employee),
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is specified in the
Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for thirty (30) days following the Optionee's termination of
Continuous Status as an Employee or Consultant. In the case of an Incentive
Stock Option, such period of time shall not exceed ninety (90) days from the
date of termination. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
(c) Disability of Optionee.Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Consulting
relationship or Continuous Status as an Employee as a result of his disability
then the period during which each outstanding option held by the Optionee is to
remain exercisable shall be limited to the six (6)-month period following the
date of such cessation of service. However, should such Disability be deemed to
constitute Permanent Disability, then the period during which each outstanding
option held by the Optionee is to remain exercisable shall be extended by an
additional six (6) months so that the exercise period shall be limited to the
twelve (12)-month period following the date of the Optionee's cessation of
Service by reason of such Permanent Disability. For the purposes of the Plan,
Disability shall mean the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute Permanent Disability in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of not less than twelve (12)
months.
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twelve (12) months (or such other
period of time as is determined by the Administrator, with such determination in
the case of an Incentive Stock Option being made at the time of grant of the
Option) following the date of death (but in no event later than the expiration
of the term of such Option as set forth in the Notice of Grant), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent that the Optionee was entitled
to exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert to
the Plan. If, after death, the Optionee's estate or a person who acquired the
right to exercise the Option by bequest or inheritance does not exercise the
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
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<PAGE> 11
(e) Rule 16b-3. Options granted to individuals subject to Section
16 of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan.
After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing, by means of a Notice of
Grant, of the terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to purchase, the price
to be paid, and the time within which the offeree must accept such offer, which
shall in no event exceed thirty (30) days from the date upon which the
Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's Continuous Status as an Employee or Consultant with the Company
for any reason (including death or Disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock purchase agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion including
but not limited to the per Share purchase price, which shall in no event be less
than the par value per Share. In addition, the provisions of Restricted Stock
Purchase Agreements need not be the same with respect to each purchaser.
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<PAGE> 12
(e) Rights as a Stockholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing to
have the Company withhold from the Shares to be issued in connection with the
Stock Purchase Right, if any, that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Stock Purchase Right is
exercised but such Optionee shall be unconditionally obligated to tender back to
the Company the proper number of Shares on the Tax Date.
13. Non-Transferability of Options and Stock Purchase Rights. An Option
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
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<PAGE> 13
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right may be assumed
or an equivalent option or right may be substituted by the successor corporation
or a Parent or Subsidiary of the successor corporation. The Administrator may,
in lieu of such assumption or substitution, provide for the Optionee to have the
right to exercise the Option or Stock Purchase Right as to all or a portion of
the Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If the Administrator makes an Option or Stock Purchase Right
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Administrator shall notify the Optionee that the Option or
Stock Purchase Right shall be fully exercisable for a period of fifteen (15)
days from the date of such notice, and the Option or Stock Purchase Right will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Stock Purchase Right shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets
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<PAGE> 14
was not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
17. Conditions Upon issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or quoted,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
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<PAGE> 15
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
18. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
by an Option or Stock Purchase Right exceeds, as of the date of grant, the
number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.
19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
-15-
<PAGE> 1
EXHIBIT 10.4
ACLARA BIOSCIENCES, INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
DECEMBER 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. CERTAIN COVENANTS OF THE COMPANY..................................... 2
(a) Financial Statements........................................... 2
(b) Operating Plan Other Reporting................................. 3
(c) Intellectual Property Rights................................... 3
(d) Payment of Taxes, Compliance with Laws, etc.................... 3
(e) Insurance...................................................... 3
(f) Maintenance of Properties...................................... 4
(g) Affiliated Transactions........................................ 4
(h) Inspection..................................................... 4
(i) Material Changes and Litigation................................ 4
(j) Confidentiality, Invention and Non-Competition
Agreements..................................................... 4
(k) Preemptive Rights.............................................. 4
(l) Employee Shares................................................ 6
2. REGISTRATION RIGHTS.................................................. 6
(a) Certain Definitions............................................ 6
(b) Sale or Transfer of Shares; Legend............................. 10
(c) Required Registrations......................................... 10
(d) Incidental Registration........................................ 12
(e) Registration Procedures........................................ 13
(f) Allocation of Expenses......................................... 17
(g) Indemnification................................................ 17
(h) Indemnification with Respect to Underwritten Offering.......... 19
(i) Information by Holder.......................................... 19
(j) Rule 144 Requirements.......................................... 19
(k) Selection of Underwriter....................................... 20
(1) Restrictions on Other Agreements............................... 20
(m) Lock-Up Agreement.............................................. 20
(n) Restrictions on Sale by the Company and Others................. 20
(o) Termination of Rights.......................................... 21
3. MISCELLANEOUS........................................................ 21
(a) Transfer of Rights............................................. 21
(b) Successors and Assigns......................................... 21
(c) Notices........................................................ 21
4. AMENDMENTS AND WAIVERS............................................... 22
5. COUNTERPARTS......................................................... 22
6. CAPTIONS............................................................. 23
7. SEVERABILITY......................................................... 23
8. GOVERNING LAW........................................................ 23
9. TERMINATION OF PRIOR AGREEMENT; WAIVER OF PREEMPTIVE RIGHTS.......... 23
10. BOARD ATTENDANCE BY J&J.............................................. 24
</TABLE>
i
<PAGE> 3
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
This Amended and Restated Investor Rights Agreement (the "Agreement") is
made as of December 30, 1999, by and among ACLARA BioSciences, Inc., a Delaware
corporation (the "Company"), Phoenix Leasing Incorporated, a California
corporation ("Phoenix"), Johnson & Johnson Development Corporation ("J&J"), The
Perkin-Elmer Corporation ("Perkin-Elmer") and the Purchasers set forth on
Schedule A attached hereto (the "Purchasers"). The Purchasers, Perkin-Elmer and
J&J are hereinafter collectively referred to as the "Preferred Stockholders."
Capitalized terms used and not defined herein shall have the meaning given in
that Series H Redeemable Preferred Stock Purchase Agreement of even date
herewith by and among the Company and certain of the Purchasers.
RECITALS
The Company and certain of the Purchasers have entered into a Series B
Redeemable Preferred Stock Purchase Agreement dated May 9, 1995, pursuant to
which such Purchasers acquired shares of the Company's Series B Redeemable
Preferred Stock ("Series B Stock");
The Company and Phoenix have entered into a Master Equipment Lease dated
November 15, 1995, pursuant to which the Company issued to Phoenix a warrant to
purchase shares of the Company's Common Stock;
The Company and certain of the Purchasers (the "Series C Purchasers") have
entered into a Series C Redeemable Preferred Stock Purchase Agreement dated as
of November 15, 1996, pursuant to which such Purchasers will acquire shares of
the Company's Series C Redeemable Preferred Stock ("Series C Stock");
The Company and Phoenix have entered into an additional equipment lease
line, pursuant to which the Company has issued to Phoenix a warrant to purchase
shares of the Company's Common Stock;
The Company and J&J have entered into a certain Stock Purchase Agreement
dated as of April 17, 1997 (the "Series D Purchase Agreement"), pursuant to
which J&J acquired shares of the Company's Series D Redeemable Preferred Stock
("Series D Stock");
The Company and certain of the Purchasers have entered into a Note and
Warrant Purchase Agreement dated as of December 15, 1997, pursuant to which the
Company has issued to such Purchasers warrants to purchase shares of Series D
Stock (the "Series D Warrants");
The Company, J&J and Perkin-Elmer (the "Series E Purchasers") have entered
into a certain Series E Redeemable Preferred Stock Purchase Agreement dated as
of March 26, 1998
1
<PAGE> 4
(the "Series E Purchase Agreement"), pursuant to which J&J and Perkin-Elmer have
purchased shares of the Company's Series E Redeemable Preferred Stock ("Series E
Stock");
The Company and certain of the Purchasers (the "Series F Purchasers") have
entered into a certain Series F Redeemable Preferred Stock Purchase Agreement
dated as of January 12, 1999 (the "Series F Purchase Agreement"), pursuant to
which such Purchasers have purchased shares of the Company's Series F Redeemable
Preferred Stock ("Series F Stock");
The Company and Perkin-Elmer (the "Series G Purchasers") entered into a
certain Series G Redeemable Preferred Stock Purchase Agreement dated as of April
29, 1999 pursuant to which Perkin-Elmer purchased shares of the Company's Series
G Redeemable Preferred Stock ("Series G Stock");
The Company and certain of the Purchasers (the "Series H Purchasers") are
entering into a certain Series H Redeemable Preferred Stock Purchase Agreement
of even date herewith (the "Series H Purchase Agreement"), pursuant to which
such Purchasers will purchase shares of the Company's Series H Redeemable
Preferred Stock ("Series H Stock").
Each of the parties hereto desires to set forth in a single document
certain covenants of the Company and certain of the pre-emptive rights,
registration rights and other rights of the Preferred Stockholders;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth and for other good and valuable consideration,
the parties hereto agree as follows:
1. Certain Covenants of the Company. The Company covenants and agrees
that, until the earlier of (i) such time as all outstanding shares of Preferred
Stock have been redeemed by the Company, or (ii) immediately prior to the
closing of a public offering of the Common Stock of the Company which causes a
mandatory conversion of the Preferred Stock pursuant to the Company's
certificate of incorporation, it will perform and observe the following
covenants and provisions:
(a) Financial Statements.
(i) The Company will maintain books of account in accordance
with generally accepted accounting principles applied on a consistent basis,
keep full and complete financial records and furnish to the Preferred
Stockholders the following reports:
(A) within 90 days after the end of each fiscal year, a
balance sheet of the Company as at the end of such year, together with
statements of operations, shareholders' equity and cash flows of the Company for
such year, audited and certified by public accountants of recognized national
standing reasonably satisfactory to the Preferred Stockholders, prepared in
accordance with generally accepted accounting principles and practices
consistently applied;
2
<PAGE> 5
(B) at the request of a Preferred Stockholder and in no
event more than 30 days after such request, an unaudited balance sheet of the
Company as at the end of the month immediately preceding the month in which such
request is made, together with statements of operations for such period,
shareholder's equity and statements of changes of cash flows of the Company for
such period and for the current fiscal year to the end of such period, and
summaries of bookings and backlogs; provided, however, that no Preferred
Stockholder may make such request more than 12 times in any 12-month period; and
(C) such other financial information as the Preferred
Stockholders may reasonably request, including, without limitation, certificates
of the principal financial officer of the Company concerning compliance with the
covenants of the Company under this Section 1.
(b) Operating Plan / Other Reporting. The Company will also prepare
and deliver to any holder of at least 250,000 shares (adjusted for stock splits,
combinations, recapitalizations and the like) of Series B Stock, Series C Stock,
Series D Stock, Series E Stock, Series F Stock, Series F-1 Preferred Stock,
Series G Stock or Series H Stock (a "Qualifying Holder") (or to the director of
the Company designated by such Qualifying Holder, if any):
(i) within 30 days after the start of each fiscal year, an
annual Operating Plan prepared on a monthly basis, as well as any material
adopted revisions to such Operating Plan, within a reasonable period of their
adoption; and
(ii) management letters, communications with shareholders,
press releases and registration statements.
(c) Intellectual Property Rights. The Company will keep in full
force and effect its corporate existence and all patents and other Intellectual
Property Rights useful in its business (except such rights as the Board of
Directors, in its reasonable business judgment, has determined are not material
to the Company's continuing operations).
(d) Payment of Taxes, Compliance with Laws, etc. The Company will
pay and discharge all lawful taxes, assessments and governmental charges or
levies imposed upon it or upon its income or property before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if not paid when due, might become a lien or charge upon its
property or any part thereof; provided, however, that the Company shall not be
required to pay and discharge any such tax, assessment, charge, levy, or claim
so long as the validity thereof is being contested by the Company in good faith
by appropriate proceedings and an adequate reserve therefor has been established
on its books. The Company will use its best efforts to comply with all
applicable laws and regulations in the conduct of its business including,
without limitation, all Environmental Laws.
(e) Insurance. The Company will keep its insurable properties
insured, upon reasonable business terms, by financially sound and reputable
insurers against liability, and the
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perils of casualty, fire and extended coverage in amounts of coverage
sufficient in the reasonable business judgment of the Company.
(f) Maintenance of Properties. The Company will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition as is reasonably necessary to permit such business to be
properly and advantageously conducted.
(g) Affiliated Transactions. All transactions by and between the
Company and any officer, employee or stockholder of the Company or persons
controlled by or affiliated with such officer, employee or stockholder, shall be
conducted on an arms-length basis, shall be on terms and conditions no less
favorable to the Company than could be obtained from unrelated persons and shall
be approved by the Board of Directors after full disclosure of the terms
thereof, for which purpose the interested party, if a Director, and any
affiliate of the interested party who is a Director, shall not be entitled to
vote.
(h) Inspection. The Company shall, upon reasonable prior notice,
permit authorized representatives of any Qualifying Holder to visit and inspect
any of the properties of the Company including its books of account (and to make
copies thereof and take extracts therefrom), and to discuss the affairs,
finances and accounts of the Company with its officers, administrative employees
and independent accountants, all at the expense of such Qualifying Holder and at
such reasonable times, during normal business hours and as often as may be
reasonably requested.
(i) Material Changes and Litigation. The Company promptly (and, in
any event, not later than the date of release of such information to the public
generally) shall notify the Preferred Stockholders or their transferees of any
material adverse change in the business, properties, assets, or condition
(financial or otherwise) of the Company and of any litigation or governmental
proceeding or investigation pending (or, to the best knowledge of the Company,
threatened) against the Company or against any officer, director, key employee,
or principal shareholder of the Company, that materially adversely affects (or
if adversely determined, could materially adversely affect) its present or
proposed business, properties, assets, or condition (financial or otherwise)
taken as a whole.
(j) Confidentiality, Invention and Non-Competition Agreements. The
Company shall require all employees and consultants of the Company to enter into
the Company's standard form of confidentiality and invention agreement.
(k) Preemptive Rights.
(i) The Preferred Stockholders shall be entitled to a right of
first refusal to purchase, on a pro rata basis, all or any part of New
Securities (as defined below) which the Company may, from time to time, propose
to sell and issue, subject to the terms and conditions set forth below. The pro
rata share of each Preferred Stockholder shall equal a fraction, the numerator
of which is the number of shares of Common Stock then held by such Preferred
Stockholder or issuable upon exercise of any options, rights or warrants, and
upon
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<PAGE> 7
conversion or exercise of the Preferred Stock or any other convertible
securities then held by such Preferred Stockholder and the denominator of which
is the total number of shares of Common Stock then outstanding plus the number
of shares of Common Stock issuable upon exercise of then outstanding options,
rights or warrants or upon conversion or exercise of the Preferred Stock or any
other then outstanding convertible securities.
(ii) "New Securities" shall mean any capital stock of the
Company whether now authorized or not, and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever which are, or may
become, convertible into capital stock; provided, however, that the term "New
Securities" shall not include (1) the issuance of up to 850,000 shares of Series
H Stock or shares of Common Stock issuable or issued upon conversion of the
Series H Stock; (2) up to 3,342,669 shares of the Company's Common Stock or
options therefor (and the shares of Common Stock issuable upon exercise of such
options), net of repurchases, issuable pursuant to the Company's 1995 Stock
Option Plan, the 1997 Stock Option Plan or another stock plan approved by the
Board of Directors of the Company and the Series F Designee (as defined in the
Company's Amended and Restated Certificate of Incorporation filed with the
Secretary of State of Delaware on December 30, 1999 (the "Restated
Certificate")), to the extent such Series F Designee has been appointed by the
holders of Series F and Series F-1 Preferred Stock; (3) shares of Common Stock
issued upon the exercise of any warrant or option or conversion of any
convertible security outstanding prior to the date hereof, as disclosed in the
Series H Purchase Agreement; (4) securities offered in a firm commitment
underwritten public offering pursuant to an effective registration statement
filed with the Securities and Exchange Commission covering the offer and sale of
Common Stock for the account of the Company at a public offering price of at
least $8.91 per share (with such amount to be appropriately adjusted for stock
splits, stock dividends and the like) and having an aggregate offering price to
the public resulting in gross proceeds to the Company of not less than
$15,000,000; and (5) securities issued as a result of any stock split, stock
dividend or reclassification of Common Stock, distributable on a pro rata basis
to all holders of Common Stock.
(iii) In the event the Company intends to issue New
Securities, it shall give each Preferred Stockholder written notice of such
intention, describing the type of New Securities to be issued, the price thereof
and the general terms upon which the Company proposes to effect such issuance.
Each Preferred Stockholder shall have 30 days from the date of any such notice
to agree to purchase all or part of its pro rata share of such New Securities
for the price and upon the general terms and conditions specified in the
Company's notice by giving written notice to the Company stating the quantity of
New Securities to be so purchased. Each Preferred Stockholder shall have a right
of overallotment such that if any Preferred Stockholder fails to exercise its
right hereunder to purchase its total pro rata portion of New Securities, the
other Preferred Stockholders may purchase such portion on a pro rata basis or on
such other basis as such Preferred Stockholders electing their overallotment
option may agree amongst themselves in writing, by giving written notice to the
Company within 5 days from the date that the Company provides written notice to
the other Preferred Stockholders of the amount of New Securities with respect to
which such non-purchasing Preferred Stockholder has failed to exercise its right
hereunder.
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<PAGE> 8
(iv) In the event the Preferred Stockholders fail to exercise
the foregoing right of first refusal with respect to any New Securities within
such 30-day period (or the additional 5-day period provided for overallotments),
the Company may within 120 days thereafter sell any or all of such New
Securities not agreed to be purchased by the Preferred Stockholders at a price
and upon general terms no more favorable to the purchasers thereof than
specified in the notice given to each Preferred Stockholder pursuant to
paragraph (c) above. In the event the Company has not sold such New Securities
within such 120-day period, the Company shall not thereafter issue or sell any
New Securities without first offering such New Securities to the Preferred
Stockholders in the manner provided above.
(v) For purposes of this Section 1(k), "Preferred
Stockholders" shall include each of the Preferred Stockholders, its general
partners, officers or other affiliates and any person or entity to whom a
Preferred Stockholder transfers Preferred Stock or Common Stock, each of which
may apportion its pro rata share among itself and such general partners,
officers and other affiliates in such proportions as it deems appropriate.
(l) Employee Shares. Stock issued or options granted by the Company
to directors, officers or employees of the Company shall generally be subject to
vesting over not less than four years (unless otherwise unanimously approved by
the Board of Directors of the Company), and stock issued to such persons shall
be subject to repurchase by the Company at the original purchase price per share
upon such person's resignation or termination with or without cause, which
repurchase rights shall lapse as to such stock ratably over four years (unless
otherwise unanimously approved by the Board of Directors of the Company). Such
stock or options shall be issued pursuant to the terms of a Restricted Stock
Agreement or Stock Option Agreement, as appropriate, each as shall be approved
by the directors elected by the holders of the Preferred Stock pursuant to the
Restated Certificate. All such persons acquiring shares of capital stock of the
Company shall be required to become parties to the Amended and Restated
Stockholders' Agreement dated as of the date hereof by and among the Company and
the stockholders named therein.
2. Registration Rights.
(a) Certain Definitions. As used in this Section 2 and elsewhere
in this Agreement, the following terms shall have the following respective
meanings:
"Commission" means the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar United States statute, and the rules and regulations of
the Commission issued under such act, as they each may, from time to time, be in
effect.
"Registration Statement" means a registration statement filed
by the Company with the Commission for a public offering and sale of securities
of the Company (other than a registration statement on Form S-8 or Form S-4, or
their successors, or any other form for
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<PAGE> 9
a limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
"Registration Expenses" means the expenses described in
Section 2(f).
"Registrable Shares" means the Registrable B Shares, the
Registrable C Shares, the Registrable D Shares, the Registrable E Shares, the
Registrable F Shares, the Registrable G Shares, the Registrable H Shares and the
Registrable Warrant Shares.
"Registrable B Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Series B Stock, and (ii) any other
shares of Common Stock of the Company issued in respect of such shares (because
of stock splits, stock dividends, reclassifications, recapitalizations, or
similar events); provided, that any such shares registered and sold under the
Securities Act or sold in reliance on Rule 144 under the Securities Act shall no
longer be considered Registrable B Shares. Wherever reference is made in this
Agreement to a request or consent of holders of a certain percentage of
Registrable B Shares, or to a number or percentage of Registrable B Shares held
by a Series B Stockholder (as defined below), such reference shall include
shares of Common Stock issuable upon conversion of the Series B Stock even
though such conversion has not yet been effected.
"Registrable C Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Series C Stock, and (ii) any other
shares of Common Stock of the Company issued in respect of such shares (because
of stock splits, stock dividends, reclassifications, recapitalizations, or
similar events); provided, that any such shares registered and sold under the
Securities Act or sold in reliance on Rule 144 under the Securities Act shall no
longer be considered Registrable C Shares. Wherever reference is made in this
Agreement to a request or consent of holders of a certain percentage of
Registrable C Shares, or to a number or percentage of Registrable C Shares held
by a Series C Stockholder (as defined below), such reference shall include
shares of Common Stock issuable upon conversion of the Series C Stock even
though such conversion has not yet been effected.
"Registrable D Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Series D Stock (including the Series D
Stock issued or issuable upon exercise of the Series D Warrants), and (ii) any
other shares of Common Stock of the Company issued in respect of such shares
(because of stock splits, stock dividends, reclassifications, recapitalizations,
or similar events); provided, that any such shares registered and sold under the
Securities Act or sold in reliance on Rule 144 under the Securities Act shall no
longer be considered Registrable D Shares. Wherever reference is made in this
Agreement to a request or consent of holders of a certain percentage of
Registrable D Shares, or to a number or percentage of Registrable D Shares held
by a Series D Stockholder (as defined below), such reference shall include
shares of Common Stock issuable upon conversion of the Series D Stock even
though such conversion has not yet been effected.
"Registrable E Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Series E Stock, and (ii) any other
shares of Common Stock of
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<PAGE> 10
the Company issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); provided,
that any such shares registered and sold under the Securities Act or sold in
reliance on Rule 144 under the Securities Act shall no longer be considered
Registrable E Shares. Wherever reference is made in this Agreement to a request
or consent of holders of a certain percentage of Registrable E Shares, or to a
number or percentage of Registrable E Shares held by a Series E Stockholder (as
defined below), such reference shall include shares of Common Stock issuable
upon conversion of the Series E Stock even though such conversion has not yet
been effected.
"Registrable F Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Series F Stock, (ii) the shares of
Common Stock issued or issuable upon conversion of the shares, if any, of Series
F-1 Preferred Stock issued or issuable upon conversion of the Series F Stock,
and (iii) any other shares of Common Stock of the Company issued in respect of
such shares (because of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, that any such shares registered
and sold under the Securities Act or sold in reliance on Rule 144 under the
Securities Act shall no longer be considered Registrable F Shares. Wherever
reference is made in this Agreement to a request or consent of holders of a
certain percentage of Registrable F Shares, or to a number or percentage of
Registrable F Shares held by a Series F Stockholder (as defined below), such
reference shall include shares of Common Stock issuable upon conversion of the
Series F Stock and Series F-1 Preferred Stock even though such conversion has
not yet been effected.
"Registrable G Shares" means (i) the shares of Common Stock
issued or issuable upon conversion of the Series G Stock, and (ii) any other
shares of Common Stock of the Company issued in respect of such shares (because
of stock splits, stock dividends, reclassifications, recapitalizations, or
similar events); provided, that any such shares registered and sold under the
Securities Act or sold in reliance on Rule 144 under the Securities Act shall no
longer be considered Registrable G Shares. Wherever reference is made in this
Agreement to a request or consent of holders of a certain percentage of
Registrable G Shares, or to a number or percentage of Registrable G Shares held
by a Series G Stockholder (as defined below), such reference shall include
shares of Common Stock issuable upon conversion of the Series G Stock even
though such conversion has not yet been effected.
"Registrable H Shares" means (i) shares of Common Stock issued
or issuable upon conversion of the Series H Stock, and (ii) any other shares of
Common Stock of the Company issued in respect of such shares (because of stock
splits, stock dividends, reclassifications, recapitalizations, or similar
events); provided, that any such shares registered and sold under the Securities
Act or sold in reliance on Rule 144 under the Securities Act shall no longer be
considered Registrable H Shares. Wherever reference is made in this Agreement to
a request or consent of holders of a certain percentage of Registrable H Shares,
or to a number or percentage of Registrable H Shares held by a Series H
Stockholder (as defined below), such reference shall include shares of Common
Stock issuable upon conversion of the Series H Stock even though such conversion
has not yet been effected.
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<PAGE> 11
"Registrable Warrant Shares" means (i) the shares of Common
Stock issued or issuable upon exercise of the Warrants, (ii) the shares of
Common Stock issuable upon conversion of shares of Series D Preferred Stock
issued or issuable upon exercise of Warrants to purchase shares of Series D
Preferred Stock, and (iii) any other shares of Common Stock of the Company
issued in respect of such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, that any
such shares registered and sold under the Securities Act or sold in reliance on
Rule 144 under the Securities Act shall no longer be considered Registrable
Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar United States statute, and the rules and regulations of the
Commission issued under such act, as they each may, from time to time, be in
effect.
"Series B Stockholders" means the Series B Purchasers and any
persons or entities to whom the rights granted under this Section 2 are
transferred by the Purchasers and their respective successors or assigns.
"Series C Stockholders" means the Series C Purchasers and any
persons or entities to whom the rights granted under this Section 2 are
transferred by the Series C Purchasers and their respective successors or
assigns.
"Series D Stockholders" means (1) J&J and any person or
entities to whom the rights with respect to the Registrable D Shares granted
under this Section 2 are transferred by J&J and its respective successors or
assigns, and (2) the holders of warrants to purchase Series D Stock.
"Series E Stockholders" means J&J and Perkin-Elmer and any
person or entities to whom the rights with respect to the Registrable E Shares
granted under this Section 2 are transferred by J&J or Perkin-Elmer and its
respective successors or assigns.
"Series F Stockholders" means the Series F Purchasers and any
person or entities to whom the rights with respect to the Registrable F Shares
(or shares of Series F-1 Preferred Stock issuable or issued upon conversion of
the Registrable F Shares) granted under this Section 2 are transferred by a
Series F Purchaser and its respective successors or assigns.
"Series G Stockholders" means the Series G Purchasers and any
person or entities to whom the rights with respect to the Registrable G Shares
granted under this Section 2 are transferred by such persons and their
respective successors or assigns.
"Series H Stockholders" means the Series H Purchasers and any
person or entities to whom the rights with respect to Registrable H Shares
granted under this Section 2 are transferred by such persons and their
respective successors and assigns.
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"Stockholders" means the Series B Stockholders, the Series C
Stockholders, the Series D Stockholders, the Series E Stockholders, the Series F
Stockholders, the Series G Stockholders, the Series H Stockholders and the
Warrantholders.
"Warrants" means (i) the Warrants, each dated as of November
15, 1995 and February 15, 1997, issued by the Company to Phoenix Leasing
Incorporated, to purchase shares of Common Stock, (ii) the Warrants to purchase
shares of Series D Preferred Stock, dated as of December 15, 1997, issued by the
Company to certain Warrantholders pursuant to the Note and Warrant Purchase
Agreement dated December 15, 1997; (iii) the Warrants to purchase shares of
Series D Preferred Stock, dated as of February 6, 1998; and (iv) the Warrants to
purchase shares of Common Stock, dated December 6, 1996.
"Warrantholder" means the holder or holders of the Warrants.
(b) Sale or Transfer of Shares; Legend.
(i) The Registrable Shares shall not be sold or transferred
unless either (1) they first shall have been registered under the Securities
Act, or (2) the Company first shall have been furnished with an opinion of legal
counsel, reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act.
With respect to a sale or transfer by a Series F Stockholder, the Company will
reimburse such holder for the reasonable legal fees and costs incurred by it in
obtaining such opinion (subject to a maximum of $1,000 for each such opinion).
(ii) Each certificate representing the Registrable Shares
shall bear a legend substantially in the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or
applicable state securities laws and may not be transferred or
otherwise disposed of unless and until such shares are registered
under the Act and such laws or (1) registration under applicable
state securities laws is not required and (2) an opinion of counsel
satisfactory to the Company is furnished to the Company to the
effect that registration under the Act is not required."
The foregoing legend shall be removed from the certificates representing
any Registrable Shares at the request of the holder thereof at such time as they
become registered under the Securities Act or eligible for resale pursuant to
Rule 144(k) under the Securities Act.
(c) Required Registrations.
(i) Within 90 days following written notice from either (1)
the holder or holders of at least forty percent (40%) of the then outstanding
Registrable B Shares, (2) the holder or holders of at least fifty-one percent
(51%) of the then outstanding Registrable C Shares, (3) the holder or holders of
at least fifty-one percent (51%) of the then outstanding Registrable D
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Shares, (4) the holder or holders of at least fifty-one percent (51%) of the
then outstanding Registrable E Shares, (5) the holder or holders of at least
fifty-one percent (51%) of the then outstanding Registrable F Shares, (6) the
holder or holders of at least fifty-one percent (51%) of the then outstanding
Registrable G Shares, or (7) the holder or holders of at least fifty-one percent
(51%) of the then outstanding Registrable H Shares, the Company shall use its
best efforts to effect the registration of such Registrable Shares on Form S-1
or Form S-2 (or any successor forms) or other appropriate Registration Statement
designated by such holder or holders; provided, however, that the Company shall
not be required to effect any registration pursuant to this Section 2(c)(i)
prior to the earlier of: (A) three years from the date of this Agreement, or (B)
six months following the closing date of the first Registration Statement
covering an underwritten public offering of the Company's Common Stock, and
provided further, that, if the Company shall furnish the holders of Registrable
Shares requesting any registration pursuant to this subsection subsequent to the
initial public offering by the Company with a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors it would be detrimental to the Company or its stockholders for a
registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to register, qualify or comply under this
Section 2(c)(i) shall be deferred for a period not to exceed 120 days from the
date of receipt of written request from the holders of Registrable Shares
requesting the registration, provided that the Company may not exercise this
deferral right more than once. Notwithstanding the foregoing, the Company may
exercise its deferral right set forth in the immediately preceding sentence with
respect to the Registrable F Shares only if it shall also furnish the holder or
holders of the Registrable F Shares requesting registration with a certificate
signed by the President of the Company stating the existence of material
nonpublic information, the disclosure of which, in the good faith judgment of
the Board of Directors, would be contrary to the best interests of the Company
and its stockholders.
(ii) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), either (1) a Series B Stockholder or Series B Stockholders, (2) a
Series C Stockholder or Series C Stockholders, (3) a Series D Stockholder or
Series D Stockholders, (4) a Series E Stockholder or Series E Stockholders, (5)
a Series F Stockholder or Series F Stockholders, or (6) a Series G Stockholder
or Series G Stockholders, or (7) a Series H Stockholder or Series H Stockholders
may each request the Company, in writing, to effect the registration on Form S-3
(or such successor form), of the Registrable B Shares, Registrable C Shares,
Registrable D Shares, Registrable E Shares, Registrable F Shares, Registrable G
Shares or Registrable H Shares, respectively, of such Stockholder or
Stockholders having a market value at the time of such request of at least
$200,000. Thereupon, the Company shall, as expeditiously as possible, use its
best efforts to effect the registration on Form S-3, or such successor form, of
all Registrable Shares which the Company has been requested to register;
provided, that, if the Company shall furnish the holders of Registrable Shares
requesting the registration a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, then the Company's obligation to use its best
efforts to register, qualify or comply under this Section 2(c)(ii) shall be
deferred for a period not to exceed 120 days from the date of receipt of written
request from the holders of Registrable B Shares, Registrable C Shares,
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Registrable D Shares, Registrable E Shares, Registrable F Shares, Registrable G
Shares or Registrable H Shares, (as applicable) requesting the registration,
provided that the Company may not exercise this deferral right more than once
with respect to each of the Registrable B Shares, Registrable C Shares,
Registrable D Shares, Registrable E Shares, Registrable F Shares, Registrable G
Shares or Registrable H Shares. In no event, however, shall the Company be
required to register Registrable Shares on Form S-3 (or such successor form)
pursuant to this Section 2(c)(ii) more than once in any six-month period.
(iii) The Series B Stockholders, the Series C Stockholders,
the Series D Stockholders, the Series E Stockholders, the Series F Stockholders,
the Series G Stockholders and the Series H Stockholders shall each have the
right to require the Company to effect one demand registration on Form S-1 or
Form S-2 pursuant to Section 2(c)(i) and an unlimited number of registrations on
Form S-3 (or any successor forms) pursuant to Section 2(c)(ii); however, a
registration on Form S-1 or Form S-2 will not count for this purpose (1) unless
it becomes effective and the Series B Stockholders, the Series C Stockholders,
the Series D Stockholders, the Series E Stockholders, the Series F Stockholders,
the Series G Stockholders or the Series H Stockholders requesting such
registration, as the case may be, are able to sell at least 80% of the
Registrable B Shares, the Registrable C Shares, the Registrable D Shares, the
Registrable E Shares, the Registrable F Shares, the Registrable G Shares or the
Registrable H Shares, as the case may be, sought to be included in such
registration, or (2) if the Company elects to sell stock of the Company pursuant
to a Registration Statement at the same time. The Company shall not, however,
register any additional shares of stock of the Company at the same time as a
required registration under this Section 2(c) without the prior written consent
of the holders of a majority of the Registrable Shares to be included in the
required registration.
(d) Incidental Registration.
(i) Whenever the Company proposes to file a Registration
Statement, prior to such filing it shall give written notice to all Stockholders
of its intention to do so, and upon the written request of a Stockholder or
Stockholders given within 30 days after the Company provides such notice, the
Company shall cause all Registrable Shares which the Company has been requested
to register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Stockholder(s).
(ii) In connection with any offering under this Section 2(d)
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such underwriting unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it, and then only in such quantity as will not, in the
opinion of the managing underwriter, jeopardize the success of the offering by
the Company. If in the opinion of the managing underwriter the registration of
all, or part of, the Registrable Shares which the holders have requested to be
included would materially and adversely affect such public offering, then the
Company shall be required to include in the underwriting only that number of
Registrable Shares, if any, which the managing underwriter believes may be sold
without causing such adverse effect; provided, however, that, with respect
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to any underwritten public offering other than the Company's initial public
offering, in no event shall less than 35% of the total number of Registrable
Shares requested to be registered be included in the underwriting. In the event
of such a reduction in the number of shares to be included in the underwriting,
all holders of Registrable Shares who have requested registration shall
participate in the underwriting pro rata based upon their total ownership of
Registrable Shares (or in any other proportion as agreed upon by such holders)
and if any such holder would thus be entitled to include more shares than such
holder requested to be registered, the excess shall be allocated among such
other requesting holders pro rata based on their ownership of Registrable
Shares. No other securities requested to be included in a registration for the
account of anyone other than the Company or the Stockholders shall be included
in a registration unless all Registrable Shares requested to be included in such
registration are so included.
(e) Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to
effect the registration of any of the Registrable Shares under the Securities
Act, the Company shall:
(i) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
(ii) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective for a period of not less than 120 days from
the effective date;
(iii) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the selling Stockholder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Shares owned by the selling Stockholder; and
(iv) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities or blue sky laws of such states as the selling Stockholder
shall reasonably request, and do any and all other acts and things that may be
reasonably necessary or desirable to enable the selling Stockholder to
consummate the public sale or other disposition in such jurisdictions of the
Registrable Shares owned by the selling Stockholder; provided, however, that the
Company shall not be required in connection with this paragraph (e) to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act.
(v) The Company will, prior to filing a registration statement
or prospectus or any amendment or supplement thereto, furnish to each selling
Stockholder, counsel representing such selling Stockholders, and each
Underwriter, if any, of the Registrable Shares covered by such registration
statement copies of such registration statement as proposed to be
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<PAGE> 16
filed, together with exhibits thereto, which documents (solely with respect to
the information required pursuant to Item 507 of Regulation S-K under the
Securities Act) will be subject to review and comment by the foregoing within
five days after delivery thereof, and thereafter furnish to such selling
Stockholder, counsel and Underwriter, if any, for their review and comment such
number of copies of such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents incorporated
by reference therein), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents or information
as such selling Stockholder, counsel or Underwriter may reasonably request in
order to facilitate the disposition of the Registrable Shares owned by such
selling Stockholder.
(vi) After the filing of the registration statement, the
Company will promptly notify each selling Stockholder of Registrable Shares
covered by such registration statement, and (if requested by any such selling
Stockholder) confirm such notice in writing, (1) when a prospectus or any
prospectus supplement or post-effective amendment has been filed and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (2) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to a
registration statement or related prospectus or for additional information
relating to the selling Stockholders, (3) of the issuance by the Commission or
any other Federal or state governmental authority of any stop order suspending
the effectiveness of a registration statement or the initiation of any
proceedings for that purpose, (4) if at any time when a prospectus is required
by the Securities Act to be delivered in connection with sales of the
Registrable Shares the representations and warranties of the Company contained
in any agreement contemplated by subsection (viii) below (including any
underwriting agreement) cease to be true and correct in all material respects,
(5) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose, (6) of the occurrence of any event which
makes any statement made in such registration statement or related prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes in a
registration statement, prospectus or documents incorporated therein by
reference so that, in the case of the registration statement, it will not
contain any 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, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading (provided, however, that the foregoing may be
satisfied by the Company through the filing with the Securities and Exchange
Commission of an amendment to such registration statement, an amended
prospectus, a prospectus supplement or a report on Form 10-K, Form 10-Q or Form
8-K which discloses such event), and (7) of the Company's reasonable
determination that a post-effective amendment to a registration statement would
be necessary.
(vii) The Company will take all reasonable actions required to
lift any suspension of the qualification (or exemption from qualification) of
any Registrable Shares for
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<PAGE> 17
sale in any jurisdiction, and to prevent the entry or obtain the withdrawal of
any order suspending the effectiveness of a registration statement.
(viii) The Company and each selling Stockholder will enter
into customary agreements (including, if applicable, an underwriting agreement
in customary form and which is reasonably satisfactory to the Company) and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Shares (the selling Stockholders may, at
their option, require that any or all of the representations, warranties and
covenants of the Company to or for the benefit of such Underwriters also be made
to and for the benefit of such selling Stockholders).
(ix) The Company will make available to each selling
Stockholder (and will deliver to their counsel) and each Underwriter, if any,
subject to restrictions imposed by the United States federal government or any
agency or instrumentality thereof, copies of all correspondence between the
Commission and the Company, its counsel or auditors and will also make available
for inspection by any selling Stockholder, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney, accountant
or other professional retained by any such selling Stockholder or Underwriter
(collectively, the "Inspectors"), all financial and other records, pertinent
corporate documents and properties of the Company (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers and employees to supply all
information reasonably requested by any Inspectors in connection with such
registration statement; provided, however, that each such Inspector shall enter
into a written nondisclosure agreement with the Company in form and substance
reasonably satisfactory to the Company. Records which the Company determines, in
good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (1) the disclosure
of such Records is reasonably necessary to avoid or correct a misstatement or
omission in such registration statement or (2) the disclosure or release of such
Records is requested or required pursuant to oral questions, interrogatories,
requests for information or documents or a subpoena or other order from a court
of competent jurisdiction or other process; provided that prior to any
disclosure or release pursuant to clause (2), the Inspectors shall provide the
Company with prompt notice of any such request or requirement so that the
Company may seek an appropriate protective order or waive such Inspectors'
obligation not to disclose such Records; and, provided further, that if failing
the entry of a protective order or the waiver by the Company permitting the
disclosure or release of such Records, the Inspectors, upon advice of counsel,
are compelled to disclose such Records, the Inspectors may disclose that portion
of the Records which counsel has advised the Inspectors that the Inspectors are
compelled to disclose. Each selling Stockholder agrees that information obtained
by it solely as a result of such inspections (not including any information
obtained from a third party who, insofar as is known to the selling Stockholder
after reasonable inquiry, is not prohibited from providing such information by a
contractual, legal or fiduciary obligation to the Company) shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company or its Affiliates unless and until
such information is made generally available to the public. Each selling
Stockholder further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the
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<PAGE> 18
Company, at its expense, to undertake appropriate action to prevent disclosure
of the Records deemed confidential.
(x) The Company will furnish to each selling Stockholder and
to each Underwriter, if any, a signed counterpart, addressed to such selling
Stockholder or Underwriter, of (1) an opinion or opinions of counsel to the
Company, and (2) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily covered by opinions or comfort letters, as the case may
be, as the Selling Stockholders or the Underwriters reasonably request.
(xi) 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 earning 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 Securities Act.
(xii) The Company will use its best efforts (1) to cause any
class of Registrable Shares 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 Shares is then permitted
under the rules of such exchange or (2) to secure designation of all such
Registrable Shares 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 Shares and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Shares with
the National Association of Securities Dealers, Inc. (the "NASD").
(xiii) The Company will appoint a transfer agent and registrar
for all such Registrable Shares covered by such registration statement not later
than the effective date of such registration statement.
(xiv) Prior to the effective date of the first demand
registration or the first incidental registration, whichever shall occur first,
the Company shall (1) provide the transfer agent with printed certificates for
the Registrable Shares in a form eligible for deposit with The Depository Trust
Company, and (2) provide a CUSIP number for the Registrable Shares.
(xv) In connection with an underwritten offering, the Company
will participate, to the extent reasonably requested by the managing Underwriter
for the offering or the selling Stockholders, in customary efforts to sell the
securities under the offering, including, without limitation, participating in
"road shows."
If the Company has delivered preliminary or final prospectuses to the
selling Stockholder and after having done so the prospectus is amended to comply
with the requirements of the Securities Act, the Company shall promptly notify
the selling Stockholder and, if requested, the
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<PAGE> 19
selling Stockholder shall immediately cease making offers of Registrable Shares
and shall return all prospectuses to the Company. The Company shall promptly
provide the selling Stockholder with revised prospectuses and, following receipt
of the revised prospectuses, the selling Stockholder shall be free to resume
making offers of the Registrable Shares.
(f) Allocation of Expenses. The Company shall pay the Registration
Expenses for (i) the first demand registration on Form S-1 or Form S-2 (or any
successor forms) requested by each of the Series B Stockholders, the Series C
Stockholders, the Series D Stockholders, the Series E Stockholders, the Series F
Stockholders, the Series G Stockholders and the Series H Stockholders, (ii) the
first two demand registrations on Form S-3 requested by each of the Series B
Stockholders, the Series C Stockholders, the Series D Stockholders, the Series E
Stockholders, the Series F Stockholders, the Series G Stockholders and the
Series H Stockholders, and (iii) with respect to the Series F Stockholders, the
first two Incidental Registrations by Series F Stockholders pursuant to Section
2(d). If a registration on a Registration Statement other than Form S-3 (or any
successor form) requested by the Stockholders pursuant to paragraph (i) of
Section 2(c) is withdrawn at the request of the Stockholders requesting it
(other than as a result of information concerning the business or financial
condition of the Company that is made known to the Stockholders after the date
on which such registration was requested) and if the requesting Stockholders
holding a majority of the Registrable Shares requested to be included in such
registration elect not to have such registration counted as a registration
requested under paragraph (i) of Section 2(c), the requesting Stockholders shall
pay the Registration Expenses of such registration pro rata in accordance with
the number of their Registrable Shares included in such registration. For
purposes of this Section, the term "Registration Expenses" shall mean all
expenses incurred by the Company in complying with this Section 2, including,
without limitation, all registration and filing fees, exchange listing fees,
printing; expenses, fees and disbursements of counsel for the Company and one
counsel for the selling Stockholders, out-of-pocket expenses of the Company and
the underwriters, state blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, but excluding
underwriting discount and selling commissions and fees of more than one counsel
for the selling Stockholders. Such underwriting discounts and selling
commissions shall be borne pro rata by the selling Stockholders in accordance
with the number of their Registrable Shares included in such registration.
(g) Indemnification. In the event of any registration of any of the
Registrable Shares under the Securities Act pursuant to this Agreement, then to
the extent permitted by law the Company shall indemnify and hold harmless the
seller of such Registrable Shares, each underwriter of such Registrable Shares
and each other person, if any, who controls such seller or underwriter within
the meaning of the Securities Act or the Exchange Act against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act,
the Exchange Act, state securities laws or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or
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<PAGE> 20
arise out of or are based upon the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading;
and the Company shall reimburse such seller, underwriter and each such
controlling person for reasonable legal or any other expenses incurred by such
seller, underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus or prospectus, or any such amendment or supplement, in reliance upon
and in conformity with information furnished to the Company, in writing, by or
on behalf of such seller, underwriter or controlling person specifically for use
in the preparation thereof.
In the event of any registration of any of the Registrable Shares under
the Securities Act pursuant to this Agreement, then to the extent permitted by
law, each seller of Registrable Shares, severally and not jointly, shall
indemnify and hold harmless the Company, each of its directors and officers and
each underwriter (if any) and each person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages or liabilities joint or several, to
which the Company, such directors and officers, underwriter or controlling
person may become subject under the Securities Act, Exchange Act, state
securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained in
the Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, if the statement or omission was made solely in reliance upon and in
conformity with information furnished in writing to the Company by or on behalf
of such seller, specifically for use in connection with the preparation of such
Registration Statement, prospectus, amendment or supplement; and such seller
shall reimburse the Company for reasonable legal or other expenses incurred by
the Company in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the obligations of any
seller of Registrable Shares hereunder shall not exceed an amount equal to the
net proceeds to such seller of the Registrable Shares sold pursuant to the
Registration Statement.
An underwriter shall not be entitled to indemnification pursuant to this
subsection in the event that it fails to deliver to any selling Stockholder any
preliminary or final or revised prospectus, as required by the rules and
regulations of the Commission. Finally, no indemnification shall be provided
pursuant to this subsection in the event that any error in a preliminary
prospectus of the Company is subsequently corrected in the final prospectus of
the Company for a particular offering, and such final prospectus is delivered to
all purchasers in the offering prior to the date of purchase of the securities.
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Each party entitled to indemnification under this Section 2(g) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, provided, further, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 2 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action.
The Indemnified Party may participate in such defense at such party's expense;
provided, however, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between the Indemnified Party and any other party represented by such
counsel in such proceeding. No Indemnifying Party, in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim or litigation, and no Indemnified Party shall consent to entry of any
judgment or settle such claim or litigation without the prior written consent of
the Indemnifying Party.
(h) Indemnification with Respect to Underwritten Offering. In the
event that Registrable Shares are sold pursuant to a Registration Statement in
an underwritten offering, the Company agrees to enter into an underwriting
agreement containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being registered and
customary covenants and agreements to be performed by such issuer, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.
(i) Information by Holder. Each holder of Registrable Shares
included in any registration shall furnish to the Company such information
regarding such holder and the distribution proposed by such holder as the
Company may reasonably request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this Section
2.
(j) Rule 144 Requirements. With a view to making available to the
Stockholders the benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Stockholder to sell securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act (at any time
after it has become subject to the reporting requirements of the Exchange Act);
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(ii) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(iii) furnish to any holder of Registrable Shares upon request
a written statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the closing of
the first sale of securities by the Company pursuant to a Registration
Statement), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as such holder may reasonably request to avail itself of any
similar rule or regulation of the Commission allowing it to sell any such
securities without registration.
(k) Selection of Underwriter. In the case of any registration
effected pursuant to Section 2(c), the requesting Stockholders shall have the
right to designate the managing underwriter, subject to the approval of the
Company, which approval shall not be unreasonably withheld or delayed.
(1) Restrictions on Other Agreements. The Company will not enter
into any agreement with any party which by its terms grants any right relating
to the registration of the Company's Common Stock without the consent of the
holders of (i) a majority of the Registrable Shares (other than the Registrable
F Shares) then outstanding and (ii) a majority of the Registrable F Shares then
outstanding.
(m) Lock-Up Agreement. In connection with any public offering of the
Company's securities in connection with an effective registration statement
under the Securities Act, each holder of Registrable Shares agrees, upon request
of the Company or the underwriters managing any underwritten offering of the
Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any securities of the
Company (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed one hundred eighty (180) days) from the
effective date of such registration as may be requested by the underwriters
(other than those Registrable Shares to be sold in such registration). Each
holder of Registrable Shares further agrees that the Company may instruct its
transfer agent to place stop-transfer notations in its records to enforce the
provisions of this subsection. Notwithstanding the foregoing, no holder of
Registrable Shares shall be obligated pursuant to this subsection unless all
directors, officers and holders of 1% or more of the Company's outstanding
securities also agree to be bound by such agreement described in this
subsection.
(n) Restrictions on Sale by the Company and Others. The Company
agrees and it shall use best efforts to cause its affiliates to agree (i) not to
effect any public sale or distribution of any securities similar to those being
registered in accordance with Section 2 hereof, or any securities convertible
into or exchangeable or exercisable for such securities (other than, with
respect to the Company only, pursuant to a registration statement on Form S-8 or
Form S-4, or their successors, or any other form for a limited purpose, or any
registration
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statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation), during the 14 days prior to, and
during the 180-day period beginning on, the effective date of any registration
statement (except as part of such registration statement), in the case of an
underwritten offering, if, and solely to the extent, reasonably requested by the
managing Underwriter or Underwriters, and (ii) to use its best efforts to ensure
that any agreement entered into after the date hereof pursuant to which the
Company issues or agrees to issue any privately placed securities (other than to
officers, directors, consultants or employees) shall contain a provision under
which holders of such securities agree not to effect any sale or distribution of
any such securities during the periods described in (i) above, in each case
including a sale pursuant to Rule 144 under the Securities Act (except as part
of any such registration, if permitted); provided, however, that the provisions
of this paragraph (n) shall not prevent (x) the conversion or exchange of any
securities pursuant to their terms into or for other securities or (y) the
issuance of any securities to employees of the Company or pursuant to any
employee plan.
(o) Termination of Rights. The rights of the holders of the
Registrable Shares pursuant to this Section 2 shall terminate at such time as
all Registrable Shares have been registered under the Securities Act or sold in
reliance on Rule 144 under the Securities Act.
3. Miscellaneous.
(a) Transfer of Rights.
(i) The rights granted hereunder may be transferred or
succeeded to only by (1) any other Preferred Stockholder or any general or
limited partner, officer or other affiliate (within the meaning of Rule 144
under the Securities Act) of any Preferred Stockholder or Warrantholder, or (2)
any other person or entity that holds (including any shares hereafter acquired)
at least 5 % of the transferors' Registrable Shares and who is not a competitor
of the Company or a partner, officer, director, employee or owner of more than
1% of the outstanding securities of any direct or indirect competitor of the
Company; provided, however, that the Company is given written notice by the
transferee at the time of such transfer stating the name and address of the
transferee and identifying the securities with respect to which such rights are
being assigned.
(ii) A transferee to whom rights are transferred pursuant to
this Section 3(a) may not again transfer such rights to any other person or
entity, other than as provided in subsection 3(a)(i) above.
(b) Successors and Assigns. The provisions of this Agreement shall
bind and inure to the benefit of the respective successors, assigns, heirs,
executors, and administrators of the parties hereto.
(c) Notices. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be delivered
by hand or mailed by first class certified or registered mail, return receipt
requested, postage prepaid or by facsimile if actually received:
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(i) If to the Company:
ACLARA BioSciences, Inc.
1288 Pear Avenue
Mountain View, CA 94043-1432
Attention: President
Fax No.: (650) 210-1210
(or at such other address as may have been furnished in writing by the
Company, as the case may be, to the Purchasers)
with a copy to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, CA 94025
Attn: Mike Hall, Esq.
Fax No.: (650) 463-2600
(ii) If to the Preferred Stockholders, to their respective
addresses set forth on the signature page to this Agreement (or at such other
address as may have been furnished to the Company in writing by the Preferred
Stockholders).
Notices provided in accordance with this Section 3(c) shall be deemed
delivered upon personal delivery or 72 hours after deposit in the mail in
accordance with the above.
4. Amendments and Waivers. Except as otherwise expressly set forth in this
Agreement, any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) in a manner which affects
the Registrable B Shares, the Registrable C Shares, the Registrable D Shares,
the Registrable E Shares, the Registrable F Shares, the Registrable G Shares and
the Registrable H Shares, with the written consent of the Company and the
holders of at least fifty-one percent (51%) of the affected series of
Registrable Shares then outstanding, or such percentage of each class, voting
separately, in the case of amendments or waivers which affect all Registrable
Shares. No waivers of or exceptions to any term, condition or provision of this
Agreement, in any one or more instances, shall be deemed to be, or construed as,
a further or continuing waiver of any such term, condition or provision.
5. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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<PAGE> 25
6. Captions. The captions of the sections, subsections and paragraphs of
this Agreement have been added for convenience only and shall not be deemed to
be a part of this Agreement.
7. Severability. Each provision of this Agreement shall be interpreted in
such manner as to validate and give effect thereto to the fullest lawful extent,
but if any provision of this Agreement is determined by a court of competent
.jurisdiction to be invalid or unenforceable under applicable law, such
provision shall not be ineffective only to the extent so determined and such
invalidity or unenforceability shall not affect the remainder of such provision
or the remaining provisions of this Agreement.
8. Governing Law. This Agreement shall be governed by and interpreted and
construed in accordance with the laws of the State of California.
9. Termination of Prior Agreement; Waiver of Preemptive Rights. The
parties hereto expressly agree that this Amended and Restated Investor Rights
Agreement shall supersede the Amended and Restated Investor Rights Agreement
dated April 29, 1999, as amended, by and among the Company and the other parties
thereto (the "Prior Agreement"). Effective upon execution of this Agreement by
the Company and the holders of at least 51% of each of the Registrable B Shares,
the Registrable C Shares, Registrable D Shares, the Registrable E Shares, the
Registrable F Shares and the Registrable G Shares, the Prior Agreement shall be
terminated and restated in its entirety as set forth in this Agreement. In
addition, each of the undersigned Preferred Stockholders who are entitled to
preemptive rights pursuant to Section 1(l) of the Prior Agreement hereby waives
such rights, on behalf of itself and the other holders of such rights, with
respect to the sale and issuance of the Series H Stock to the Series H
Purchasers.
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10. Board Attendance by J&J. Each party hereto agrees that, for so long as
J&J (or an affiliate of J&J) continues to hold at least 50% of the total number
of shares of Series D, Series E and Series F Stock (or Series F-1 Preferred
Stock issuable or issued upon conversion of Series F Stock) originally purchased
by J&J pursuant to the Series D Purchase Agreement, Series E Purchase Agreement
and the Series F Purchase Agreement, J&J shall be entitled to appoint a
representative (the "J&J Representative") to attend all meetings of the Board of
Directors of the Company, and the Company shall provide J&J with copies of all
notices of such meetings and all other written materials provided to the
Directors of the Company at the same time as such notices and written materials
are provided to the Directors of the Company. J&J acknowledges and agrees that
the Company's management shall have the right to exclude the J&J Representative
from all or portions of meetings of the Board of Directors or omit to provide
the J&J Representative with certain information if the Company's management
believes it is necessary in order to preserve the attorney-client privilege or
fulfill the Company's obligations with respect to confidential or proprietary
information of third parties, or if such meeting or information involves matters
concerning the Company's relationship or prospective relationship with J&J or
its affiliates or competitors of J&J or its affiliates or other situations where
a director would customarily not participate in the meeting or be provided such
information. In addition, J&J acknowledges and agrees that J&J and the J&J
Representative will maintain the confidentiality of all information obtained
through the J&J Representative's position as a director of the Company, except
to the extent (a) such information is already in J&J's possession, (b) it
becomes public knowledge other than as a result of J&J's actions or inactions,
(c) J&J rightfully obtains it subsequently from a third party, (d) J&J develops
it independently and without use of the information provided by the Company, or
(e) it is approved in writing for release by the Company.
24
<PAGE> 27
The parties have executed this Amended and Restated Investor Rights
Agreement as of the date first written above.
COMPANY:
ACLARA BIOSCIENCES, INC.
By:
--------------------------------------
Joseph M. Limber, President
Address: 1288 Pear Avenue
Mountain View, CA 94043-1432
Tel: (650) 210-1200
Fax: (650) 210-1210
<PAGE> 1
EXHIBIT 10.5
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of January 19, 2000, by and between Joseph M. Limber (the
"Employee") and ACLARA BioSciences, Inc., a Delaware corporation (the
"Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee, an executive officer of the Company, and can
cause the Employee to consider alternative employment opportunities. The Board
has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
or her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon termination of the Employee's employment in connection
with a Change of Control, which benefits are intended to provide the Employee
with sufficient security to encourage the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Employee by the Company,
the parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as defined
under applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of the Company's then existing employee plans and written policies in
effect at the time of termination. The terms of this Agreement shall terminate
upon the earlier of
<PAGE> 2
(i) the date on which Employee ceases to be employed as an executive officer of
the Company, other than as a result of an involuntary termination by the Company
without Cause (ii) the date that all obligations of the parties hereunder have
been satisfied, or (iii) one (1) year after a Change of Control. A termination
of the terms of this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall not affect the
payment or provision of compensation or benefits on account of a termination of
employment occurring prior to the termination of the terms of this Agreement.
2. Stock Options. Subject to Sections 4 and 5 below, in the event
of an Involuntary Termination of Employee's employment with the Company within
one year following a Change of Control, each stock option granted for the
Company's securities held by the Employee shall become fully vested and
immediately exercisable on the effective date of the Involuntary Termination and
shall be exercisable to the extent so vested in accordance with the provisions
of the stock option agreement and stock option plan pursuant to which such stock
option was granted.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) Merger/Sale of Assets. A merger or
consolidation of the Company whether or not approved by the Board of Directors
of the Company, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of January
1, 2000 or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual
2
<PAGE> 3
whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence or
willful misconduct in the performance of the Employee's duties to the Company
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company or its subsidiaries,
(ii) repeated unexplained or unjustified absence from the Company, (iii) a
material and willful violation of any federal or state law; (iv) commission of
any act of fraud with respect to the Company; or (v) conviction of a felony or a
crime involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by the Board
of Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination"
shall include any termination by the Company other than for Cause and the
Employee's voluntary termination, upon 30 days prior written notice to the
Company, following (i) any reduction of the Employee's base compensation (other
than in connection with a general decrease in base salaries for most similarly
situated employees of the successor corporation); or (ii) the Employee's refusal
to relocate to a location more than 50 miles from the Company's current
location.
4. Limitation-on Payments. To the extent that any of the payments
or benefits provided for in this Agreement to the Employee constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and, but for this Section 5, would be subject to
the excise tax imposed by Section 4999 of the Code, the Company shall reduce the
aggregate amount of such payments and benefits such that the present value
thereof (as determined under the Code and the applicable regulations) is equal
to 2.99 times the Employee's "base amount" as defined in Section 28OG(b)(3) of
the Code.
5. Certain Business Combinations. In the event it is determined
by the Board, upon consultation with Company management and the Company's
independent auditors, that the enforcement of any Section of this Agreement,
including, but not limited to, Section 2 hereof, which allows for the
acceleration-of-vesting of option shares upon the effective date of an
Involuntary Termination within one year following a Change of Control, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void. For purposes of this Section 5, the Board's determination shall require
the unanimous approval of the non-employee Board members.
6. Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to
3
<PAGE> 4
the benefit of, and be enforceable by, the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
7. Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor, except as
otherwise provided in this Agreement, shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void; provided, however, that the parties acknowledge that (i) the Company and
Employee are parties to a prior agreement that provides certain
acceleration-of-vesting benefits to Employee in the event of a change of control
(the "Prior Agreement"), and (ii) the terms of the Prior Agreement shall be of
full force and effect in the event that the provisions of Section 5 hereof
prevent the Employee from receiving the benefits set forth in Section 2 hereof.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this
Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of
4
<PAGE> 5
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or unenforceable, and a suitable and equitable term or
provision shall be substituted therefor to carry out, insofar as may be valid
and enforceable, the intent and purpose of the invalid or unenforceable term or
provision.
(f) Arbitration. Any dispute or controversy arising under
or in connection with this Agreement may be settled at the option of either
party by binding arbitration in the County of Santa Clara, California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear
their own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a section of this Agreement shall mean the corporation that actually employs the
Employee.
(k) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
ACLARA BIOSCIENCES, INC. EMPLOYEE
By: /s/ WENDY R. HITCHCOCK /s/ JOSEPH M. LIMBER
------------------------------- -----------------------------------
Title: Secretary Joseph M. Limber
---------------------------- -----------------------------------
Printed Name
5
<PAGE> 1
EXHIBIT 10.6
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of January 19, 2000, by and between Herbert H. Hooper (the
"Employee") and ACLARA BioSciences, Inc., a Delaware corporation (the
"Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee, an executive officer of the Company, and can
cause the Employee to consider alternative employment opportunities. The Board
has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
or her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon termination of the Employee's employment in connection
with a Change of Control, which benefits are intended to provide the Employee
with sufficient security to encourage the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Employee by the Company,
the parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as defined
under applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of the Company's then existing employee plans and written policies in
effect at the time of termination. The terms of this Agreement shall terminate
upon the earlier of
<PAGE> 2
(i) the date on which Employee ceases to be employed as an executive officer of
the Company, other than as a result of an involuntary termination by the Company
without Cause (ii) the date that all obligations of the parties hereunder have
been satisfied, or (iii) one (1) year after a Change of Control. A termination
of the terms of this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall not affect the
payment or provision of compensation or benefits on account of a termination of
employment occurring prior to the termination of the terms of this Agreement.
2. Stock Options. Subject to Sections 4 and 5 below, in the event
of an Involuntary Termination of Employee's employment with the Company within
one year following a Change of Control, each stock option granted for the
Company's securities held by the Employee shall become fully vested and
immediately exercisable on the effective date of the Involuntary Termination and
shall be exercisable to the extent so vested in accordance with the provisions
of the stock option agreement and stock option plan pursuant to which such stock
option was granted.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) Merger/Sale of Assets. A merger or
consolidation of the Company whether or not approved by the Board of Directors
of the Company, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of January
1, 2000 or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual
2
<PAGE> 3
whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence or
willful misconduct in the performance of the Employee's duties to the Company
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company or its subsidiaries,
(ii) repeated unexplained or unjustified absence from the Company, (iii) a
material and willful violation of any federal or state law; (iv) commission of
any act of fraud with respect to the Company; or (v) conviction of a felony or a
crime involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by the Board
of Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination"
shall include any termination by the Company other than for Cause and the
Employee's voluntary termination, upon 30 days prior written notice to the
Company, following (i) any reduction of the Employee's base compensation (other
than in connection with a general decrease in base salaries for most similarly
situated employees of the successor corporation); or (ii) the Employee's refusal
to relocate to a location more than 50 miles from the Company's current
location.
4. Limitation-on Payments. To the extent that any of the payments
or benefits provided for in this Agreement to the Employee constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and, but for this Section 5, would be subject to
the excise tax imposed by Section 4999 of the Code, the Company shall reduce the
aggregate amount of such payments and benefits such that the present value
thereof (as determined under the Code and the applicable regulations) is equal
to 2.99 times the Employee's "base amount" as defined in Section 28OG(b)(3) of
the Code.
5. Certain Business Combinations. In the event it is determined
by the Board, upon consultation with Company management and the Company's
independent auditors, that the enforcement of any Section of this Agreement,
including, but not limited to, Section 2 hereof, which allows for the
acceleration-of-vesting of option shares upon the effective date of an
Involuntary Termination within one year following a Change of Control, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void. For purposes of this Section 5, the Board's determination shall require
the unanimous approval of the non-employee Board members.
6. Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to
3
<PAGE> 4
the benefit of, and be enforceable by, the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
7. Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor, except as
otherwise provided in this Agreement, shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void; provided, however, that the parties acknowledge that (i) the Company and
Employee are parties to a prior agreement that provides certain
acceleration-of-vesting benefits to Employee in the event of a change of control
(the "Prior Agreement"), and (ii) the terms of the Prior Agreement shall be of
full force and effect in the event that the provisions of Section 5 hereof
prevent the Employee from receiving the benefits set forth in Section 2 hereof.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this
Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of
4
<PAGE> 5
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or unenforceable, and a suitable and equitable term or
provision shall be substituted therefor to carry out, insofar as may be valid
and enforceable, the intent and purpose of the invalid or unenforceable term or
provision.
(f) Arbitration. Any dispute or controversy arising under
or in connection with this Agreement may be settled at the option of either
party by binding arbitration in the County of Santa Clara, California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear
their own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a section of this Agreement shall mean the corporation that actually employs the
Employee.
(k) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
ACLARA BIOSCIENCES, INC. EMPLOYEE
By: /s/ JOSEPH M. LIMBER /s/ HERBERT H. HOOPER
------------------------------- -----------------------------------
Title: CEO Herbert H. Hooper
---------------------------- -----------------------------------
Printed Name
5
<PAGE> 1
EXHIBIT 10.7
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of January 19, 2000, by and between Wendy R. Hitchcock (the
"Employee") and ACLARA BioSciences, Inc., a Delaware corporation (the
"Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee, an executive officer of the Company, and can
cause the Employee to consider alternative employment opportunities. The Board
has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.
B. The Board believes that it is in the best interests of the Company
and its stockholders to provide the Employee with an incentive to continue his
or her employment with the Company.
C. The Board believes that it is imperative to provide the Employee with
certain benefits upon termination of the Employee's employment in connection
with a Change of Control, which benefits are intended to provide the Employee
with sufficient security to encourage the Employee to remain with the Company
notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 3 below.
In consideration of the mutual covenants contained in this Agreement,
and in consideration of the continuing employment of Employee by the Company,
the parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge
that the Employee's employment is and shall continue to be at-will, as defined
under applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement, or as may otherwise be available in accordance with
the terms of the Company's then existing employee plans and written policies in
effect at the time of termination. The terms of this Agreement shall terminate
upon the earlier of
<PAGE> 2
(i) the date on which Employee ceases to be employed as an executive officer of
the Company, other than as a result of an involuntary termination by the Company
without Cause (ii) the date that all obligations of the parties hereunder have
been satisfied, or (iii) one (1) year after a Change of Control. A termination
of the terms of this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall not affect the
payment or provision of compensation or benefits on account of a termination of
employment occurring prior to the termination of the terms of this Agreement.
2. Stock Options. Subject to Sections 4 and 5 below, in the event
of an Involuntary Termination of Employee's employment with the Company within
one year following a Change of Control, each stock option granted for the
Company's securities held by the Employee shall become fully vested and
immediately exercisable on the effective date of the Involuntary Termination and
shall be exercisable to the extent so vested in accordance with the provisions
of the stock option agreement and stock option plan pursuant to which such stock
option was granted.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing twenty percent
(20%) or more of the total voting power represented by the Company's then
outstanding voting securities without the approval of the Board of Directors of
the Company; or
(ii) Merger/Sale of Assets. A merger or
consolidation of the Company whether or not approved by the Board of Directors
of the Company, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of January
1, 2000 or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual
2
<PAGE> 3
whose election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence or
willful misconduct in the performance of the Employee's duties to the Company
where such gross negligence or willful misconduct has resulted or is likely to
result in substantial and material damage to the Company or its subsidiaries,
(ii) repeated unexplained or unjustified absence from the Company, (iii) a
material and willful violation of any federal or state law; (iv) commission of
any act of fraud with respect to the Company; or (v) conviction of a felony or a
crime involving moral turpitude causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by the Board
of Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination"
shall include any termination by the Company other than for Cause and the
Employee's voluntary termination, upon 30 days prior written notice to the
Company, following (i) any reduction of the Employee's base compensation (other
than in connection with a general decrease in base salaries for most similarly
situated employees of the successor corporation); or (ii) the Employee's refusal
to relocate to a location more than 50 miles from the Company's current
location.
4. Limitation-on Payments. To the extent that any of the payments
or benefits provided for in this Agreement to the Employee constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and, but for this Section 5, would be subject to
the excise tax imposed by Section 4999 of the Code, the Company shall reduce the
aggregate amount of such payments and benefits such that the present value
thereof (as determined under the Code and the applicable regulations) is equal
to 2.99 times the Employee's "base amount" as defined in Section 28OG(b)(3) of
the Code.
5. Certain Business Combinations. In the event it is determined
by the Board, upon consultation with Company management and the Company's
independent auditors, that the enforcement of any Section of this Agreement,
including, but not limited to, Section 2 hereof, which allows for the
acceleration-of-vesting of option shares upon the effective date of an
Involuntary Termination within one year following a Change of Control, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void. For purposes of this Section 5, the Board's determination shall require
the unanimous approval of the non-employee Board members.
6. Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, lease, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company's business and/or assets
shall assume the obligations under this Agreement and agree expressly to perform
the obligations under this Agreement in the same manner and to the same extent
as the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to
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<PAGE> 4
the benefit of, and be enforceable by, the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
7. Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. Mailed notices to the Employee
shall be addressed to the Employee at the home address which the Employee most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.
8. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employee shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor, except as
otherwise provided in this Agreement, shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
(b) Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof. This Agreement
supersedes any agreement of the same title and concerning similar subject matter
dated prior to the date of this Agreement, and by execution of this Agreement
both parties agree that any such predecessor agreement shall be deemed null and
void; provided, however, that the parties acknowledge that (i) the Company and
Employee are parties to a prior agreement that provides certain
acceleration-of-vesting benefits to Employee in the event of a change of control
(the "Prior Agreement"), and (ii) the terms of the Prior Agreement shall be of
full force and effect in the event that the provisions of Section 5 hereof
prevent the Employee from receiving the benefits set forth in Section 2 hereof.
(d) Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this
Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of
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<PAGE> 5
such invalidity or unenforceability without invalidating or rendering
unenforceable the remaining terms and provisions of this Agreement or the
application of such terms and provisions to circumstances other than those as to
which it is held invalid or unenforceable, and a suitable and equitable term or
provision shall be substituted therefor to carry out, insofar as may be valid
and enforceable, the intent and purpose of the invalid or unenforceable term or
provision.
(f) Arbitration. Any dispute or controversy arising under
or in connection with this Agreement may be settled at the option of either
party by binding arbitration in the County of Santa Clara, California, in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. Punitive damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear
their own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a section of this Agreement shall mean the corporation that actually employs the
Employee.
(k) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
ACLARA BIOSCIENCES, INC. EMPLOYEE
By: /s/ JOSEPH M. LIMBER /s/ WENDY R. HITCHCOCK
------------------------------- -----------------------------------
Title: CEO Wendy R. Hitchcock
---------------------------- -----------------------------------
Printed Name
5
<PAGE> 1
Exhibit 10.8
EXHIBIT "A"
BASIC LEASE INFORMATION
INDUSTRIAL NET
<TABLE>
<S> <C>
LEASE DATE: March 1, 1999
(same as date in first paragraph of
Lease)
TENANT: ACLARA BIOSCIENCES, INC., a Delaware
corporation
TENANT'S NOTICE ADDRESS: 1288 Pear Avenue, Mountain View,
California
TENANT'S BILLING ADDRESS: 1288 Pear Avenue, Mountain View,
California
TENANT Matthew Franklin,
CONTACT: Chief Financial
Officer
LANDLORD: THE PEAR AVENUE GROUP, a California
family limited partnership
LANDLORD'S NOTICE ADDRESS: THE PEAR AVENUE GROUP
11035 Eastbrook Avenue
Los Altos, California 94024
LANDLORD'S REMITTANCE ADDRESS: THE PEAR AVENUE GROUP
11035 Eastbrook Avenue
Los Altos, California 94024
PROJECT DESCRIPTION: That certain Building and common area,
including without limitation, the
parking lot, landscaped area, walkways
located at 1288 Pear Avenue, Mountain
View, California
BUILDING DESCRIPTION: That certain research and development
building located at 1288 Pear Avenue,
Mountain View, California
PREMISES: The entire Building consisting of
approximately 44,210 rentable square
feet commonly known as 1288 Pear
Avenue, Mountain View, California
PERMITTED USE: General Office, storage, research and
development, light manufacturing of
biosciences and biotech products and
all legally related uses related to
biosciences and biotech products
PARKING DENSITY: See Parking Plan attached hereto as
Exhibit B
SCHEDULED TERM COMMENCEMENT DATE: July 16, 1999
SCHEDULE LENGTH OF TERM: One Hundred Twenty (120 Months
("Term")
SCHEDULED TERM EXPIRATION DATE: July 15, 2009
RENT:
BASE RENT: Months 1 through 4 $0 per month
Months 5 through 12 $86,210 per month
Months 13 through 24 $86,227 per month
Months 25 through 36 $92,350 per month
Months 37 through 48 $98,583 per month
Months 49 through 60 $98,928 per month
Months 61 through 72 $102,390 per month
Months 73 through 84 $105,974 per month
Months 85 through 96 $109,683 per month
</TABLE>
<PAGE> 2
Months 97 through 108 $113,522 per
month
Months 109 through 120 $117,495 per
month
Month 1 commences on the Term
Commencement Date (not the Delivery Date).
ESTIMATED FIRST YEAR OPERATING
EXPENSES: $____________
SECURITY DEPOSIT: $100,000
TENANT'S PROPORTIONATE SHARE:
OF BUILDING: One Hundred Percent (100%)
OF PROJECT: One Hundred Percent (100%)
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
LANDLORD: TENANT:
THE PEAR AVENUE GROUP, ACLARA BIOSCIENCES, INC.,
a California family limited partnership a Delaware corporation
By: /s/ DONNA REHRMANN By: /s/ JOSEPH M. LIMBER
----------------------------------- ------------------------------
Print Name: Donna Rehrmann Print Name: Joseph M. Limber
Title: General Partner Title: President, CEO
---------------------------
By: /s/ GEORGE REHRMANN By: /s/ BERTRAM ROWLAND
----------------------------------- -----------------------------
Print Name: George Rehrmann Print Name: Bertram Rowland
Title: General Partner Title: General Counsel
---------------------------
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Basic Lease Information ............................................. 1
Table of Contents ................................................... 2
1. Premises ............................................................ 1
2. Possession and Lease Commencement ................................... 1
3. Term ................................................................ 3
4. Use ................................................................. 3
5. Rules and Regulations ............................................... 8
6. Rent ................................................................ 8
7. Operating Expenses .................................................. 9
8. Insurance and Indemnification ....................................... 12
9. Waiver of Subrogation ............................................... 15
10. Landlord's Repairs and Maintenance .................................. 15
11. Tenant's Repairs and Maintenance .................................... 15
12. Alterations ......................................................... 16
13. Signs ............................................................... 17
14. Inspection/Posting Notices .......................................... 17
15. Services and Utilities .............................................. 18
16. Subordination ....................................................... 18
17. Financial Statements ................................................ 19
18. Estoppel Certificate ................................................ 19
19. Security Deposit .................................................... 19
20. Limitation of Tenant's Remedies ..................................... 20
21. Assignment and Subletting ........................................... 20
22. Authority of Tenant ................................................. 22
23. Condemnation ........................................................ 22
24. Casualty Damage ..................................................... 23
25. Holding Over ........................................................ 25
26. Default ............................................................. 25
27. Liens ............................................................... 27
28. Substitution ........................................................ 27
29. Transfers by Landlord ............................................... 28
30. Right of Landlord to Perform Tenant's Covenants ..................... 28
31. Waiver .............................................................. 28
32. Notices ............................................................. 28
33. Attorney's Fees .................................................... 29
34. Successors and Assigns .............................................. 29
35. Force Majeure ....................................................... 29
36. Surrender of Premises ............................................... 29
37. Miscellaneous ....................................................... 29
38. Additional Provisions ............................................... 31
39. Jury Trial Waiver ................................................... 33
Signatures .......................................................... 33
</TABLE>
<PAGE> 4
Exhibits:
<TABLE>
<S> <C>
Exhibit A.......................................................The Premises and Project
Exhibit B...................................................................Parking Plan
Exhibit C..................................................Tenant's Initial Improvements
Exhibit D........................................................Warm Shell Improvements
Exhibit E................................................................Landlord's Work
Exhibit F..................................................Permitted Hazardous Materials
Exhibit G..........................................................Rules and Regulations
Exhibit H...........................................................................Note
Exhibit I.............................................................Security Agreement
Exhibit J...............................................................Letter of Credit
</TABLE>
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<PAGE> 5
LEASE
THIS LEASE is made as of the 1st day of March, 1999, by and between The Pear
Avenue Group, a California family limited partnership (hereinafter called
"Landlord"), and ACLARA BIOSCIENCES, INC., a Delaware corporation (hereinafter
called "Tenant").
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the
terms and conditions hereinafter set forth, those premises (the "Premises")
outlined in Exhibit A and described in the Basic Lease Information. The Premises
shall be all of a building (the "Building") and of a project (the "Project"),
which may consist of more than one building and additional facilities, as
described in the Basic Lease Information. The Building and Project are outlined
on Exhibit A.
2. POSSESSION AND LEASE COMMENCEMENT
A. EXISTING IMPROVEMENTS. If this Lease pertains to a Premises in which the
interior improvements have already been constructed ("Existing Improvements"),
the provisions of this Paragraph 2.A. shall apply and the term commencement date
("TERM COMMENCEMENT DATE") shall be the earlier of the date on which: (1) Tenant
takes possession of some or all of the Premises; or (2) Landlord notifies Tenant
that Tenant may occupy the Premises. If for any reason Landlord cannot deliver
possession of the Premises to Tenant on the scheduled Term Commencement Date,
Landlord shall not be subject to any liability therefor, nor shall Landlord be
in default hereunder nor shall such failure affect the validity of this Lease,
and Tenant agrees to accept possession of the Premises at such time as Landlord
is able to deliver the same, which date shall then be deemed the Term
Commencement Date. Tenant shall not be liable for any Rent (defined below) for
any period prior to the Term Commencement Date. Tenant acknowledges that Tenant
has inspected and accepts the Premises in their present condition, broom clean,
"AS IS," and as suitable for, the Permitted Use (as defined below), and for
Tenant's intended operations in the Premises. Tenant agrees that the Premises
and other improvements are in good and satisfactory condition as of when
possession was taken. Tenant further acknowledges that no representations as to
the condition or repair of the Premises nor promises to alter, remodel or
improve the Premises have been made by Landlord or any agents of Landlord unless
such are expressly set forth in this Lease. Upon Landlord's request, Tenant
shall promptly execute and return to Landlord a "START-UP LETTER" in which
Tenant shall agree, among other things, to acceptance of the Premises and to the
determination of the Term Commencement Date, in accordance with the terms of
this Lease, but Tenant's failure or refusal to do so shall not negate Tenant's
acceptance of the Premises or affect determination of the Term Commencement
Date.
B. CONSTRUCTION OF IMPROVEMENTS. Because this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph. 2.B. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("TERM COMMENCEMENT DATE") shall be the
earlier of (i) July 16, 1999 or (ii) the date on which the improvements to be
constructed or performed in the Premises by Tenant shall have been substantially
completed (as defined in Paragraph 2.E below) in accordance with the plans and
specifications, described in Exhibit C and Exhibit D (collectively "Tenant's
Initial Improvements"). The improvements described in Exhibit D are also
referred to herein as the "WARM SHELL IMPROVEMENTS." Landlord shall allow Tenant
to enter the Premises immediately upon the full execution and delivery of this
Lease or at any time thereafter prior to the Term Commencement Date requested by
Tenant (the "DELIVERY DATE") for the purpose of constructing the Tenant's
Initial Improvements and installing its furniture, fixtures and equipment on the
condition that during such early entry all provisions of this Lease shall be
applicable and shall be complied with by Tenant (except that no Base Rent shall
be due until the date set forth in the Basic Lease Information. If for any
reason Landlord cannot deliver occupancy of the Premises to Tenant on the
Delivery Date, or possession of the Promises to Tenant on the scheduled Term
Commencement Date, Landlord shall not be subject to any liability therefor, nor
shall Landlord be in default hereunder nor shall such failure affect the
validity of this Lease, and Tenant agrees to accept possession of the Premises
at such time as such delivery of possession occurs, which date shall then be
deemed the Term Commencement Date. Tenant shall not be liable for any Rent for
any period prior to the Term Commencement Date (but without affecting any
obligations of Tenant under any improvement agreement appended to this lease).
Upon Landlord's request, Tenant shall promptly execute and return to Landlord a
"START-UP" LETTER" in which Tenant shall agree, among other things, to
acceptance of the Premises and to the determination of the Delivery Date, and
Term Commencement Date, in accordance with the terms of this Lease, but Tenant's
failure or refusal to do so shall not negate Tenant's acceptance of the Premises
or affect determination of the Term Commencement Date. Notwithstanding anything
to the contrary herein, if the Delivery Date has
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<PAGE> 6
not occurred by April 1, 1999, through no fault of Tenant, Tenant shall have the
right to terminate this Lease and Landlord shall promptly refund all monies and
the LC previously tendered by Tenant in connection with its execution of this
Lease.
C. PREPARATION AND APPROVAL OF CONSTRUCTION DRAWINGS.
(1) Tenant shall retain Devcon ("Devcon") as its general contractor to
construct the Initial Tenant Improvements. Tenant acknowledges that
Landlord's Work was and is being contracted by Devcon. Tenant shall
retain Dowler-Gruman or any other architect/space planner reasonably
approved by Landlord (the "ARCHITECT") to prepare the Construction
Drawings (as defined below) for the Tenant Initial Improvements, which
approval shall be granted or denied by Landlord within three (3)
business days after Tenant has submitted the proposed architect to
Landlord. Tenant has retained, through Devcon, the following engineering
consultants: Western Allied, KDS Plumbing, and Cupertino Electric, which
engineers are hereby approved by Landlord (the "ENGINEERS"),to prepare
all plans and engineering working drawings relating to the structural,
mechanical, electrical, plumbing, HVAC, life safety, and sprinkler work
of the Tenant's Initial Improvements. The plans and drawings to be
prepared by Architect and the Engineers hereunder shall be known
collectively as the "CONSTRUCTION DRAWINGS." All Construction Drawings
shall be subject to Landlord's approval pursuant to the terms set forth
this Lease. The Construction Drawings described in Exhibits C and D are
hereby approved by Landlord. Landlord's review of the Construction
Drawings as set forth in this Lease, shall be for its sole purpose and
shall not imply Landlord's review of the same, or obligate Landlord to
review the same, for quality, design, compliance with laws or other like
matters.
(2) Tenant and the Architect shall promptly prepare the final space plan
and plans and specifications for Tenant Initial Improvements in the
Premises (collectively, the "Final Plans"), and shall deliver the Final
Plans to Landlord for Landlord's approval. Landlord shall, within five
(5) business days after Landlord receives such Final Plans, (i) approve
the Final Plans, (ii) approve the Final Plans subject to specified
conditions to be complied with when the Final Working Drawings (as
defined below) are submitted by Tenant to Landlord, or (iii) disapprove
the Final Plans and return the same to Tenant with requested revisions;
provided however that Landlord shall only be entitled to disapprove the
Final Plans for the following reasons: (i) an adverse effect on the
structural integrity of the Building; (ii) noncompliance with laws;
(iii) an adverse effect on the systems and equipment of the Building;
(iv) an adverse effect on the exterior appearance of the Building; or
(v) non-conformance with the Warm Shell Improvements or with plans and
specifications previously approved by Landlord and not modified by
Tenant (individually or collectively, a "DESIGN PROBLEM"). If Landlord
disapproves the Final Plans, Tenant shall promptly resubmit the Final
Plans to Landlord revised to address the Design Problems indicated by
Landlord.
(3) After the Final Plans are approved by Landlord, Tenant, the
Architect and the Engineers shall promptly complete the architectural
and engineering drawings for the Premises in a form which is complete to
allow subcontractors to bid on the work and to obtain all applicable
permits (collectively, the "FINAL WORKING DRAWINGS") and shall submit
the same to Landlord for Landlord's approval. The Final Working Drawings
may be submitted in one or more stages at one or more times, provided
that Tenant shall ultimately supply Landlord with two (2) completed
copies signed by Tenant of such Final Working Drawings. Landlord shall,
within five (5) business days after Landlord receives the Final Working
Drawings, either (i) approve the Final Working Drawings, (ii) approve
the Final Working Drawings subject to the specified conditions to be
satisfied by Tenant prior to submitting the Approved Working Drawings
for permits as set forth in the preceding subparagraph (2), if the Final
Working Drawings do not comply with the Final Plans or contain a Design
Problem, or (iii) disapprove and return the Final Working Drawings to
Tenant with requested revisions if the Final Working Drawings do not
comply with the Final Plans or contain a Design Problem. If Landlord
disapproves the Final Working Drawings, Tenant shall promptly resubmit
the Final Working Drawings to Landlord revised to address the Design
Problems indicated by Landlord. Tenant's Initial Improvements shall be
constructed in accordance with the Final Plans, the Final Working
Drawings, all applicable Regulations, and in a good and workmanlike
manner, free of defects and using new materials and equipment of good
quality.
D. LANDLORD'S WORK. The improvements constructed and/or to be constructed by
Landlord in accordance with the plans and specifications described in EXHIBIT E
("LANDLORD'S WORK") are to be substantially completed by the Term Commencement
Date. Landlord's Work shall be constructed in accordance with the plans and
specifications set forth in Exhibit E and all applicable Regulations, in a good
and workmanlike manner, free of defects and using new materials and equipment of
good quality. Notwithstanding anything to the contrary contained in this Lease,
2
<PAGE> 7
Tenant's acceptance of the Premises or submission of a "PUNCH LIST" regarding
the Landlord's Work shall not be deemed a waiver of Tenant's right to have
defects in the Landlord's Work or the Premises repaired at no cost to Tenant.
Tenant shall give notice to Landlord whenever any such defect becomes reasonably
apparent, and Landlord shall repair such defect as soon as practicable. Landlord
agrees to cooperate with Tenant (without any obligation to make any payments or
to incur any additional cost or expense which would not be deemed an Operating
Expense (as defined below)) to enforce all warranties relating to the Landlord's
Work which may reduce any repair or maintenance obligations of Tenant hereunder.
E. SUBSTANTIAL COMPLETION OF TENANT'S INITIAL IMPROVEMENTS. Tenant's Initial
Improvements shall be deemed to be "SUBSTANTIALLY COMPLETE," and the phrase,
"SUBSTANTIAL COMPLETION" as used herein in connection with Tenant's Initial
Improvements is defined as, when (i) Tenant's Architect or Devcon shall have
certified in writing that Tenant's Initial Improvements have been substantially
completed, or have recorded with the County Recorder of Santa Clara County a
Notice of Completion with respect to Tenant's Initial Improvements pursuant to
California Civil Code Section 3093, and (ii) any compliance review customarily
undertaken by the City of Mountain View and County of Santa Clara has been
completed for legal occupancy, or (iii) the governmental entity responsible for
issuing certificates of occupancy or equivalent occupancy approvals has issued
the same or has provided Tenant or Landlord with all documents or occupancy
approvals (written or oral), which are customarily given prior to the actual
delivery of a certificate of occupancy and pursuant to which Tenant may legally
occupy the Premises, whichever first occurs. Tenant's Initial Improvements shall
be deemed to be Substantially Complete notwithstanding any requirement for
Tenant to complete "PUNCH LIST" or similar minor corrective work.
F. SUBSTANTIAL COMPLETION OF LANDLORD'S WORK. Landlord's Work shall be deemed to
be "SUBSTANTIALLY COMPLETE," and the phrase, "SUBSTANTIAL COMPLETION" as used
herein in connection with Landlord's Work is defined as, when (i) Landlord's
architect or contractor shall have certified in writing that Landlord's Work
have been substantially completed, or have recorded with the County Recorder of
Santa Clara County a Notice of Completion with respect to Landlord's Work
pursuant to California Civil Code Section 3093, and (ii) any compliance review
customarily undertaken by the City and County of Santa Clara County ???? has
been completed with respect to such work. Landlord's Work shall be deemed to be
Substantially Complete notwithstanding any requirement for Landlord to complete
"PUNCH LIST" or similar minor corrective work. Tenant acknowledges and agrees
that (i) that upon the Substantial Completion of Landlord's Work the Premises
will not be completed for legal occupancy and no certificate of occupancy will
be obtained, and (ii) that portion of Landlord's Work to be constructed within
the Building is substantially complete. Prior to the Term Commencement Date,
Landlord shall substantially complete the remaining portion of Landlord's Work
to be completed on the exterior of the Building and to the exterior of the
Premises.
G. DELAY IN TERM COMMENCEMENT DATE. Notwithstanding any other provision in this
Lease to the contrary, the Term Commencement Date shall be postponed for each
day that Tenant has been delayed in completing Tenant's Initial Improvements due
to a "LANDLORD DELAY." A Landlord Delay is a delay attributable to: (a)
Landlord's failure to approve the Construction Drawings, Final Plans or Final
Working Drawings or to disapprove of the same within the time periods and for
the reasons set forth in Paragraph 2.C, or if disapproved within such time
period, the failure to specifically identify the Design Problem for which such
disapproval was given; (b) Landlord's failure to deliver possession of the
Premises to Tenant with the Landlord's Work substantially completed on the Term
Commencement Date; (c) Landlord's failure to deliver the Premises to Tenant on
the Delivery Date; (d) Landlord's failure to fund (or delays in Landlord's
funding) the Landlord's Loan as required below; and (e) Landlord's failure to
cooperate (without any obligation to make any payments or to incur any
additional cost or expense which would not be deemed an Operating Expense) with
Tenant in obtaining building permits for Tenant's Initial Improvements (to the
extent such cooperation is reasonably required).
3. TERM
The term of this Lease (the "TERM") shall commence on the Term
Commencement Date and continue in full force and effect for the number of months
specified as the Length of Term in the Basic Lease Information or until this
Lease is terminated as otherwise provided herein. If the Term Commencement Date
is a date other than the first day of the calendar month, the Term shall be the
number of months of the Length of Term in addition to the remainder of the
calendar month following the Term Commencement Date.
4. USE
A. GENERAL. Tenant shall use the Premises for the permitted use specified in the
Basic Lease Information ("PERMITTED USE") and for no other use or purpose.
Tenant shall use commercially reasonable efforts to control Tenant's employees,
agents, customers, visitors, invitees, licensees,
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contractors, assignees and subtenants (collectively, "TENANT'S PARTIES") so that
Tenant and Tenant's Parties cumulatively do not exceed the parking density
specified in the Basic Lease Information (the "PARKING DENSITY") at any time. So
long as Tenant is occupying the Premises, Tenant and Tenant's Parties shall have
the nonexclusive right to use, in common with other parties occupying the
Building or Project, the parking areas, driveways and other common areas of the
Building and Project, subject to the terms of this Lease and such rules and
regulations as Landlord may from time to time prescribe. Landlord reserves the
right, without notice or liability to Tenant, and without the same constituting
an actual or constructive eviction, to alter or modify the common areas from
time to time, including the location and configuration thereof, and the
amenities and facilities which Landlord may determine to provide from time to
time. Landlord's exercise of the foregoing rights shall not materially increase
Tenant's obligations or diminish Tenant's rights under this Lease, or interfere
with Tenant's parking rights.
B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibrations to emanate from the Premises or from any portion of the
common areas as a result of Tenant's or Tenant's Parties' use thereof in
violation of any Regulations (as defined below) or which would constitute a
public or private nuisance, nor take any action which would constitute a public
or private nuisance or would unreasonably disturb, obstruct or endanger
neighboring tenants or occupants, or unreasonably interfere with their use of
their respective premises or common areas. Storage outside the Premises of
materials, vehicles or any other items is prohibited, provided that Tenant shall
be permitted to store equipment outside the Premises within the enclosed outside
storage area to be constructed by Tenant as part of Tenant's Initial
Improvements, so long as such storage is done in compliance with Regulations and
the other terms of this Lease. Tenant shall not use or allow the Premises to be
used for any unlawful purpose, nor shall Tenant cause or maintain or permit any
nuisance in, on or about the Premises. Tenant shall not commit or permit the
commission of any waste in, on or about the Premises. Tenant shall not allow any
sale by auction upon the Premises, or place any loads upon the floors, walls or
ceilings which could endanger the structure, or place any Hazardous Materials in
the drainage system of the Premises, Building or Project in violation of any
Regulations. No waste, materials or refuse shall be dumped upon or permitted to
remain outside the Premises except in trash containers placed inside exterior
enclosures designated for that purpose by Landlord. Landlord shall not be
responsible to Tenant for the non-compliance by any other tenant or occupant of
the Building or Project with any of the above-referenced rules or any other
terms or provisions of such tenant's or occupant's lease or other contract.
C. COMPLIANCE WITH REGULATIONS. Landlord represents, to the best of its
knowledge, that as of the Delivery Date, Landlord's Work, the Building and the
Project are in compliance with all Regulations. Subject to the foregoing
sentence and the provisions of Paragraph 2 above, by entering the Promises,
Tenant accepts the Premises in the condition existing as of the date of such
entry. Tenant shall at its sole cost and expense strictly comply with all
existing or future applicable municipal, state and federal and other
governmental statutes, rules, requirements, regulations, laws and ordinances,
including zoning ordinances and regulations, and covenants, easements and
restrictions of record governing and relating to Tenant's and/or Tenant's
Parties' use, occupancy or possession of the Premises, Building or Project to
Tenant's and/or Tenant's Parties' use of the common areas, or to Tenant's and/or
Tenant's Parties' use, storage, generation or disposal of Hazardous Materials
on, in, about or from the Premises, Building and Project thereinafter defined)
(collectively "REGULATIONS"). Tenant shall at its sole cost and expense obtain
any and all licenses or permits necessary for Tenant's use of the Premises.
Tenant shall at its sole cost and expense promptly comply with the requirements
of any board of fire underwriters or other similar body now or hereafter
constituted. With respect to repairs or alterations required to comply with
Regulations or the requirements of any board of fire underwriters or similar
body which are generally applicable to the condition of the Building for use as
office/research and development/industrial space, and are not required or caused
by Tenant's or Tenant's Parties' particular use or activities or by Tenant's
Initial Improvements or any Alterations made by Tenant or Tenant's Parties',
Landlord shall make such repairs or alterations and the cost thereof shall be
included in Operating Expenses as provided in Paragraph 7.A below. Tenant shall
not do or permit anything to be done in, on, under or about the Project or bring
or keep anything which will in any way increase the rate of any insurance upon
the Premises, Building or Project or upon any contents therein or cause a
cancellation of said insurance or otherwise affect said insurance in any manner;
provided, however, that if Tenant pays the cost of any increase in insurance
caused by Tenant's permitted use of the Premises, Tenant shall not be deemed to
be in default hereunder. Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect and hold Landlord harmless from and against any
loss, cost, expense, damage, reasonable attorneys' fees or liability arising out
of the failure of Tenant or Tenant's Parties to comply with any Regulation,
except to the extent caused by the gross negligence or willful misconduct of
Landlord, its agents, employees or contractors. Tenant's obligations pursuant to
the foregoing indemnity shall survive the expiration or earlier termination of
this Lease.
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D. HAZARDOUS MATERIALS.
(1) As used in this Lease, "HAZARDOUS MATERIALS" shall include, but
not be limited to, hazardous, toxic and radioactive materials
and those substances defined as "HAZARDOUS SUBSTANCES,"
"HAZARDOUS MATERIALS," "HAZARDOUS WASTES," "TOXIC SUBSTANCES,"
or other similar designations in any Regulation. Tenant shall
not cause, or allow any of Tenant's Parties to cause, any
Hazardous Materials to be handled, used, generated, stored,
released or disposed of in, from, on, under or about the
Premises, the Building or the Project or surrounding land or
environment in violation of any Regulations. Notwithstanding the
foregoing, Tenant and Tenant's Parties may handle, store, use
and dispose of products containing small quantities of Hazardous
Materials for "GENERAL OFFICE PURPOSES" (such as toner for
copiers) to the extent customary and necessary for the Permitted
Use of the Premises, provided that Tenant and Tenant's Parties
shall always handle, store, use, and dispose of any such
Hazardous Materials in a safe and lawful manner in compliance
with all Regulations.
(2) Notwithstanding Paragraph 4.D.1, Tenant and Tenant's employees,
agents and representatives shall be permitted to handle, use,
generate, store, or dispose in, from, on, under or about the
Premises, the Building or the Project the Hazardous Materials
identified on Exhibit F attached hereto and by this reference
incorporated herein (the "PERMITTED HAZARDOUS MATERIALS") so
long as all of the conditions set forth in Paragraph 4.D are
complied with and satisfied. In accordance with changing
industry standards for the research and development,
manufacturing and assembly of Tenant's products, it is expected
that Tenant may change the quantities and types of Hazardous
Materials it uses in its business operations ("Additional
Materials"). After all necessary permits and approvals required
by any Regulations for such Additional Materials have been
obtained by Tenant, and provided that Tenant handles, uses,
stores, generates, and disposes of such Additional Materials in
conformance with all Regulations and this Paragraph 4.D, Tenant
shall be permitted to handle, use, store, generate and dispose
of such Additional Materials in or about the Premises. Tenant
shall submit an updated list of Permitted Hazardous Materials
and Additional Materials twice per calendar year. The right to
use, store, transport to and from the Premises and dispose of
the Permitted Hazardous Materials and/or the Additional
Materials is personal to ACLARA Biosciences Inc., a Delaware
corporation, ("ACLARA") and may not be assigned or otherwise
transferred, either as part of or separate from this Lease, by
ACLARA, except to a Permitted "Transferee (as defined below)
Without the prior written consent of Landlord which consent
shall not be unreasonably withheld. Notwithstanding the
provisions of the previous sentence to the contrary, (but
without limiting or restricting Landlord's approval rights set
forth in Paragraph 21 below) Tenant's approved assignee or
subtenant shall be permitted to handle, use, store, generate and
dispose of Permitted Hazardous Materials and Additional
Materials in or about the Premises, on the condition that (i)
all necessary permits and approvals required by any Regulations
for such Additional Materials have first been obtained by such
assignee or subtenant, (ii) such assignee or subtenant delivers
to Landlord a prior notice setting forth in reasonable detail
its anticipated use of any Permitted Hazardous Material or
Additional Materials and Landlord consents to such anticipated
use, which consent shall not be unreasonably withhold or
delayed, and (iii) such assignee or subtenant handles, uses,
stores, generates, and disposes of such Permitted Hazardous
Materials and/or Additional Materials approved by Landlord in
conformance with all Regulations and this Paragraph 4.D.
Notwithstanding any provision in this Lease to the contrary, at
no time shall Permitted Hazardous Materials or Additional
Materials be handled, used, generated, stored, or disposed in,
from, on, under of about the Promises, the Building or the
Project by Tenant or Tenant's Parties in excess of the
quantities customarily considered in Tenant's business to be
necessary for research or laboratory amounts (e.g., "B"
occupancies per the Uniform Building Code as opposed to "H"
occupancies per the Uniform Building Code).
(3) With respect to Tenant's or Tenant's Parties' handling, use,
generation, storage, or disposal of Hazardous Materials in, from
on or about the Premises, the Building or the Project, Tenant
shall keep and maintain the Premises, Building and Project in
compliance with, and shall not cause or knowingly permit the
Premises, Building and Project to be in violation of (i) any
Hazardous Materials management plan required to be prepared by
or for Tenant or Tenant's Parties under any Regulations (the
"PLAN"), or (ii) any Regulations. For purposes of this Lease,
Tenant shall not be considered to "knowingly permit" the
Premises the Building or the Project to be in violation of any
Plan or any Regulations unless Tenant or Tenant's Parties are
required to take affirmative action to investigate or remediate
such Hazardous Materials
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pursuant to this Lease, Tenant shall surrender the Premises in
as good a condition as when received by Tenant, reasonable wear
and tear excepted, it being specifically agreed to by Landlord
and Tenant that the presence at expiration or termination of
this Lease of Hazardous Materials which are generated, released,
discharged or disposed of by Tenant on, under or about the
Premises. Building or Project at levels requiring any
affirmative action by the owner, tenant, occupant and/or user
thereof pursuant to any Regulation, shall not be "REASONABLE
WEAR AND TEAR" as that term is used in this Lease.
Notwithstanding anything to the contrary herein, Tenant shall
not be responsible for any Hazardous Materials existing on or
about the Premises, the Building or the Project prior to the
Delivery Date.
(4) Tenant agrees to provide Landlord with (i) copies of all
reports, studies and written results of tests or inspections
conducted at the Premises with respect to Hazardous Materials,
whether conducted by Tenant or any other person including but
not limited to any governmental entity (collectively "REPORTS")
and (ii) copies of any Plan or similar documents delivered to,
or required by, any governmental entity. Tenant shall deliver
all Reports to Landlord no later than five (5) business days
following Tenant's receipt of such Reports. Notwithstanding the
foregoing to the contrary, Tenant shall have no obligation to
deliver to Landlord any Reports which either contain proprietary
information or are routine in nature and prepared by Tenant as
part of its normal course of business, unless and until any such
Reports are delivered to any governmental entity, in which case
such Reports shall be delivered to Landlord within five (5)
business days thereafter.
(5) Upon commencing any activity involving Hazardous Materials on
the Premises and continuing throughout the Term of this Lease,
Tenant shall initiate and maintain the systems set forth in
subparagraphs 4.D(5)(a) through 4.D(5)(d) below, inclusive, for
the routine monitoring of levels of Hazardous Materials which
may be present at the Premises or adjacent properties as the
result of Tenant's and/or Tenant's Parties' activities in, from,
on, under or about the Premises, Building and Project and for
continued compliance with the procedures and Regulations
concerning the handling, use, generation, storage, and disposed
in, from, on, under or about the Premises, the Building or the
Project of Hazardous Materials.
(a) Once every twelve (12) calendar months, during the Term,
unless there has been a Prohibited Release (as defined below) in
which case not less often than quarterly, Tenant shall provide
Landlord, at Tenant's sole expense, with a written report which
shall set forth the results of the monitoring of Hazardous
Materials during the previous twelve (12) period (or three (3)
month period, if applicable) required pursuant to any Regulation
or any other provision of this Lease. If there has been a
Prohibited Release, or if Landlord has a reasonable basis to
believe that a Prohibited Release has occurred in, from, on,
under or about the Premises, the Building or the Project,
Landlord may retain, at Tenant's expense, an independent
consultant experienced in the use and management of Hazardous
Materials for the purpose of reviewing any information received
by Landlord in connection with Hazardous Materials. Pursuant to
such review, Landlord's consultant may make recommendations in
connection with Tenant's control of Hazardous Materials on the
Premises. If the implementation of such recommendations is
necessary in order for Tenant to maintain full compliance with
all Regulations and Tenant has not otherwise implemented
alternative procedures which would cause Tenant to maintain full
compliance with all Regulations, Tenant shall be required to
implement the recommendations of Landlord's consultant.
(b) At reasonable times and upon reasonable prior notice,
Landlord and its representatives shall have the right, at the
following times, to enter the Premises in order to (1) conduct
testing, monitoring and analysis for Hazardous Materials
(including the installation and testing of permanent monitoring
wells); (2) review any documents, materials, inventory, notices
or correspondence to of from private parties or governmental
entities in connection therewith, but only when Landlord has a
reasonable basis to believe that a Prohibited Release has
occurred in, from, on, under or about the Premises, the Building
or the Project (Tenant may redact or otherwise delete therefrom
any proprietary information); and (3) review all storage, use
and disposal facilities and procedures associated with the
storage, use and disposal of Hazardous Materials (collectively
"INSPECTION"):
(c) Once every six (6) months for the first year after Tenant
introduces Hazardous Materials to the Premises pursuant to this
Lease and once in every twelve (12) months thereafter;
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(d) At any time during the term of this Lease if, in Landlord's
reasonable judgment, Tenant is in default of its obligations
under Paragraph 4 of this Lease; and
(e) Prior to Landlord retaining any independent consultants)
pursuant to the provisions of this Paragraph 4.D.5, Landlord
shall consult, in good faith, with Tenant with respect to the
need to retain such consultants. Also, prior to Landlord,
pursuant to the provisions of this Paragraph 4.D.5, installing,
placing or otherwise causing to be constructed any test wells on
or about the Project, Landlord shall consult, in good faith,
with Tenant with respect to the need to construct such test
wells. Landlord agrees to use commercially reasonably efforts to
not unreasonably interfere with Tenant's business operations in
the conduct of any Inspection.
If there has been a Prohibited Release, or if Landlord has a reasonable basis to
believe that a Prohibited Release has occurred in, from, on, under or about the
Premises, the Building or the Project, all costs and expenses reasonably
incurred by Landlord in connection with any Inspection pursuant to this
Paragraph 4.D. shall become due and payable by Tenant as Additional Rent, upon
presentation by Landlord of an invoice therefor.
(6) Tenant shall give immediate written notice to Landlord of:
(a) Any action, proceeding or non-routine inquiry by any
governmental authority (including, without limitation, the
California State Department of Health Services, the State or
any Regional Water Quality Control Board, the Bay Area Air
Quality Management District or any local governmental entity)
with respect to the presence of any Hazardous Material on the
Premises or the migration thereof from or to other property;
(b) All demands or claims made, or threatened by any third party
against Tenant or the Premises relating to any loss or injury
resulting from any Hazardous Materials; and
(c) Any spill, release, discharge or non-routine disposal of
Hazardous Materials that occurs with respect to the Premises,
Building and/or Project or Tenant's and/or Tenant's Parties'
operations which creates an independent reporting requirement
under any Regulation;
(d) All matters of which Tenant is required to give notice of
pursuant to any Regulation; and
(e) Tenant's discovery of any occurrence or condition on, under
or about the Promises or any part thereof that could cause the
Premises, Building or Project or any part thereof to be
classified as "BORDER-ZONE PROPERTY" under the provisions of any
Regulation.
(7) Landlord shall have the right to join and participate in, as a
party if it so elects, any legal proceedings or actions
affecting the Premises initiated in connection with any
Regulation and have its reasonable attorneys' fees in connection
therewith paid by Tenant as Additional Rent.
(8) Tenant shall indemnify, defend (by counsel reasonably acceptable
to Landlord), protect and hold Landlord harmless from and
against any and all claims, liabilities, losses, costs, loss of
rents, liens, damages, injuries or expenses (including
reasonable attorneys' and consultants' fees and court costs),
demands, causes of action, or judgments directly or indirectly
arising out of, attributable or related to the use, generation,
storage, release, disposal, manufacture, production, threatened
release, discharge, or presence of Permitted Hazardous Materials
or Hazardous Materials by Tenant or any of Tenant's Parties
(collectively a "RELEASE") in, on, under or about the Promises,
Building or Project or surrounding land or environment, which
indemnity shall include, without limitation, damages for
personal or bodily injury, property damage, damage to the
environment or natural resources occurring on or off the
Premises, losses attributable to diminution in value or adverse
effects on marketability, the cost of any investigation,
monitoring, government oversight, repair, removal, remediation,
restoration, abatement, and disposal, and the preparation of any
closure or other required plans (collectively "REMEDIAL WORK"),
whether such Remedial Work is required or necessary prior to or
following the expiration or earlier termination of this Lease.
In the event of the occurrence of a Release requiring Remedial Work, Tenant
shall, at its sole expense and within the time period required under applicable
Regulation or by any governmental
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entity having jurisdiction thereof) commence to perform and thereafter
diligently prosecute to completion such Remedial Work as is necessary to comply
with Regulations or order of any such governmental entity having jurisdiction
thereof. All such Remedial Work shall be performed in conformance with the
requirements of all applicable Regulations. All Remedial Work shall be performed
by one or more contractors, reasonably approved in advance in writing by
Landlord. All costs and expenses of such Remedial Work shall be paid by Tenant
including, without limitation, to the charges of such contractors) and
Landlord's reasonable out of pocket costs incurred in connection with monitoring
or review of such Remedial Work. In the event Tenant shall fail to timely
commence, or cause to be commenced, or fail to diligently prosecute to
completion such Remedial Work, Landlord may, but shelf not be required to, cause
such Remedial Work to be performed and all costs and expenses thereof, or
incurred in connection therewith, shall become immediately due and payable as
Additional Rent. For purposes of this Lease, the term "Prohibited Release" shall
mean a Release which requires Remedial Work.
(9) Neither the consent by Landlord to the use, generation, storage,
release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous
Materials shall excuse Tenant from Tenant's obligation of
indemnification pursuant to this Paragraph 4.D. Tenant's
obligations pursuant to the foregoing indemnity shall survive
the expiration or earlier termination of this Lease.
(10) Landlord hereby represents and warrants to Tenant that, to the
best of Landlord's actual present knowledge: (i) the Premises,
Building and Project are as of the date of this Lease in
compliance with all Regulations regarding Hazardous Materials,
and (ii) Landlord has not received any written notice of any
violation of any Regulations relating to Hazardous Materials
existing as of the date of this Lease with respect to the
presence of Hazardous Materials on or under the Premises,
Building or Project. In making the foregoing representation
Landlord is relying, with Tenant's acknowledgement and consent,
upon the documents described in EXHIBIT F attached hereto
("HAZARDOUS MATERIALS DOCUMENTS"), copies of which have been
previously delivered to Tenant, and the documents presently in
Landlord's possession. Tenant acknowledges that Landlord has not
conducted any independent investigation relating to the Release
of Hazardous Materials other than that disclosed in the
Hazardous Material Documents. Landlord shall have no liability
to Tenant, and Tenant shall neither be relieved of any
obligations hereunder, nor have any right to terminate this
Lease (except to the extent set forth in Paragraph 24) if (i)
the Hazardous Materials Documents are in error or are in anyway
misleading, or (ii) Landlord's foregoing representation and
warranty is incorrect. Operating Expenses, however, shall not
include any cost or expense of any Remedial Work incurred by
Landlord in connection with a Release of Hazardous Materials for
which Tenant has no liability or responsibility for pursuant to
Paragraphs 4.D.1 through 8 or any other provision of this Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as EXHIBIT G and any other reasonable rules and
regulations and any reasonable modifications or additions thereto which Landlord
may from time to time prescribe in writing for the purpose of maintaining the
proper care, cleanliness, safety, traffic flow and general order of the Premises
or the Building or Project. Tenant acknowledges that the rules and regulations
currently appended in Exhibit G will not unreasonably interfere with Tenant's
use of the Premises or Tenant's parking rights. Tenant shall cause Tenant's
Parties to comply with such rules and regulations. Landlord shall not be
responsible to Tenant for the non-compliance by any other tenant or occupant of
the Building or Project with any of such rules and regulations or any
Regulations. Notwithstanding anything to the contrary contained in this Lease,
Tenant shall not be required to comply with any modified or additional rule or
regulation which unreasonably interferes with Tenant's use of the Premises or
Tenant's parking rights.
6. RENT
A. BASE RENT. Commencing on the Term Commencement Date, Tenant shall pay to
Landlord and Landlord shall receive, without notice or demand throughout the
Term, Base Rent as specified in the Basic Lease Information, payable in monthly
installments in advance on or before the first day of each calendar month, in
lawful money of the United States, without deduction or offset whatsoever, at
the Remittance Address specified in the Basic Lease Information or to such other
place as Landlord may from time to time designate in writing. Base Rent for the
FIFTH (5TH) full month of the Term shall be paid by Tenant upon Tenant's
execution of this Lease. If the obligation for payment of Base Rent commences on
a day other than the first day of a month, then Base Rent shall be prorated and
the prorated installment shall be paid on the first day of the calendar month
next succeeding the Term Commencement Date. The Base Rent payable by
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Tenant hereunder is subject to adjustment as provided elsewhere in this Lease,
as applicable. As used herein, the term "BASE RENT" shall mean the Base Rent
specified in the Basic Lease Information as it may be so adjusted from time to
time.
B. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("ADDITIONAL RENT"). "RENT" shall mean
Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. OPERATING EXPENSES. In addition to the Base Rent required to be paid
hereunder, commencing on the Term Commencement Date, Tenant shall pay as
Additional Rent, Tenant's Proportionate Share of the Building and/or Project (as
applicable), as defined in the Basic Lease information, of Operating Expenses
(defined below) in the manner set forth below. Tenant shall pay the applicable
Tenant's Proportionate Share of each such Operating Expenses. Landlord and
Tenant acknowledge that if the number of buildings which constitute the Project
increases of decreases, or if physical changes are made to the Premises,
Building or Project or the configuration of any thereof, Landlord may at its
discretion reasonably adjust Tenant's Proportionate Share of the Building or
Project to reflect the change. Landlord's determination of Tenant's
Proportionate Share of the Building and of the Project shall be conclusive so
long as it is reasonably and consistently applied. "OPERATING EXPENSES" shall
mean all expenses and costs of every kind and nature which Landlord shall pay or
become obligated to pay, because of or in connection with the ownership,
management, maintenance, repair, preservation, replacement and operation of the
Building or Project and its supporting facilities other than those expenses and
costs which are specifically attributable to Tenant or which are expressly made
the financial responsibility of Landlord or specific tenants of the Building or
Project pursuant to this Lease. Operating Expenses shall include, but are not
limited to, the following:
(1) TAXES. All real property taxes and assessments, possessory
interest taxes, sales taxes, personal property taxes, business
or license taxes or fees, gross receipts taxes, service payments
in lieu of such taxes or fees, annual or periodic license or use
fees, excises, transit charges, and other impositions, general
and special, ordinary and extraordinary, unforeseen as well as
foreseen, of any kind including fees "in-lieu" of any such tax
or assessment) which are now or hereafter assessed, levied,
charged, confirmed, or imposed by any public authority upon the
Building or Project, its operations or the Rent (or any portion
or component thereof), or any tax, assessment or fee imposed in
substitution, partially or totally, of any of the above.
Operating Expenses shall also include any taxes, assessments,
reassessments, or other fees or impositions with respect to the
development, leasing, management, maintenance, alteration,
repair, use or occupancy by "Tenant of the Premises, Building or
Project or any portion thereof, including, without limitation,
by or for Tenant, and all increases therein or reassessments
thereof whether the increases or reassessments result from
increased rate and/or valuation (whether upon a transfer of the
Building or Project or any portion thereof or any interest
therein or for any other reason). Operating Expenses shall not
include inheritance or estate taxes imposed upon or assessed
against the interest of any person in the Project, gift,
transfer, franchise or taxes computed upon the basis of the net
income of any owners of any interest in the Project.
Notwithstanding anything to the contrary contained in this
Lease, Tenant shall not be required to pay any portion of any
assessment expense in excess of (i) for existing assessments,
the amount which would be payable it such tax or assessment
expense were paid in the installments presently billed, and (ii)
for any future assessments, the amount which would be payable if
such tax or assessment expense were paid in the installments
over the longest possible term offered to Landlord. If it shall
not be lawful for Tenant to reimburse Landlord for all or any
part of such taxes, the monthly rental payable to Landlord under
this Lease shall be revised to net Landlord the same net rental
after imposition of any such taxes by Landlord as would have
been payable to Landlord prior to the payment of any such taxes.
Tenant shall have the right to contest, in good faith, the
validity or the amount of any tax or assessment levied against
the Project and may pay the same under protest, or take such
steps as Tenant may deem appropriate provided that Tenant posts
appropriate bonds to safeguard Landlord's interest in the
Project. Landlord agrees to cooperate with Tenant in the
institution and prosecution of any such proceedings, including
permitting the action to be brought in the name of Landlord, and
will execute any documents reasonably required therefor. The
expense of such proceedings shall be borne by the Tenant
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and any refunds or rebated secured relating to the period of
Tenant's occupancy of the Premises shall belong to the Tenant.
(2) INSURANCE. All insurance premiums and costs, including, but not
limited to, any deductible amounts, premiums and other costs of
insurance incurred by Landlord, including for the insurance
coverage set forth in Paragraph 8.A. herein.
(3) COMMON AREA MAINTENANCE.
(a) Repairs, replacements, and general maintenance of and for
the Building and Project and public and common areas and
facilities of and comprising the Building and Project,
including, but not limited to, the roof and roof membrane (other
than the structural portions of the roof which are the sole
expense of Landlord under Paragraph 10), elevators, mechanical
rooms, alarm systems, pest extermination, landscaped areas,
parking and service areas, driveways, sidewalks, truck staging
areas, rail spur areas, fire sprinkler systems, sanitary and
storm sewer lines, utility services, heating/ventilation/air
conditioning systems (except as specifically provided to the
contrary in Paragraph 11), electrical, mechanical or other
systems, telephone equipment and wiring servicing, plumbing,
lighting, and any other items or areas which affect the
operation or appearance of the Building or Project, which
determination shall be at Landlord's reasonable discretion,
except for: those items expressly made the financial
responsibility of Landlord pursuant to Paragraph 10 hereof;
those items to the extent paid for by the proceeds of insurance
or condemnation proceeds; and those items attributable solely or
jointly to specific tenants of the Building or Project.
(b) Repairs, replacements, and general maintenance shall include
the cost of any capital improvements made to or capital assets
acquired for the Project or Building that in Landlord's
discretion (i) may reduce any other Operating Expenses,
including present or future repair work, (ii) are reasonably
necessary for the health and safety of the occupants of the
Building or Project, (iii) are required to comply with any
Regulation, or (iv) are required to restore the Premises,
Building and/or Project in the event of any casualty or
condemnation (including structural components which absent a
casualty or condemnation would be Landlord's obligation to
repair and maintain at its sole expense under Paragraph 10),
such costs or allocable portions thereof shall be amortized over
the useful life of the capital item as determined in accordance
with generally accepted accounting principles, together with
interest on the unamortized balance at the publicly announced
"PRIME RATE" charged by Wells Fargo Bank, N.A. (San Francisco)
or its successor at the time such improvements or capital assets
are constructed or acquired, plus two (2) percentage points, or
in the absence of such prime rate, then at the U.S. Treasury
six-month market note (or bond, if so designated) rate as
published by any national financial publication selected by
Landlord, plus four (4) percentage points, but in no event more
than the maximum rate permitted by law, plus reasonable
financing charges.
(c) Payment under or for any easement, license, permit,
operating agreement, declaration, restrictive covenant or
instrument relating to the Building or Project to which the
Building or the Project may be currently subject or which may be
applicable thereto during the Term hereof; provided that
Landlord shall not voluntarily enter into any future agreement
under which Tenant may be required to make any payments without
Tenant's prior written approval which approval shall not to be
unreasonably withheld or delayed).
(d) All expenses and rental related to services and costs of
supplies, materials and equipment used in operating, managing
and maintaining the Premises, Building and Project, the
equipment therein and the adjacent sidewalks, driveways, parking
and service areas, including, without limitation, expenses
related to service agreements regarding security, fire and other
alarm systems, janitorial services to the extent not addressed
in Paragraph 11 hereof, window cleaning, elevator maintenance,
Building exterior maintenance, landscaping and expenses related
to the management and operation of the Project.
(e) The cost of supplying any services and utilities which
benefit all or a portion of the Premises, Building or Project to
the extent not addressed in Paragraph 15 hereof.
(f) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable
as Operating Expenses shall not include the cost of negotiating
leases, collecting rents, evicting tenants nor shall it
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include costs incurred in legal proceedings with or against any
tenant or third party or to enforce the provisions of any lease.
(g) A management and accounting cost recovery fee equal to three
percent (3%) of the sum of the Project's base rents and
Operating Expenses (other than such management and accounting
fee, taxes as described in Paragraph 7.A(l) and insurance
premiums solely attributable to earthquake insurance).
(4) EXCLUSIONS FROM OPERATING EXPENSES. Operating Expenses shall not
include the cost of providing tenant improvements or other
specific costs incurred for the account of, separately billed to
and paid by specific tenants of the Building or Project, the
Landlord's Work, Landlord's Loan (as defined below) or debt
service on any mortgage or deed of trust recorded with respect
to the Project other than pursuant to Paragraph 7.A.(3) above.
Notwithstanding anything to the contrary contained in this
Lease, Operating Expenses shall also not include the following:
(i) costs and expenses occasioned by the violation of
Regulations existing as of the Delivery Date, or any act or
omission of Landlord or Landlord's employees, agent or
contractors in violation of any Regulation during the Term; (ii)
costs and expenses occasioned by the act, omission or violation
of ground leases, or security instruments by Landlord or its
respective agents, employees or contractors; (iii) costs and
expenses when and if Landlord collects or receives a
reimbursement from others; (iv) penalties or charges for failure
to perform Landlord's obligations under any loans or
indebtedness secured by the Premises; (v) costs and expenses
incurred in connection with Remedial Work in connection with any
Release of any Hazardous Materials on or about the Premises
(this exclusion shall in no way limit, restrict, reduce, or
otherwise relieve Tenant of its-obligations under Paragraph
4.D); (vi) except as expressly set forth herein, depreciation,
amortization of capital expenditures and expense reserves; (vii)
points, fees and other charges for Landlord's financing or
refinancing of the Premises; (viii) costs and expenses of
advertising and promoting the Premises, the Building, the
Project or other buildings belonging to Landlord; (ix) costs and
expenses of repairs to the extent directly and solely
attributable to the gross negligence or willful misconduct of
Landlord, its agents, contractors or employees; (x) the cost and
expenses associated with the operation of the business of the
partnership or entity which constitutes Landlord, or the
operation of any parent, subsidiary or affiliate of Landlord,
as the same are distinguished from the costs of operation and
management of the Premises; (xi) costs and expenses to correct
any construction defect in Landlord's Work; (xii) costs and
expenses incurred for the repair and replacement of the
structural components of the Building on the Premises,
including, without limitation, beams, columns, foundations,
footings, load bearing and exterior walls, structural slabs and
components of the roof (but excluding the roof membrane which
shall be included as an Operating Expense); (xiii) costs
occasioned by fire, acts of God or other casualties or by the
exercise of the power of eminent domain, including the cost to
restore the Building (except for insurance deductibles payable
by Tenant) to the extent Landlord receives insurance proceeds to
cover such costs (or could have been received if Landlord had
carried the insurance it was required to obtained hereunder), or
a condemnation award which is specifically awarded to cover such
cost; (xiv) leasing commissions and any legal fees incurred in
connection with the negotiation and documentation of this Lease;
(xv) capital expenses except as specifically set forth in this
Lease; (xvi) the cost of resurfacing any paved areas in the
Project more often than once every three years during the Term;
and (xvii) dedications or exactions imposed with respect to
zoning changes, or other governmental consents, permits,
variances or approvals sought by Landlord in connection with
Landlord's Work.
The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities, except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto; except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. PAYMENT OF ESTIMATED OPERATING EXPENSES. "Estimated Operating Expenses" for
any particular year shall mean Landlord's estimate of the "Operating Expenses
for such fiscal year made with respect to such fiscal year as hereinafter
provided. Landlord shall have the right from time to time to revise its fiscal
year and interim accounting periods so long as the periods as so revised are
reconciled with prior periods in a reasonable manner. During the last month of
each fiscal year during the Term, or as soon thereafter as practicable, Landlord
shall give Tenant written notice of
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the Estimated Operating Expenses for the ensuing fiscal year. Tenant shall pay
Tenant's Proportionate Share of the Estimated Operating Expenses with
installments of Base Rent for the fiscal year to which the Estimated Operating
Expenses applies in monthly installments on the first day of each calendar month
during such year, in advance. Such payment shall be construed to be Additional
Rent for all purposes hereunder. It at any time during the course of the
fiscal year, Landlord reasonably determines that Operating Expenses are
projected to vary from the then Estimated Operating Expenses by more than five
percent (5%). Landlord may, by written notice to Tenant, revise the Estimated
Operating Expenses for the balance of such fiscal year, and Tenant's monthly
installments for the remainder of such year shall be adjusted so that by the end
of such fiscal year Tenant has paid to Landlord Tenant's Proportionate Share of
the revised Estimated Operating Expenses for such year, such devised installment
amounts to be Additional Rent for all purposes hereunder.
C. COMPUTATION OF OPERATING EXPENSE ADJUSTMENT. "OPERATING EXPENSE ADJUSTMENT"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment, If such statement shows that
Tenant's payment based upon Estimated Operating Expenses is less than Tenant's
Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the
difference within twenty (20) days after receipt of such statement, such payment
to constitute Additional Rent for all purposes hereunder. If such statement
shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of Operating Expenses, then (provided that if Tenant is in
default under this Lease, only when and if Tenant cures such default) Landlord
shall pay to Tenant the difference within twenty (20) days after delivery of
such statement to Tenant. If this Lease has been terminated or the Term hereof
has expired prior to the date of such statement, then the Operating Expense
Adjustment shall be paid by the appropriate party within twenty (20) days after
the date of delivery of the statement. Should this Lease commence or terminate
at any time other than the first day of the fiscal year, Tenant's Proportionate
Share of the Operating Expense Adjustment shall be prorated based on a month of
30 days and the number of calendar months during such fiscal year that this
Lease is in effect. Notwithstanding anything to the contrary contained in
Paragraph 7.A or 7.B, Landlord's failure to provide any notices or statements
within the time periods specified in those paragraphs shall in no way excuse
Tenant from its obligation to pay Tenant's Proportionate Share of Operating
Expenses.
D. NET LEASE. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be necessary or
desirable to the Building and/or Project.
E. TENANT AUDIT. If Tenant shall dispute the amount set forth in any statement
provided by Landlord under Paragraph 7.8. or 7.C. above, Tenant shall have the
right, not later than sixty (60) days following receipt of such statement and
upon the condition that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect to Operating
Expenses for such fiscal year to be audited by certified public accountants
selected by Tenant and subject to Landlord's reasonable right of approval. The
Operating Expense Adjustment shall be appropriately adjusted on the basis of
such audit. If such audit discloses a liability for a refund in excess of ten
percent (10%) of Tenant's Proportionate Share of the Operating Expenses
previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
twenty (20) days after receipt of Landlord's statement provided pursuant to
Paragraph 7.8. or 7.C., such statement shall be final and binding for all
purposes hereof.
S. INSURANCE AND INDEMNIFICATION
A. LANDLORD'S INSURANCE. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord's sole control.
(1) PROPERTY INSURANCE. Landlord agrees to maintain property
insurance insuring the Building and Project (excluding Tenant's
Initial Improvements and other Alterations constructed within
the Premises by Tenant) against damage or destruction due to
risk including fire, vandalism, and malicious mischief in an
amount not less than one hundred percent (100%) of the
replacement cost thereof, in the form and with
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deductibles and endorsements as reasonably selected by Landlord,
but not with deductibles substantially different from what
typically would be carried by owners of Buildings operated for
substantially similar purposes as the Building in the
geographical vicinity of the Building. At Landlord's option,
Landlord may elect to maintain property insurance on Tenant's
Initial Improvements and other Alterations constructed within
the Premises by Tenant, provided that before obtaining such
insurance coverage, Landlord shall notify Tenant of such
election. At its election, Landlord may instead (but shall have
no obligation to) obtain "ALL RISK" coverage for any property it
insures, and may also obtain earthquake, pollution, and/or flood
insurance in amounts reasonably selected by Landlord. Landlord
agrees that it shall not obtain earthquake or property insurance
on the Building, the Tenant's Initial Improvements or the
Alterations unless Tenant is offered the right to purchase such
insurance on Landlord's behalf (with Landlord as the insured
party) directly in order to obtain competitive rates provided
that (i) Landlord and Landlord's lenders shall have the right to
reasonably approve any insurance which Tenant would agree to
obtain, including without limitation, the insurance company and
the amount of any deductibles, (ii) Tenant promptly notifies
Landlord of its intention to purchase such insurance and
provides Landlord with copies of all proposed insurance
policies, and (iii) Tenant purchases such insurance at least
thirty (30) days prior to the expiration or cancellation of any
insurance policy to be renewed or replaced.
(2) OPTIONAL INSURANCE. Landlord, at Landlord's option, may also
(but shall have no obligation to) carry insurance against loss
of rent, in an amount equal to the amount of Base Rent and
Additional Rent that Landlord could be required to abate to all
Building tenants in the event of condemnation or casualty
damage for a period of twelve (12) months. Landlord may also
(but shall have no obligation to) carry such other insurance as
Landlord may deem reasonably prudent or advisable, including,
without limitation, liability insurance in such amounts and on
such terms as Landlord shall reasonably determine. Landlord
shall not be obligated to insure, and shall have no
responsibility whatsoever for any damage to, any furniture,
machinery, goods, inventory or supplies, or other personal
property or fixtures which Tenant may keep or maintain in the
Premises, or any leasehold improvements, additions or
alterations within the Premises, including, without limitation,
Tenant's Initial Improvements. Notwithstanding the foregoing to
the contrary, in the event Tenant obtains business interruption
insurance in an amount equal to the amount of Base Rent and
Additional Rent that Landlord could be required to abate to all
Building tenants in the event of condemnation or casualty damage
for a period of twelve (12) months and names Landlord an
additional insured on such policy for such amount, then Landlord
may not include any premium for insurance against loss of rent
as an Operating Expense.
B. TENANT'S INSURANCE.
(1) PROPERTY INSURANCE. Tenant shall procure at Tenant's sole cost
and expense and keep in effect from the date of this Lease and
at all times until the and of the Term, insurance on all
personal property and fixtures of Tenant and all improvements,
additions or alterations made by or for Tenant to the Premises
(including, without limitation, Tenant's Initial Improvements
and Alterations, unless Landlord procures insurance on the same)
on an "All Risk" basis (including coverage for earthquakes on
Tenant Initial Improvements and Alterations), insuring such
property for the full replacement value of such property.
(2) LIABILITY INSURANCE. Tenant shall procure at Tenant's sole cost
and expense and keep in effect from the date of this Lease and
at all times until the end of the Term Commercial General
Liability insurance covering bodily injury and property damage
liability occurring in or about the Premises or arising out of
the use and occupancy of the Premises and the Project, and any
part of either, and any areas adjacent thereto, and the business
operated by Tenant or by any other occupant of the Premises.
Such insurance shall include contractual liability coverage
insuring all of Tenant's indemnity obligations under this Lease.
Such coverage shall have a minimum combined single limit of
liability of at least Five Million Dollars ($5,000,000.00), and
a minimum general aggregate limit of Five Million Dollars
($5,000,000.00), with an "ADDITIONAL INSURED - MANAGERS OR
LESSORS OF PREMISES ENDORSEMENT" and the "AMENDMENT OF THE
POLLUTION EXCLUSION ENDORSEMENT." All such policies shall be
written to apply to all bodily injury (including death),
property damage or loss, personal and advertising injury and
other covered loss, however occasioned, occurring during the
policy term, shall be endorsed to add Landlord and any party
holding an interest to which this Lease may be subordinated as
an additional insured, and shall provide that such coverage
shall be "PRIMARY" and noncontributing with any insurance
maintained by Landlord, Which shall be excess
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insurance only. Such coverage shall also contain endorsements
including employees as additional insureds if not covered by
Tenant's Commercial General Liability Insurance. All such
insurance shall provide for the severability of interests of
insureds; and shall be written on an "OCCURRENCE" basis, which
shall afford coverage for all claims based on acts, omissions,
injury and damage, which occurred or arose (or the onset of
which occurred or arose) in whole or in part during the policy
period.
(3) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE. Tenant
shall carry Workers' Compensation Insurance as required by any
Regulation, throughout the Term at Tenant's sole cost and
expense. Tenant shall also carry Employers' Liability Insurance
in amounts not less than One Million Dollars ($1,000,000) each
accident for bodily injury by accident; One Million Dollars
($1,000,000) policy limit for bodily injury by disease; and One
Million Dollars ($1,000,000) each employee for bodily injury by
disease, throughout the Term at Tenant's sole cost and expense,
(4) COMMERCIAL AUTO LIABILITY INSURANCE. Intentionally Deleted.
(5) GENERAL INSURANCE REQUIREMENTS. All coverages described in this
Paragraph 8.B. shall be endorsed to (i) provide Landlord with
thirty (30) days' notice of cancellation or change in terms; and
(ii) waive all rights of subrogation by the insurance carrier
against Landlord. If at any time during the Term (but not more
than once each calendar year) the amount or coverage of
insurance which Tenant is required to carry under this Paragraph
8.B. is, in Landlord's reasonable judgment, materially less than
the amount or type of insurance coverage typically carried by
owners or tenants of properties located in the general area in
which the Premises are located which are similar to and operated
for similar purposes as the Premises or if Tenant's use of the
Premises should change with or without Landlord's consent,
Landlord shall have the right to require Tenant to increase the
amount or change the types of insurance coverage required under
this Paragraph 8.B. All insurance policies required to be
carried by Tenant under this Lease (as well as any insurance
policy obtained by Tenant under Paragraph 8.A) shall be written
by companies rated A X or better in "BEST'S INSURANCE GUIDE" and
authorized to do business in the State of California. In any
event deductible amounts under all insurance policies required
to be carried by Tenant under this Lease shall not exceed Five
Thousand Dollars ($5,000.00) per occurrence (except for
deductibles for earthquake insurance). Tenant shall deliver to
Landlord on or before the Term Commencement Date, and thereafter
at least thirty (30) days before the expiration dates of the
expired policies, certified copies of Tenant's insurance
policies (as well as any insurance policy obtained by Tenant
under Paragraph 8.A) evidencing the same issued by the insurer
thereunder; and, if Tenant shall fail to procure such insurance,
or to deliver such policies, Landlord may, at Landlord's option
and in addition to Landlord's other remedies in the event of a
default by Tenant hereunder, procure the same for the account of
Tenant, and the cost thereof shall be paid to Landlord as
Additional Rent.
C. INDEMNIFICATION. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses, including reasonable attorneys' and consultants' fees and
court costs, demands, causes of action, or judgments, directly or indirectly
arising out of or related to: (1) claims of injury to or death of persons or
damage to property occurring or resulting directly or indirectly from the use or
occupancy of the Premises, Building or Project by Tenant or Tenant's Parties, or
from activities or failures to act of Tenant or Tenant's Parties; (2) claims
arising from work or labor performed, or for materials or supplies furnished to
or at the request of Tenant in connection with performance of any work done for
the account of Tenant within the Premises or Project; (3) claims arising from
any breach or default on the part of Tenant in the performance of any covenant
contained in this Lease; and (4) claims arising from the negligence or
intentional acts or omissions of Tenant or Tenant's Parties. The foregoing
indemnity by Tenant shall not be applicable to claims to the extent arising from
the gross negligence or willful misconduct of Landlord or Landlord's agents,
employees or contractors. Landlord shall not be liable to Tenant and Tenant
hereby waives all claims against Landlord for any injury or damage to any person
or property in or about the Premises, Building or Project by or from any cause
whatsoever (other than Landlord's or Landlord's agents', employees' or
contractors' gross negligence or willful misconduct) and, without limiting the
generality of the foregoing, whether caused by water leakage of any character
from the roof, walls, basement or other portion of the Premises, Building or
Project, or caused by gas, fire, oil or electricity in, on or about the
Premises, Building or Project. The provisions of this Paragraph shall survive
the expiration or earlier termination of this Lease. Notwithstanding anything to
the contrary contained in this Lease, Landlord shall not be released from
damages, liabilities, judgments, actions, claims, attorneys' fees, consultants'
fees, payments, costs and expenses arising from a default of Landlord's
obligations under this Lease.
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9. WAIVER OF SUBROGATION
To the extent permitted by law and without affecting the coverage
provided by insurance to be maintained hereunder or any other rights or
remedies, Landlord and Tenant each waive any right to recover against the other
for: (a) damages for injury to or death of persons; (b) damages to property,
including personal property; (c) damages to the Premises or any part thereof;
and (d) claims arising by reason of the foregoing due to hazards covered by
insurance maintained or required to be maintained pursuant to this Lease to the
extent of proceeds recovered therefrom, or proceeds which would have been
recoverable therefrom in the case of the failure of any party to maintain any
insurance coverage required to be maintained by such party pursuant to this
Lease. This provision is intended to waive fully, any rights and/or claims
arising by reason of the foregoing, but only to the extent that any of the
foregoing damages and/or claims referred to above are covered or would be
covered, and only to the extent of such coverage, by insurance actually carried
or required to be maintained pursuant to this Lease by either Landlord or
Tenant. This provision is also intended to waive fully, and for the benefit of
each party, any rights and/or claims which might give rise to a right of
subrogation on any insurance carrier. Subject to all qualifications of this
Paragraph 9, Landlord waives its rights as specified in this Paragraph 9 with
respect to any subtenant that it has approved pursuant to Paragraph 21 but only
in exchange for the written waiver of such rights to be given by such subtenant
to Landlord upon such subtenant taking possession of the Premises or a portion
thereof. Each party shall cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against either party in connection with any damage covered by any policy.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall at Landlord's expense maintain in good repair, reasonable
wear and tear excepted, the structural soundness of the roof, foundations, and
load bearing and exterior walls of the Building, beam, columns, footings and
structural slabs in the Building. The term "EXTERIOR WALLS" as used herein shall
not include windows, glass or plate glass, doors, dock bumpers or dock plates,
special store fronts or office entries. Any damage caused by or repairs
necessitated by any negligence or act of Tenant or Tenant's Parties may be
repaired by Landlord at Landlord's option and Tenant's expense. Tenant shall
promptly give Landlord written notice of any defect or need of repairs in such
components of the Building for which Landlord is responsible, after which
Landlord shall have a reasonable opportunity and the right to enter the Premises
at all reasonable times to repair same. Landlord's liability with respect to any
defects, repairs, or maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of such repairs or
maintenance, and there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
(including without limitation, actual and consequential damages) arising from
the making of repairs, alterations or improvements in or to any portion of the
Premises, the Building or the Project or to fixtures, appurtenances or equipment
in the Building, except as provided in Paragraph 24. If Landlord fails to repair
the Premises within thirty (30) days after Landlord's receipt of written notice
from Tenant (except that if such repairs cannot reasonably be made within said
thirty (30) day period, this period shall be extended for an additional
reasonable time, provided that Landlord commences the repair with such thirty
(30) day period and proceeds diligently thereafter to substantially complete the
repair), Tenant shall be entitled, at Tenant's option upon notice to Landlord,
to cause the repair to be made and promptly collect from Landlord Tenant's
reasonable out of pocket repair costs in so doing. Tenant shall not be required,
however, to wait the entire thirty (30) day period if and to the extent earlier
action is required to prevent imminent injury to persons, imminent damage to
property or to comply with any Regulations. Subject to Landlord's obligation to
Substantially Complete Landlord's Work in accordance with the provisions of
Paragraph 2.G, and the provisions of Paragraph 4.C above, by taking occupancy
and/or possession of the Premises, Tenant accepts them "AS IS," as being in good
order, condition and repair and the condition in which Landlord is obligated to
deliver them and suitable for the Permitted Use and Tenant's intended operations
in the Premises, whether or not any notice of acceptance is given.
11. TENANT'S REPAIRS AND MAINTENANCE
Except as set forth in Paragraph 10, Tenant shall at all times during
the Term at Tenant's expense maintain all parts of the Premises and such
portions of the Building as are within the exclusive control of Tenant in a
first-class, good, clean and secure condition and promptly make all necessary
repairs and replacements, as determined by Landlord, including but not limited
to, all windows, glass, doors, walls, including demising walls, and wall
finishes, floors and floor covering, heating, ventilating and air conditioning
systems, ceiling insulation, truck doors, hardware, dock bumpers, dock plates
and levelers, plumbing work and fixtures, downspouts, entries, skylights, smoke
hatches, roof vents, electrical and lighting systems, and fire sprinklers, with
materials and workmanship of the same character, kind and quality as the
original. Tenant shall at Tenant's expense also perform regular removal of trash
and debris. If Tenant uses rail and if required by the railroad company, Tenant
agrees to sign a joint maintenance agreement
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governing the use of the rail spur, if any. Tenant shall, at Tenant's own
expense, enter into a regularly scheduled preventative maintenance/service
contract with a maintenance contractor (the "HVAC CONTRACTOR") for servicing all
hot water, heating and air conditioning systems and equipment within or serving
the Premises. The HVAC Contractor and the contract must be approved by Landlord.
Landlord's approval shall not be unreasonably withheld or delayed. The service
contract must include all services suggested by the equipment manufacturer
within the operation/maintenance manual and must become effective and a copy
thereof delivered to Landlord within thirty (30) days after the Term
Commencement Date. If Tenant shall fail to enter into such a service contract
within such thirty (30) day period or at any time during the Term, Landlord may,
upon notice to Tenant, enter into such a service contract on behalf of Tenant or
perform the work and in either case charge Tenant the cost thereof.
Notwithstanding anything to the contrary contained herein, Tenant shall, at its
expense, promptly repair any damage to the Premises or the Building or Project
resulting from or caused by any negligence or act of Tenant or Tenant's Parties.
Nothing herein shall expressly or by implication render Tenant Landlord's agent
or contractor to effect any repairs or maintenance required of Tenant under this
Paragraph 11, as to all of which Tenant shall be solely responsible.
Notwithstanding anything to the contrary contained in this Lease, as part of its
maintenance and repair obligations or its obligation to pay Operating Expenses,
Tenant shall not be required to construct or pay the cost of complying with any
Regulations (i) regarding the presence of Hazardous Materials, except to the
extent required pursuant to any other Paragraph in this Lease; or (ii) requiring
the correction of any latent or structural defect in Landlord's Work during the
Term, as extended.
12. ALTERATIONS
A. Except for non-structural Alterations not requiring a permit and not in
excess of One Hundred Thousand Dollars ($100,000) in the aggregate during any
three (3) year period, Tenant shall not make, or allow to be made, any
alterations, physical additions, improvements or partitions, including without
limitation the attachment of any fixtures or equipment, in, about or to the
Premises ("ALTERATIONS") without obtaining the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed with
respect to proposed Alterations which: (a) comply with all applicable
Regulations; and (b) are, in Landlord's reasonable opinion, compatible with the
Building or the Project and its mechanical, plumbing, electrical,
heating/ventilation/air conditioning systems. Specifically, but without limiting
the generality of the foregoing, Landlord shall have the right of written
consent for all plans and specifications for the proposed Alterations,
construction means and methods, all appropriate permits and licenses, any
contractor or subcontractor to be employed on the work of Alterations, and the
time for performance of such work, and may impose reasonable rules and
regulations for contractors and subcontractors performing such work. Landlord's
consent with respect to the foregoing items shall not be unreasonably withheld
or delayed. Tenant shall also supply to Landlord any documents and information
reasonably requested by Landlord in connection with Landlord's consideration of
a request for approval hereunder.
(1) Tenant shall cause all Alterations to be accomplished in a
first-class, good and workmanlike manner, and to comply with all
applicable Regulations and Paragraph 27 hereof. Tenant shall at
Tenant's sole expense, perform any additional work required
under applicable Regulations due to the Alterations hereunder.
No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of
Tenant's obligations under this Paragraph 12. Tenant shall
reimburse Landlord for all reasonable costs which Landlord may
incur in connection with granting approval to Tenant for any
such Alterations, including any costs or expenses which Landlord
may incur in electing to have outside architects and engineers
review said plans and specifications as Additional Rent
hereunder (except that no such expenses shall be charged to
Tenant for Tenant's Initial Improvements). All such Alterations
(including Tenant's Initial Improvements) shall remain the
property of Tenant until the expiration or earlier termination
of this Lease, at which time they shall be and become the
property of Landlord; provided, however, that Landlord may, at
Landlord's option, in writing at the time that Tenant requests
Landlord's consent, or, if no consent is required, within thirty
(30) days after the expiration or earlier termination of this
Lease and the date Tenant vacates the Premises, require that
Tenant, at Tenant's expense, remove any or all Alterations made
by Tenant and restore the Premises by the expiration or earlier
termination of this Lease, to their condition existing prior to
the construction of any such Alterations. All such removals and
restoration shall be accomplished in a first-class and good and
workmanlike manner so as not to cause any damage to the Premises
or Project whatsoever. If Tenant fails to remove such
Alterations or Tenant's trade fixtures or furniture or other
personal property, Landlord may keep and use them or remove any
of them and cause them to be stored or sold in accordance with
applicable law, at Tenant`s sole expense.
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(2) In no event shall Tenant remove or be required to remove
Tenant's Initial Improvements upon the expiration or earlier
termination of this Lease. Tenant acknowledges and agrees that
none of Tenant's Initial Improvements constitute trade
fixtures, personal property or equipment of Tenant which are
removable by Tenant upon the expiration or termination of this
Lease. In addition to and wholly apart from Tenant's obligation
to pay Tenant's Proportionate Share of Operating Expenses,
Tenant shall be responsible for and shall pay prior to
delinquency any taxes or governmental service fees, possessory
interest taxes, fees or charges in lieu of any such taxes,
capital levies, or other charges imposed upon, levied with
respect to or assessed against its fixtures or personal
property, on the value of Alterations within the Premises, and
on Tenant's interest pursuant to this Lease, or any increase in
any of the foregoing based on such Alterations. To the extent
that any such taxes are not separately assessed or billed to
Tenant, Tenant shall pay the amount thereof as invoiced to
Tenant by Landlord.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of nonresponsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.
13. SIGNS
Tenant shall not place, install, affix, paint or maintain any signs,
notices, graphics or banners whatsoever or any window decor which is visible in
or from public view or corridors, the common areas or the exterior of the
Premises or the Building, in or on any exterior window or window fronting upon
any common areas or service area or upon any truck doors or man doors without
Landlord's prior written approval which Landlord shall not unreasonably withhold
or delay; provided that (i) Tenant's name shall be included in any Building-
standard door and directory signage, if any, and (ii) Tenant shall be allowed to
erect and install, at its sole cost and expense, a monument sign in conformance
with the provisions of Paragraph 12. Any installation of signs, notices,
graphics or banners on or about the Premises or Project approved by Landlord
shall be subject to any Regulations. Tenant shall remove all such signs or
graphics by the expiration or any earlier termination of this Lease. Such
installations and removals shall be made in such manner as to avoid injury to or
defacement of the Premises, Building or Project and any other improvements
contained therein, and Tenant shall repair any injury or defacement including
without limitation discoloration caused by such installation or removal.
14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall
be required, and during normal business hours, Landlord and Landlord's agents
and representatives, shall have the right to enter the Premises to inspect the
same, to clean, to perform such work as may be permitted or required hereunder,
to make repairs, improvements or alterations to the Premises, Building or
Project, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project, to exhibit the Premises to prospective tenants in the last
twelve (12) months of the Term, or to exhibit the Premises, Building or Project
to prospective purchasers, encumbrancers or to others, or for any other purpose
as Landlord may deem reasonably necessary or desirable; provided, however, that
Landlord shall use reasonable efforts not to unreasonably interfere with
Tenant's business operations. Tenant shall not be entitled to any abatement of
Rent by reason of the exercise of any such right of entry. Except to the extent
caused by the gross negligence or willful misconduct of Landlord, its agents,
employees or contractors, Tenant waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and 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, excluding Tenant's vaults and safes
or special security areas (designated in advance), and Landlord shall have the
right to use any and all means which Landlord may deem necessary or proper to
open said doors in an emergency, in order to obtain entry to any portion of the
Premises, and any entry to the Premises or portions thereof obtained by Landlord
by any of said means, or otherwise, shall not be construed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual or
constructive, of Tenant from the Premises or any portions thereof. At any time
within six (6) months prior to the expiration of the Term or following any
earlier termination of this Lease or agreement to terminate this Lease, Landlord
shall have the right to erect on the Premises, Building and/or Project a
suitable sign indicating that the Premises are available for lease.
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15. SERVICES AND UTILITIES
A. Tenant shall pay directly for all water, gas, heat, air conditioning, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or from the Premises, together with any taxes, penalties, surcharges or the
like pertaining thereto, and maintenance charges for utilities and shall furnish
all electric light bulbs, ballasts and tubes. If any such services are not
separately billed or metered to Tenant, Tenant shall pay a proportion, as
reasonably determined by Landlord, of all charges jointly serving other
premises. All sums payable under this Paragraph 15 shall constitute Additional
Rent hereunder.
B. Tenant acknowledges that Tenant has inspected and accepts the water,
electricity, heat and air conditioning and other utilities and services being
supplied or furnished to the Premises as of the date Tenant takes possession of
the Premises, if any, as being sufficient in their present condition, "as is,"
for the Permitted Use, and for Tenant's intended operations in the Premises.
Landlord shall have no obligation to provide additional or after-hours
electricity, heating or air conditioning, but if Landlord elects to provide such
services at Tenant's request, Tenant shall pay to Landlord a reasonable charge
for such services as reasonably determined by Landlord. Tenant agrees to keep
and cause to be kept closed all window covering when necessary because of the
sun's position, and Tenant also agrees at all times to cooperate fully with
Landlord and to abide by all of the regulations and requirements which Landlord
may prescribe for the proper functioning and protection of electrical, heating,
ventilating and air conditioning systems. Wherever heat-generating machines,
excess lighting or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in-the
Premises and the cost thereof, including the cost of installation and the cost
of operation and maintenance thereof, shall be paid by Tenant to Landlord upon
demand by Landlord.
C. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, which will require additions or alterations
to the Building power distribution systems unless the same are installed at the
expense of Tenant. If Tenant shall require water or electric current or any
other resource in excess of that being furnished or supplied for the use of the
Premises as of the date Tenant takes possession of the Premises, Tenant shall
first procure the written consent of Landlord which Landlord may not refuse,
provided that Tenant shall pay directly to Landlord the cost of installation,
maintenance and repair thereof and of any additional circuits or other equipment
necessary to furnish such additional resources, energy, utility or service.
Landlord shall not be liable for any damages directly or indirectly resulting
from nor shall the Rent or any monies owed Landlord under this Lease herein
reserved be abated by reason of: (a) the installation, use or interruption of
use of any equipment used in connection with the furnishing of any such
utilities or services, or any change in the character or means of supplying or
providing any such utilities or services or any supplier thereof; (b) the
failure to furnish or delay in furnishing any such utilities or services when
such failure or delay is caused by acts of God or the elements, labor
disturbances of any character, or any other accidents or other conditions beyond
the reasonable control of Landlord or because of any interruption of service; or
(c) the inadequacy, limitation, curtailment, rationing or restriction on use of
water, electricity, gas or any other form of energy or any other service or
utility whatsoever serving the Premises or Project otherwise; or (d) the partial
or total unavailability of any such utilities or services to the Premises or the
Building, whether by Regulation or otherwise; nor shall any such occurrence
constitute an actual or constructive eviction of Tenant. Landlord shall further
have no obligation to protect or preserve any apparatus, equipment or device
installed by Tenant in the Premises, including without limitation by providing
additional or after-hours heating or air conditioning unless the same is paid
for by Tenant at rates charged by the public utility providing the same. Tenant
shall cooperate with Landlord and any supplier or provider of such services
designated by Landlord from time to time to facilitate the delivery of such
services to Tenant at the Premises and to the Building and Project, including
without limitation allowing Landlord and Landlord's suppliers or providers, and
their respective agents and contractors, reasonable access to the Premises for
the purpose of installing, maintaining, repairing, replacing or upgrading such
service or any equipment or machinery associated therewith.
16. SUBORDINATION
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, this Lease shall be and is
hereby declared to be subject and subordinate at all times to: (a) all ground
leases or underlying leases which may now exist or hereafter be executed
affecting the Premises and/or the land upon which the Premises and Project are
situated, or both; and (b) any mortgage or deed of trust which may now exist or
be placed upon the Building, the Project and/or the land upon which the Premises
or the Project are situated, or said ground leases or underlying leases, or
Landlord's interest or estate in any of said items which is specified as
security. Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or any such
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liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) days after request by Landlord, Tenant shall
execute and deliver any additional documents evidencing Tenant's attornment or
the subordination of this Lease with respect to any such ground leases or
underlying leases or any such mortgage or deed of trust, in the form customarily
required by any ground landlord, mortgagee, or beneficiary under a deed of
trust, subject to such nondisturbance requirement. Landlord shall use
commercially reasonable efforts to obtain a subordination, nondisturbance and
attornment agreement for the benefit of Tenant reflecting the foregoing from any
future ground landlord, mortgagee or beneficiary. Notwithstanding anything to
the contrary contained in this Lease, within thirty (30) days after Landlord's
execution of this Lease, Landlord shall provide to Tenant any existing lender's
or ground lessor's standard form of subordination, nondisturbance and attornment
agreement, which Tenant shall execute, provided that the nondisturbance
provisions are commercially reasonable.
17. FINANCIAL STATEMENTS
At the written request of Landlord from time to time delivered no more
than two (2) times per calendar year, Tenant shall provide to Landlord Tenant's
and any guarantor's current financial statements or other information discussing
financial worth of Tenant and any guarantor, which Landlord shall use solely for
purposes of this Lease and in connection with the ownership, management,
financing and disposition of the Project.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) business days after
request of Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this Lease is in full force and effect, that this Lease
has not been modified (or stating all modifications, written or oral, to this
Lease), the date to which Rent has been paid, the unexpired portion of this
Lease, that there are no current defaults by Landlord or Tenant under this Lease
(or specifying any such defaults), that the leasehold estate granted by this
Lease is the sole interest of Tenant in the Premises and/or the land at which
the Premises are situated, and such other matters pertaining to this Lease as
may be reasonably requested by Landlord or any mortgagee, beneficiary, purchaser
or prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten (10) business day
period, Landlord may execute and deliver such certificate on Tenant's behalf and
that such certificate shall be binding on Tenant. Landlord and Tenant intend
that any statement delivered pursuant to this Paragraph may be relied upon by
any mortgagee, beneficiary, purchaser or prospective purchaser of the Building
or Project or any interest therein. The parties agree that Tenant's obligation
to furnish such estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of this Lease, and shall be an event of
default (without any cure period that might be provided under Paragraph 26.A(3)
of this Lease) if Tenant fails to fully comply or makes any material
misstatement in any such certificate.
19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a
security deposit as stated in the Basic Lease Information (the "SECURITY
DEPOSIT"), which sum shall be held and owned by Landlord, without obligation to
pay interest, as security for the performance of Tenant's covenants and
obligations under this Lease and the Note (as defined in Paragraph 38.C). The
Security Deposit is not an advance rental deposit or a measure of damages
incurred by Landlord in case of Tenant's default. Upon the occurrence of any
event of default by Tenant, Landlord may from time to time, without prejudice to
any other remedy provided herein or by law, use such fund as a credit to the
extent necessary to credit against any arrears of Rent or other payments due to
Landlord hereunder or under the Note, and any other damage, injury, expense or
liability caused by such event of default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the Security Deposit to its
original amount. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this Lease that all of Tenant's
obligations under this Lease and the Note have been fulfilled, reduced by such
amounts as maybe required by Landlord to remedy defaults on the part of Tenant
in the payment of Rent or other obligations of Tenant under this Lease or Note,
to repair damage to the Premises, Building or Project caused by Tenant or any
Tenant's Parties and to clean the Premises. Landlord may use and commingle the
Security Deposit with other funds of Landlord.
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20. LIMITATION OF TENANT'S REMEDIES
The obligations and liability of Landlord to Tenant for any default by
Landlord under the terms of this Lease are not personal obligations of Landlord
or of the individual or other partners of Landlord or its or their partners,
directors, officers, or shareholders, and Tenant agrees to look solely to
Landlord's interest in the Project for the recovery of any amount from Landlord,
and shall not look to other assets of Landlord nor seek recourse against the
assets of the individual or other partners of Landlord or its or their partners,
directors, officers or shareholders. Any lien obtained to enforce any such
judgment and any levy of execution thereon shall be subject and subordinate to
any lien, mortgage or deed of trust on the Project. Under no circumstances shall
Tenant have the right to offset against or recoup Rent or other payments due and
to become due to Landlord hereunder except as expressly provided in Paragraph
23.B. below, which Rent and other payments shall be absolutely due and payable
hereunder in accordance with the terms hereof.
21. ASSIGNMENT AND SUBLETTING
A. GENERAL
(1) This Lease has been negotiated to be and is granted as
an accommodation to Tenant. Accordingly, this Lease is
personal to Tenant, and any assignee or subtenant
permitted in accordance with this Paragraph 21, and
Tenant's rights granted hereunder do not include the
right to assign this Lease or sublease the Premises, or
to receive any excess, either in installments or lump
sum, over the Rent which is expressly reserved by
Landlord as hereinafter provided, except as otherwise
expressly hereinafter provided. Tenant shall not assign
or pledge this Lease (except as otherwise provided in
Paragraph 38.B) or sublet the Premises or any part
thereof, whether voluntarily or by operation of law, or
permit the use or occupancy of the Premises or any part
thereof by anyone other than Tenant, or suffer or permit
any such assignment, pledge, subleasing or occupancy,
without Landlord's prior written consent, which shall
not be unreasonably withhold or delayed, except as
provided herein. If Tenant desires to assign this Lease
or sublet any or all of the Premises, Tenant shall give
Landlord written notice (the "TRANSFER NOTICE") at least
twenty (20) days prior to the anticipated effective date
of the proposed assignment or sublease, which shall
contain all of the information reasonably requested by
Landlord to address Landlord's decision criteria
specified hereinafter. Landlord shall then have a period
of fifteen (15) business days following receipt of the
Transfer Notice to notify Tenant in writing that
Landlord elects either: (i) to refuse to grant its
consent based on the criteria set forth in Paragraph
21.A.(2); or (ii) to consent to the proposed assignment
or sublease, subject, however, to the proposed assignee
or subtenant execution of Landlord's then commercially
reasonable consent agreement and of any related
documents or agreements associated with the assignment
or sublease. If Landlord does not exercise option (i)
above, Landlord's consent to a proposed assignment or
sublease shall not be unreasonably withheld. Consent to
any assignment or subletting shall not constitute
consent to any subsequent transaction to which this
Paragraph 21 applies.
(2) CONDITIONS OF LANDLORD'S CONSENT. Without limiting the
other instances in which it may be reasonable for
Landlord to withhold Landlord's consent to an assignment
or subletting, Landlord and Tenant acknowledge that it
shall be reasonable for Landlord to withhold Landlord's
consent in the following instances: if the proposed
assignee does not agree to be bound by and assume the
obligations of Tenant under this Lease in form and
substance reasonably satisfactory to Landlord; the use
of the Premises by such proposed assignee or subtenant
would not be a Permitted Use or any Regulation or would
increase the Occupancy Density or Parking Density of the
Building or Project, as reasonably determined by
Landlord; the proposed assignee or subtenant has a poor
credit history or is not of sound financial condition as
determined by Landlord in Landlord's sole but reasonable
discretion (except that in the case of a start up
company, a low net worth by itself shall not be a basis
for Landlord to withhold its consent); the proposed
assignee or subtenant is a governmental agency; the
proposed assignee or subtenant does not have a good
reputation as a tenant of property or a good business
reputation; the assignment or subletting would entail
any Alterations which would lessen the value of the
leasehold improvements in the Premises or use of any
Hazardous Materials other than those permitted under
Paragraph 4.D. or other noxious use. It also shall not
be unreasonable for Landlord to withhold its consent to
any proposed assignment or sublease if (i) the proposed
assignee's or subtenant anticipated use of the Premises
or Project involves the generation, storage, use,
treatment or disposal of Hazardous Materials in other
than research or laboratory amounts (i.e., B occupancy
per the
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Uniform Building Code); (ii) the proposed assignee or
subtenant has been required by any prior landlord,
lender, or governmental authority to take remedial
action in connection with Hazardous Materials
contaminating a property if the contamination resulted
from such proposed assignee's or subtenant's actions or
use of the property in question; or (iii) the proposed
assignee or subtenant is subject to an enforcement
order issued by any governmental authority in
connection with the use, disposal or storage of
Hazardous Materials. Failure by or refusal of Landlord
to consent to a proposed assignee or subtenant shall
not cause a termination of this Lease, and Tenant
waives any right it may have under any Regulation or
equity to terminate this Lease in such event. At the
option of Landlord, a surrender and termination of this
Lease shall operate as an assignment to Landlord of
some or all subleases or subtenancies. Landlord shall
exercise this option by giving notice of that
assignment to such subtenants on or before the
effective date of the surrender and termination. In
connection with each request for assignment or
subletting, Tenant shall pay to Landlord Landlord's
standard fee for approving such requests, not to exceed
Three Hundred Dollars ($300), as well as all reasonable
costs incurred by Landlord or any mortgagee or ground
lessor in approving each such request and effecting any
such transfer, including, without limitation,
reasonable attorneys' fees.
B. BONUS RENT. Any Rent or other consideration realized by Tenant under any such
sublease or assignment, after deduction by Tenant of the Transfer Expenses (as
defined below) (the "Bonus Rent"). "Transfer Expenses" shall mean the sum of the
following: (i) any reasonable brokerage commission, (ii) the cost of any new
Alterations (excluding the cost of Tenant's Initial Improvements and any trade
fixtures, equipment or personal property) constructed or installed within the
Premises specifically for and in connection with any sublease or assignment, to
the extent actually paid by Tenant to unrelated and unaffiliated third parties,
(iii) the lesser of (a) the book value of, (b) consideration paid for, or (c)
the fair market value of, Tenant's furniture, fixtures and equipment (but
excluding Tenant's Initial Improvements) which are sold to any proposed
subtenant or assignee as a part of any such sublease or assignment, (iv) the
Base Rent paid by Tenant per square foot for the space being subleased or
assigned ("the Rent Factor"), and (v) Forty-Four Cents ($0.44) per square foot
for the space being subleased or assigned (the "TI Factor"). The Rent Factor
shall be determined by dividing the monthly Base Rent then payable under the
Lease by the total rentable square footage of the Premises and multiplying such
quotient by the number of rentable square feet of space being subleased or
assigned. Except as provided below, Bonus Rent shall be divided and paid, fifty
percent (50%) to Tenant, fifty percent (50%) to Landlord within five (5)
business days after receipt by Tenant (whether or not such receipt is after the
Term of this Lease expires or is terminated). Notwithstanding the foregoing, if
Tenant subleases more than Fifty percent (50%) of the rentable square feet of
the Premises, Landlord shall be entitled to one hundred percent (100%) of Bonus
Rent attributable to such subleases (other than that paid pursuant to any
Initial Sublease for which Landlord's share of Bonus Rent shall remain at Fifty
percent (50%)) after deduction of the Transfer Expenses with such sum(s) to be
paid to Landlord within five (5) business days after receipt by Tenant.
C. CORPORATION. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.
D. UNINCORPORATED ENTITY. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
E. LIABILITY. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or alter the primary
liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
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F. INITIAL SUBLEASES. Landlord acknowledges that Tenant intends to sublease the
second floor of the Premises to one or more subtenants for terms which may vary
during the first twenty-four months of the Term ("INITIAL SUBLEASES"). Tenant
shall, however, remain obligated to provide Landlord with advance notice of all
Initial Subleases. Landlord shall not unreasonably withhold or delay its consent
to the Initial Subleases, and because Landlord recognizes that the Initial
Sublease subtenant will most likely be a startup company, Landlord agrees that
it will not refuse its consent based upon the net worth of the Initial Sublease
subtenant. Tenant shall not be charged Landlord's standard fee for approving
such Initial Subleases, but Tenant shall pay Landlord's reasonable attorneys'
fees incurred in connection with the review thereof. Landlord further agrees
that if prior to the Term Commencement Date Tenant completes the Tenant's
Initial Improvements in the second floor in a manner permitting Tenant to obtain
a certificate of occupancy for such portion of the Premises (or equivalent
approval from the City of Mountain View required for the legal occupancy
thereof), Tenant shall be entitled to enter into an Initial Sublease on the
terms set forth herein providing for a sublease commencement date prior to the
Term Commencement Date. In such event, all of the terms and conditions of this
Lease which are to be in effect from and after the Term Commencement Date shall
be in effect upon the commencement date of such Initial Sublease with respect to
that portion of the Premises subleased. Notwithstanding the foregoing, (i)
Landlord agrees that Tenant's obligation to pay Base Rent shall not be affected
by such Initial Subleases (i.e., the date upon which Tenant is obligated to
commence payments of Base Rent shall not change or be accelerated), and (ii)
Tenant agrees to share Bonus Rent as aforesaid in Paragraph 21.B.
G. PERMITTED TRANSFEREES. Notwithstanding anything to the contrary contained in
this Lease, Tenant, without Landlord's prior written consent, may sublet the
Premises or assign this Lease to: (1) a subsidiary, affiliate, franchisee,
division or corporation controlling, controlled by or under common control with
Tenant; (2) a successor corporation related to Tenant by merger, consolidation,
non-bankruptcy reorganization or government action; (3) a purchaser of
substantially all of Tenant's assets located at the Premises (by stock purchase
or other form of consideration); or (4) a purchaser of a majority of Tenant's
corporate shares (collectively referred to herein as a "Permitted Transferee"),
provided in each instance (i) the net worth of such Permitted Transferee is then
equal to or greater than Ten Million Dollars ($10,000,000), (ii) Tenant shall
notify Landlord in writing at least fifteen (15) business days prior to such
assignment or sublease, (iii) Tenant complies with all other terms and
conditions relating to assignments and subleases (other than Paragraph 21.B,
(iv) such Permitted Transferee expressly agrees to be (or reaffirms its
obligation to be) bound by all the terms and conditions of this Lease and (v)
any such assignment or sublease is not a subterfuge by Tenant to avoid
Landlord's consent. In the event these conditions are not absolutely and
unconditionally satisfied, any such assignment or sublease shall require the
consent of Landlord. For purposes of this Lease, a sale of a majority of
outstanding shares of Tenant's capital stock to any one person or entity through
any public exchange shall be deemed an assignment, subletting or other transfer
of this Lease or the Premises requiring Landlord's consent, but any other sale
of Tenant's capital stock through any public exchange shall not.
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to
enter into this Lease and to perform all of Landlord's obligations hereunder and
that all persons signing this Lease on its behalf are authorized to do. Tenant
and the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any substantial part
of the Premises, Building or Project should be taken or condemned for any public
use under any Regulation, or by right of eminent domain, or by private purchase
in lieu thereof, and the taking would prevent or materially interfere with the
Permitted Use of the Premises, Tenant shall have the right to terminate this
Lease at its option. The taking or condemnation of the Premises, Building or
Project shall not be deemed to prevent or materially interfere with the
Permitted Use of the Premises, unless more than twenty-five (25%) percent of the
usable area of the Premises, or more than twenty-five percent (25%) of the land
outside the Building is taken or condemned.
B. TERMINATION OF LEASE. To terminate this Lease pursuant to this Paragraph 23,
Tenant must exercise its right by giving written notice to the Landlord within
thirty (30) days after its receipt of a Notice of Intended Taking (as defined
below), and the effective date of such termination shall be the date when the
physical taking of the Premises shall have occurred. Upon the effective date of
Lease termination (i) all rights and obligations between the parties shall
cease, except the provisions of this Paragraph 23 and those provisions which
otherwise would survive the
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termination of this Lease, and (ii) Rent due shall be apportioned. A "NOTICE OF
INTENDED TAKING" shall mean any notice or notification on which a reasonably
prudent person would rely and who would interpret as expressing an existing
intention of taking as distinguished from a mere preliminary inquiry or
proposal. It includes, but is not limited to, the service of a condemnation
summons and complaint on a party to this Lease. The notice is considered to have
been received when a party to this Lease receives from the condemning condemnor,
a Notice of Intended Taking, in writing, containing a description or map of the
Taking reasonably defining the extent of the taking or condemnation.
C. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, including the extent of the interference with Tenant's access
to or use of the Premises, but only after giving Landlord credit for all sums
received or to be received by Tenant by the condemning authority.
Notwithstanding anything to the contrary contained in this Paragraph, if the
temporary use or occupancy of any part of the Premises shall be taken or
appropriated under power of eminent domain during the Term, this Lease shall be
and remain unaffected by such taking or appropriation and Tenant shall continue
to pay in full all Rent payable hereunder by Tenant during the Term; in the
event of any such temporary appropriation or taking, Tenant shall be entitled to
receive that portion of any award which represents compensation for the use of
or occupancy of the Premises during the Term, and Landlord shall be entitled to
receive that portion of any award which represents the cost of restoration of
the Premises and the use and occupancy of the Premises. Notwithstanding the
foregoing sentence, in the event there is a temporary taking of the entire
Building for a period of one hundred eighty (180) days or more, Tenant may by
written notice to Landlord in accordance with the provisions of Paragraph 23.B,
terminate this Lease as of such date.
D. AWARD. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever in
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, after Landlord's costs and expenses incurred in
connection with the recovery of any award (including without limitation
attorneys' fees, expert fees and costs) are first deducted from any award,
Tenant shall be entitled to the lesser of, the unamortized cost of Tenant's
Initial Improvements (but excluding the unamortized cost of the Warm Shell
Improvements (as defined below)) and other Alterations paid for by Tenant (with
the amortization period to be that shown on Tenant's books and records), or the
then fair market value of such Tenant's Initial Improvements and Alterations. In
addition, Tenant shall be entitled to any award for Tenant's moving or
relocation expenses, damages for Tenant's business interruption, or for
depreciation to, damage to, and/or cost of removal of, and/or for the value of
stock and/or trade fixtures, furniture and other personal property belonging to
Tenant which Tenant pursuant to this Lease has the right to remove from the
Premises upon termination or expiration of this Lease, and goodwill, or similar
claims, which are specifically and separately awarded to Tenant
E. WAIVER OF CCP SECTION 1265.130. Each party waives the provisions of
California Civil Code Procedure Section 1265.130 allowing either party to
petition the superior court to terminate this Lease as a result of a partial
taking.
24. CASUALTY DAMAGE
A. GENERAL. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "CASUALTY"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's reasonable estimation material restoration of the Premises can
reasonably be made within one hundred eighty (180) days from the date of such
notice and receipt of required permits for such restoration ("Landlord's
Casualty Notice"). Landlord's determination shall be binding on Tenant.
B. WITHIN 180 DAYS. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's reasonable estimation be
reasonably completed within one hundred eighty (180) days after the date of such
notice and receipt of required permits for such restoration, this Lease shall
not terminate. Provided that insurance proceeds are received by Landlord to
fully repair the damage (or could have been received if Landlord had carried the
insurance it was required to obtained hereunder), Landlord shall proceed to
rebuild and repair that portion of the Premises which constitutes Landlord's
Work in the manner determined by Landlord
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except that Landlord shall not be required to rebuild, repair or replace any
part of the Alterations (including without limitation, Tenant's Initial
Improvements) which may have been placed on or about the Premises by Tenant.
Notwithstanding the foregoing, if Landlord insures Tenant's Initial Improvements
or any other Alterations and receives insurance proceeds to fully repair the
damage to the same, Landlord shall also proceed to rebuild Tenant's Initial
Improvements and such Alterations. If the Premises are untenantable in whole or
in part following such damage, the Rent payable hereunder during the period in
which they are untenantable shall be abated proportionately to the extent of the
interference with Tenant's access to and use of the Premises, but only to the
extent of rental abatement insurance proceeds received by Landlord during the
time and to the extent the Premises are unfit for occupancy. Tenant shall be
obligated to rebuild, repair or replace Tenant's Initial Improvements, except if
landlord is otherwise obligated to do so pursuant to this Paragraph 24.B.
C. GREATER THAN 180 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, Tenant shall have the right to terminate this Lease provided that Tenant
shall notify Landlord of its election within fifteen (15) business days after
Tenant's receipt of Landlord's Casualty Notice. Tenant shall also have the right
to terminate this Lease if Casualty occurs in the last twelve (12) months of the
Term resulting in damage to the Premises that materially interferes with the
Permitted Use of the Premises and the damage is to such an extent that
rebuilding or repairs cannot in Landlord's reasonable estimation be reasonably
completed within sixty (60) days, provided that Tenant shall notify Landlord of
its election within five (5) business days after Tenants receipt of Landlord's
estimation. Landlord shall rebuild or repair that which Landlord is obligated to
pursuant to Paragraph 24.B diligently and in the manner determined by Landlord
unless Tenant has elected to terminate this Lease. Notwithstanding the above,
Landlord shall not be required to rebuild, repair or replace any part of any
Alterations which may have been placed, on or about the Premises by Tenant,
except to the extent otherwise provided in Paragraph 24.B. If the Premises are
untenantable in whole or in part following such damage, the Rent payable
hereunder during the period in which they are untenantable shall be abated
proportionately, but only to the extent of rental abatement insurance proceeds
received by Landlord during the time and to the extent the Premises are unfit
for occupancy. Unless this Lease is terminated pursuant to this Paragraph 24.C,
Tenant shall be obligated to rebuild, repair or replace Tenant's Initial
Improvements, except if Landlord is otherwise obligated to do so pursuant to
this Paragraph 24.B.
D. TENANT'S FAULT. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.
E. INSUFFICIENT INSURANCE PROCEEDS. Notwithstanding anything herein to the
contrary, if the Premises or Building are damaged or destroyed and are not fully
covered by the insurance proceeds received by Landlord (or could have been
received if Landlord had carried the insurance it was required to obtain
hereunder) or if the holder of any indebtedness secured by a mortgage or deed of
trust covering the Premises requires that the insurance proceeds be applied to
such indebtedness, then in either case Landlord shall have the right to
terminate this Lease by delivering written notice of termination to Tenant
within thirty (30) days after the date of notice to Landlord that said damage or
destruction is not fully covered by insurance (or would have been covered if
Landlord had carried the insurance it was required to obtain hereunder) or such
requirement is made by any such holder, as the case may be, whereupon this Lease
shall terminate. Notwithstanding the foregoing, Landlord shall have no right to
terminate this Lease pursuant to this Paragraph 24.E if Tenant notifies Landlord
within fifteen (15) days of Tenant's receipt of Landlord's notice that it shall
make the required repairs at Tenant's sole cost and provide at the time of such
notice evidence of its ability to pay for such repairs in the form of a payment
and performance bond or letter of credit reasonably satisfactory to Landlord.
F. INSURANCE PROCEEDS RELATING TO TENANT'S INITIAL IMPROVEMENTS AND ALTERATIONS.
Notwithstanding any provision in this Lease to the contrary, in the event this
Lease is terminated pursuant to this Paragraph 24, Landlord shall be entitled to
(and Tenant shall assign to Landlord) any and all insurance proceeds covering,
attributable or relating to, Tenant's Initial Improvements and any other
Alterations which are not removable by Tenant upon the expiration or termination
of this Lease. In the event this Lease is not terminated pursuant to this
Paragraph 24 and Tenant is obligated to rebuild, repair or restore Tenant's
Initial Improvement and/or such Alterations, Landlord shall disburse such
insurance proceeds in the same manner and upon the same conditions a prudent
institutional lender would disburse the such proceeds.
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G. WAIVER. This Paragraph 24 Shall be Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Paragraphs 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs, or under any similar law, statute or
ordinance now or hereafter in effect.
H. TENANT'S PERSONAL PROPERTY. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over,
Tenant shall be unlawfully and illegally in possession of the Premises, whether
or not Landlord accepts any rent from Tenant or any other person while Tenant
remains in possession of the Premises without Landlord's written consent. If
Tenant shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
double the amount of Base Rent as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any time required by Landlord to complete such
obligations shall be considered a period of holding over and the terms of this
Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any
expiration or earlier termination of this Lease.
26. DEFAULT
A. EVENTS OF DEFAULT. The occurrence of any of the following shall at Landlord's
option constitute an event of default on the part of Tenant under this Lease
(and whenever the term default is used in this Lease it shall be assumed that
any cure period provided below, if any, shall have expired):
(1) ABANDONMENT. Abandonment of the Premises for a
continuous period in excess of ten (10) days coupled
with Tenant's failure to pay rent. Tenant waives any
right to notice Tenant may have under Section 1951.3 of
the Civil Code of the State of California, the terms of
this Paragraph 26.A. being deemed such notice to Tenant
as required by said Section 1951.3.
(2) NONPAYMENT OF RENT. Failure to pay any installment of
Rent or any other amount due and payable hereunder upon
the date when said payment is due, as to which time is
of the essence, except that for the first failure in any
twelve (12) calendar month period Tenant shall not be in
default under this subparagraph unless any such failure
shall continue for a period of five (5) days after
written notice thereof by Landlord to Tenant (which
notice shall be in lieu of the three (3) days' notice
provided for and in Section 1161 of the California Code
of Civil Procedure or other statutory notice).
(3) OTHER OBLIGATIONS. Failure to perform any obligation,
agreement or covenant under this Lease other than those
matters specified in subparagraphs (1) and (2) of this
Paragraph 26.A., such failure continuing for thirty (30)
days after written notice of such failure, as to which
time is of the essence (which notice shall be in lieu of
the three (3) days' notice provided for in Section 1161
of the California Code of Civil Procedure or other
statutory notice provisions) provided, however, that if
the nature of Tenant's default is such that more than
thirty (30) days are reasonably required for its cure,
then Tenant shall not be deemed to be in default if
Tenant commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to
completion within ninety (90) days.
(4) GENERAL ASSIGNMENT. A general assignment by Tenant for
the benefit of creditors.
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(5) BANKRUPTCY. The filing of any voluntary petition in
bankruptcy by Tenant, or the filing of an involuntary
petition by Tenant's creditors, which involuntary
petition remains undischarged for a period of sixty (60)
days. If under applicable law, the trustee in bankruptcy
or Tenant has the right to affirm this Lease and
continue to Perform the obligations of Tenant hereunder,
such trustee or Tenant shall, in such time period as may
be permitted by the bankruptcy court having
jurisdiction, cure all defaults of Tenant hereunder
outstanding as of the date of the affirmance of this
Lease and provide to Landlord such adequate assurances
as may be necessary to ensure Landlord of the continued
performance of Tenant's obligations under this Lease.
(6) RECEIVERSHIP. The employment of a receiver to take
possession of substantially all of Tenant's assets or
the Premises, if such appointment remains undismissed or
undischarged for a period of fifteen (15) days after
the order therefor.
(7) ATTACHMENT. The attachment, execution or other judicial
seizure of all or substantially all of Tenant's assets
or Tenant's leasehold of the Premises, if such
attachment or other seizure remains undismissed or
undischarged for a period of sixty (60) days after the
levy thereof.
(8) INSOLVENCY. The admission by Tenant in writing of its
inability to pay its debts as they become due.
(9) DEFAULT UNDER NOTE. Tenant's default under the Note (as
defined in Paragraph 38.D below).
B. REMEDIES UPON DEFAULT.
(1) TERMINATION. In the event of the occurrence of any event
of default, Landlord shall have the right to give a
written termination notice to Tenant, and on the date
specified in such notice, Tenant's right to possession
shall terminate, and this Lease shall terminate unless
on or before such date all Rent in arrears and all costs
and expenses incurred by or on behalf of Landlord
hereunder shall have been paid by Tenant and all other
events of default of this Lease by Tenant at the time
existing shall have been fully remedied to the
satisfaction of Landlord. At any time after such
termination, Landlord may recover possession of the
Premises or any part thereof and expel and remove
therefrom Tenant and any other person occupying the
same, including any subtenant or subtenants
notwithstanding Landlord's consent to any sublease, by
any lawful means, and again repossess and enjoy the
Promises without prejudice to any of the remedies that
Landlord may have under this Lease, or at law or equity
by any reason of Tenant's default or of such
termination. Landlord hereby reserves the right, but
shall not have the obligation, to recognize the
continued possession of any subtenant. The delivery or
surrender to Landlord by or on behalf of Tenant of keys,
entry codes, or other means to bypass security at the
Premises shall not terminate this Lease.
(2) CONTINUATION AFTER DEFAULT. Even though an event of
default may have occurred, this Lease shall continue in
effect for so long as Landlord does not terminate
Tenant's right to possession under Paragraph 26.B.(1)
hereof, and Landlord may enforce all of Landlord's
rights and remedies under this Lease and at law or in
equity, including without limitation, the right to
recover Rent as it becomes due, and Landlord, without
terminating this Lease, may exercise all of the rights
and remedies of a landlord under Section 1951.4 of the
Civil Code of the State of California or any successor
code section. Acts of maintenance, preservation or
efforts to lease the Premises or the appointment of a
receiver under application of Landlord to protect
Landlord's interest under this Lease or other entry by
Landlord upon the Premises shall not constitute an
election to terminate Tenant's right to possession.
(3) INCREASED SECURITY DEPOSIT. If Tenant is in default
under Paragraph 26.A.(2) hereof and such default remains
uncured for more than ten (10) days or such default
occurs more than three times in any twelve (12) month
period, Landlord may require that Tenant increase the
Security Deposit to the amount of two times the current
month's Rent at the time of the most recent default,
C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(l) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of
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termination, (2) the worth at the time of award of the amount by which the
unpaid Rent and other amounts that would have been earned after the date of
termination until the time of award exceeds the amount of such Rent loss that
Tenant proves could have been reasonably avoided; (3) the worth at the time of
award of the amount by which the unpaid Rent and other amounts for the balance
of the Term after the time of award exceeds the amount of such Rent loss that
the Tenant proves could be reasonably avoided; and (4) any other amount and
court costs necessary to compensate Landlord for all detriment proximately
caused by Tenant's failure to perform Tenant's obligations under this Lease or
which, in the ordinary course of things, would be likely to result therefrom.
The "WORTH AT THE TIME OF AWARD" as used in (1) and (2) above shall be computed
at the Applicable Interest Rate (defined below). The "WORTH AT THE TIME OF
AWARD" as used in (3) above shall be computed by discounting such amount at the
Federal Discount Rate of the Federal Reserve Bank of San Francisco at the time
of award plus one percent (1%). If this Lease provides for any periods during
the Term during which Tenant is not required to pay Base Rent or if Tenant
otherwise receives a Rent concession, then upon the occurrence of an event of
default, Tenant shall owe to Landlord the full amount of such Base Rent or value
of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.
D. LATE CHARGE. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment required to be made
by Tenant hereunder, and which is not paid and received by Landlord on or before
the first day of each calendar month, an amount equal to five percent 15%) of
the delinquency for each month or portion thereof that the delinquency remains
outstanding to compensate Landlord for the loss of the use of the amount not
paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord. Notwithstanding the
foregoing to the contrary, for the first delinquency during any twelve (12)
month period, Tenant shall have no obligation to pay a late charge unless any
such delinquency continues for five (5) days after Tenant's receipt of
Landlord's notice of such failure to make any such payment.
E. INTEREST. Interest shall accrue on all sums not paid when due hereunder at
the lesser of eighteen percent (18%) per annum or the maximum interest rate
allowed by law ("APPLICABLE INTEREST RATE") from the due date until paid.
F. REMEDIES CUMULATIVE. All rights, privileges and elections or remedies of the
parties are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.
27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within ten (10) days following receipt of
notice of the imposition of any such lien, cause the same to be released of
record by payment or posting of a proper bond, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as Landlord shall
deem proper, including payment of the claim giving rise to such lien. All sums
paid by Landlord on behalf of Tenant and all expenses incurred by Landlord in
connection therefor shall be payable to Landlord by Tenant on demand with
interest at the Applicable Interest Rate as Additional Rent. Landlord shall have
the right at all times to post and keep posted on the Premises any notices
permitted or required by law, or which Landlord shall deem proper, for the
protection of Landlord, the Premises, the Project and any other party having an
interest therein, from mechanics' and materialmen's liens, and Tenant shall give
Landlord not less than ten (10) business days prior written notice of the
commencement of any work in the Premises or Project which could lawfully give
rise to a claim for mechanics' or materialmen's liens to permit Landlord to post
and record a timely notice of non-responsibility, as Landlord may elect to
proceed or as the law may from time to time provide, for which purpose, if
Landlord shall so determine, Landlord may enter the Premises. Tenant shall not
remove any such notice posted by Landlord without Landlord's consent, and in any
event not before completion of the work which could lawfully give rise to a
claim for mechanics' or materialmen's liens.
28. SUBSTITUTION
Intentionally Deleted.
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29. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the
successor-in-interest of Landlord under this Lease with respect to the
performance of the covenants and duties of "LANDLORD" to be performed after the
passing of title to Landlord's successor-in-interest. This Lease shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform any of the obligations of "LANDLORD", to
the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.
30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent. If Tenant shall fail to pay any sum
of money, other than Base Rent, required to be paid by Tenant hereunder or shall
fail to perform any other act on Tenant's part to be performed hereunder,
including Tenant's obligations under Paragraph 11 hereof, and such failure shall
continue for fifteen (15) days after notice thereof by Landlord, in addition to
the other rights and remedies of Landlord, Landlord may make any such payment
and perform any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without releasing Tenant from any of Tenant's
obligations. All sums so paid by Landlord and all incidental costs incurred by
Landlord and interest thereon at the Applicable Interest Rate, from the date of
payment by Landlord, shall be paid to Landlord on demand as Additional Rent.
31. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant
or condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord or Tenant to
enforce any of the terms, Covenants or conditions of this Lease for any length
of time shall not be deemed to waive or decrease the right of Landlord or Tenant
to insist thereafter upon strict performance by the other. Waiver by Landlord or
Tenant of any term, covenant or condition contained in this Lease may only be
made by a written document signed by Landlord or Tenant, based upon full
knowledge of the circumstances.
32. NOTICES
Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to sending,
mailing, or delivery of any notice or the making of any payment by Landlord or
Tenant to the other shall be deemed to be complied with when and if the
following steps are taken:
A. RENT. All Rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at Landlord's Remittance Address set
forth in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
Tenant's obligation to pay Rent and any other amounts to Landlord under the
terms of this Lease shall not be deemed satisfied until such Rent and other
amounts have been actually received by Landlord.
B. OTHER. All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be in writing and
either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease Information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Promises.
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C. REQUIRED NOTICES. Tenant shall promptly notify Landlord in writing of any
notice of a violation or a potential or alleged violation of any Regulation that
relates To the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises or any
claim that is instituted or threatened by any third party that relates to the
Premises or the project.
33. ATTORNEYS' FEE
If Landlord places the enforcement of this Lease, or any part thereof,
or the collection of any Rent due, or to become due hereunder, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord's reasonable attorneys' fees and court costs,
whether incurred at trial, appeal or review. In any action which Landlord or
Tenant brings to enforce its respective rights hereunder, the unsuccessful party
shall pay all costs incurred by the prevailing party including reasonable
attorneys' fees, to be fixed by the court, and said costs and attorneys' fees
shall be a part of the judgment in said action. "Prevailing Party" as used in
this Lease includes a party who dismisses an action for recovery hereunder in
exchange for sums allegedly due, performance of covenants allegedly breached or
consideration substantially equal to the relief sought in the action.
34. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord,
its successors and assigns, and shall be binding upon and inure to the benefit
of Tenant, its successors, and to the extent assignment is approved by Landlord
as provided hereunder, Tenant's assigns.
35. FORCE MAJEURE
If performance by a party of any portion of this Lease is made
impossible by any prevention, delay, or stoppage caused by strikes, lockouts;
labor disputes, acts of God, inability to obtain services, labor, or materials
or reasonable substitutes for those items, government actions, civil commotions,
fire or other casualty, or other causes beyond the reasonable control of the
party obligated to perform, performance by that party for a period equal to the
period of that prevention, delay, or stoppage is excused. Tenant's obligation to
pay Rent, however, is not excused by this Paragraph 35.
36. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease,
surrender the Premises to Landlord in the same condition as existed on the
Commencement Date, ordinary wear and tear, acts of God, casualties,
condemnation, Hazardous Materials (other than that which Tenant has liability or
responsibility for pursuant any other provision of this Lease) and Alterations
with respect to which Landlord has not reserved the right to require removal
excepted, including, but not limited to, all interior walls cleaned, all
interior painted surfaces cleaned, all holes in walls repaired, all carpets
shampooed and cleaned, all HVAC equipment in operating order and in good repair,
and all floors cleaned, waxed, and free of any Tenant-introduced marking or
painting, all to the reasonable satisfaction of Landlord. Tenant shall remove
all of its debris from the Project. At or before the time of surrender, Tenant
shall comply with the terms of Paragraph 12.A. hereof with respect to
Alterations to the Promises and all other matters addressed in such Paragraph.
If the Premises are not so surrendered at the expiration or sooner termination
of this Lease, the provisions of Paragraph 25 hereof shall apply. All keys to
the Premises or any part thereof shall be surrendered to Landlord upon
expiration or sooner termination of the Term. Tenant shall give written notice
to Landlord at least thirty (30) days prior to vacating the Premises and shall
meet with Landlord for a joint inspection of the Premises at the time of
vacating, but nothing contained herein shall be construed as an extension of the
Term or as a consent by Landlord to any holding over by Tenant. In the event of
Tenant's failure to give such notice or participate in such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall
conclusively be deemed correct for purposes of determining Tenant's
responsibility for repairs and restoration. Any delay caused by Tenant's failure
to carry out its obligations under this Paragraph 36 beyond the term hereof,
shall constitute unlawful and illegal possession of Premises under Paragraph 25
hereof.
37. MISCELLANEOUS
A. GENERAL. The term "TENANT" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.
B. TIME. Time is of the essence regarding this Lease and all of its provisions.
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C. CHOICE OF LAW. This. Lease shall in all respects be governed by the laws of
the State of California.
D. ENTIRE AGREEMENT. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease information, contains all the agreements of the
parties hereto and supersedes any Previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
E. MODIFICATION. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the
Premises for all purposes under this Lease, and acknowledges and agrees that no
other definition of the area (rentable, usable or otherwise) of the Premises
shall apply. Tenant shall in no event be entitled to a recalculation of the
square footage of the Premises, rentable, usable or otherwise, and no
recalculation, if made, irrespective of its purpose, shall reduce Tenant's
obligations under this Lease in any manner, including without limitation the
amount of Base Rent payable by Tenant or Tenant's Proportionate Share of the
Building and of the Project.
F. SEVERABILITY. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
G. RECORDATION. Tenant shall not record this Lease but it may record a short
form memorandum hereof executed by both Tenant and Landlord.
H. EXAMINATION OF LEASE. Submission of this Lease to Tenant does not constitute
an option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.
I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.
J. EASEMENTS. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant or dedication shall materially (i) interfere with Tenant's Permitted
Use of the Premises, (ii) increase Tenant's obligations, (iii) diminish Tenant's
rights under this Lease, or (iv) interfere with Tenant's parking rights. Within
ten (10) business days after receipt of Landlord's request, Tenant shall
execute, acknowledge and deliver to Landlord documents, instruments, maps and
plats necessary to effectuate Tenant's covenants hereunder.
K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or requested of Landlord, Landlord's consent, determination or estimation
shall be given or made solely by Landlord in Landlord's good faith opinion,
whether or not objectively reasonable. If Landlord fails to respond to any
request for its consent within the time period, if any, specified in this Lease,
Landlord shall be deemed to have disapproved such request.
L. EXHIBITS. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.
M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and Tenant
and nothing herein is intended to create any third party benefit.
O. QUIET ENJOYMENT. Upon payment by Tenant of the Rent, and upon the observance
and performance of all of the other covenants, terms and conditions on Tenant's
part to be observed and performed, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereby demised without hindrance or interruption
by Landlord or any other person or persons lawfully or equitably claiming by,
through or under Landlord, subject, nevertheless, to all of the other terms and
conditions of this Lease. Landlord shall not be liable for any hindrance,
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interruption, interference, or disturbance by other tenants or third persons,
nor shall Tenant be released from any obligations under this it interruption,
interference or disturbance.
P. COUNTERPARTS. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original.
Q. MULTIPLE PARTIES. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.
R. PRORATIONS. Any Rent or other amounts payable to Landlord by Tenant hereunder
for any fractional month shall be prorated based on a month of 30 days. As used
herein, the term "fiscal year" shall mean the calendar year or such other fiscal
year as Landlord may deem appropriate.
S. COMPUTATION OF TIME. If the time for performance of any provision of this
Lease ends on a Saturday, Sunday or federal, state or legal holiday, then such
date shall automatically be extended until 5:00 p.m. Pacific Time on the next
day which is not a Saturday, Sunday or federal, state or legal holiday.
38. ADDITIONAL PROVISIONS
A. BROKERAGE COMMISSION. Tenant represents and warrants that (i) Tenant has not
dealt with any broker other than SCOTT ATHEARN AND GEORGE REILLY OF CPS CORFAC
INTERNATIONAL (the "COOPERATING BROKER"), and JOE CARROLL OF RESOURCE ONE
("LANDLORD'S BROKER"), and (ii) insofar as Tenant knows, no other broker
negotiated this agreement or is entitled to any commission in connection
herewith. It is understood that (i) Tenant will pay all commissions and other
fees and expenses due to any broker or agent who claims or did in fact act on
Tenant's behalf in connection with this Lease, but will not be obligated to pay
any such commissions, fees or expenses to any broker who claims it acted solely
on Landlord's behalf, (ii) Tenant will pay a commission due to Cooperating
Broker in two equal installments of ONE HUNDRED TWENTY-ONE THOUSAND FIVE HUNDRED
SEVENTY-SEVEN DOLLARS AND FIFTY CENTS ($121,577.50) the first installment to be
paid promptly upon full execution and delivery of this Lease, and the second
installment on July 16, 1999, and (iii) Tenant will pay a commission due to
Landlord's Broker in two equal installments of FORTY-FOUR THOUSAND TWO HUNDRED
TEN DOLLARS ($44,210) the first installment to be paid promptly upon full
execution and delivery of this Lease, and the second installment on July 16,
1999. Tenant shall make the foregoing commission payments directly to the
Cooperating Broker and Landlord's Broker. Tenant's failure to pay such
commissions on time without offset, defense or demand shall constitute a
material default under this Lease. Landlord shall not be liable to Cooperating
Broker or Landlord's Broker for the failure of Tenant to pay any commissions,
fees or other payments due to Cooperating Broker or Landlord's Broker.
B. TENANT'S OBLIGATION TO CONSTRUCT SUBSTANTIAL IMPROVEMENTS. Tenant
acknowledges and agrees that as a material inducement to Landlord to enter into
this Lease, it has agreed to construct, at its sole cost and expense, the
Tenant's Initial improvement described in Exhibits C and D, and to expend not
less than Two Million Dollars ($2,000,000) (including sums loaned to Tenant by
Landlord and any third party lender)("TENANT'S MINIMUM EXPENDITURE") to
construct Tenant's Initial Improvements. Tenant's Initial Improvements are to be
Substantially Completed on or prior to the Term Commencement Date. Tenant's
Minimum Expenditure shall cover all hard construction costs, architectural,
design and engineering fees and expenses, permit fees, but shall exclude any
loan fees, construction loan interest and all costs and expenses attributable to
the acquisition, erection and installation of Tenant's furniture, fixtures and
equipment. Landlord acknowledges that Tenant intends to obtain construction
financing for the Tenant's Initial Improvements. Landlord agrees to reasonably
cooperate with Tenant in connection therewith, provided that Landlord shall not
be required to subordinate its interest in this Lease and/or the Premises,
Building or Project, or to assume any obligations to the lender except
obligations to provide notice of Tenant's default. Tenant agrees that Tenant's
Initial Improvements shall not be encumbered by Tenant in connection with any
such financing or any other financing, but that, provided Landlord's prior
written consent is obtained, such prohibition shall not preclude Tenant from
granting such construction lender a:
(i) leasehold mortgage encumbering Tenant's rights and interest under
this Lease; and/or
(ii) security interest in Tenant's furniture, trade fixtures, equipment
or any other personal property that can be removed from the Premises by
Tenant upon the expiration or termination of the Term of this Lease.
Landlord shall only be allowed to withhold its consent if (i) Tenant's Initial
Improvements are to be encumbered in any construction lender's loan documents,
(ii) the definition of trade fixtures in any construction lender's loan
documents is not in Landlord's reasonable opinion specific enough to exclude
other fixtures, or (iii) such leasehold mortgage and/or security agreement is
inconsistent with any provision in this Lease. Tenant's Initial Improvements
shall include, without limitation,
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the WARM SHELL IMPROVEMENTS, together with (i) a drop ceiling throughout the
Premises, (ii) installation of a completed heating, ventilation and air
conditioning system designed to service the entire Premises and (iii) the
purchase and installation of a Schindler brand elevator (at a cost of
approximately $43,170) currently on order for the Building. Tenant's Initial
Improvements shall be constructed in accordance with all provisions of this
Lease, including without limitation the provisions of Paragraph 12, and Tenant
shall have no obligation to pay to Landlord any construction management or
supervision fee with respect to the construction of the Tenant's Initial
Improvements. Prior to commencing Tenant's initial Improvement Alterations,
Tenant shall provide Landlord with a copy of the construction contract with
Devcon and evidence of a construction loan in an amount not less than the amount
of Tenant's Minimum Expenditure (less the amount of Landlord's Loan as defined
below) or a payment bond reasonably satisfactory to Landlord which is intended
to provide Landlord with the assurance that Tenant can pay for the Tenant's
Initial Improvements. Upon the substantial completion of Tenant's Initial
Improvements, Tenant shall promptly deliver to Landlord copies of As Built
drawings and plans prepared by Devcon, Architect and/or Engineers.
C. LANDLORD LOAN TO TENANT. Landlord shall provide Tenant with a loan
("LANDLORD'S LOAN") in the amount not to exceed SIX HUNDRED SIXTY-THREE THOUSAND
ONE HUNDRED FIFTY DOLLARS ($663,150) upon the following terms and conditions:
(1) Tenant is not in default under this Lease and the
Construction Loan (as defined below) on the date
Landlord receives Tenant's Loan Notice and on the date
Landlord is to advance such loan or portions thereof;
(2) Landlord has approved the Final Plans and Final Working
Drawings in accordance with this Lease;
(3) Tenant has provided Landlord with evidence reasonably
satisfactory to Landlord that Tenant has paid Devcon,
Architect, Engineers, permit fees and any other hard or
soft construction costs in connection with Tenant's
Initial Improvement (excluding interest and fees paid to
any lender, attorneys' fees and any amounts attributable
to Tenants furniture, fixtures and equipment) an
aggregate sum of not less than One Million Four Hundred
Thousand Dollars ($1,400,000) ("Threshold
Contribution"). In addition, if Tenant has obtained a
Construction Loan (as defined below) to fund any portion
of the Threshold Payment, Tenant shall not be in default
under any note or any other document or agreement
executed by Tenant in favor of such lender evidencing or
securing such Construction Loan.
(4) Tenant has submitted a written draw request to Landlord
accompanied with all appropriate lien waivers and such
other documentation from Devcon as may be reasonably
requested by Landlord to support the amount of the draw
request;
(5) The basic terms of the Landlord's Loan are that (i)
interest shall accrue on the outstanding principal
balance at the rate of Eight and One Half percent (8.5%)
per annum from the date disbursed, (ii) monthly payments
of interest only on amounts disbursed commencing on the
first day of the calendar month immediately following
the date any loan proceeds are first disbursed until the
Term Commencement Date, and thereafter equal payments of
principal and interest shall be payable commencing on
August 1, 1999 and on the first day of each calendar
month thereafter in an amount sufficient to fully repay
all principal and interest by the Maturity Date, (iii)
the Maturity Date shall be July 1, 2009, (iv) the
Landlord's Loan may be prepaid at any time without
penalty or other charge, (v) a default under this Lease
shall constitute a default under the Note, and NO the
Note shall be secured by the Security Deposit and the LC
(as defined below) and Tenant's Initial Improvements to
the extent such improvements do not constitute real
property, but shall not be construed to be secured by
real property;
(6) The loan shall be evidenced by a Promissory Note to be
executed by Tenant in the form attached hereto as
EXHIBIT H (the "NOTE") and shall be secured by a
security agreement and UCC-1 Financing Statement to be
executed by Tenant in the forms attached hereto in
EXHIBIT I providing Landlord with a first lien on the
Security Deposit and Letter of Credit and any materials,
improvements and fixtures to be constructed or
installed, and constructed or installed, within the
Premises as part of Tenant's Initial Improvements to the
extent the same do not constitute real property
("Security Agreement"); and
(7) Landlord shall disburse loan proceeds in no more than
three (3) progress payments based on invoices submitted
by Devcon, within five (5) business days after Tenant
complies with the terms and conditions set forth in this
Paragraph 38.C. Tenant acknowledges and agrees that (i)
Tenant intends to obtain a loan to finance the cost
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and expense it will incur in connection with the
construction of Tenant's Initial Improvements in an
amount not less than One Million Four Hundred Thousand
Dollars ($1,400,000) (the "CONSTRUCTION LOAN"), and (ii)
Landlord may require the name of, Devcon, Architect,
Engineers or any subcontractor or supplier to which such
loan proceeds are owed, be named in joint check form on
any such disbursement check.
39. JURY TRIAL WAIVER
EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR
PERSONAL REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES
TRIAL BY JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN
WHICH THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION
OF THE COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 39. THE
PROVISIONS OF THIS PARAGRAPH 39 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
40. RIGHT TO EXTEND TERM
A. RIGHT TO EXTEND TERM. Tenant shall have the right to extend the term of this
Lease for a term of FIVE (5) years commencing on the day after the original
Expiration Date (the "EXTENSION TERM") which shall be exercisable upon the
following terms and conditions:
(1) Tenant shall not (i) be in default under any of the terms,
covenants, conditions, provisions or agreements of this Lease at the
time it notifies Landlord of its election to extend the term as provided
in Subparagraph (c) below or on the day before the Extension Term
commences and (ii) have entered into an assignment of the Lease
requiring Landlord's consent, or have entered into one or more subleases
covering more than thirty percent (30%) of the net rentable square
footage of the Building in the aggregate with one or more sublessees
where such sublease(s) have not terminated on or prior to Tenant's
Extension Notice (as defined below), or the subleases will not terminate
prior to the day the Extension Term commences.
(2) The Base Rent for the Premises shall be Ninety-five (95%) of the
Fair Market Rental Rate (as such phrase is defined below) of the
Premises (including all rights Tenants has under this Lease relating to
the Project) as of the Term Expiration Date. Neither Tenant nor Landlord
shall have any obligation to pay Cooperating Broker, Landlord's Broker
or any other broker a commission, fee or other consideration by reason
of Tenant's election to extend the term of this Lease.
(3) Tenant shall have notified Landlord, in the manner provided under
this LEASE, NOT EARLIER THAN 365 DAYS PRIOR TO THE TERM EXPIRATION DATE
AND NOT LATER THAN 270 DAYS PRIOR TO THE TERM EXPIRATION DATE of
Tenant's election to exercise such right ("TENANT'S EXTENSION NOTICE"),
otherwise said option to be null and void. Once Tenant's Extension
Notice is given Tenant shall have no right to withdraw its election to
extend the term of this Lease.
(4) All of the other terms, covenants, conditions, provisions and
agreements of this Lease shall remain in full force and effect.
(5) There shall be no further right of renewal of this Lease beyond said
FIVE (5) year renewal period.
(6) Landlord and Tenant shall attempt to agree on the Fair Market Rental
Rate within THIRTY (30) DAYS after Landlord's receipt of Tenant's notice
described in Subparagraph (c). In the event Landlord and Tenant cannot
agree on the Fair Market Rental Rate, then the process described in
subparagraphs (g) through (i) below shall be followed.
(7) If Landlord and Tenant are unable to agree on Fair Market Rental
Rate within the THIRTY (30) DAY period described in Subparagraph (f),
then within FIVE (5) BUSINESS DAYS THEREAFTER, Landlord and Tenant shall
each simultaneously submit to the other
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in a sealed envelope its good faith estimate of the Fair Market Rental
Rate. If the higher of such estimates is not more than one hundred five
percent (105%) of the lower of such estimates, then the Fair Market
Rental Rate shall be the average of the two estimates.
(8) If the matter is not resolved by the exchange of estimates as
provided in Paragraph (g) above, then either Landlord or Tenant may, by
written notice to the other on or before five (5) days after the
exchange, require that the disagreement be resolved by arbitration.
Within seven (7) days after such notice, the parties shall select as an
arbitrator a mutually acceptable MAI appraiser, with at least five
(5) years' experience in appraising comparable rental space in buildings
comparable to the building in the vicinity of the Building. If the
parties cannot agree on an arbitrator, then within a second period of
seven (7) days, each party shall select an independent arbitrator who is
a MAI appraiser meeting the aforementioned criteria, and within a third
period of seven (7) days, the two appointed arbitrators shall select a
third arbitrator meeting the aforementioned criteria. Each party shall
bear the cost of its own arbitrator and the parties shall share equally
the cost of the third arbitrator. If either Landlord or Tenant fails to
designate an arbitrator, or only one arbitrator is mutually selected by
Landlord and Tenant, in accordance with the above, the determination of
the Fair Market Rental Rate made by the arbitrator selected shall be
deemed conclusive.
(9) The arbitrators (or sole arbitrator) shall select one of the two
Fair Market Rental Rate estimates proposed by Landlord and Tenant, and
shall have no right to propose a middle ground or any modification of
either of the two proposed estimates. The Fair Market Rental Rate they
or he chooses shall constitute the decision of the arbitrator(s) and
shall be final and binding upon the parties and not subject to appeal.
In the event of a failure, refusal or inability of any arbitrator to
act, his successor shall be appointed by the party hereto who appointed
such arbitrator, but in the case of the third arbitrator, his successor
shall be appointed in the same manner as provided for appointment of the
original third arbitrator. The arbitrator(s) shall attempt to decide the
issue within ten (10) business days after the appointment of the third
arbitrator. The arbitrator(s) shall have the right to consult experts
and competent authorities with factual information or evidence
pertaining to a determination of Fair Market Rental Rate, but any such
consultation shall be made in the presence of both parties with full
right of the other party to cross-examine. The arbitrator(s) shall
render their or his decision and award in writing with counterpart
copies to each party. The arbitrator(s) shall have no power to modify
the provisions of this Lease.
(10) Should the Fair Market Rental Rate not be established by the Term
Expiration Date, then Tenant shall pay the rent for the Premises (which
shall include the base annual rent, together with Tenant's share of
Operating Expenses) payable by Tenant during the last full calendar
month of the initial term of this Lease, and a lump sum payment by
Tenant or credit by Landlord, as the case may be, shall be made promptly
upon the determination of Fair Market Rental Rate.
(11) The phrase "FAIR MARKET RENTAL RATE" shall mean the rental rate,
including all other monetary payments and escalations, at which tenants
lease comparable space as of the commencement of the Option Term. For
this purpose, "comparable space" shall be office/research and
development/industrial space that: (a) is not subleased; (b) is not
subject to another tenant's expansion rights; (c) is not leased to a
tenant that is affiliated with Landlord; (d) is not leased to a tenant
under a renewal or an extension of a Lease; (e) is comparable in size,
location, and quality to the Premises; (f) is leased for a term
substantially comparable to the Option Term ; (g) is located in
comparable buildings in the Shoreline Business Park; and (h) has tenant
improvements comparable to the then existing tenant improvements in the
Premises, Building and Project. For purposes hereof, "comparable
buildings" mean buildings that are comparable in age, location, quality
of construction, services and amenities. Fair Market Rental Rate shall,
however, not include any value attributable to Tenant's or any
subtenant's or assignee's personal property, trade fixtures paid for by
Tenant or any subtenant or assignee and equipment which Tenant or any
assignee has a right to remove from the Premises at the end of the Term
as specifically provided for in the Lease, or which any subtenant has a
right to remove at the end of the term of its sublease. In determining
the rental rate of comparable space, the parties shall include all
escalations and take into consideration the following concessions: (i)
rental abatement concessions, if any, being granted to tenants in
connection with the comparable space; (ii) Tenant improvements or
allowances provided or to be provided for the
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comparable space, taking into account the value of the existing
improvements in the Premises, as compared to the value of improvements
in the comparable space then being offered for lease, based on the age,
quality and layout of the improvements; and (iii) all other monetary
and nonmonetary concessions, if any, being granted to tenants in
connection with the comparable space.
41. LETTER OF CREDIT
A. DELIVERY OF LETTER OF CREDIT. In addition to the Security Deposit, Tenant
shall by the earlier of (a) the commencement of construction of the Tenant's
Initial Improvements, or (b) ten (10) days after the execution of this Lease,
deliver to Landlord and cause to be in effect during the Lease Term an
unconditional, irrevocable letter of credit ("LC") in the amount of Five Hundred
Thousand Dollars ($500,000) (the "LC AMOUNT") (subject to reduction in
accordance with the provisions of Paragraph 41.G below). The LC shall be
substantially in the form attached hereto as Exhibit J, and be issued by a bank
that (i) accepts deposits, (ii) maintains accounts, (iii) has a local branch in
San Jose, California that will negotiate a letter of credit, and (iv) has its
deposits insured by the Federal Deposit Insurance Corporation (the "LC Bank").
Notwithstanding the foregoing to the contrary, but without waiving any of the
foregoing requirements in the future, Landlord hereby approves State Street Bank
as the initial issuer of the LC and the initial LC Bank. The LC Bank shall be
selected by Tenant and be reasonably acceptable to Landlord. Tenant shall pay
all expenses, points, and/or fees incurred by Tenant in obtaining and
maintaining the LC. The LC shall be available by draft at sight, subject only to
a receipt by the bank of a notarized statement from an authorized representative
of Landlord stating (i) that a default under the Lease has occurred, (ii) that
any applicable notice and cure period has expired, (iii) that the amount
demanded is due and owing to Landlord, and (iv) that the signatory executing the
statement is signing in their capacity as a partner of Landlord and/or is
authorized to make such statement on behalf of the partnership. The amount of
the draw shall be equal to the amount then in default under the terms of this
Lease, together with any reasonable costs incurred by Landlord in connection
with Tenant's default.
B. REPLACEMENT OF LETTER OF CREDIT. Tenant may, from time to time, replace any
existing LC with a new LC provided that the new letter of credit:
(1) becomes effective at least 30 days before the expiration of the LC
that it replaces;
(2) is in the required LC Amount;
(3) is issued by an LC Bank acceptable to Landlord; and
(4) otherwise complies with the requirements of this Paragraph 41.
C. LANDLORD'S RIGHT TO DRAW ON LETTER OF CREDIT. Landlord shall hold the LC as
security for the performance of Tenant's covenants and obligations under this
Lease and the Note. If Tenant is in default under any provision of this Lease
and/or the Note (after the expiration of any applicable cure periods, if any),
Landlord may, without prejudice to any other remedy it has, draw on that portion
of the LC necessary to:
(1) pay Rent or other monetary sum in default;
(2) pay or reimburse Landlord for any amount that Landlord may spend or
become obligated to spend in exercising Landlord's rights under this
Lease, the Note, or law; and/or
(3) compensate Landlord for any expense, loss, or damage that Landlord
may suffer because of Tenant's default under this Lease or the Note.
If Tenant fails to renew or replace the LC at least thirty (30) days before its
expiration, Landlord may, without prejudice to any other remedy it has, draw on
all of the LC.
D. TRANSFER OF LC. If Landlord transfers or mortgages its interest in the
Premises, Landlord shall transfer or assign the LC or the to Landlord's
mortgagee or transferee and thereupon be relieved of further responsibility with
respect to the LC as long as the transferee agrees in writing to hold the LC in
accordance with the provisions of this Lease. If Landlord fails to transfer or
assign the LC to Landlord's mortgagee or transferee, Tenant shall not be
required to replace the LC until expiration of the LC. If Landlord draws on the
LC after a transfer or an assignment, the mortgagee or the transferee shall pay
to Tenant, within ten (10) days after the date Tenant notifies such person or
entity of the date of the draw, the amount drawn. If the mortgagee or transferee
fails to pay Tenant such amount within that ten (10) day period, Tenant
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<PAGE> 40
may deduct from Rent payable by Tenant under this Lease the amount drawn by
Landlord under the LC.
E. ASSIGNMENT OR ENCUMBRANCE OF LETTER OF CREDIT. Tenant may not -assign,
mortgage or encumber the LC without the prior written consent of Landlord which
may be- withheld in Landlord's sole and absolute discretion. Any attempt to do
so shall -be void and shall not be binding on Landlord.
F. RESTORATION OF LETTER OF CREDIT. If Landlord draws on all or any portion of
the LC, Tenant shall, within five (5) business days after demand by Landlord,
either (a) -deposit cash with Landlord in an amount that, when added to the
amount remaining under the LC shall equal the LC amount then required under this
Lease., or (b) deliver written documentation executed by the LC Bank confirming
that the LC has been reinstated to the LC Amount then required under this
Lease.*
G. PERIODIC REDUCTION OF LC AMOUNT. The LC Amount shall be reduced on the
following dates in the following amounts on the following conditions:
(1) If no Tenant default occurs under the Lease and Note during the
first thirty (30) month period of the Term (Months 1 through 30), then
the LC Amount shall be reduced by One Hundred Twenty-five Thousand
Dollars ($125,000) commencing the first day of the thirty first (31st)
month of the Term;
(2) If no Tenant default under the Lease and Note occurs during the
second thirty (30) month period of the Term (Months 31 through 60), then
the LC Amount shall be reduced by One Hundred Twenty-five Thousand
Dollars ($125,000) commencing the first day of the sixty-first (61st)
month of the Term; and
(3) If no Tenant default under the Lease and Note occurs during the
third thirty (30) month period of the Term (Months 61 through 90), then
the LC Amount shall be reduced by One Hundred Twenty-five Thousand
Dollars ($125,000) commencing the first day of the ninety-first (91st)
month of the Term;
Notwithstanding the foregoing to the contrary, if there has been any
monetary default by Tenant under the Lease or Note during any of the
foregoing thirty (30) month periods, the LC Amount shall not be reduced
for that period or for any subsequent thirty (30) month period. If there
has been any non-monetary default by Tenant under the Lease or Note
during any of the foregoing thirty (30) month periods, the LC Amount
shall not be reduced for that period, but may be reduced for subsequent
thirty (30) month periods provided that there is no Tenant default
during such period(s). If the LC is held by Landlord at the expiration
of the Lease Term pursuant to the terms of this Lease it shall be
returned to Tenant together with and under the conditions governing the
return of the Security Deposit under this Lease and/or the Security
Agreement securing Tenant's obligations under the Note.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD: TENANT
THE PEAR AVENUE GROUP, ACLARA BIOSCIENCES, INC.,
a California family limited a Delaware corporation
partnership
By: /s/ DONNA REHRMANN By: /s/ JOSEPH M. LIMBAR
----------------------------- ---------------------------------
Print Name: Donna Rehrmann Print Name: Joseph M. Limbar
Title: General Partner Title: President, CEO
By:/s/ GEORGE REHRMANN By: /s/ BERTRAM ROWLAND
----------------------------- ---------------------------------
Print Name: George Rehrmann Print Name: Bertram Rowland
Title: General Partner Title: General Counsel
*Notwithstanding anything contained in this Paragraph 41 to the contrary, if
Landlord draws on the LC as a result of Tenant's failure to renew or replace the
LC, then Tenant shall have the right to obtain a refund from Landlord of any
unapplied proceeds of the LC which Landlord has drawn upon, on the condition
that (i) Tenant has delivered to Landlord a new replacement LC in the form and
in the amount then required hereunder, and (ii) Tenant shall not otherwise be in
default under this Lease, the Note or the Security Agreement. Landlord shall
deliver such refund to Tenant within ten (10) business days after Landlord's
receipt of such renewed or replacement LC. If Landlord has applied a portion of
the LC which Landlord has drawn upon, then the amount of the refund from
Landlord to Tenant pursuant to the provisions of this Paragraph shall be the
amount of the replacement LC less such funds theretofore applied by Landlord.
<PAGE> 1
EXHIBIT 10.9
MASTER EQUIPMENT LEASE NO. 053-9999
Under this Master Equipment Lease No. 053-9999 (the "Lease"), dated as of
November 15, 1995 Phoenix Leasing Incorporated, a California corporation
("Lessor"), hereby leases to Soane BioSciences, Inc., a Delaware corporation
("Lessee"), and Lessee hereby leases from Lessor, the equipment (herein called
"Equipment") which is described on the schedule attached hereto or any
subsequently-executed schedule entered into by Lessor and Lessee and which
incorporates this Lease by reference. Any such schedules shall hereinafter
individually be referred to as a "Schedule" and collectively be referred to as
the "Schedules." Lessor hereby leases the Equipment to Lessee upon the following
terms and conditions:
1. TERM OF AGREEMENT. The term of this Lease begins on the date set forth
above and shall continue thereafter and be in effect so long as and at any time
any Schedule entered into pursuant to this Lease is in effect. The Initial Term
and rent payable with respect to each leased item of Equipment shall be as set
forth in and as stated in the respective Schedule(s). The terms of each Schedule
hereto are subject to all conditions and provisions of this Lease as it may at
any time be amended. Each Schedule shall constitute a separate and independent
lease and contractual obligation of Lessee and shall incorporate the terms and
conditions of this Master Equipment Lease and any additional provisions
contained in such Schedule. In the event of a conflict between the terms and
conditions of this Lease and any additional provisions of such Schedule, the
additional provisions of such Schedule shall prevail with respect to such
Schedule only.
2. NON-CANCELLABLE LEASE. This Lease and any Schedule cannot be cancelled
or terminated except as expressly provided herein. This Lease (including all
Schedules to this Lease) constitutes a net lease and Lessee agrees that its
obligations to pay all rent and other sums payable hereunder (and under any
Schedule) and the rights of Lessor and assignee in and to such rent and other
sums, are absolute and unconditional and are not subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment due or alleged to be due
to, or by reason of, any past, present or future claims which Lessee may have
against Lessor, any assignee, the manufacturer or seller of the Equipment, or
against any person for any reason whatsoever.
3. LESSOR COMMITMENT. So long as no Event of Default or event which with
the giving of notice or passage of time, or both, could become an Event of
Default has occurred or is continuing, Lessor agrees to lease to Lessee the
groups of Equipment described on each Schedule, subject to the following
conditions: (i) that in no event shall Lessor be obligated to lease Equipment to
Lessee hereunder where the aggregate purchase price of all Equipment leased to
Lessee hereunder would exceed $450,000.00; (ii) the amount of Equipment
purchased by Lessor at any one time shall be at least equal to $35,000.00 except
for a final advance which may be less than $35,000.00; (iii) Lessor shall not be
obligated to purchase Equipment hereunder after December 31, 1996; (iv) all
Lease documentation required by Lessor has been executed by Lessee or provided
by Lessee no later than December 6, 1995; (v) the equipment described on the
Schedule is acceptable to Lessor; (vi) with respect to each funding Lessee has
provided to Lessor each of the closing documents and other items described in
Exhibit A hereto (which documents shall be in form and substance acceptable to
Lessor) and which list may be modified for each subsequent funding; (vii) there
is no material adverse change in Lessee's condition, financial or otherwise, as
determined by Lessor, and Lessee so certifies, from (yy) the date of the most
recent financial statements delivered by Lessee to Lessor prior to execution of
this Lease, to (zz) the date of the proposed lease of the Equipment; (viii)
Lessee is performing according to its business plan referred to as Soane
BioSciences, Inc. "Forecast - July 95" dated 9/29/95 14:20 and "1996 Profit and
Loss Statement" and "1996
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Balance Sheet" both labeled Conservative Case (CC) and both dated 9/29/95, as
may be amended from time to time in form and substance acceptable to Lessor
("Business Plan"); (ix) Lessor or its agent has inspected and placed
identification labels on the Equipment; (x) Lessee shall offer to Lessor, on an
exclusive basis, all lease transactions for equipment contemplated by Lessee
until expiration of all Schedules; however if Lessor declines to finance any
such transaction or Lessee and Lessor cannot agree upon terms, then Lessee shall
be free to seek such financing from any other third party; and (xi) Lessor has
received in form and substance acceptable to Lessor; (a) Lessee's interim
financial statements signed by a financial officer of Lessee; and (b) evidence
of balance(s) in Lessee's bank checking account(s) at least equal to
$150,000.00.
4. NO WARRANTIES BY LESSOR. (a) Lessee has selected both (i) the
Equipment and (ii) the suppliers (herein called "Vendor") from whom Lessor is to
purchase the Equipment. LESSOR MAKES NO WARRANTY EXPRESS OR IMPLIED AS TO ANY
MATTER WHATSOEVER, INCLUDING THE CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY
OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, AND AS TO LESSOR, LESSEE LEASES THE
EQUIPMENT "AS IS" AND WITH ALL FAULTS. (b) If the Equipment is not properly
installed, does not operate as represented or warranted by Vendor or is
unsatisfactory for any reason, Lessee shall make any claim on account thereof
solely against Vendor and shall, nevertheless, pay Lessor all rent payable under
this Lease, Lessee hereby waiving any such claims as against Lessor. Lessor
hereby agrees to assign to Lessee solely for the purpose of making and
prosecuting any said claim, to the extent assignable, all of the rights which
Lessor has against Vendor for breach of warranty or other representation
respecting the Equipment. Lessor shall have no responsibility for delay or
failure to fill the order. (c) Lessee understands and agrees that neither the
Vendor nor any salesman or other agent of the Vendor is an agent of Lessor. No
salesman or agent of Vendor is authorized to waive or alter any term or
condition of this Lease, and no representations as to the Equipment or any other
matter by the Vendor shall in any way affect Lessee's duty to pay the rent and
perform its other obligations as set forth in this lease. (d) Lessee hereby
requests lessor to purchase Equipment from Vendor and to lease Equipment to
Lessee on the terms and conditions of the Lease set forth herein. (e) Lessee
hereby authorizes Lessor to insert in this Lease and each Schedule hereto the
serial numbers and other identification data of the Equipment when determined by
Lessor.
5. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee represents and
warrants that (a) it is a corporation in good standing under the laws of the
state of its incorporation, and duly qualified to do business, and will remain
duly qualified during the term of this Lease, in each state where the Equipment
will be located, as specified on each Schedule hereto; (b) it has full authority
to execute and deliver this Lease and perform the terms hereof, and this Lease
has been duly authorized and constitutes valid and binding obligations of Lessee
enforceable in accordance with its terms; (c) this Lease will not contravene any
law, regulation or judgment affecting Lessee or result in any breach of any
agreement or other instrument binding on Lessee; (d) no consent of Lessee's
shareholders or holder of any indebtedness, or filing with, or approval of, any
governmental agency or commission, is a condition to the performance of the
terms hereof; (e) there is no action or proceeding pending or threatened against
Lessee before any court or administrative agency which might have a materially
adverse effect on the business, financial condition or operations of Lessee; (f)
no deed of trust, mortgage or third party interest arising through Lessee will
attach to the Equipment or the Lease; (g) the Equipment will remain at all times
under applicable law, removable personal property, free and clear of any lien or
encumbrance in favor of Lessee or any other person, notwithstanding the manner
in which the Equipment may be attached to any real property; (h) all credit,
financial and any other information submitted to Lessor herewith or any other
time is true and correct; and (i) Lessee has provided, or will provide if
requested, Lessee's tax identification number.
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<PAGE> 3
6. EQUIPMENT ORDERING. Lessee shall be responsible for all packing,
rigging, transportation and installation charges for the Equipment and Lessor
may separately invoice Lessee for such charges. Lessee has selected the
Equipment itself and shall arrange for delivery of Equipment so that it can be
accepted in accordance with Section 7 hereof. Lessee hereby agrees to indemnify
and hold Lessor harmless form any claims, liabilities, costs and expenses,
including reasonable attorneys' fees, incurred by Lessor arising out of any
purchase orders or assignments executed by Lessor with respect to any Equipment
or services relating thereto.
7. LESSEE ACCEPTANCE. Lessee shall return to Lessor the signed and
dated Acceptance Notice attached to each Schedule hereto (a) acknowledging the
Equipment has been received, installed and is ready for use and (b) accepting
it as satisfactory in all respects for the purposes of this Lease. Lessor is
authorized to fill in the Rent Start Date on each Schedule in accordance with
the foregoing.
8. LOCATION; INSPECTION; LABELS. Equipment shall be delivered to and
shall not be removed from the Equipment "Location" shown on each Schedule
without Lessor's prior written consent, which "Location" shall in all events be
within the United States. Lessor shall have the right to inspect Equipment at
any reasonable time. Lessee shall be responsible for all labor, material and
freight charges incurred in connection with any removal or relocation of such
Equipment which is requested by the Lessee and consented to by Lessor, as well
as for any charges due to the installation or moving of the Equipment. The
rental payments shall continue during any period in which the Equipment is in
transit during a relocation. Lessor or its agent shall mark and label
Equipment, which labels shall state Equipment is owned by Lessor, and Lessee
shall keep such labels on the Equipment as labeled by Lessor or its agent.
9. EQUIPMENT MAINTENANCE. (a) General. Lessee will locate or base each
item of Equipment where designated in an Acceptance Notice and will reasonably
permit Lessor to inspect such item of Equipment and its maintenance records.
Lessee will at its sole expense comply with all applicable laws, rules,
regulations, requirements and orders with respect to the use, maintenance,
repair, condition, storage and operation of each item of Equipment. Except as
required herein, Lessee will not make any addition or improvement to any item
of Equipment that is not readily removable without causing material damage to
any item or impairing its original value or utility. Any addition or
improvement that is so required or cannot be so removed will immediately become
the property of Lessor. (b) Service and Repair. With respect to computer
equipment, other than personal computers, Lessee has entered into, and will
maintain in effect, Vendor's standard maintenance contract or another contract
satisfactory to Lessor for a period equal to the term of each Schedule and
extensions thereto which provides for the maintenance of the Equipment and
repairs and replacement parts thereof in good condition and working order, all
in accordance with the terms of such maintenance contract. Lessee shall have
the Equipment certified for the Vendor's standard maintenance agreement prior
to delivery to Lessor upon expiration of this Lease. With respect to any other
Equipment, Lessee will, at its sole expense, maintain and service, and repair
any damage to, each item of Equipment in a manner consistent with prudent
industry practice and Lessee's own practice so that such item of Equipment is
at all times (i) in the same condition as when delivered to Lessee, except for
ordinary wear and tear, (ii) in good operating order for the function intended
by its manufacturer's warranties and recommendations.
10. LOSS OR DAMAGE. Lessee assumes the entire risk of loss to the
Equipment through use, operation or otherwise. Lessee hereby indemnifies and
holds harmless Lessor from and against all claims, loss of rental payments,
costs, damages, and expenses relating to or resulting from any loss, damage or
destruction of the Equipment, any such
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<PAGE> 4
occurrence being hereinafter called a "Casualty Occurrence." On the first rental
payment date following such Casualty Occurrence, or, if there is no such rental
payment date, thirty (30) days after such Casualty Occurrence, Lessee shall (i)
repair the Equipment, returning it to good operating condition or (ii) replace
the Equipment with identical equipment in good condition and repair, the title
to which shall vest in Lessor and which thereafter shall be subject to the terms
of this Lease; or (iii) pay to Lessor (a) any unpaid accrued amounts relating to
such Equipment due Lessor under this Lease up to the date of the Casualty
Occurrence, and (b) a sum equal to the Casualty Value as set forth in the
Casualty Value table attached to each Schedule hereto for such Equipment. Upon
the making of such payment, the term of this Lease as to each unit of Equipment
with respect to which the Casualty Value was paid shall terminate.
11. GENERAL INDEMNITY. Lessee will protect, indemnify and save harmless
Lessor from and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses, imposed upon or incurred by or
asserted against Lessor or any assignee of Lessor by Lessee or any third party
by reason of the occurrence or existence (or alleged occurrence or existence) of
any act or event relating to or caused by the Equipment, including but not
limited to, consequential or special damages of any kind, or any failure on the
part of Lessee to perform or comply with any of the terms of this Lease. In the
event that any action, suit or proceeding is brought against Lessor by reason of
any such occurrence, Lessee, upon request of Lessor, will at Lessee's expense
resist and defend such action, suit or proceeding or cause the same to be
resisted and defended by counsel designated and approved by Lessor. Lessee's
obligations under this Section 11 shall survive the expiration of this Lease
with respect to acts or events occurring or alleged to have occurred prior to
the return of the Equipment to Lessor at the end of the Lease term.
12. INSURANCE. Lessee at its expense shall keep the Equipment insured for
the entire term and any extensions of this Lease against all risks for at least
the replacement value of such Equipment and shall provide for (a) loss payable
endorsement to Lessor or any assignee of Lessor. Lessee shall maintain public
liability and property damage insurance in an amount not less than
$1,000,000.00, naming Lessor as additional insured. Such insurance shall contain
insurer's agreement to give thirty (30) days written notice to Lessor before
cancellation or material change of any policy of insurance. Lessee will provide
Lessor and any assignee of Lessor with a certificate of insurance from the
issuer evidencing Lessor's or such assignee's interest in the policy of
insurance. Such insurance shall cover any Casualty Occurrence to any unit of
Equipment. Notwithstanding anything in Section 10 or this Section 12 to the
contrary, this Lease and Lessee's obligations hereunder and under each Schedule
shall remain in full force and effect with respect to any unit of Equipment
which is not subject to a Casualty Occurrence. If Lessee fails to provide or
maintain insurance as required herein, Lessor shall have the right, but shall
not be obligated to obtain such insurance. In that event, Lessee shall pay to
Lessor the cost thereof.
13. TAXES. Lessee agrees to reimburse Lessor for, (or pay directly if
instructed by Lessor), and agrees to indemnify and hold Lessor harmless from,
all fees (including, but not limited to, license, documentation, recording and
registration fees), and all sales, use, gross receipts, personal property,
occupational, value added to other taxes, levies, imposts, duties, assessments,
charges, or withholdings of any nature whatsoever, together with any penalties,
fines, additions to tax, or interest thereon (all of the foregoing being
hereafter referred to an "Impositions") except same as may be attributable to
Lessor's income, arising at any time prior to or during the term of this Lease,
or upon termination or early termination of this Lease and levied or imposed
upon Lessor directly or otherwise by any Federal, state or local government in
the United States or by any
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<PAGE> 5
foreign country or foreign or international taxing authority upon or with
respect to (i) the Equipment, (ii) the exportation, importation, registration,
purchase, ownership, delivery, leasing, possession, use, operation, storage,
maintenance, repair, return, sale, transfer of title, or other disposition
thereof, (iii) the rentals, receipts, or earnings arising from the Equipment, or
any disposition of the rights to such rentals, receipts, or earnings, (iv) any
payment pursuant to this Lease, and (v) this Lease or the transaction or any
part thereof. Lessee's obligations under this Section 13 shall survive the
expiration of this Lease with respect to acts or events occurring or alleged to
have occurred prior to the return of the Equipment to Lessor at the end of the
Lease term.
14. PAYMENT BY LESSOR. If Lessee shall fail to make any payment or
perform any act required hereunder, then Lessor may, but shall not be required
to, after such notice to Lessee as is reasonable under the circumstances, make
such payment or perform such act with the same effect as if made or performed by
Lessee. Lessee will upon demand reimburse Lessor for all sums paid and all costs
and expenses incurred in connection with the performance of any such act.
15. SURRENDER OF EQUIPMENT. Upon termination or expiration of this Lease,
with respect to each group of Equipment, Lessee will forthwith surrender the
Equipment to Lessor delivered in as good order and condition as originally
delivered, reasonable wear and tear excepted. Lessor may, at its sole option,
arrange for removal and transportation of the Equipment provided that Lessee's
obligations under Sections 10, 11 and 12 shall not be released. Lessee shall
bear all expenses of delivering (which include, but are not limited to, the
de-installation, insurance, packaging and transportation of) the Equipment to
Lessor's location or other location within the United States as Lessor may
request. In the event Lessee fails to deliver the Equipment as directed above,
all obligations of Lessee under this Lease, including rental payments, shall
remain in full force and effect until Lessee delivers the Equipment to Lessor.
16. ASSIGNMENT. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, SUCH CONSENT NOT
TO BE UNREASONABLY WITHHELD, LESSEE SHALL NOT (a) ASSIGN, TRANSFER, PLEDGE,
HYPOTHECATE OR OTHERWISE DISPOSE OF THIS LEASE, EQUIPMENT, OR ANY INTEREST
THEREIN, OR (b) SUBLET OR LEND EQUIPMENT OR PERMIT IT TO BE USED BY ANYONE OTHER
THAN LESSEE OR LESSEE'S EMPLOYEES. LESSOR MAY ASSIGN THIS LEASE OR GRANT A
SECURITY INTEREST IN ANY OR ALL EQUIPMENT, OR BOTH, IN WHOLE OR IN PART TO ONE
OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO LESSEE. If Lessee is
given notice of such assignment it agrees to acknowledge receipt thereof in
writing and Lessee shall execute such additional documentation as Lessor's
assignee shall require. Each such assignee and/or secured party shall have all
of the rights, but none of the obligations, of Lessor under this Lease, unless
such assignee or secured party expressly agrees to assume such obligations in
writing. Lessee shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Lessee may have against Lessor.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lessor, or its assignees, secured parties, or their
agents or assigns, shall not interfere with Lessee's right to quietly enjoy use
of Equipment subject to the terms and conditions of this Lease. Subject to the
foregoing, this Lease inures to the benefit of and is binding upon the
successors and assignees of the parties hereto. Lessee acknowledges that any
such assignment by Lessor will not materially change Lessee's duties or
obligations under the Lease or increase any burden of risk on Lessee.
17. DEFAULT. (a) Event of Default. Any of the following events or
conditions shall constitute an "Event of Default" hereunder: (i) Lessee's
failure to pay any monies due to Lessor hereunder or under any Schedule beyond
the fifth (5th) day after the same is due; (ii) Lessee's failure to comply with
its obligations under Section 12 or Section 16;
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(iii) Lessee's failure to comply with or perform any term, covenant, condition,
warranty or representation of this Lease or any Schedule hereto or under any
other agreement between Lessee and Lessor or under any lease of real property
covering the location of Equipment if such failure to comply or perform is not
cured by Lessee within thirty (30) days of receipt of notice thereof; (iv)
seizure of the Equipment under legal process; (v) the filing by or against
Lessee of a petition for reorganization or liquidation under the Bankruptcy
Code or any amendment thereto or under any other insolvency law providing for
the relief of debtors; (vi) the voluntary or involuntary making of an
assignment of a substantial portion of its assets by Lessee, or any guarantor
("Guarantor") under any guaranty executed in connection with this Lease
("Guaranty"), for the benefit of its creditors, the appointment of a receiver
or trustee for Lessee or any Guarantor for any of Lessee's or Guarantor's
assets, the institution by or against Lessee or any Guarantor of any formal or
informal proceeding for dissolution, liquidation, settlement of claims against
or winding up of the affairs of Lessee or any Guarantor, provided that in the
case of all such involuntary proceedings, same are not dismissed within sixty
(60) days after commencement; or (vii) the making of Lessee or any Guarantor of
a transfer of all or a material portion of Lessee's or Guarantor's assets or
inventory not in the ordinary course of business.
(b) Remedies. If any Event of Default shall have occurred:
(i) Lessor may proceed by appropriate court action or actions either at
law or in equity to enforce performance by Lessee, of the applicable covenants
of this Lease, or to recover damages therefor; or
(ii) Lessee will, without demand, on the next rent payment date following
the Event of Default, pay to Lessor as liquidated damages which the parties
agree are fair and reasonable under the circumstances existing at the time this
Lease is entered into, and not as a penalty, an amount equal to the Casualty
Value of the Equipment set forth in Exhibit C together with any rent or other
amounts past due and owing by Lessee hereunder; and
(iii) Lessor may, without notice to or demand upon Lessee:
(a) Take possession of the Equipment and lease or sell the same or
any portion thereof, for such period, amount, and to such entity as Lessor
shall elect. The proceeds of such lease or sale will be applied by Lessor (A)
first, to pay all costs and expenses, including reasonable legal fees and
disbursements, incurred by Lessor as a result of the default and the exercise
of its remedies with respect thereto, (B) second, to pay Lessor an amount equal
to any unpaid rent or other amounts past due and payable plus the Casualty
Value, to the extent not previously paid by Lessee, and (C) third, to reimburse
Lessee for the Casualty Value to the extent previously paid. Any surplus
remaining thereafter will be retained by Lessor.
(b) Take possession of the Equipment and hold and keep idle the same
or any portion thereof.
Lessee agrees to pay all internal and out-of-pocket costs of
Lessor related to the exercise of its remedies, including direct costs of its
in-house counsel and out-of-pocket legal fees and expenses. At Lessor's
request, Lessee shall assemble the Equipment and make it available to Lessor at
such location as Lessor may designate. Lessee waives any right it may have to
redeem the Equipment.
-6-
<PAGE> 7
Repossession of any or all Equipment shall not terminate this
Lease or any Schedule unless Lessor notifies Lessee in writing. Any amount
required to be paid under this Section shall be increased by a service charge at
the rate of 2% per month, or the highest rate of interest permitted by
applicable law, whichever is less, accruing from the date the Casualty Value or
other amounts are payable hereunder until such amounts are paid.
None of the above remedies is intended to be exclusive, but each
is cumulative and in addition to any other remedy available to Lessor, and all
may be enforced separately or concurrently.
18. LATE PAYMENTS. Lessee shall pay to Lender an amount equal to the
greater of 18% of all amounts owed Lessor by Lessee which are not paid when due
or $100, but in no event an amount greater than the highest rate permitted by
applicable law. If such funds have not been received by Lessor at Lessor's place
of business or by Lessor's designated agent by the date such funds are due under
this Lease, Lessor shall bill Lessee for such charges. Lessee acknowledges that
invoices for rentals due hereunder are sent by Lessor for Lessee's convenience
only. Lessee's non-receipt of an invoice will not relieve Lessee of its
obligation to make rent payments hereunder.
19. LESSOR'S EXPENSE. Lessee shall pay Lessor all costs and expenses
including reasonable attorney's fees and the fees of the collection agencies,
incurred by Lessor in enforcing any of the terms, conditions or provisions
hereof.
20. OWNERSHIP; PERSONAL PROPERTY. The Equipment shall be and remain
personal property of Lessor, and Lessee shall have no right, title or interest
therein or thereto except as expressly set forth in this Lease, notwithstanding
the manner in which it may be attached or affixed to real property, and upon
termination or expiration of the Lease term, Lessee shall have the duty and
lessor shall have the right to remove the Equipment from the premises where the
same by located whether or not affixed or attached to the real property or any
building, at the cost and expense of Lessee.
21. ALTERATIONS; ATTACHMENTS. No alterations or attachments shall be made
to the Equipment without Lessor's prior written consent, which shall not be
given for changes that will affect the reliability and utility of the Equipment
or which cannot be removed without damage to the Equipment, or which in any way
affect the value of the Equipment for purposes of resale or re-lease.
22. FINANCING STATEMENT. Lessee will execute financing statements pursuant
to the Uniform Commercial Code. Lessee authorizes Lessor to file financing
statements signed only by Lessor (where such authorization is permitted by law)
at all places where Lessor deems necessary.
23. MISCELLANEOUS. (a) Lessee shall provide Lessor with such corporate
resolutions, financial statements and other documents as Lessor shall request
from time to time. (b) Lessee represents that the Equipment is being leased
hereunder for business purposes. (c) Time is of the essence with respect to this
Lease. (d) Lessee shall keep its books and records in accordance with generally
accepted accounting principles and practices consistently applied and shall
deliver to Lessor its annual audited financial statements, unaudited monthly
financial statements to include any financial information given to Lessee's
Board of Directors, and signed by an officer of Lessee and such other unaudited
financial statements as may be reasonably requested by Lessor. (e) Any action
-7-
<PAGE> 8
by Lessee against Lessor for any default by Lessor under this Lease, including
breach of warranty or indemnity, shall be commenced within one (1) year after
any such cause of action accrues.
24. NOTICES. All notices hereunder shall be in writing, by registered
mail, or reliable messenger or delivery service and shall be directed, as the
case may be, to Lessor at 2401 Kerner Boulevard, San Rafael, California 94901,
Attention: Account Management and to Lessee at Soane BioSciences, Inc., 3916
Trust Way, Hayward, CA 94545-3716, Attention: Roger G. Novesky.
25. ENTIRE AGREEMENT. Lessee acknowledges that Lessee has read this Lease,
understands it and agrees to be bound by its terms, and further agrees that it
and each Schedule constitute the entire agreement between Lessor and Lessee with
respect to the subject matter hereof and supersedes all previous agreements,
promises, or representations. The terms and conditions hereof shall prevail
notwithstanding any variance with the terms of any purchase order submitted by
the Lessee with respect to any Equipment covered hereby.
26. AMENDMENT. This Lease may not be changed, altered or modified except
by an instrument in writing signed by an officer of the Lessor and the Lessee.
27. WAIVER. Any failure of Lessor to require strict performance by Lessee
or any waiver by Lessor of any provision herein shall not be construed as a
consent or waiver of any other breach of the same or any other provision.
28. SEVERABILITY. If any provision of this Lease is held invalid, such
invalidity shall not affect any other provisions hereof.
29. JURISDICTION AND WAIVER OF JURY TRIAL. This Lease shall be governed by
and construed under the laws of the State of California. It is agreed that
exclusive jurisdiction and venue for any legal action between the parties
arising out of this Lease shall be in the Superior Court for Marin County,
California, or, in cases where Federal diversity jurisdiction is available, in
the Untied States District Court for the Northern District of California.
LESSEE, TO THE EXTENT IT MAY LAWFULLY DO SO, HEREBY WAIVES ITS RIGHT TO TRIAL BY
JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS LEASE, ANY SCHEDULE, OR
ANY AGREEMENT EXECUTED IN CONNECTION HEREWITH.
30. NATURE OF TRANSACTION. Lessor makes no representation whatsoever,
express or implied, concerning the legal character of the transaction evidenced
hereby, for tax or any other purpose.
31. SECURITY INTEREST. (a) One executed copy of the Lease will be marked
"Original" and all other counterparts will be duplicates. To the extent, if any,
that this Lease constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction) no security
interest in the lease may be created in any documents other than the "Original."
(b) There shall be only one original of each Schedule and it shall be marked
"Original," and all other counterparts will be duplicates. To the extent, if
any, that any Schedule(s) to this Lease constitutes chattel paper (or as such
term is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction) no security interest in any Schedule(s) may be created in any
documents other than the "Original."
32. SUSPENSION OF OBLIGATIONS. The obligations of Lessor hereunder will be
suspended to the extent that it is hindered or prevented from complying
therewith because
-8-
<PAGE> 9
of labor disturbances, including but not limited to strikes and lockouts, acts
of God, fires, storms, accidents, failure of the manufacturer to deliver any
item of Equipment, governmental regulations or interference, or any cause
whatsoever not within the sole and exclusive control of Lessor.
33. SOFTWARE. For the term of this Lease, and so long as no Event of
Default has occurred and is continuing, Lessor hereby assigns to Lessee all of
Lessor's rights under any License Agreement executed by Lessor in connection
with the Equipment (except for any right of Lessor to be reimbursed for the
License Fee). Lessee agrees to be bound by the provisions of any such License
Agreement and to perform all obligations of Lessor (except Lessor's payment
obligations) thereunder. Lessee acknowledges that all of Lessee's obligations
under the Lease with respect to the Equipment will apply equally to the
software, including but not limited to Lessee's obligation to pay rent to
Lessor.
34. STOCK WARRANT. Lessee agrees that it will issue to Lessor upon
execution of this Lease a Warrant in the form of Warrant Agreement attached
hereto as Exhibit D. Lessee and Lessor agree that the value of the Warrant
hereunder is ten dollars ($10.00).
36. COMMITMENT FEE. Lessee has paid to Lessor a commitment fee ("Fee") of
$10,000.00. The Fee shall be applied by Lessor first to reimburse Lessor for
all out-of-pocket UCC search costs, inspections and appraisal fees incurred by
Lessor, and then proportionally to the first month's rent for each Schedule
hereunder in the proportion that the purchase price of the Equipment leased
pursuant to the Schedule bears to Lessor's entire commitment. However, the
portion of the Fee which is not applied to rental shall be non-refundable
except if Lessor defaults in its obligations pursuant to Section 3.
37. FINANCE LEASE. The parties agree that this lease is a "Finance Lease"
as defined by section 10-103(a)(7) of the California Commercial Code
(Cal.Com.C). Lessee acknowledges either (a) that Lessee has reviewed and
approved any written Supply Contract (as defined by Cal.Com.C. Section
10-103(a)(25)) covering Equipment purchased from the "Supplier" (as defined by
Cal.Com.C. Section 10-103(a)(24)) thereof for lease to Lessee or (b) that
Lessor has informed or advised Lessee, in writing, either previously or by this
Lease of the following: (i) the identity of the Supplier; (ii) that the Lessee
may have rights under the Supply Contract; and (iii) that the Lessee may
contact the Supplier for a description of any such rights Lessee may have under
the Supply Contract. Lessee hereby waives any rights and remedies Lessee may
have under Cal.Com.C. Sections 10-508 through 522.
38. PURCHASE OR RENEWAL REQUIREMENT FOR ALL SCHEDULES TO MASTER EQUIPMENT
LEASE. At the expiration of the Initial Term for Schedule No. 1, and
notwithstanding anything to the contrary in the Lease, upon 90 days prior
written notice to Lessor, Lessee shall either:
No. 1
To extend the Initial Term of all Schedules to this Lease for an additional
twelve (12) months ("Renewal Term:) commencing with the end of the Initial
Term of each Schedule at a rate of 2.0% per month of the Equipment's
original Purchase Price; followed by an option to purchase all, but not
less than all, the Equipment AS-IS, WHERE-IS for an amount equal to 10% of
the Equipment's original Purchase Price for all Schedules all determined
prior to expiration of the Initial Term for Schedule No. 1, or
-9-
<PAGE> 10
No. 2
Purchase AS-IS, WHERE-IS all, but not less than all, of the Equipment
covered under all Schedules to this Lease at the expiration of the Initial
Term for each such Schedule for an amount equal to the Fair Market Value of
the Equipment but not less than ten percent (10%) or more than twenty
percent (20%) of the Equipment's original purchase price, whereupon Lessor
shall issue to Lessee a Bill of Sale for the Equipment transferring it to
Lessee without any representation or warranty whatsoever.
Lessee's right to exercise one of these options is conditioned upon (a) Lessee
having performed all of the terms and conditions of the Lease and this Schedule
and (b) Lessee's payment to Lessor at the end of the Initial Term for each
Schedule to this Lease of the applicable amount, including any sales taxes and
other amounts due.
If Lessee and Lessor cannot agree on Fair Market Value or Fair Rental Value,
such Value shall be determined by appraisal, with expenses to be shared by
Lessor and Lessee. Appraisal shall be a procedure whereby two recognized
independent appraisers, one chosen by Lessor and one by Lessee, shall mutually
agree on the amount in question. If the appraisers are unable to agree and the
higher appraisal is no more than 110% of the lower appraisal, the Value shall
be equal to the average of the two appraisals. If the higher appraisal is more
than 110% of the lower appraisal, the two appraisals shall jointly name an
independent third appraiser and the Value shall equal the average of the two
closest appraisals.
For each Schedule hereunder, in the event Lessee does not exercise any option,
or, if Lessee and Lessor cannot agree on the Value of the Equipment, and Lessee
retains possession of the Equipment after the end of the Initial Term or Renewal
Term as applicable, all obligations of Lessee under the Lease, including current
rental payments, shall remain in full force and effect during such holdover
period on a month-to-month basis, until the earlier of (i) Lessee's purchase of
the Equipment at a price or commencement of the Renewal Term as then agreed by
Lessee and Lessor, (ii) return of the Equipment to Lessor, or (iii) Lessor's
taking possession of the Equipment and termination of the Lease after notice to
Lessee.
Lease shall be responsible for all applicable taxes in connection with any
purchase of Equipment by Lessee.
In the event Lessee does not provide 90 days prior written notice as specified
above, Lessee shall be deemed to have selected No. 1 above for all Schedules to
the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease.
PHOENIX LEASING INCORPORATED SOANE BIOSCIENCES, INC.
By: /s/ [Signature Illegible] By: /s/ ROGER M. NOVESKY
------------------------- -------------------------
Title: Contract Administrator Title: President/CEO
------------------------- -----------------------
Headquarters Location:
3916 Trust Way
Hayward, CA 94545-3716
County of Alameda
Exhibit A - Closing Memorandum
-10-
<PAGE> 11
STATE OF CALIFORNIA
UNIFORM COMMERCIAL CODE-FINANCING STATEMENT-FORM UCC-1 (REV. 1/90)
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
1. DEBTOR (LAST NAME, FIRST-IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
Soane BioSciences, Inc.
- ------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
3916 Trust Way Hayward, CA 94545
- ------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME, FIRST-IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAME OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
- ------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME Phoenix Leasing Incorporated
MAILING ADDRESS 2401 Kerner Boulevard
CITY San Rafael STATE CA ZIP CODE 94901
- ------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record
when required by Instruction 4).
Equipment, fixtures and general intangibles more specifically described on
Exhibit A attached hereto, leased by Secured Party as Lessor to Debtor as
Lessee under that certain Master Equipment Lease dated ______________, 19__
(the "Lease"); said Lease and all rentals and other sums due thereunder;
all proceeds including insurance and general intangibles related thereto.
The goods on the attached Exhibit A are or are to become fixtures on 3916
Trust Way, Hayward, CA 94545 and this financing statement is to be recorded
in the real estate records. The name of the record owner is _____________.
The goods that are or are to become fixtures are located on the real
property more fully described on the attached Exhibit B.
FILE WITH ALAMEDA COUNTY OFFICIAL RECORDS (Fixture Filing).
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE ARE ALSO COVERED INSTRUCTION ?(?) ITEM
[ ] (1) [ ] (2) [ ] (3) [ ] (4)
- ------------------------------------------------------------------------------------------------------------------------
8. CHECK [X] [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC Section 9105 (?)(?)
IF APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------
9. DATE: C 10. THIS SPACE FOR USE OF FILING OFFICER
O (DATE, TIME, FILE NUMBER
BY: /s/ ROGER G. NOVESKY 11/29/95 D AND FILING OFFICER)
SIGNATURE(S) OF DEBTOR(S) E
- ------------------------------------------------------------------------------------------------------------------------
Soane BioSciences, Inc. 1
TYPE OR PRINT NAME(S) OF DEBTOR(S) 2
- ---------------------------------------------------
BY: 3
SIGNATURE(S) OF SECURED PARTY(IES)
- --------------------------------------------------- 4
Phoenix Leasing Incorporated
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 5
- ---------------------------------------------------
1. Return copy to: 6
NAME
ADDRESS 7
CITY
8
9
</TABLE>
<PAGE> 12
STATE OF CALIFORNIA
UNIFORM COMMERCIAL CODE-FINANCING STATEMENT-FORM UCC-1 (REV. 1/90)
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
1. TRANSFEROR (LAST NAME, FIRST-IF AN INDIVIDUAL) 1A. SOCIAL SECURITY OR FEDERAL TAX NO.
Soane BioSciences, Inc.
- ------------------------------------------------------------------------------------------------------------------------
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
3916 Trust Way Hayward, CA 94545
- ------------------------------------------------------------------------------------------------------------------------
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME, FIRST-IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO.
- ------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------
3. DEBTOR'S TRADE NAME OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
- ------------------------------------------------------------------------------------------------------------------------
4. TRANSFEREE 4A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME Phoenix Leasing Incorporated
MAILING ADDRESS 2401 Kerner Boulevard
CITY San Rafael STATE CA ZIP CODE 94901
- ------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO.
OR BANK TRANSIT AND A.B.A. NO.
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record
when required by Instruction 4).
Notice is hereby given to the Creditors of Soane BioSciences, Inc.,
Transferor(s), whose principal address is 3916 Trust Way, City of Hayward,
County of Alameda, State of California, that a Sale and Leaseback is about
to be made to Phoenix Leasing Incorporated, Transferee(s), whose business
address is 2401 Kerner Boulevard, City of San Rafael, County of Marin,
State of California.
The property to be transferred is located at 3916 Trust Way, City of
Hayward, County of Alameda, State of California. Said property is described
in general as analytical and production equipment of that business known as
Soane BioSciences, Inc.
The Sale and Leaseback will be consummated on or after the ____ day of
__________, 19 __, at 2401 Kerner Boulevard, City of San Rafael, County of
Marin, State of California.
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH
IF APPLICABLE ARE ALSO COVERED INSTRUCTION ?(?) ITEM
[ ] (1) [ ] (2) [ ] (3) [ ] (4)
- ------------------------------------------------------------------------------------------------------------------------
8. CHECK [X] [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC Section 9105 (?)(?)
IF APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------
9. DATE: C 10. THIS SPACE FOR USE OF FILING OFFICER
O (DATE, TIME, FILE NUMBER
BY: /s/ ROGER G. NOVESKY 11/29/95 D AND FILING OFFICER)
SIGNATURE(S) OF DEBTOR(S) E
- ------------------------------------------------------------------------------------------------------------------------
Soane BioSciences, Inc. 1
TYPE OR PRINT NAME(S) OF DEBTOR(S) 2
- ---------------------------------------------------
BY: 3
SIGNATURE(S) OF SECURED PARTY(IES)
- --------------------------------------------------- 4
PHOENIX LEASING INCORPORATED
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 5
- ---------------------------------------------------
1. Return copy to: 6
NAME
ADDRESS 7
CITY
8
9
</TABLE>
<PAGE> 1
EXHIBIT 10.10
AGREEMENT FOR AN EXCLUSIVE ALLIANCE TO DEVELOP, MANUFACTURE AND
MARKET A CHIP-BASED SCREENING SYSTEM FOR CELL ANALYSIS
This is an agreement executed this Twenty-sixth day of October, 1999,
hereinafter the "Effective Date") between Cellomics, Inc., 635 William Pitt
Way, Pittsburgh, PA. 15238 (hereinafter CELLOMICS) and ACLARA BioSciences Inc.
1288 Pear Avenue, Mountain View, CA 94043-1432 (hereinafter ACLARA).
RECITALS
Whereas CELLOMICS has expertise in drug discovery, patterning cells on
substrates, cell analyses, luminescence detection, imaging science and
informatics;
Whereas ACLARA has expertise in microfluidics, design and engineering of
microdevices in plastic, and process engineering;
Whereas CELLOMICS and ACLARA desire to form a development, manufacturing and
marketing alliance to produce a Screening System for the life sciences to
perform Cell-based Assays.
Now, therefore, in consideration of the covenants and conditions contained
herein, the Parties, intending to be legally bound, agree as follows:
1. Definitions
1.1 "Cassette" means an assembled unit comprising an operable combination of a
Cell Plate and Microfluidic Plate.
1.2 "Cell-based Array" means any assay in which a biological target molecule or
organelle is analyzed in, on and [*]. The cells can be from any life form
including but not limited to bacteria, animals and plants.
1.3 "Cell Plate" means a glass or plastic plate material having a modified
surface that supports selective adhesion of cells in discrete regions.
1.4 "EAP" shall mean an Early Access Partner. This is a third party that has
executed a TAP Agreement approved by the JSC pursuant to which such third
party (i) is provided access to Prototypes during the Development Phase and
(ii) pays a fee for having early access under the applicable TAP.
1.5 "High Content Screening (HCS)" means the activity or status of cells in the
Cassette [*].
1.6 "High Throughput Screening (HTS)" means the measurement of single values
that represent the average or total of a signal obtained from a single
well in a Cassette,
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
-1-
<PAGE> 2
regardless of whether the signal is produced intra- or extracellularly. The
single values will be obtained as a group of values as to different
candidate compounds or different indications resulting from the same
compound.
1.7 "Intellectual Property Milestone" shall be when the Parties complete a
Prototype and the aggregate commitment from the TAP shall be [*] based on
individual EAP fees of at least [*].
1.8 "JSC" shall mean the Joint Steering Committee, which will be composed of
equal numbers of members from both CELLOMICS and ACLARA, not to exceed a
total of eight, which members may be changed from time to time by the Party
whom they represent, and to be chaired by the Project Leaders for the
Parties.
1.9 "Liquid Transfer System" means any system used for transferring materials
to the Cassette.
1.10 "Luminescence-based Reagents" are reagents that result in light emission
for use in Cell-based Assays.
1.11 "Microfluidic Plate" means microfluidic device of an electrically
non-conducting material designed to mate with the Cell Plate to [*].
1.12 "Microplate" means a standard multiwell plate most commonly of 96 or 384
wells, but also available in 6, 12, 24, 48, 1536 and other formats with
overall dimensions of about 3.5 x 4.5 cm.
1.13 "Program" shall mean a research program to develop a Screening System as
set forth in the Workplan.
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
-2-
<PAGE> 3
1.14 "Prototype" shall mean a development stage Screening System meeting all or
most of the specifications set forth in the applicable Workplan, however,
not in a format useful for general sale and commercial distribution. A
Prototype is typically suitable for delivery to an EAP.
1.15 "Reader" shall mean the optical system and accompanying software
developed for reading the Luminescence signals from the cells.
1.16 "Revenue Source" is any source of revenues to support the Program other
than internal sources, including but not limited to government grants, EAP
fees, funds from the other Party and funds from collaborators other than
a Party.
1.17 "Robotics" means the mechanical units for assembling and moving the
components necessary for performing a Cell-based Assay with a Cassette.
1.18 "Screening System" shall mean the Cassette, Robotics, Reader, Liquid
Transfer System, software and such other integrated peripheral devices to
conduct High Throughput and/or High Content Screening, including
disposables. The Screening System shall be all of the hardware and
software to provide a complete system for performing Cell-based Assays
(except for the Luminescence-based Reagents and such other reagents as
may be used for Cell-based Assays).
1.19 "TAP" shall mean Technology Access Program between ACLARA and CELLOMICS
with companies which shall serve as EAPs.
1.20 "Workplan" shall list goals and tasks detailing the actual work expected
to be done, with timelines, budget and a delineation of responsibilities.
2. Development
2.1 The "Field" of this collaboration is the development of an automated
system for [*]. It is an essential term of this agreement that
CELLOMICS agrees to work exclusively with ACLARA on any and all
matters involving microfluids in Cell-based Assays and ACLARA
agrees to work exclusively with CELLOMICS on any and all matters
involving Cell-based Assays during the Program.
2.2 This Agreement will become effective on the Effective Date.
2.3 CELLOMICS is attempting to obtain [*] to be permitted to utilize [*]
to support ACLARA's research effort for the [*] of the Program.
Whether or not CELLOMICS ever obtains such approval from [*],
CELLOMICS is obligated to and hereby commits to pay [*] to support
ACLARA's said research for the [*] of the
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
-3-
<PAGE> 4
Program in [*]. During the period in which CELLOMICS is paying
ACLARA, ACLARA shall provide CELLOMICS with a statement of the cost
allocated to the Program as determined in accordance with reasonable
accounting procedures used internally by ACLARA within thirty (30)
days of receipt of the quarterly check due ACLARA. The dates on
which such payments are due may be changed in accordance with the
date of initiation of work by ACLARA and the rate at which employees
are hired by ACLARA to perform the Program.
2.4 During the first year of the term of this agreement ("First Year"),
the Parties agree to work in accordance with the Workplan set forth
in Appendix A, with the goal to have a Prototype of the Cassette by
the first anniversary of the Effective Date. The goal during the [*]
is to optimize the Cell Plate and Microfluidic Plate design and
interfacing to enable fabrication of a functional Cassette. This
Cassette is intended to have the specifications for and serve as a
testbed for a [*]. In addition, it is intended that the Parties will
use this Cassette as a working Prototype in a TAP program.
Development of the Cassette Prototype will be directed to enable:
[*]. During the First Year and thereafter, each Party will provide
written reports with thirty (30) days of the end of each calendar
quarter of the progress it has made during such quarter and the work
to be performed in the next quarter and a written summation of the
work accomplished at the end of each calendar year within thirty (30)
days of the end of such calendar year.
2.5. Notwithstanding the intention to achieve the goals of the Workplan
for the First Year, it is understood that in order to staff the
Program, ACLARA and CELLOMICS will be required to hire new personnel
or transfer existing personnel as they may become available. While
each Party will act diligently to staff the Program in accordance
with the Program's needs and available funding, the timing of such
hires or transfers is not completely within the control of the
Parties and the schedule of the Workplan may be delayed. At each
quarterly meeting of the JSC, the accomplishment of the previous
quarter, and the available funding, committed or to be committed,
will be evaluated and the Workplan modified, if necessary, in light
of the circumstances then pertaining.
2.5.i. If prior to the occurrence of the Intellectual Property
Milestone there appears to either Party to be an
insufficient Revenue Source at that time or in the
reasonably foreseeable future to support the Program in the
amounts required by each Party for its performance, the JSC
shall review the situation and report to the respective
CEO's its recommendation as to how to proceed within sixty
(60) days of notification by either Party that such Party
believes there is an insufficient Revenue Source to support
the Program. If the CEOs cannot agree within sixty (60) days
of receiving
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notification from the JSC as to how to proceed, either Party
may terminate this Agreement upon giving prompt notice of
termination to the other Party without obligation to license
the other party under the terminating Party's intellectual
property. If the Program is terminated for other than material
breach prior to the completion of the Intellectual Property
Milestone, the parties will negotiate in good faith to allow a
continuing party to continue the Program.
2.5.ii. Notwithstanding Paragraph 2.5.i, after the Intellectual
Property Milestone has been achieved, the terminating Party
will be obligated to license the continuing Party under the
terminating Party's intellectual property to continue to
develop and commercialize the Prototype and Screening System
as hereinafter provided. Upon termination by one Party for
other than material breach, with the Intellectual Property
Milestone having been achieved, the other Party may continue
the Program and the terminating Party agrees to enter into
negotiations within thirty (30) days of such termination with
the other Party over the terms of such license which the
terminating Party is obligated to license to the continuing
Party under its intellectual property, both background and
foreground, on reasonable terms and conditions to make, use
and sell Screening Systems substantially conforming to the
Screening System which was to be jointly developed.
2.6 Assuming financing is obtained as required to support the Program
for the second and third years of the term of this Agreement, or
such other periods in which the goals of these years are to be
fulfilled as determined by the JSC, a Screening System will be
developed, which is intended to offer a complete solution to the
need for flexibility in Cell-based Assays starting with an initial
focus on [*]. The Screening System will be designed to have the
ability to provide a complete portfolio of assays including [*].
The Screening System will offer a ready-to-use and easy-to-use
solution for the life scientist and further will promote
penetration of sophisticated Cell-based Assays HCS in drug
discovery. The target pharmaceutical customer for the Screening
System is an entity with significant biological expertise in
primary screening, a therapeutic group or a specialty such as [*].
2.7 The development program for [*] of the term of this agreement is
set forth in Appendix B with the intention of developing a
Screening System. The 3D Cassette will have a high density plumbing
architecture for selective addressing of a high density of
micro-arrayed cells on the Cell Plate. The initial design and
prototypes will focus on multiples of 96 well patterns in a
footprint ranging from [*].
2.8 CELLOMICS shall be responsible for identifying sources for the
Robotics, Reader and such other equipment, which is not available
from or to be developed
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by the Parties to this agreement. Selection of one or more sources
for providing the additional equipment will begin not later than
four (4) months after a Cassette Prototype has been shown to be
satisfactory to the Parties. CELLOMICS shall submit to ACLARA a
list of potential sources of producing the components of the
Screening System not already being produced by either ACLARA or
CELLOMICS. ACLARA and CELLOMICS shall mutually agree on the
priority in which these sources are to be approached, and
additional candidates added, neither party shall unreasonably
withhold such agreement. Such third party(s) and the terms upon
which they agree to participate in developing the Screening System
shall be proposed and negotiated by CELLOMICS and shall be subject
to the review, but not the approval of the JSC.
2.9 In [*] of the term of this Agreement, the Parties will direct their
efforts to the development of a Screening System commercial product.
The Prototype developed in [*] is to be taken through the final
phase of the product development cycle and to establish
manufacturing, marketing and sales.
2.10 A complete Screening System will include all the components
required by a user to take a library of compounds stored in a
Microplate format and screen the library of compounds against a
target, producing a data set in a standard database format for ease
of access. The responsibilities of the Parties as to the following
components that are required to accomplish this goal are:
- CELLOMICS
[*]
- ACLARA
[*]
3. Funding
3.1 A budget is set forth for the First Year in Appendix B. Promptly
after execution of this Agreement, the Parties will submit a
proposed budget for [*], which budget shall be subject to review,
modification, and approval by the JSC. These budgets will be the
basis for [*] and provide for the division of money received from
[*] between the Parties.
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3.2. Not later than three (3) months after initiation of the
Workplan, the JSC will prepare and submit a budget to [*]
based on the budgets submitted by the Parties requesting an
increase in the total funding for both companies to accelerate
the development of the Screening System. Not later than [*],
the Parties will prepare and submit a [*] grant. The budget
may reflect provision for sources of components of the
Screening System, which the Parties do not intend to develop
or supply.
3.3 CELLOMICS and ACLARA will jointly prepare a TAP to attract
companies as EAPs that will fund the Program. CELLOMICS and
ACLARA will jointly make presentations to the pharmaceutical
industry. The Parties will develop jointly the basic terms for
a TAP, which shall be the basis for entering into agreements
with EAPs. The TAP will be developed not later than one (1)
month from the completion of a satisfactory Cassette
Prototype.
4. Commercialization plan
4.1. Final product development and component manufacturing: The
Prototype completed in [*] and delivered as a beta test system
to at least [*] EAPs in [*] will be developed into a Screening
System component for manufacturing. ACLARA will be responsible
for final engineering and establishment of manufacturing
capability for the Microfluidic Plate. ACLARA is developing a
[*], and if applicable, ACLARA will contribute this to the
Screening System. If incremental development is required to
render this [*] applicable to the Screening System, the JSC
may adjust the Workplan accordingly. CELLOMICS will be
responsible for Cell Plates, all reagents, assays, and
protocols. CELLOMICS will work to ensure that the components
which neither Party intends to produce are made available from
a third party and are available for commercialization of the
Screening System. CELLOMICS will be responsible for the final
development and manufacturing of the remaining components of
the Screening System.
4.2. Manufacturing of the integrated system: The final
manufacturing, packaging and delivery of [*] and other
Cell-based Assay reagents, Cassettes and Screening Systems to
customers will be the responsibility of CELLOMICS. Prior to
the initiation of manufacturing of a Cassette, the Parties
will enter into a supply agreement in which ACLARA will be
responsible for delivering to CELLOMICS, or a third party
designated by CELLOMICS, sufficient quantities of Microfluidic
Plates for packaging with Cell Plates. Such supply agreement
will provide for indemnification of the other Party on
conventional terms for the intentional, willful, or negligent
act or failure to act of one Party, giving rise to a claim
against the other Party. The supply terms for ACLARA's
delivery to CELLOMICS shall be conventional, giving due regard
to
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the size of the batches required, the effect of volume on price,
agreements with third parties for manufacture of the Microfluidic
Plates and the time required for initiating a run of Microfluidic
Plates. CELLOMICS will provide ACLARA with sales projections on a
rolling basis. Inventory shall be the responsibility of CELLOMICS.
4.3. Deliver Production Systems: For all life science applications,
CELLOMICS will have full responsibility for ensuring that all
components of the Screening System are available for marketing,
marketing of the Screening System, and providing support for the
Screening Systems and its components. The target markets for these
systems will include, but not be limited to pharmaceutical discovery
and development, clinical diagnostics, agriculture biotech, and basic
biomedical research.
4.4. Product Designation: ACLARA's name and trademark shall appear
prominently on the Microfluidic Plate and CELLOMICS shall give due
credit for ACLARA's contributions in its labeling, advertising and
promotion. Statements made by CELLOMICS concerning ACLARA shall be
subject to review and approval by ACLARA, which approval shall not be
unreasonably withheld.
4.5. Reader Designation: CELLOMICS's name and trademark shall be use din a
primary capacity and ACLARA's name and trademark shall be use din a
secondary capacity on the Reader and CELLOMICS shall give due credit
for ACLARA's contributions in its labeling, advertising and promotion.
Statements made by CELLOMICS concerning ACLARA shall be subject to
review and approval by ACLARA, which approval shall not be
unreasonably withheld.
5. Revenue Sharing
5.1 During the development and commercialization phase, the money obtained
from third parties from a Revenue Source shall be divided to ensure
that each Party's expenditure of its own money on a JSC approved
Workplan is minimized. The exact division of [*] will be decided at
the time of [*]. The division of TAP fees will be defined by the JCS,
and approved by the CEO of both Parties, and written into a separate
agreement between CELLOMICS and ACLARA before a TAP agreement is
consummated. Funding from a collaborator other than the other Party
will primarily be used for the purposes of the collaboration.
5.2 Not later than the end of [*] the Parties shall initiate negotiations
as to the division of income resulting from the sales of Screening
Systems and its components. The division of the income will first be
considered by the JSC with final approval of the CEO's from CELLOMICS
and ACLARA. ACLARA shall receive from CELLOMICS [*] and a reasonable
profit margin for items manufactured or supplied by ACLARA;
Considerations in determining the division of remaining
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income shall be the financial contribution of each of the Parties,
except to the extent the Parties have been reimbursed any portion of
their contribution by a Revenue Source, the novelty of their
contributions, the value of the intellectual property that protects
components of the Screening Systems, the competitive advantages
provided by the contributions of the two Parties, the responsibilities
of the two Parties in manufacturing, marketing and supporting the
ongoing expenditures, the risks involved with the continuing
investments, and the like. The income to ACLARA shall not be less than
a reasonable royalty on patents and know-how contributed by ACLARA
with the base being Screening Systems and components, where the
royalty may vary as to whole Screening Systems and as to individual
disposable Screening System components. Royalty shall not be paid
twice for the same component of the Screening System. If there is no
agreement between the Parties, the matter shall be given to mediation
as provided for hereinafter. The exact mechanism for delivering the
value to the Parties will be defined as the program proceeds toward
commercialization. It may involve strict revenue sharing, licensing,
royalties or some combination that will be defined by the JSC.
6. Public Relations
6.1 All press releases created by an originating Party shall be submitted
to the other Party for approval and shall not be released without the
prior written approval of the other Party. In the event of a dispute,
the matter shall be submitted to the CEOs of the Parties and if the
issue cannot be reconciled, there shall be no press release containing
disputed subject matter.
6.2 Prior to commercial introduction of a Screening System, all public
presentation relating to this Program, not already made public,
including Web postings, corporate presentations, investor relations,
and marketing collateral, must be approved by the other Party, such
approval not to be unreasonably withheld.
7. Intellectual Property
7.1 Ownership. Each of the Parties will own all intellectual property and
inventions made by individuals who have a duty to assign to that Party
and will jointly own all inventions co-invented by at least one
inventor having a duty to assign to each Party. The Party owning the
invention shall have the exclusive right to file worldwide for patent
applications covering the invention.
7.2 Joint Intellectual Property. CELLOMICS and ACLARA will jointly
determine the advisability of filing a patent application. The JSC
will appoint one of the Parties to be responsible to prepare, file,
prosecute diligently and maintain such application(s). The Parties
will share equally all reasonable costs incurred in
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connection with such activities (i.e., the non-prosecuting Party will
promptly reimburse the prosecuting Party), provided, however, that
either Party may avoid its responsibility for such costs by assigning
its rights in such Joint Intellectual Property to the other Party. In
such an event, the other Party may decide at its sole discretion
whether or not to file or continue prosecution of such applications.
Also, the assigning Party will provide reasonable assistance to the
assignee to facilitate the filing and prosecution of all such
applications. Joint Intellectual Property will be jointly owned, and
either Party is free to use such Joint Intellectual Property as it
sees fit, outside the Field of this Agreement. CELLOMICS shall have
the exclusive right to use such Joint Intellectual Property within the
Field of this Agreement for the lessor of i) a period of five (5)
years from the first commercial release of the Screening System, or
ii) eight years (8) from the Effective Date. Thereafter, either Party
may use such Joint Intellectual Property without accounting to the
other Party.
7.3 Rights. All inventions owned by ACLARA developed as part of the
program having application to the Cell Plate shall be licensed to
CELLOMICS on reasonable terms and conditions, if at the time of filing
of a patent application for such invention, CELLOMICS agrees to pay
[*] of the out-of-pocket costs of the filing, prosecution and
maintenance of such application, continuing applications, foreign
analogs, and Letters Patent issuing thereon. All inventions owned by
CELLOMICS developed as part of the collaboration having application to
the Microfluidic Plate shall be licensed to ACLARA on reasonable terms
and conditions, if at the time of filing of a patent application for
such invention, ACLARA agrees to pay [*] of the out-of-pocket costs of
the filing, prosecution and maintenance of such application,
continuing applications, foreign analogs, and Letters Patent issuing
thereon.
7.4 Licensing of Foreground technology. Technical know-how and patent
rights developed as part of the Program shall be available on
reasonable terms and conditions after termination of this Agreement in
the event that one Party wishes to continue the Program.
7.5 Licenses of Background Technology. Technical know-how and patent
rights developed prior to initiation of the Program or outside of the
Program may be licensed for a Screening System developed in the
Program as set forth in Section 2.5.
7.6 Label License. All products supplied by ACLARA to CELLOMICS will
include a label license, granting CELLOMICS a license under ACLARA's
intellectual property to use, offer to sell, and sell any such
products for use in the Field, such label license being transferable
to the purchasers of such products.
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7.7. Confidentiality. All technical and business information given the
recipient Party by the disclosing Party shall be assumed to be in
confidence and if disclosed orally, shall be reduced to writing and
delivered to the recipient within thirty (30) days of disclosure.
Information received in confidence shall be used solely for the
purposes of this Agreement and shall be disclosed to others who assume
like duties of confidentiality. The restrictions on use and disclosure
shall not apply where the information is or becomes generally known
without failure on the part of the recipient; was known to the
recipient prior to receipt from the discloser; or is given to the
recipient by a third party who has the right to disclose the
information, without restriction on use or disclosure. The obligations
on use and disclosure shall terminate five (5) years from the
termination of the Program.
8. Surviving Rights/Termination
8.1 Surviving Rights and Duties. The right to obtain licenses to
intellectual property rights covering technology employed in the
Program as provided for in this Agreement shall survive termination of
this Agreement. Either Party shall have the right to a license from
the other Party if such license is requested within two (2) years
after termination of this Agreement.
8.2 Termination. This Agreement may be terminated by either Party in the
event of material breach by the other Party, upon giving sixty (60)
days prior written notice of the intent to terminate, which
termination will be effective if the breaching Party has not taken
reasonable steps to correct the material breach. The right to
terminate is in addition to all other rights the non-breaching Party
may have against the breaching Party.
8.3 Permissive termination. Either Party may terminate this Agreement,
with the acceptance of the other.
9. Governance
9.1 Joint Steering Committee. The Program will be governed by the JSC. The
JSC shall consist of at least one senior executive, one business
director, and one technical director from each Party. The JSC will
meet at least once per quarter, alternating between locations selected
by ACLARA and CELLOMICS, to oversee activities under a Workplan. In
particular, the JSC will monitor and support collaboration and/or
supply relationships existing between ACLARA and CELLOMICS, review,
recommend modifications to, and oversee the implementation of active
Workplans, define deliverables for TAPs, approve EAPs, review the
commercial feasibility of Screening Systems being developed under a
Workplan, review the progress of the Workplan and funding, offer
modifications to the Workplan in light of changed circumstances,
discuss new commercial opportunities and develop the objectives and
terms for additional Programs between the Parties that may be pursued.
The JSC shall have the authority to make reasonable alterations or
amendments to the Workplan, which
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will be considered final after reduction to writing and
attachment to the Agreement. Significant alterations to the
Workplan must be approved by the CEO of both Parties. The JSC
shall have the authority to recommend alterations or amendments
to this Agreement, which shall not become final until reduced to
writing and signed by the CEO of each of the Parties. Except as
otherwise expressly provided herein, decisions of the JSC will be
made by consensus.
9.2 Dispute resolution. Should disputes arise, the Parties agree to
negotiate in good faith to resolve the disputes. Disputes that
cannot be resolved by the JSC within a reasonable period shall be
submitted to the CEOs of the Parties. If agreement is still not
reached, the Parties agree to submit disputes to mediation in
accordance with the section 9.3, "Mediation", prior to seeking
any other remedy.
9.3 Mediation. If the Parties are unable to resolve by negotiation
within forty-five days of the disputing Party's written request
for dispute resolution (or such other time period expressly set
forth in this Agreement), or if the Parties fail to meet within
twenty (20) days after such notice, the Parties shall endeavor to
settle the dispute by mediation administered by the American
Arbitration Association ("AAA") pursuant to the Commercial
Mediation Rules of the AAA the time of submission prior to
resorting to any other remedy. Mediation shall be held in a
location to be decided later. The mediator appointed to assist
the Parties must possess such credentials as qualify said
mediator as (1) either an expert in the field being mediated or
(2) at a minimum as reasonably familiar with the industries and
specific applications as will enable the mediator to quickly
understand and assist the Parties in dealing with the issues that
are in dispute. Notwithstanding the foregoing, to the extent that
any controversy or claim hereunder gives rise to a prayer for
injunctive relief, equitable action or specific performance, the
aggrieved Party shall have the right to commence such an action
in any court of competent jurisdiction.
10. Representations and Warranties
10.1 Authority. Each Party hereby represents and warrants to the other that it
has full power and authority to enter into this agreement and to consummate
the transactions contemplated hereby. This agreement has been duly executed
and delivered and constitutes a valid and binding obligation of the Party,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally from time to time in effect or by general equitable
principles.
10.2 Corporate Organization and Authority. Each Party hereby represents and
warrants to the other that it is a corporation duly organized, validly
existing and in good standing under the laws of Delaware as to CELLOMICS
and California as to ACLARA and has all corporate power and authority to
carry on its business as
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now being conducted and to own its properties, is duly qualified and in
good standing to do business in every jurisdiction in which such
qualification is necessary because of the nature of the property owned,
leased or operated by it or the nature of the business conducted by it
except where the failure to be so qualified would not have a material
adverse effect.
10.3 Ability to Carry Out the Agreement: Consents and Waivers. Each Party
hereby represents and warrants to the other that the execution and
delivery of this agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination under, or accelerate
the performance required by, or result in the creation of any lien,
security interest, charge, increase in liability or other encumbrance
upon any of its assets under, any provision of:
(i) any law, statute, rule, regulation or judicial or
administrative decision;
(ii) any certificate of incorporation or by-laws;
(iii) any mortgage, deed of trust, lease, note, shareholders'
agreement, bond, indenture, contract or other instrument
or agreement; or
(iv) any judgment, order, writ, injunction or decree of any
court, governmental body, administrative agency or
arbitrator relating to it;
(v) other than conflicts, violations, defaults, right of
termination or encumbrances which could not reasonably be
expected to have a material adverse effect on the
enforceability or validity or the agreement.
10.4 Litigation. Each Party hereby represents and warrants to the other that
there is no action, suit, or governmental, administrative or regulatory
proceeding or investigation pending or, to the knowledge of the Party,
threatened against it at law, in equity or otherwise, in, before, or by
any court or governmental agency or authority which could reasonably be
expected to have a material adverse effect on this agreement or the
transactions contemplated therein. ACLARA is presently involved solely
in two pieces of litigation; being sued for misappropriation of trade
secrets; and suing for patent infringement.
10.5 Year 2000. Each Party hereby represents and warrants to the other that
software, hardware, equipment and systems owned, leased or licensed by
it and used in the conduct of its business are Year 2000 Compliant.
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10.6 Regulatory Filings. Each of the Parties hereto will furnish to the other
Party hereto such necessary information and reasonable assistance as
such other Party may reasonably request in connection with its
preparation of necessary filings or submissions to any governmental
entity.
10.7 Announcement. Neither Party nor their respective affiliates will issue
any press release or other public announcement with respect to this
agreement or the transactions contemplated hereby without the prior
written approval of the other Party hereto (such approval not to be
unreasonably withheld, conditioned or delayed).
10.8 Indemnification. Each Party agrees to defend, indemnify and hold
harmless the other and its respective successors and assigns against
and in respect of:
(a) any and all losses, damages, deficiencies or liabilities ("Damages")
caused by, resulting or arising from or otherwise relating to any
material failure by a Party to perform or otherwise fulfill or
comply with any undertaking or other agreement or obligation to be
performed, fulfilled or complied with by the Party resulting from
its gross negligence, willful misconduct or arising from or
otherwise relating to any material breach of any representation or
warranty of the Party contained in this agreement.
10.9 Entire Agreement. The Agreement (including the appendices attached
hereto, all of which are part hereof) contain the entire understanding
of the Parties hereto with respect to the subject matter contained
herein, and supersede and cancel all prior agreements, negotiations,
correspondence, undertakings and communications of the Parties, oral or
written, respecting such subject matter. There are no restrictions,
promises, representations, warranties, agreements or undertakings of any
Party hereto with respect to the transactions under this Agreement
other than those set forth herein or therein or made hereunder or
thereunder.
10.10 Amendments. This agreement may be amended only by a written instrument
executed by the Parties or their respective successors or assigns.
10.11 Headings; References. The article and section headings contained in
this agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this agreement. All references
herein to "Articles," "Sections," "Schedules," or "Appendices" shall be
deemed to be references to Articles or Sections hereof or Schedules or
Appendices hereto unless otherwise indicated.
11. Notices
11.1. Notices may be given to an officer of a Party by;
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personal delivery, fax or registered mail addressed as follows:
overnight delivery by an internationally recognized courier service
If to ACLARA Biosciences Inc.:
Joseph M. Limber
President and CEO
ACLARA Biosciences, Inc.
1288 Pear Avenue
Mountain View, CA 94043-1432
FAX (650) 210-1210
If to CELLOMICS, Inc.:
D. Lansing Taylor
President and CEO
CELLOMICS, Inc.
635 William Pitt Way
Pittsburgh, PA 15238
FAX (412) 826-3896
12. Binding Effect
12.1 This agreement shall inure to the benefit of and be binding on each Party's
successors in interest and assigns.
13. Assignment
13.1 Either Party may assign this agreement only in connection with the sale or
disposition of the entire business of such Party or that portion to which
this agreement pertains. Either Party may assign this Agreement to an
Affiliate(s) without permission of the other Party. Affiliate shall mean
an entity controlling, controlled by, or under common control with a Party
to this Agreement.
14. Governing Law
14.1 This Agreement shall be interpreted in accordance with the local laws of
the Party defending any action brought under this Agreement.
[Signature page Follows]
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Signature Page for Agreement For An Exclusive Alliance To Develop, Manufacture
And Market A Chip-Based Screening System For Cell Analysis
In Witness Whereof, this Agreement has been executed in multiple counterparts,
each of which shall constitute an original Agreement, on behalf of the Parties
by their authorized officers as of the date first written above:
CELLOMICS, INC.
Signature /s/ D. LANSING TAYLOR
------------------------------
Print D. Lansing Taylor
----------------------------------
Title President & CEO
----------------------------------
Date 10/26/99
-----------------------------------
ACLARA BIOSCIENCES INC.
Signature /s/ JOSEPH M. LIMBER
------------------------------
Print Joseph M. Limber
----------------------------------
Title President & CEO
----------------------------------
Date October 26, 1999
-----------------------------------
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APPENDIX A
WORKPLAN
[*]
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[*]
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[*]
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EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
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APPENDIX B
FUNDING PLAN
[*]
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[*]
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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[*]
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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[*]
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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EXHIBIT - 10.11
COLLABORATION AGREEMENT
This Collaboration Agreement ("Agreement") dated as of the 19 day of March,
1999 is by and between ACLARA BIOSCIENCES, INC., 3906 Trust Way, Hayward,
California 94545-3716 ("ACLARA") and THE PERKIN-ELMER CORPORATION, having its PE
Biosystems Division at 850 Lincoln Centre Drive, Foster City, CA 94404
("PERKIN-ELMER").
A. WHEREAS, ACLARA has proprietary technology and know-how with respect
to microfluidic electrophoresis devices;
B. WHEREAS, ACLARA has certain skills and know-how related to the
manufacture, design and use of such devices;
C. WHEREAS, PERKIN-ELMER has certain skills and know-how related to high
throughput screening systems utilizing electrophoresis, and the manufacture,
marketing, sales and support of products incorporating such systems;
D. WHEREAS, PERKING-ELMER and Soane Biosciences, Inc. (the predecessor to
ACLARA) entered into a previous Collaboration Agreement dated as of April 25,
1998, with the objective of developing genetic analysis systems incorporating
microfluidic electrophoresis devices;
E. WHEREAS, ACLARA and PERKIN-ELMER desire to enter into an additional
collaboration with the objective of developing high throughput screening systems
incorporating microfluidic electrophoresis devices;
F. WHEREAS, both Parties recognize that each has rights to pre-existing
intellectual properties which may directly or indirectly contribute to the
commercialization of such high throughput screening systems and understand that
in the process of developing the high throughput screening systems contemplated
by the collaboration, both parties will reveal to each other relevant
intellectual property that existed prior to the effective date of the
collaboration under appropriate confidentiality and nondisclosure provisions,
irrespective of whether the intellectual property is an issued patent, a pending
patent application, a trade secret, know-how or otherwise;
G. WHEREAS, ACLARA desires to manufacture such microfluidic
electrophoresis devices and supply PERKIN-ELMER'S requirements therefor;
H. WHEREAS, PERKIN-ELMER and Soane Biosciences, Inc. (the predecessor to
ACLARA) have entered into a certain Series E Redeemable Preferred Stock Purchase
Agreement dated on or about April 27, 1998;
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I. WHEREAS, the Parties will enter into a Series G Redeemable Preferred
Stock Purchase Agreement within thirty (30) days of the Effective Date, under
substantially the same terms as those of the Series E offering, whereby
PERKIN-ELMER will invest Three Million Dollars ($3,000,000) in ACLARA at a share
price of Four Dollars and Two Cents ($4.02) (the "Equity Agreement");
NOW THEREFORE, in considerations of the mutual covenants and promises
contained in this Agreement, the Parties agree as follows:
1. DEFINITIONS.
1.1. "Affiliates" means any corporation, firm, partnership or other entity,
whether de jure or de facto, which directly or indirectly owns, is
owned by or is under common ownership with a Party to this Agreement
to the extent of at least fifty percent (50%) of the equity (or such
lesser percentage which is the maximum allowed to be owned by a
foreign corporation in a particular jurisdiction) having the power to
vote on or direct the affairs of the entity.
1.2. "Intellectual Property Rights" means all intellectual property rights
worldwide arising under statutory or common law, and whether or not
perfected, including, without limitation, all (1) patents, patent
applications and patent rights; (2) rights associated with the works
of authorship including copyrights, copyright applications, copyright
registrations, mask works, mask work applications, mask work
registrations; (3) rights relating to the protection of trade secrets
and confidential information; (4) any right analogous to those set
forth in this definition and any other proprietary rights relating to
intangible property (other than trademark, trade dress, or service
mark rights); (5) divisions, continuations, renewals, reissues,
continuing prosecution, and extensions of the foregoing (as and to the
extent applicable) now existing, hereafter filed, issued or acquired;
and (6) know-how.
1.3. "Pre-Collaboration ACLARA Intellectual Property" means all
Intellectual Property Rights relating to Microfluidic Electrophoresis
Devices that are owned by, either partially or wholly, or licensed to,
ACLARA as of the Effective Date, including without limitation [*]
and any Related Patents.
1.4. "Collaboration ACLARA Intellectual Property" means all Intellectual
Property Rights arising out of work performed pursuant to this
Agreement, conceived during the Collaboration Period solely by one or
more employees or agents of ACLARA.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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1.5. "Collaboration Joint Intellectual Property" means all Intellectual
Property Rights arising out of work performed pursuant to this
Agreement, which is jointly conceived during the Collaboration Period by
one or more employees or agents of ACLARA, and by one or more employees
or agents of PERKIN-ELMER.
1.6. "Collaboration PERKIN-ELMER Intellectual Property" means all
Intellectual Property arising out of work performed pursuant to this
Agreement, conceived during the Collaboration Period solely by one or
more employees or agents of PERKIN-ELMER.
1.7. "Collaboration Period" means the term beginning on the Effective Date
and ending [*] thereafter.
1.8. "Exclusive Period" means the term beginning on the Effective Date and
ending [*] thereafter.
1.9. "Effective Date" means the date of this Agreement first written above
or such later date as the Parties will determine by mutual agreement.
1.10. "Net Sales" means (1) with respect to sales by a Party, or an Affiliate
of a Party, to non-affiliated third party purchasers, the actual amount
of gross sales of Collaboration Product to a third party, less: trade,
cash and quantity discounts, if any, actually allowed, amounts refunded
for faulty or defective product, returns, rejections, freight, insurance
and other transportation costs, tariffs, duties and similar governmental
charges paid (except income taxes); (2) with respect to sales by a Party
made to any Affiliate or to any entity enjoying a special course of
dealing with a Party, the Net Sales will be determined based on the
first resale in a bona fide arms-length transaction of Collaboration
Product by such Affiliate, person, firm or corporation to third parties;
and (3) with respect to Collaboration Product which are used by a Party,
or an Affiliate of a Party, to supply services or information to a third
party for commercial purposes, or are otherwise disposed of, excluding
demonstration or other marketing activities performed for no or de
minimis compensation, the Net Sales will be determined as if such
Collaboration Product had been sold to a non-affiliated third party
purchaser at the average Net Sales for such Collaboration Product during
the immediately preceding one hundred and twenty (120) days.
1.11. "Residual Net Sales" means Net Sales minus Manufacturing Cost.
1.12. "Party" means ACLARA or PERKIN-ELMER and, when used in the plural,
means ACLARA and PERKIN-ELMER.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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1.13. "Subject Patent" means any patent or patent application claiming or
disclosing Pre-Collaboration ACLARA Intellectual Property, Collaboration
ACLARA Intellectual Property, Collaboration Joint Intellectual Property,
and/or Collaboration PERKIN-ELMER Intellectual Property, including any
Related Patents.
1.14. "Collaboration Product" means any product for use in the Collaboration
Field which, but for the licenses granted hereunder, manufacture, use
or sale thereof would infringe a Valid Claim of a Subject Patent.
1.15. "Valid Claim" means a claim of a patent or patent application that has
not been held invalid or otherwise unenforceable by a court of
competent jurisdiction or has not otherwise finally been held
unpatentable by an appropriate administrative agency.
1.16. "Prosecute" means, in the context of prosecuting pending patent
applications, taking necessary actions, including conducting
oppositions and interferences, to perfect patent rights to an invention.
1.17. "High Throughput Screening" means methods utilizing Microfluidic
Electrophoresis Devices in which [*] candidate compounds are contacted
with [*], and an extent of [*] interaction is determined based on [*].
For avoidance of doubt, the definition of High Throughput Screening
expressly excludes methods not employing an electrophoretic separation
step.
1.18. "Assay Development System" means an HTS System useful for optimizing
conditions for carrying out High Throughput Screening assays, and having
a throughput of approximately [*] assays per
day.
1.19. "Secondary Screening System" means an HTS System capable of performing
multiple candidate-versus-target concentration titration assays, e.g.,
IC50 titration assays, and having a throughput of approximately [*]
assays per day.
1.20. "Collaboration Field" means the field of High Throughput Screening.
1.21. "Microfluidic Electrophoresis Device" means a device comprising
intersecting electrophoresis channels formed in a monolithic solid
substrate, e.g., glass or plastic, which may comprise one or more
layers, which manufacture, use or sale thereof would infringe at least
one Valid Claim of a Subject Patent.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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1.22. "HTS Systems" means instruments or instrument systems for performing
High Throughput Screening which are adapted to utilize one or more
Microfluidic Electrophoresis Devices.
1.23. "Related Patent" means any patent or patent application owned, held, or
otherwise controlled, in whole or in part by ACLARA that (1) claims
substantially the same subject matter as a Subject Patent, (2) claims
improvements to inventions disclosed or claimed in a Subject Patent and
requires rights under the Subject Patent to exploit such improvements,
(3) claims priority to, a Subject Patent, including but not limited to
continuation applications and patents, continuation-in-part
applications and patents, divisional applications and patents,
reexamination applications and patents, reissue applications and
patents, and continuing prosecution applications and patents, (4) is a
parent of a Subject Patent, and/or (5) any foreign equivalents of a
Subject Patent or any patent or patent application in (1), (2), (3) or
(4) above.
1.24. "Start Development Checkpoint" means a point in a project at which a
report is produced which documents that the following parameters have
been established with respect to a Collaboration Product: [*].
1.25. "Technology Access Partner" means a third party who receives early
access to HTS Systems and Microfluidic Electrophoresis Devices
developed pursuant to this Agreement.
1.26. "Technology Access Agreement" means an agreement between one or both
Parties and a Technology Access Partner defining the terms and
conditions under which the Technology Access Partner provides funding in
return for receiving early access to HTS Systems and Microfluidic
Electrophoresis Devices.
1.27. "Manufacturing Cost" means the fully-burdened manufacturing cost of a
product including the direct material costs and material overhead cost,
direct labor costs, and fixed, variable and semi-variable manufacturing
overhead costs, as determined using a Party's customary practices and
procedures in accordance with United States generally accepted
accounting procedures (GAAP).
1.28. "Quarter" means a three month period beginning on the first day of
January, April, July or October next following the Effective Date, and
each three month period thereafter, except that the first Quarter will
include the
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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period from the Effective Date to the first day of the nearest three
month period after the Effective Date.
1.29. "Confidential Information" means confidential knowledge, know-how,
practices, processes, equipment or information that a receiving party
has a reasonable basis to believe is confidential to the disclosing
party or is treated by the disclosing party as confidential.
Notwithstanding the above, Confidential Information will not include,
and nothing in Section 6 will in any way restrict the rights of either
ACLARA or PERKIN-ELMER to use, disclose or otherwise deal with any
information which:
(a) can be demonstrated to have been in the public domain as of the
Effective Date or comes into the public domain during the term of
this Agreement through no act of the receiving party; or
(b) can be demonstrated to have been independently known to the
receiving party prior to the receipt thereof, or made available to
the receiving party as a matter of lawful right by a third party;
or
(c) can be demonstrated to have been rightfully received by the
receiving party from a third party who did not require the
receiving party to hold it in confidence or limit its use, or on
the basis of a restriction that has lapsed, and who did not
acquire it, directly or indirectly, from the other Party to this
Agreement under a continuing obligation of confidentiality; or
(d) will be required for disclosure to any governmental regulatory
agencies pursuant to approval for use; or
(e) is independently conceived, invented or acquired by researches of
the receiving party who have not been personally exposed to the
information provided to the receiving party hereunder.
2. Feasibility Phase.
2.1. Purpose. During the feasibility phase the Parties will work both
jointly and independently to establish technical and commercial
feasibility of all Collaboration Product. All jointly developed
Collaboration Product must be approved by the Joint Steering
Committee per Section 4. The feasibility phase of a project will
continue until a Start Development Checkpoint has been achieved
for that project.
2.2. Responsibilities. FERKIN-ELMER will have primary responsibility
for system development and integration, including software,
optical, mechanical and fluidic subsystems. ACLARA will have
primary
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responsibility for development of Microfluidic Electrophoresis
Devices, and ACLARA and PERKIN-ELMER will share responsibilities for
assay development; provided, however, that such primary
responsibilities may be reallocated by the Joint Steering Committee.
2.3 Work Plan. Feasibility and commercial development of Collaboration
Product will be established by the Parties in accordance with a Work
Plan. The Work Plan will set forth at least a plan of action to
achieve a Start Development Checkpoint. The Work Plan will be
defined and modified as required from time to time by the Joint
Steering Committee. An initial Work Plan is set forth in Exhibit 1
attached hereto.
2.4 [*] System. Within four (4) months after the Effective Date, the
Parties will develop a Work Plan to achieve a Start Development
Checkpoint for an [*] System within [*] after the Effective Date.
If, [*] after the Effective Date, a Party (the "Proposing Party")
desires to commercially develop an [*] System, then the Proposing
Party will so notify the other Party (the "Reviewing Party") of such
desire in writing, such notice to include a reasonable description
of the proposed [*] System sufficient for the Reviewing Party to
meaningfully evaluate the technical and commercial merits of such
[*] System. Thereafter, the Reviewing Party will have a period of
[*] to evaluate the [*] System and to notify the Proposing Party in
writing that the Reviewing Party has elected to commercially develop
such [*] System jointly with the Proposing Party pursuant to this
Agreement, in which case the Parties will promptly amend the Work
Plan to include such commercial development plans. Alternatively, if
the Reviewing Party declines to develop such [*] System, or fails to
notify the proposing Party of its election to develop such [*]
System, within the [*] period, the development of such [*] System
will be excluded from the exclusivity provisions of Section 3.3.1,
and the Reviewing Party will grant a non-exclusive license under
Subject Patents, as necessary to effect commercialization of such
[*] System, as such non-exclusive licenses are set forth in Sections
5.4.1, 5.4.4, and 5.4.5.
2.5 Secondary Screening System. Within [*] after the Effective Date, the
Parties will develop a Work Plan to achieve a Start Development
Checkpoint for a Secondary Screening System within [*] after the
Effective Date; except that, if the Work Plan requires four (4) or
more persons beyond those persons already committed to any Work
Plans then in place, then the Work Plan will achieve a Start
Development Checkpoint for a Secondary Screening System within [*]
after the Effective Date. If, [*] after the Effective
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Date, depending upon when the Work Plan calls for achieving a Start
Development Checkpoint, a Party (the "Proposing Party") desires to
commercially develop a Secondary Screening System, then the Proposing
Party will so notify the other Party (the "Reviewing Party") of such
desire in writing, such notice to include a reasonable description of
the proposed Secondary Screening System sufficient for the Reviewing
Party to meaningfully evaluate the technical and commercial merits of
such Secondary Screening System. Thereafter, the Reviewing Party will
have a period of [*] to evaluate the Secondary Screening System and to
notify the Proposing Party in writing that the Reviewing Party has
elected to commercially develop such Secondary Screening System
jointly with the Proposing Party pursuant to this Agreement, in which
case the Parties will promptly amend the Work Plan to include such
commercial development plans. Alternatively, if the Reviewing Party
declines to develop such Secondary Screening System, or fails to
notify the proposing Party of its election to develop such Secondary
Screening System, within the [*] period, the development of such
Secondary Screening System will be excluded from the exclusivity
provisions of Section 3.3.1, and the Reviewing Party will grant a
non-exclusive license under Subject Patents, as necessary to effect
commercialization of such Assay Development System, as such
non-exclusive licenses are set forth in Sections 5.4.1, 5.4.4, and
5.4.5.
2.6 Feasibility Teams. Each Party will assign personnel to its feasibility
team with the appropriate skills and experience to accomplish the work
established in the Work Plan. It is expected that such teams will work
together to accomplish the objective of the collaboration including,
if appropriate, conducting efforts at the same facility.
2.7 Provision of HTS Systems to ACLARA. PERKIN-ELMER will provide
prototype HTS Systems to ACLARA at PERKIN-ELMER's internal transfer
cost, as such systems become available to PERKIN-ELMER, for ACLARA's
use and not for resale, subject to any prior commitments to a
Technology Access Partner. The number of systems so provided will be
determined by the Joint Steering Committee.
2.8 Technology Access Program (TAP). Funding for the Work Plan may be
obtained through a TAP between one or both Parties and a Technology
Access Partner. Terms governing a TAP must be mutually agreed to by
the Parties through the Joint Steering Committee. Neither Party will
enter into a TAP without the prior written consent of the other Party.
However, terms and conditions relating directly to the purchase of
equity in ACLARA will be at the sole discretion of ACLARA.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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3. COMMERCIALIZATION PHASE.
3.1 Purpose. The purpose of the commercialization phase of the
collaboration is the facilitation of a cost effective manufacturing,
marketing, sales and support program for a Collaboration Product. The
commercialization phase of a project will commence upon reaching a
Start Development Checkpoint for that project.
3.2 Marketing, Sales and Support. In order to effectively market a
Collaboration Product the Parties agree that:
3.2.1. a Collaboration Product will be exclusively marketed, sold
and supported (including customer training and application
support of customers) through the sales and service
organization of PERKIN-ELMER, its Affiliates and
distributors, in accordance with a marketing plan to be
developed by PERKIN-ELMER;
3.2.2. PERKIN-ELMER will be responsible for all expenses for the
marketing, sales and support of a Collaboration Product; and
3.2.3. Microfluidic Electrophoresis Devices, HTS Systems, and
related marketing literature will be marked so as to
indicate that such devices are a product of both
PERKIN-ELMER and ACLARA.
3.3 Sale and Purchase of Microfluidic Electrophoresis Devices. Subject to
the terms and conditions of this Agreement, ACLARA will sell to
PERKIN-ELMER and PERKIN-ELMER will purchase from ACLARA Microfluidic
Electrophoresis Devices.
3.3.1. During the Exclusive Period. Within the Collaboration Field,
and during the Exclusive Period, ACLARA will sell
Microfluidic Electrophoresis Devices solely to PERKIN-ELMER
and PERKIN-ELMER will purchase Microfluidic Electrophoresis
Devices solely from ACLARA.
3.3.2. After Expiration of the Exclusive Period. After the
expiration of the Exclusive Period, if PERKIN-ELMER desires
to develop a Microfluidic Electrophoresis Device for use in
the Collaboration Field, then PERKIN-ELMER will so notify
ACLARA in writing. Thereafter, ACLARA will have a period of
three (3) months to evaluate PERKIN-ELMER's proposed
Microfluidic Electrophoresis Device and to notify
PERKIN-ELMER in writing that ACLARA has elected to develop
and supply such Microfluidic Electrophoresis Device jointly
with PERKIN-ELMER pursuant to terms to be negotiated in good
faith, such terms to be in accordance
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with Section 3, in which case the Parties will promptly
enter into a collaboration and supply agreement with respect
to such Microfluidic Electrophoresis Device. If the Parties
cannot agree to the terms of such agreement within ninety
(90) days after ACLARA's election to develop and supply such
Microfluidic Electrophoresis Device, the Parties will
resolve the outstanding issues pursuant to the procedures
set forth in Section 4.4. Conversely, if, after the
expiration of the Exclusive Period, ACLARA declines to
develop and supply such Microfluidic Electrophoresis Device,
or fails to notify PERKIN-ELMER of its election to develop
and supply such Microfluidic Electrophoresis Device, within
the three (3) month period, the development and manufacture
of such Microfluidic Electrophoresis Device may be performed
by PERKIN-ELMER or its designate pursuant to the
non-exclusive license set forth in Section 5.4.1.
3.3.3. Supply Agreement. Prior to ninety (90) days before a first
commercial sale of a Microfluidic Electrophoresis Device,
the Parties will enter into a supply agreement which,
consistent with this Agreement, will govern the purchase and
sale of Microfluidic Electrophoresis Devices. Such supply
agreement will contain provisions which, in addition to
customary warranty, representations and indemnification
provisions, will (1) set forth a commercially reasonable
plan for ACLARA to supply Microfluidic Electrophoresis
Devices to PERKIN-ELMER in satisfaction of PERKIN-ELMER's
requirements as to volume, cost, physical specifications,
regulatory requirements and schedule, and (2) obligate
ACLARA to provide technical support to PERKIN-ELMER (but not
directly to PERKIN-ELMER's customers). Reasonable minimum
purchase quantities will be negotiated between the Parties
in good faith. With respect to the supply of a Microfluidic
Electrophoresis Device jointly developed pursuant to this
Agreement, the supply agreement will also include
exclusivity provisions stating that ACLARA will supply such
Microfluidic Electrophoresis Device solely to PERKIN-ELMER
and that PERKIN-ELMER will purchase such Microfluidic
Electrophoresis Device solely from ACLARA during the term of
this Agreement, subject to the provisions of Section 3.3.7
and Section 3.3.6.
3.3.4. Purchase Orders. PERKIN-ELMER will purchase Microfluidic
Electrophoresis Devices from ACLARA by issuing a written
purchase order identifying the quantity, shipping
instructions, delivery dates, and any other special
information. To the extent the terms of any such purchase
order differ from or conflict with the
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terms of this Agreement, the terms of this Agreement will
govern. Within forty-five (45) days prior to the date of
commercial introduction, and prior to the end of each
calendar month thereafter, PERKIN-ELMER will submit a
six-month rolling forecast of estimated requirements of
Microfluidic Electrophoresis Devices. The forecast for the
first three (3) months of the six (6) month period will
constitute a binding purchase order and the balance of such
forecast will be non-binding. The Joint Steering Committee
will determine a maximum rate of increase for forecast orders.
3.3.5. Transfer Price. ACLARA will supply Microfluidic
Electrophoresis Devices to PERKIN-ELMER at a transfer price
equal to [*] for such Microfluidic Electrophoresis Devices.
[*].
3.3.5.[SIC] Label License. Microfluidic Electrophoresis Devices
supplied to PERKIN-ELMER pursuant to this Section 3.3 will
include a label license as set forth in Section 5.4.3.
3.3.6. ACLARA Unable to Supply Microfluidic Electrophoresis Devices
to PERKIN-ELMER. If, during the Exclusive Period, ACLARA is
unable to supply Microfluidic Electrophoresis Devices to
PERKIN-ELMER in accordance with this Section 3, such
Microfluidic Electrophoresis Devices may be made by
PERKIN-ELMER or its designate, pursuant to the conditional
non-exclusive license set forth in Section 5.4.1; provided,
however, that ACLARA will have sixty (60) days following
notice by PERKIN-ELMER to remedy any cause for non-compliance
with the requirements of this Section 3.
3.3.7. Minimum Net Sales and Early Termination of Exclusive Period.
If, after a first commercial sale of a Microfluidic
Electrophoresis Device that is subject to the exclusivity
obligations of Sections 3.3.1 or 3.3.3, the Net Sales of such
Microfluidic Electrophoresis Device does not meet or exceed a
minimum value ("Minimum Net Sales"), ACLARA's obligation to
exclusively supply that particular Microfluidic
Electrophoresis Device to PERKIN-ELMER will immediately
terminate, but PERKIN-ELMER's obligation to exclusively
purchase such Microfluidic Electrophoresis Device from ACLARA
will remain in effect. Such Minimum Net Sales will be
determined as follows. For the first year after a first
commercial sale of a Microfluidic Electrophoresis Device,
there will be no Minimum Net Sales. For the second year after
a first commercial sale of a Microfluidic Electrophoresis
Device, the Minimum Net Sales will
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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equal [*] of the actual Net Sales for that Microfluidic
Electrophoresis Device in the first year after a first commercial
sale. For the third year after a first commercial sale of a
Microfluidic Electrophoresis Device, and each year thereafter, the
Minimum Net Sales will equal [*] of the average actual annual Net
Sales realized for that Microfluidic Electrophoresis Device in the
preceeding [*] years. For the purpose of this Section 3.3.8, a sale
of a Microfluidic Electrophoresis Device to a Technology Access
Partner under a Technology Access Agreement will not constitute a
commercial sale.
3.4. Sales Price. The sales price of Microfluidic Electrophoresis Devices
to third party purchasers will be determined by the Joint Steering
Committee. In the event a price change of a Microfluidic
Electrophoresis Device becomes necessary for any reason, such as a
model change, a major change of a competitive situation with respect
to price performance or any other reasonable cause, the Parties
will, in good faith, negotiate, primarily through the Joint Steering
Committee, to establish a reasonable sales price.
3.5. Value Sharing. With respect to the sale of Microfluidic
Electrophoresis Devices supplied to PERKIN-ELMER by ACLARA pursuant
to Section 3.3.1, PERKIN-ELMER will pay ACLARA [*] of such
Microfluidic Electrophoresis Devices sold by PERKIN-ELMER, its
Affiliates, distributors and sublicensees, and the balance of Net
Sales will be retained by PERKIN-ELMER, as determined at the end of
each Quarter.
4. Joint Steering Committee.
4.1. Purpose. A Joint Steering Committee will be established to oversee
the collaboration established by this Agreement throughout the term
of this Agreement. The purpose of the Joint Steering Committee will
be:
(a) to oversee all aspects of the collaboration, including
development and implementation of the Work Plan, manufacturing
(supply), marketing, sales, and support of a Collaboration
Product;
(b) to review and evaluate progress under the Work Plan with
respect to the development of a Collaboration Product,
including annual budgets;
(c) to recommend and ensure implementation of changes to the Work
Plan as appropriate;
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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(d) to approve any Technology Access Partner and to
negotiate and approve any Technology Access Agreement;
(e) to organize the Feasibility Team(s) and oversee and
direct their activities; and
(f) to resolve disputes arising under this Agreement.
4.2. Membership. The Joint Steering Committee will be comprised of
three employees each from ACLARA and PERKINS-ELMER, appointed
at the sole direction of the respective Parties. Substitute
employees may be appointed at any time. The Joint Steering
Committee will be chaired in the first year by a senior
representative from ACLARA, and thereafter on a rotating
annual basis, by a senior representative from ACLARA or
PERKIN-ELMER.
4.3. Meetings. The Joint Steering Committee will meet as often as
is reasonably necessary to accomplish its purpose but at least
quarterly, on a mutually agreeable date and at a place
selected initially by ACLARA and then by each party in turn
thereafter, such place to be located in the San Francisco bay
area. Representatives of ACLARA or PERKIN-ELMER, or both, in
addition to members of the Joint Steering Committee, may
attend such meetings at the invitation of either Party.
4.4. Joint Steering Committee Decisions and Dispute Resolution.
Decisions by the Joint Steering Committee will be made by
consensus. If the Joint Steering Committee is unable to reach
agreement, within ten (10) days the matter will be submitted
for resolution to the President of ACLARA and the President of
the PE Biosystems Division of PERKIN-ELMER. In the event that
the Presidents for each Party cannot reach agreement within
ten (10) days after receiving notice from the Joint Steering
Committee, which period may be extended by mutual agreement of
the Parties, then either Party may initiate arbitration in
accordance with this section under the rules of the American
Arbitration Association then in effect. A Party will notify
the other in writing should it intend to arbitrate. The
Parties will select, by mutual agreement, a neutral expert
from the National Panel of Arbitrators of the AAA, within
thirty (30) days after receipt of such notice. Should no
arbitrator be chosen within the above period, the AAA will
appoint the arbitrator within thirty (30) days after the end
of such period. The Laws of the State of California will apply
to the arbitration proceedings. The decision of the
arbitrators with respect to this Agreement will be final and
binding on the Parties and their legal successors.
4.5. Expenses. The Parties shall each bear all expenses of their
respective members related to their participation on the Joint
Steering Committee.
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5. INTELLECTUAL PROPERTY; PATENT PROSECUTION AND LITIGATION; LICENSES;
TRADEMARKS.
5.1. Ownership of Intellectual Property
5.1.1. Pre-Collaboration ACLARA Intellectual Property and
Collaboration ACLARA Intellectual Property. All rights
and title to Pre-Collaboration ACLARA Intellectual
Property and Collaboration ACLARA Intellectual
Property, whether patentable or copyrightable or not,
will belong to ACLARA and will be subject the terms
and conditions of this Agreement.
5.1.2. Collaboration Joint Intellectual Property. All rights
and title to Collaboration Joint Intellectual
Property, whether patentable or copyrightable or not,
will belong jointly to PERKIN-ELMER and will be
subject to the terms and conditions of this Agreement.
5.1.3. Collaboration PERKIN-ELMER Intellectual Property. All
rights and title to Collaboration PERKIN-ELMER
Intellectual Property, whether patentable or
copyrightable or not, will belong to PERKIN-ELMER and
will be subject to the terms and conditions of this
Agreement.
5.2. Invention Disclosures. ACLARA and PERKIN-ELMER agree to use
reasonable efforts to report inventions conceived and/or
reduced to practice that are within the scope of the
collaboration intellectual property described in Sections
1.4, 1.5 and 1.6 within thirty (30) days of their
identification thereof.
5.3. Filing of Patent Applications.
5.3.1 Collaboration ACLARA Intellectual Property. ACLARA
will have the first right, using in-house or outside
legal counsel selected at ACLARA's sole discretion, to
prepare, file, Prosecute, maintain and extend patent
applications for Collaboration ACLARA Intellectual
Property in countries of ACLARA's choosing, and ACLARA
will bear all costs relating to such activities which
occur at ACLARA's request or direction. ACLARA will
solicit PERKIN-ELMER's advice and review of ACLARA's
patent applications and other official communications
concerning the protection of Collaboration ACLARA
Intellectual Property relating to a Collaboration
Product, and take into consideration PERKIN-ELMER's
advice thereon. If ACLARA elects not to prepare, file,
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<PAGE> 15
Prosecute or maintain certain of such patent applications or certain
claims encompassed within such applications, in one or more countries,
ACLARA will give PERKIN-ELMER notice thereof within a reasonable period
prior to allowing such patents or claims to lapse or become abandoned
or unenforceable, and PERKIN-ELMER will thereafter have the right, at
its sole expense, to prepare, file, Prosecute, and maintain such
applications in its own name in such one or more countries. ACLARA
will, at PERKIN-ELMER's expense, provide reasonable assistance to
PERKIN-ELMER to facilitate the filing and prosecution of all such
applications and will execute all documents deemed necessary or
desirable therefor. PERKIN-ELMER and ACLARA will each hold all
information it presently knows or acquires under this Section 5.3.1 as
Confidential Information in accordance with Section 6.
5.3.2 Collaboration PERKIN-ELMER Intellectual Property. PERKIN-ELMER will have
the first right, using in-house or outside legal counsel selected at
PERKIN-ELMER's sole discretion, to prepare, file, Prosecute, maintain
and extend patent applications for Collaboration PERKIN-ELMER
Intellectual Property in countries of PERKIN-ELMER's choosing, and
PERKIN-ELMER will bear all costs relating to such activities which occur
at PERKIN-ELMER's request or direction. PERKIN-ELMER will solicit
ACLARA's advice and review of PERKIN-ELMER's applications relating to
Collaboration Product and take into consideration ACLARA's advice
thereon. If PERKIN-ELMER elects not to prepare, file, Prosecute or
maintain certain of such patent applications or certain claims
encompassed within such applications, in one or more countries,
PERKIN-ELMER will give ACLARA notice thereof within a reasonable period
prior to allowing such patents or claims to lapse or become abandoned or
unenforceable, and ACLARA will thereafter have the right, at its sole
expense, to prepare, file, Prosecute, and maintain such applications in
its own name in such one or more countries. PERKIN-ELMER will, at
PERKIN-ELMER's expense, provide reasonable assistance to ACLARA to
facilitate the filing and prosecution of all such applications and will
execute all documents deemed necessary or desirable therefor.
PERKIN-ELMER and ACLARA will each hold all information it presently
knows or acquires under this Section 5.3.2 as Confidential Information
in accordance with Section 6.
5.3.3 Collaboration Joint Intellectual Property. With respect to
Collaboration Joint Intellectual Property, PERKIN-ELMER and
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ACLARA will jointly determine the advisability of filing a
patent application for other intellectual property thereon. The
Joint Steering Committee, as appropriate, will appoint one of the
Parties the responsibility to prepare, file, Prosecute diligently
and maintain such application(s). The Parties will share equally
all reasonable costs incurred in connection with such activities
(the non-prosecuting Party will promptly reimburse the
prosecuting Party); provided, however, that either Party may
avoid its responsibility for such costs by assigning its rights
in such Collaboration Joint Intellectual Property to the other
Party. If either Party assigns to the other its rights in such
Collaboration Joint Intellectual Property as set forth above, the
assignee Party will be free to decide, in it sole discretion,
whether or not to file or continue prosecution or maintain any
such application(s), and whether or not to maintain any
protection issuing thereon in the U.S. and in any foreign
country. Any such filing, prosecution or maintenance will then be
at the assignee Party's sole expense. The assigning Party will,
at its own expense, provide reasonable assistance to the assignee
Party to facilitate the filing and prosecution of all such
application(s) and will execute all documents deemed necessary or
desirable therefor. Both Parties will hold all information it
presently knows or acquires under this Section 5.3.3 as
Confidential Information in accordance with Section 6.
5.4. Licenses of Intellectual Property.
5.4.1. Conditional Non-Exclusive License to PERKIN-ELMER for
Microfluidic Electrophoresis Devices. If, after the expiration of
the Exclusive Period, ACLARA declines to supply Microfluidic
Electrophoreses Devices to PERKIN-ELMER pursuant to Section
3.3.2, or, if during the Exclusive Period, ACLARA is unable to
supply Microfluidic Electrophoreses Devices to PERKIN-ELMER
pursuant to Section 3.3.6, or, as a Reviewing Party, ACLARA
elects not to commercially develop an Assay Development System
pursuant to Section 2.4 or a Secondary Screening System pursuant
to Section 2.5, ACLARA grants to PERKIN-ELMER a non-exclusive
royalty-bearing world-wide license under ACLARA's interest in
Subject Patents to make, have made, use, import, offer to sell,
and sell Microfluidic Electrophoreses Devices in the
Collaboration Field, subject to the exclusion of Section 5.4.2,
and the royalty obligation of Section 5.4.7.
5.4.2. [*] Exclusion From License to PERKIN-ELMER. The conditional
non-exclusive license granted in Section 5.4.1, the
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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label license granted in Section 5.4.3, and the non-exclusive license
granted in Section 5.4.4, each expressly excludes the sale of
Collaboration Product [*].
5.4.3. Label License for Microfluidic Electrophoresis Devices. Microfluidic
Electrophoresis Devices supplied to PERKIN-ELMER pursuant to Section 3.3
will include a label license granting PERKIN-ELMER a license under
ACLARA's interest in Subject Patents to use, offer to sell, and sell
Microfluidic Electrophoresis Devices in the Collaboration Field,
including the right to grant sublicenses to customers to use such
Microfluidic Electrophoresis Devices, subject to the exclusion of
Section 5.4.2.
5.4.4. Non-Exclusive License to PERKIN-ELMER for HTS Systems. ACLARA grants to
PERKIN-ELMER a non-exclusive royalty-bearing world-wide license under
ACLARA's interest in Subject Patents to make, have made, use, import,
offer to sell, and sell HTS Systems in the Collaboration Field, subject
to the exclusion of Section 5.4.2.
5.4.5. Conditional Non-Exclusive License to ACLARA for Collaboration Product.
If, as a Reviewing Party, PERKIN-ELMER elects not to commercially
develop an [*] System pursuant to Section 2.4 or a Secondary Screening
System pursuant to Section 2.5, PERKIN-ELMER grants to ACLARA a
non-exclusive royalty-bearing world-wide license under PERKIN-ELMER's
interest in Subject Patents to make, have made, use, import, offer to
sell, and sell Collaboration Product in the Collaboration Field, subject
to the royalty obligation of Section 5.4.7. In addition, if ACLARA
desires rights under any other Intellectual Property Rights owned or
controlled by PERKIN-ELMER for the purpose of commercializing such [*]
System or Secondary Screening System, PERKIN-ELMER will consider, in
good faith, granting a royalty-bearing non-exclusive license under such
rights to ACLARA for the limited purpose of commercializing such
systems, the decision to grant such license being solely at the
discretion of PERKIN-ELMER.
5.4.6. Restriction on Sale and Licensing of Collaboration Intellectual
Property. During the Exclusive Period and within the Collaboration
Field, except as required for effecting the purposes of this Agreement,
(1) PERKIN-ELMER is prohibited from granting a license or otherwise
transferring to any third party any portion of its interest in Subject
Patents, and (2) ACLARA is prohibited from
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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granting a license or otherwise transferring to any third
party any portion of its interest in Subject Patents.
5.4.7. Royalties. PERKIN-ELMER will pay to ACLARA a royalty of [*] on
Net Sales of Microfluidic Electrophoresis Devices sold or
otherwise disposed of under the conditional non-exclusive
license granted under Section 5.4.1. PERKIN-ELMER will pay to
ACLARA a royalty of [*] on Net Sales of HTS Systems sold or
otherwise disposed of under the non-exclusive license granted
under Section 5.4.4. ACLARA will pay to PERKIN-ELMER a royalty
of [*] on Net Sales of Collaboration Product sold or otherwise
disposed of under the conditional non-exclusive license
granted under Section 5.4.5.
5.4.8. Most Favored Licensee. If a Party grants a license under
Subject Patents at a royalty rate lower then the applicable
royalty rate set forth in Section 5.4.7, that Party will (1)
promptly notify the other Party in writing of such license,
and (2) extend to the other Party the lower royalty rate,
effective as of the date on which the lower royalty rate
became effective in such license. This Section 5.4.8 will not
apply to a license granted by a Party for which the
consideration consists in whole or in part of patent rights or
other rights of such substantial value as, in the judgement of
the licensing Party, to warrant a reduction in royalty rates
below the rates provided in this Agreement, or the acceptance
of such rights in lieu of royalties.
5.5. Patent Litigation.
5.5.1. In the event of the institution of any suit by a third party
against ACLARA or PERKIN-ELMER alleging that the manufacture,
use, sale, distribution or marketing of Collaboration Product
infringes a third party patent, the Party sued will promptly
notify the other Party in writing. The other Party will have
the right but not the obligation to defend or participate in
the defense of such suit at its own expense. ACLARA and
PERKIN-ELMER will assist one another and cooperate in any such
litigation at the other's reasonable request without expense
to the requesting Party. The Party conducting such action will
have full control over its conduct, including settlement
thereof; except that, if the allegedly infringing
Collaboration Product consists solely of a Microfluidic
Electrophoresis Device, ACLARA will have full control over the
conduct of the action. However, no settlement of an action
will be made without the prior written consent of the other
Party if such
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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settlement would adversely affect the rights of the other Party,
such consent not to be unreasonably withheld or delayed.
5.5.2. In the event that ACLARA or PERKIN-ELMER becomes aware of actual or
threatened infringement of a patent resulting from Collaboration
ACLARA Intellectual Property, Collaboration PERKIN-ELMER
Intellectual Property, or Collaboration Joint Intellectual Property,
that Party will promptly notify the other Party in writing. Either
owner of a patent resulting from such intellectual property will
have the first right but not the obligation to bring, at its own
expense, an infringement action against any third party and to use
the other Party's name in connection therewith. If an owner of the
patent does not commence a particular infringement action within [*]
the other Party, after notifying the owner in writing, will be
entitled to bring such infringement action at its own expense. The
Party conducting such action will have full control over its
conduct, including settlement thereof provided such settlement will
not be made without the prior written consent of the other Party if
it would adversely affect the rights of the other Party; such
consent not to be unreasonably withheld or delayed. In any event,
ACLARA and PERKIN-ELMER will assist one another and cooperate in any
such litigation at the other's reasonable request without expense to
the requesting Party, and, if a Party is necessary in order to
institute and maintain an infringement suit by the other Party as
defined by law, that Party will join such suit, represented by its
own counsel.
5.5.3. ACLARA and PERKIN-ELMER have the right to recover their respective
actual out-of-pocket expenses, or proportionate share thereof, in
connection with any litigation or settlement thereof from any
recovery made by any Party. Any excess amount will be shared
between PERKIN-ELMER and ACLARA in an amount proportional to their
respective lost revenues.
5.5.4. The Parties will keep one another reasonably informed of the status
of their respective activities regarding any such litigation or
settlement thereof.
5.6. Effect of Bankruptcy. All rights and licenses granted under or pursuant to
this Agreement by one Party to the other Party are, and will irrevocably
be deemed to be, "intellectual property" as defined in Section 101(56) of
Title 11, U.S. Code ("Bankruptcy Code"). In the event of the commencement
of a case by or against either Party under any Chapter of the Bankruptcy
Code, this Agreement will be deemed an executory contract and all rights
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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and obligations hereunder will be determined in accordance with
Section 365(n) thereof.
5.7. Trademarks and Non-Proprietary Names
5.7.1. PERKIN-ELMER, at its expense, will be responsible for the
selection, registration and maintenance of all trademarks
which it employs in connection with Collaboration Product,
except for Microfluidic Electrophoresis Devices, and will own
and control such trademarks. Nothing in this Agreement will be
construed as a grant of rights, by license or otherwise, to
ACLARA to use such trademarks for any purpose other than
co-promotion as provided in this Agreement.
5.7.2. PERKIN-ELMER, at its expense, will be responsible for the
selection of non-proprietary names for Collaboration Product
sold by PERKIN-ELMER.
5.7.3. ACLARA, at its expense, will be responsible for the selection,
registration and maintenance of all trademarks that it
employs in connection with Microfluidic Electrophoresis
Devices, and will own and control such trademarks. Nothing in
this agreement will be construed as a grant of rights, by
license or otherwise, to PERKIN-ELMER to use such trademarks
for any purpose other than co-promotion as provided in this
Agreement.
6. CONFIDENTIALITY
6.1 Non-Disclosure. Because ACLARA and PERKIN-ELMER will be cooperating
with each other pursuant to this Agreement, each may reveal
Confidential Information to the other. The Parties agree, by using
the same degree of care as each uses for information of like
importance, but not less than a reasonable degree of care (1) to
hold in confidence any Confidential Information disclosed by the other
Party hereunder and (2) not to disclose any Confidential Information
to any third party without the express written consent of the other
Party, except to the extent that may be required for purposes of
advancing the developing, manufacturing or marketing of Collaboration
Product, or to conduct any litigation concerning the same, provided
that each such third party is informed of the confidentiality of such
information and that each said third party agrees to be bound to at
least the same degree of confidentiality as the Parties are bound
under this Agreement. With respect to any Confidential Information
that is revealed by a Party to the other Party, this confidentiality
requirement will remain in force for a period of five (5) years
following the date such Confidential Information is revealed.
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6.2 Responsibility over Employees and Agents. Each of the Parties agrees
to assume individual responsibility for the actions and omissions of
its respective employees, agents and assigns, and to inform same of
the responsibilities for confidentiality and disclosure under this
Agreement, and to obtain their agreement to be bound in the same
manner that the Party is bound.
6.3 Affiliates. Nothing herein will be construed as preventing either
Party from disclosing any information to an Affiliate of PERKIN-ELMER
or ACLARA or to a sub-licensee, distributor or joint venture or other
associated company of either Party for the purpose of developing or
commercializing Collaboration Product, provided such Affiliate,
sub-licensee, distributor or joint venture or other associated
company has undertaken a similar obligation of confidentiality with
respect to the Confidential Information.
6.4 Bankruptcy. All Confidential Information disclosed by one Party to
the other will remain the intellectual property of the disclosing
Party. In the event that a court or other legal or administrative
tribunal, directly or through an appointed master, trustee or
receiver, assumes partial or complete control over the assets of a
Party to this Agreement based on the insolvency or bankruptcy of such
Party, the bankrupt or insolvent Party will promptly notify the court
or other tribunal (1) that Confidential Information received from the
other Party under this Agreement remains the property of the other
Party and (2) of the confidentiality obligations under this
Agreement. In addition, the bankrupt or insolvent Party will, to the
extent permitted by law, take all steps necessary or desirable to
maintain the confidentiality of the other Party's Confidential
Information and to ensure that the court or other tribunal such
information in confidence in accordance with the terms of this
Agreement.
6.5 Publication. Neither PERKIN-ELMER nor ACLARA will submit for written
or oral publication any manuscript, abstract or the like which
includes data or other information generated and provided by the
other Party or otherwise developed by either Party in the performance
of activities in furtherance of this Agreement without first
obtaining the prior written consent of the other Party, which consent
will not be unreasonably withheld or delayed, except that the
foregoing will not apply to customary non-confidential literature
which is prepared for marketing and sales purposes.
6.6 Publicity. Within thirty (30) days following the Effective Date, the
Parties will make reasonable efforts to agree on the form and
language of a joint press release related to this agreement. However,
neither Party nor any of
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its Affiliates will originate any news relating to this Agreement
without the prior written approval of the other Party, which approval
will not be unreasonably withheld or delayed.
6.7 Compliance with Statutory Requirements. Nothing in this Agreement will
be construed as preventing or in any way inhibiting either Party from
complying with statutory and regulatory requirements governing the
development, manufacture, use and sale or other distribution of
Collaboration Product in any manner which it reasonably deems
appropriate, including, for example, by disclosing to regulatory
authorities Confidential Information or other information received
from a Party or third parties. The Parties will take reasonable
measures to assure that no unauthorized use or disclosure is made by
others to whom access to such information is granted.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Party represents, warrants and covenants to the other Party that:
(a) it has the corporate power and authority and legal right to enter into
this Agreement and to perform its obligations hereunder;
(b) the execution and delivery of this Agreement and the performance of
the transactions contemplated thereby have been duly authorized by all
necessary corporate action of such Party;
(c) the execution and delivery of this Agreement and the performance by
such Party of any of its obligations under this Agreement do not and
will not (1) conflict with, or constitute a breach or violation of,
any other contractual obligation to which it is a party, any judgment
of any court or governmental body applicable to such Party or its
properties or, to such Party's knowledge, any statute, decree, order,
rule or regulation of any court or governmental agency or body
applicable to such Party or its properties, and (2) require any
consent or approval of any governmental authority or other person;
(d) each Party will to the best of its knowledge without undertaking a
special investigation, disclose to the other Party any material
adverse proceedings, claims or actions that arise that would
materially interfere with that party's performance of its obligations
under this Agreement; and
(e) each Party's employees have executed or will execute agreements
whereby all right, title and interest in any technology and
invention(s) will be assigned to their respective employers.
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8. INDEMNIFICATION.
8.1. PERKIN-ELMER Indemnification of ACLARA. PERKIN-ELMER will defend,
indemnify and hold harmless ACLARA, Affiliates of ACLARA, and their
respective directors, officers, shareholders in their capacity as
shareholders, agents and employees, from and against any and all loss,
damage, liability, or expenses (including attorney's fees) resulting
from claims, demands, costs or judgments which may be made or
instituted against any of them by a third party arising out of (1) the
untruth, inaccuracy, breach, or nonfulfillment of any representation
or warranty or any covenant or agreement of PERKIN-ELMER contained in
or made pursuant to this Agreement or (2) the manufacture,
distribution, sale or other disposition by or through PERKIN-ELMER or
its Affiliates of Collaboration Product or part thereof.
PERKIN-ELMER's obligation to defend, indemnify and hold harmless will
include claims, demands, or judgments, whether for money damages or
equitable relief by reason of alleged personal injury (including
death) to any person or alleged property damage, provided, however,
the indemnity will not extend to any claims against ACLARA to the
extent resulting from (i) the negligence or willful misconduct of
ACLARA, (ii) a claim of patent infringement, or (iii) where such
claims result from a modification of Collaboration Product by ACLARA
which was not approved by PERKIN-ELMER. PERKIN-ELMER will have the
exclusive right to control the defense of any action which is to be
indemnified in whole by PERKIN-ELMER hereunder, including the right to
select counsel acceptable to ACLARA to defend ACLARA and to settle
any claim, provided that, without the written consent of ACLARA (which
will not be unreasonably withheld or delayed), PERKIN-ELMER will not
agree to settle any claim against ACLARA to the extent such claim has
a material adverse effect on ACLARA. The provisions of this Section
8.1 will survive and remain in full force and effect after any
termination, expiration or cancellation of this Agreement and
PERKIN-ELMER'S obligation hereunder will apply whether or not such
claims are rightfully brought.
8.2. ACLARA Indemnification of PERKIN-ELMER. ACLARA will defend, indemnify
and hold harmless PERKIN-ELMER, Affiliates of PERKIN-ELMER and their
respective directors, officers, shareholders in their capacity as
shareholders, agents and employees, from and against any and all loss,
damage, liability, or expenses (including attorney's fees) resulting
from claims, demands, or judgments which may be made or instituted
against any of them by a third party arising out of (1) the untruth,
inaccuracy, breach, or nonfulfillment of any representation or
warranty or any covenant or agreement of ACLARA contained in or made
pursuant to this Agreement or (2) the manufacture by or through
ACLARA or its Affiliates of any Collaboration Product or part
thereof. ACLARA'S
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obligation to defend, indemnify and hold harmless will include
claims, demands, or judgments, whether for money damages or
equitable relief by reason of alleged personal injury (including
death) to any person or alleged property damage, provided, however,
the indemnity will not extend to any claims against PERKIN-ELMER
that results (i) from the negligence or willful misconduct of
PERKIN-ELMER, or (ii) a claim of patent infringement, or (iii) where
such claims result from a modification of Collaboration Product by
PERKIN-ELMER which was not approved by ACLARA. ACLARA will have the
exclusive right to control the defense of any action which is to be
indemnified in whole by ACLARA hereunder, including the right to
select counsel acceptable to PERKIN-ELMER to defend PERKIN-ELMER and
to settle any claim, provided that, with the written consent of
PERKIN-ELMER (which will not be unreasonably withheld or delayed),
ACLARA will not agree to settle any claim against PERKIN-ELMER to
the extent such claim has a material adverse effect on PERKIN-ELMER.
The provisions of this Section 8.2 will survive and remain in full
force and effect after any termination, expiration or cancellation
of this Agreement and ACLARA's obligations hereunder will apply
whether or not such claims are rightfully brought.
8.3. Notice; Choice of Attorney. A Party that intends to claim
indemnification under this Section 8 (the "indemnitee") will
promptly notify the other Party (the "Indemnitor") of any loss,
claim, damage, liability, action, expenses (including attorney's
fees), claims, demands, or judgments in respect of which the
Indemnitee intends to claim such indemnification, and the
Indemnitor, after it determines that indemnification is required of
it, will assume the defense thereof with counsel mutually
satisfactory to the Parties; provided, however, that an Indemnitee
will have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor if Indemnitor does not assume
the defense; or, if representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other
Party represented by such counsel in such proceedings. The failure
to deliver notice to the Indemnitor within a reasonable time after
the commencement of any such action, if prejudicial to its ability
to defend such action, will relieve such Indemnitor of any liability
to the Indemnitee under this Section 8, but the omission to deliver
notice to the Indemnitor will not relieve it of any liability that
it may have to any Indemnitee otherwise than under this Section 8.
8.4. Consent Required. The indemnity agreement in this Section 8 will not
apply to amounts paid in settlement of any loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Indemnitor, which consent will not be unreasonably
withheld or delayed.
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8.5. Cooperation. The Indemnitee under this Section 8, its employees and
agents, will cooperate fully with the Indemnitor and its legal
representatives in the investigations of any action, claim or
liability covered by this indemnification. In the event that each
Party claims indemnity from the other and one Party is finally held
liable to indemnify the other, the Indemnitor will additionally be
liable to pay the reasonable legal costs and attorneys' fees incurred
by the Indemnitee in establishing its claim for indemnity.
9. TERM AND TERMINATION
9.1 Term. Unless terminated earlier as provided herein, this Agreement
will commence on the Effective Date and will remain in full force
until the expiration of the last to expire Subject Patent.
9.2. Termination.
9.2.1. This Agreement may be terminated without cause by mutual
written agreement of the Parties, effective as of the time
specified in such written agreement.
9.2.2. This Agreement may be terminated by either Party.
(a) in the event the other Party will file in any court or
agency pursuant to any statute or regulation of any
state or country, a petition in bankruptcy or
insolvency or for reorganization or for the appointment
of a receiver or trustee of the other Party or of its
assets, or if the other Party proposes a written
agreement of composition or extension of its debts, or
if the other Party will be served with an involuntary
petition against it, filed in any insolvency
proceeding, and such petition will not be dismissed
within sixty (60) days after the filing thereof, or if
the other Party will propose or be a Party to any
dissolution or liquidation, or if the other Party will
make an assignment for the benefit of creditors; or
(b) upon any material breach of this Agreement by the other
Party; provided, however, that the Party alleging such
breach must first give the other Party written notice
thereof, which notice must state the nature of the
breach in reasonable detail and the Party receiving
such notice must have failed to cure such alleged
breach within sixty (60) days after receipt of such
notice.
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<PAGE> 26
9.3 Survival of Obligations. Upon any termination of this Agreement, by
expiration of the term or otherwise, neither Party will be relieved of
any obligations incurred prior to such termination. Despite any
termination of this Agreement, the obligations of the Parties under
Sections 3, 5, 6, 8, 9.3, 10 and 11, as well as any other provisions
which by their nature are intended to survive any such termination,
will survive and continue to be enforceable. With respect to the
survival of licenses granted in Section 5.4, if termination of this
Agreement is a result of a material breach of this Agreement by a
Party under Section 9.2.2.(b), such licenses will survive the
termination of this Agreement only to the extent that such licenses
relate to Collaboration Product that have been commercialized; except
that, if termination of this Agreement is a result of a Party's
failure to pay royalties under Section 5.4.7, or failure to payment of
a share of Residual net sales under Section 3.5, such licenses will
not survive termination of this Agreement.
10. OBSERVATION RIGHTS
So long as PERKIN-ELMER (or an affiliate of PERKIN-ELMER) continues to hold
at lease fifty percent 50% of the total number of shares of Series E Stock
originally purchased by PERKIN-ELMER pursuant to the Series E Redeemable
Preferred Stock Purchase Agreement dated March 26, 1998, and shares of Series G
Stock pursuant to the Equity Agreement entered into in conjunction with this
Agreement, PERKIN-ELMER will be entitled to appoint a representative (the
"PERKIN-ELMER Representative") to attend all meetings of the Board of Directors
of ACLARA, and ACLARA will provide PERKIN-ELMER with copies of all notices of
such meetings and all other written materials provided to the Directors of
ACLARA at the same time as such notices and written materials are provided to
the Directors of ACLARA. PERKIN-ELMER acknowledges and agrees that ACLARA's
management will have the right to exclude the PERKIN-ELMER Representative from
all or portions of meetings of the Board of Directors, or omit to provide the
PERKIN-ELMER Representative with certain information, if ACLARA's management
believes it is necessary in order to preserve the attorney-client privilege, or
fulfill ACLARA's obligations with respect to confidential or proprietary
information of third parties, or if such meeting or information involves matters
concerning ACLARA's relationship or prospective relationship with PERKIN-ELMER
or its affiliates or competitors of PERKIN-ELMER or its affiliates, or other
situations where a director would customarily not participate in a meeting or be
provided such information. In addition, PERKIN-ELMER and the PERKIN-ELMER
Representative will maintain the confidentiality of all information obtained
through the PERKIN-ELMER Representative's position, except to the extent that
(1) such information is already in PERKIN-ELMER's possession, (2) such
information becomes public knowledge other than as a result of PERKIN-ELMER's
actions or inactions, (3) PERKIN-ELMER rightfully obtains such information
subsequently from a third
26
<PAGE> 27
party, (4) PERKIN-ELMER develops such information independently and without
use of the information provided by ACLARA, or (5) such information is
approved in writing for release by ACLARA.
11. MISCELLANEOUS
11.1 Force Majeure. If the performance of any part of this Agreement by
either Party, or of any obligation under this Agreement, is prevented,
restricted, interfered with or delayed by reason of any cause beyond
the reasonable control of the Party liable to perform, unless
conclusive evidence to the contrary is provided, the Party so affected
will, upon giving written notice to the other Party, be excused from
such performance to the extent of such prevention, restriction,
interference or delay; provided, however, the affected Party will use
its reasonable best efforts to avoid or remove such causes of
non-performance and will continue performance with the utmost dispatch
whenever such causes are removed. When such circumstances arise, the
Parties will discuss what, if any, modification of the terms of this
Agreement may be required in order to arrive at an equitable solution.
11.2 Governing Law. This Agreement will be deemed to have been made in the
State of California and its form, execution, validity, construction
and effect will be determined in accordance with the laws of the State
of California.
11.3 Books and Records. Each Party will keep and maintain proper and
complete records and books of account sufficient in detail to enable
the verification of Actual Profit, Manufacturing Cost and Net Sales.
Such books and records shall be retained for a period of at least six
(6) years. Each Party will have the right from time to time (not to
exceed once during each calendar year) during normal business hours
and upon reasonable notice to inspect in confidence, or have an agent,
accountant or other representative inspect in confidence, such books
and records. The Party initiating such inspection will bear the costs
thereof unless the inspection reveals a discrepancy unfavorable to
that Party of at least ten percent (10%), in which case the other
Party will pay the costs of such inspection; provided, however, if the
amount of such discrepancy is greater than or equal to Fifty Thousand
Dollars ($50,000), the other Party will pay the costs of such
inspection regardless of percentage. If such inspection results in a
final determination that amounts have been overstated or understated,
the applicable amount will be refunded or paid promptly by the
appropriate Party.
11.4 Payments. All payments under this Agreement will be made in United
States dollars by wire transfer to a bank account designated by the
party receiving the payment, without deduction of taxes charges and
any other
27
<PAGE> 28
duties that may be imposed. For converting payments due on sales made in
currencies other than United States dollars into United States dollars,
such payments will be converted at the closing commercial sell rate of
exchange for United States dollars and each currency involved as quoted by
Citibank, N.A., or any successor thereto, in New York on the last business
day of the relevant period.
11.5 Severability. In the event any portion of this Agreement will be held
illegal, void or ineffective, the remaining portions hereof will be
interpreted to maintain the intent of the Parties. If any of the terms or
provisions of this Agreement are in conflict with any applicable statute or
rule of law, then such terms or provisions will be deemed inoperative to
the extent that they may conflict therewith and will be deemed to be
modified to conform with such statute or rule of law.
11.6 Entire Agreement. The Agreement and the Equity Agreement constitute the
sole agreements between the Parties relating to the subject matter hereof
and supersede all previous writings and understandings. This Section 11.6
does not relate to or affect the previously executed Collaboration
Agreement between the Parties dated April 25, 1998, or the previously
executed Series E Redeemable Preferred Stock Purchase Agreement between the
Parties dated March 26, 1998. Confidential disclosures made pursuant to
previously executed Confidentiality Agreements between ACLARA and
PERKIN-ELMER will remain subject to the terms of those Confidentiality
Agreements. No terms or provisions of this Agreement will be varied or
modified by any prior or subsequent statement, conduct or act of either of
the Parties, except that the Parties may amend this Agreement by written
instruments specifically referring to and executed in the same manner as
this Agreement.
11.7 Assignment. This Agreement and the licenses herein granted will be binding
upon and inure to the benefit of the successors in interest of the
respective Parties. Neither Party has the power to assign this Agreement
nor any interest hereunder without the written consent of the other Party;
provided, however, that either Party may assign this Agreement or any of
its rights or obligations to any Affiliate or to any third party with which
it may merge or consolidate, or to which it may transfer all or
substantially all of its assets to which this Agreement relates, without
obtaining the consent of the other Party, subject to the other Party
assuming all liabilities and obligations under the Agreement.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will be deemed an original instrument,
but all such counterparts together will constitute but one agreement.
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<PAGE> 29
11.9. Notices. Any notice required or permitted under this Agreement
will be sent by air mail, postage pre-paid, or Federal
Express, to the following addresses of the Parties:
If to ACLARA:
ACLARA BioSciences, with copy to ACLARA BioSciences,
Inc. Inc.
3906 Trust Way 3906 Trust Way
Hayward, CA 94545-3716 Hayward, CA 94545-3716
Attn.: President Attn.: General Counsel
If to PERKIN-ELMER:
The PERKIN-ELMER with copy to The PERKIN-ELMER
Corp. Corp.
850 Lincoln Centre Drive 850 Lincoln Centre Drive
Foster City, CA 94404 Foster City, CA 94404
Attn.: Michael Albin Attn: Legal Department
and
PerSeptive Biosystems
500 Old Connecticut Path
Framingham, MA 04701
Attn: Legal Department
[Signature Page Follows]
29
<PAGE> 30
IN WITNESS WHEREOF, the Parties, through their authorized officers, have
executed this Agreement as of the date first written above.
ACLARA BIOSCIENCES, INC. THE PERKIN-ELMER CORPORATION,
THROUGH ITS PE BIOSYSTEMS
DIVISION
By: /s/ JOSEPH M. LIMBER By: /s/ MICHAEL HUNKAPILLER
---------------------------------- ---------------------------------
Name: Joseph M. Limber Name: Michael Hunkapiller
- ------------------------------ -------------------------------
Title: President, CEO Title: Executive Vice President
------------------------------- -------------------------------
Date: March 19, 1999 Date: 3/19/99
------------------------------- -------------------------------
30
<PAGE> 31
EXHIBIT 1
WORK PLAN
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1
<PAGE> 32
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2
<PAGE> 33
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
3
<PAGE> 1
EXHIBIT 10.12
SIDE AGREEMENT
This Side Agreement ("Agreement") is dated as of the 19th day of March 1999,
is by and between ACLARA BIOSCIENCES, INC., 3906 Trust Way, Hayward, California
94545-3716 ("ACLARA") and THE PERKIN-ELMER CORPORATION, having its PERKIN-ELMER
Biosystems Division at 850 Lincoln Centre Drive, Foster City, CA 94404
("PERKIN-ELMER").
A. WHEREAS, ACLARA and PERKIN-ELMER (the "Parties") will enter into a
collaboration agreement ("Collaboration Agreement") at a date coincident
with the execution of this Agreement;
B. WHEREAS, the Parties will enter into a Custom Instrument Development and
Commercialization Agreement ("PRI Agreement") with the R.W. Johnson
Pharmaceutical Research Institute, a Division of Ortho-McNeil
Pharmaceutical, Inc. (PRI), at a date coincident with the execution of this
Agreement, for the purpose of developing certain HTS Systems, under which
the Parties will receive [*] from PRI;
C. WHEREAS, PERKIN-ELMER has already received [*] from PRI;
D. WHEREAS, the Parties desire to clarify certain matters relating to the
Collaboration Agreement as it pertains to their participation in the PRI
Agreement.
NOW THEREFORE, in considerations of the mutual covenants and promises contained
in this Agreement, the Parties agree as follows:
1. Definitions. As used herein, capitalized terms will have the meaning
ascribed to them in the PRI Agreement or the Collaboration Agreement.
2. Distribution of Funds Received from PRI. Under the PRI Agreement, PRI will
provide the Parties with [*] with which to undertake the development of
certain HTS Systems for PRI, the money to be distributed between the Parties
as follows: [*] will go to PERKIN-ELMER, and [*] will go to ACLARA. In
particular, PERKIN-ELMER will pay ACLARA, within three (3) days after
received by PERKIN-ELMER, [*] scheduled to be received from PRI pursuant to
Section 6.1 of the PRI Agreement, and [*] of funds received from PRI
pursuant to Sections 6.2, 6.3 and 6.4 of the PRI Agreement. PERKIN-ELMER
will have no liability to ACLARA on account of PRI's failure for any reason
whatsoever to make any payment due PERKIN-ELMER, or PERKIN-ELMER and ACLARA,
under the PRI
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE> 2
Agreement. PERKIN-ELMER's sole obligation will be to pay ACLARA the
designated portion of whatever funds PERKIN-ELMER does in fact receive from
PRI.
3. Commercial Sale. Sales of Microfluidic Electrophoresis Devices to PRI under
the PRI Agreement will not be considered commercial sales as that term is
used in Section 3.3.8 of the Collaboration Agreement.
4. Technology Access Partner. PRI is a Technology Access Partner and the PRI
Agreement is a Technology Access Agreement.
5. Royalties. Any royalty received from PRI for PRI's manufacture or sale of
Microfluidic Electrophoresis Devices will be split [*] between PERKIN-ELMER
and ACLARA.
6. Installation, Service and Support. ACLARA and PERKIN-ELMER will determine
as between themselves which company will provide installation, service and
support to PRI pursuant to the provisions of Section 5.5 of the PRI
Agreement. Generally, it is contemplated that ACLARA will provide support
on matters involving Microfluidic Chips and assay chemistry, and
PERKIN-ELMER will provide support on matters involving HTS Chip Devices and
Commercial Instruments. Each party will bear its own expenses of providing
installation, service and support to PRI.
7. Allocation of Personnel. Commencing on the date the PRI Agreement is signed
by the last of the parties thereto or as soon thereafter as is feasible, but
in any event no later than ninety (90) days after such date, and during the
remainder of the original [*] term of the Project, which [*] term ends
[*], PERKIN-ELMER agrees to allocate an average of at least fourteen FTE's
to the Project, and ACLARA agrees to allocate an average of at least [*]
FTE's to the Project. In the event that the original [*] term of the Project
is extended by PERKIN-ELMER and ACLARA on the other hand, or PRI on the
other, PERKIN-ELMER will allocate and expend [*] of the number of FTE's
allocated to the Project and ACLARA will allocate and expend [*] of the
number of FTE's allocated and expended to the Project, unless the
PERKIN-ELMER/ACLARA Joint Steering Committee otherwise agrees.
8. Manufacturing Cost. Manufacturing Cost within the meaning of the
Collaboration Agreement will never be more than Fully Burdened Manufacturing
Cost and Fully Burdened Chip Manufacturing Cost within the meaning of the
PRI Agreement, notwithstanding anything contained in the Collaboration
Agreement to the contrary.
[Signature page Follows]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2
<PAGE> 3
IN WITNESS WHEREOF, the Parties, through their authorized officers, have
executed this Agreement as of the date first written above.
ACLARA BIOSCIENCES, INC. THE PERKIN-ELMER CORPORATION,
THROUGH ITS PE BIOSYSTEMS
DIVISION
By: /s/ JOSEPH M. LIMBER By: /s/ MICHAEL HUNKAPILLER
-------------------------- ------------------------------
Name: Joseph M. Limber Name: Michael Hunkapiller
------------------------ -----------------------------
Title: President, CEO Title: Executive Vice President
----------------------- ----------------------------
Date: March 19, 1999 Date: March 19, 1999
------------------------ -----------------------------
3
<PAGE> 1
EXHIBIT 10.13
CUSTOM INSTRUMENT DEVELOPMENT
AND COMMERCIALIZATION AGREEMENT
between
The R.W. Johnson Pharmaceutical Research Institute, a Division of Ortho-
McNeil Pharmaceutical, Inc., PE Biosystems Division of The Perkin-Elmer
Corporation and ACLARA BioSciences, Inc.
As of October 1, 1998
Signed March, 1999
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
SECTION TITLE PAGE #
<S> <C>
RECITALS.......................................................................................................... 1
1. Definitions.................................................................................................. 2
2. Description and Elements of the Project...................................................................... 10
2.1 Goals, Level of Effort and Cooperation.................................................................. 10
2.1.1 Goals......................................................................................... 10
2.1.2 Notice of Achievement of Goals................................................................ 11
2.1.3 Cooperation and Obligation to use Commercially Reasonable Efforts............................. 11
2.1.4 Minimum Number of FTEs........................................................................ 12
2.2 Research Plan........................................................................................... 12
2.3 Milestones.............................................................................................. 12
2.4 Functional Requirements................................................................................. 12
2.5 Certain Responsibilities of PRI......................................................................... 13
3. Reports...................................................................................................... 13
4. Steering Committee and Project Structure; Third Party Licenses............................................... 13
4.1 Steering Committee...................................................................................... 13
4.1.1 Steering Committee Structure and Role......................................................... 13
4.1.2 Steering Committee Proceedings................................................................ 14
4.2 Project Structure....................................................................................... 15
4A. Third Party Licenses and Steering Committee Approval of Third Party Licenses................................. 15
5. Deliverables................................................................................................. 17
5.1 Prototypes.............................................................................................. 17
5.2 Commercial Instruments.................................................................................. 17
5.3 Microfluidic Chips...................................................................................... 19
5.3.1 Purchase Rights............................................................................... 19
5.3.1.1 Pricing............................................................................. 19
5.3.1.2 Pricing Assumptions................................................................. 20
5.3.2 Inability or Determination not to Manufacture Chips; License to PRI........................... 20
5.3.3 Expiration of License......................................................................... 22
5.3.4 Minimum and Maximum Quantities................................................................ 22
5.3.5 Use of Chips.................................................................................. 23
5.3.6 Supply Agreement.............................................................................. 23
5.4 General Terms of Sale................................................................................... 23
5.5 Post Delivery Installation, Training, Support and Service............................................... 24
5.5.1 Basic Prototype Support and Service........................................................... 24
5.5.2 Extent of Support, Training and Service for Prototypes........................................ 25
5.5.3 Support For Commercial Instruments............................................................ 26
5.6 Quarterly Reports and Final Report...................................................................... 26
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
6. Project Funding and Levels of Effort.............................................................. 26
7. Exclusive Right................................................................................... 27
8. Intellectual Property............................................................................. 28
8.1 Intellectual Property Ownership and Rights................................................... 28
9. Responsibility for Certain Matters, Indemnification............................................... 29
9.1 Injury to Employees; Responsibility for Certain Matters...................................... 29
9.2 Indemnity by PRI in connection with Use of Devices and Substances............................ 30
9.3 Patent and Copyright Indemnification......................................................... 31
10. Confidentiality................................................................................... 32
11. Term and Termination.............................................................................. 33
12. Relationship of the Parties....................................................................... 36
13. Publicity......................................................................................... 37
14. No Implied Licenses or Other Intellectual Property Rights......................................... 37
15 Limitation of Liability........................................................................... 37
16. No Guarantees or Warranties....................................................................... 37
17. Several Liability of PE and ACLARA................................................................ 38
18. Other Work........................................................................................ 38
19. Prohibition on Hiring............................................................................. 38
20. Force Majeure..................................................................................... 38
21. Expenses.......................................................................................... 38
22. Severability...................................................................................... 38
23. Performance of Work by Affiliates of PE........................................................... 39
24. Low Throughput Devices............................................................................ 39
25. Due Authority and Execution....................................................................... 41
26. Documentation..................................................................................... 41
27. Dispute Resolution................................................................................ 41
27.1 Steering Committee........................................................................... 41
27.2 Other Controversies and Claims............................................................... 41
28. Notices........................................................................................... 42
29. Counterparts...................................................................................... 43
30. Waiver............................................................................................ 43
31. No Third Party Beneficiaries...................................................................... 43
32. Miscellaneous..................................................................................... 43
Exhibit 2.2.1 Current Molar Consumption of Screening Targets, Chemical Libraries and Substrates................. 45
Exhibit 2.2 Research Plan..................................................................................... 46
Exhibit 2.3 Project Milestones................................................................................ 49
Exhibit 5.3 Statement of Year 2000 Conformity A Year 2000 Readiness Disclosure................................ 51
</TABLE>
ii
<PAGE> 4
CUSTOM INSTRUMENT DEVELOPMENT AND COMMERCIALIZATION AGREEMENT
This Development and Commercialization Agreement ("Agreement"), effective as of
October 1, 1998 (the "Effective Date"), is by and between The R.W. Johnson
Pharmaceutical Research Institute, a Division of Ortho-McNeil Pharmaceutical,
Inc., a Delaware corporation (hereinafter referred to as "PRI"), having a
business address at 920 U.S. Route 202, Raritan, New Jersey 08869, PE Biosystems
Division of The Perkin-Elmer Corporation, having a business address at 500 Old
Connecticut Path, Framingham, MA 01701 (hereinafter referred to as "PE"), and
ACLARA BioSciences, Inc., a Delaware corporation have a business address at
3906 Trust Way, Hayward, California 94545-3716 (hereinafter referred to as
"ACLARA"). PRI, PE and ACLARA are referred to in this Agreement individually or
collectively as Party or Parties, as the case may be.
RECITALS
A. PE and ACLARA collectively have expertise in the separation and
analysis of biological molecules, drug discovery instrumentation and automation,
and in the design, development and manufacture of devices, plastics and polymers
for electric field driven fluidics on microchannels and the detection and
quantitation thereof.
B. PE, ACLARA and PRI each represent that as of the date of execution of
this Agreement, to the best of each of their knowledge, respectively, there are
no patents that would prevent PE or ACLARA from making, using, or selling the
devices contemplated in this Agreement.
C. PRI has expertise in the high throughput screening of compounds for
drug discovery and has been investigating and will continue to investigate
alternative systems for such high throughput screening for drug discovery.
D. PerSeptive Biosystems, Inc., a Center of Excellence of PE, and PRI
are parties to a Custom Instrument Development and Feasibility Agreement dated
as of January 31, 1997, as amended (the "PE Feasibility Agreement") and certain
letter agreements dated May 21, 1998 and December 23, 1998 providing for the
payment of certain funds (the "Interim Research and Activities Funding and
Initial Funds Agreements"), and ACLARA and PRI are parties to a Feasibility
Agreement dated February 14, 1997 and an Amended and Restated Feasibility
Agreement dated as of March 26, 1998 (the "ACLARA Feasibility Agreement"),
(collectively, the "Feasibility Agreements"), pursuant to which, among other
things, PE and ACLARA performed research and development work and explored and
developed technology relevant to
1
<PAGE> 5
the design, development and manufacture of devices for electric field driven
fluidics on microchannels for the high throughput screening of compounds for
drug discovery.
E. PRI has elected to enter into this Agreement with PE and ACLARA,
pursuant to which, subject to the terms and conditions of this Agreement, PE
and ACLARA will undertake the project (the "Project"), as more fully described
herein.
F. PRI on the one hand, and PE and ACLARA on the other, intend to
negotiate a Microfluidic Chip supply agreement, as more fully set forth in
Section 5.3.6, setting forth terms and conditions called for by this Agreement
and other terms and conditions to be negotiated (the "Microfluidic Chip Supply
Agreement").
AGREEMENT
NOW, THEREFORE, in consideration of the above premises and the covenants
set forth in this Agreement, the Parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have been
meanings ascribed to them below.
1.1 "Affiliate" shall mean any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly owns, is
owned by or is under common ownership with a Party to this Agreement, as
the case may be, to the extent of at least fifty percent of the equity (or
such lesser percentage which is the maximum allowed to be owned by a
foreign corporation in a particular jurisdiction) having the power to vote
on or direct the affairs of the entity.
1.2 "Chip Price Time Periods" shall have the meaning set forth in Section
5.3.1.
1.3 "Commercial Instrument" shall mean an HTS Chip Device that PE
determines in its sole discretion is suitable for Commercial Sale to
general customers with PE's customary limited warranties, and that has been
designated as a "Commercial Sale Ready" instrument in accordance with PE's
customary policies and procedures, and that substantially meets the
Functional Requirements.
1.4 "Developments" shall have the meaning set forth in Section 1.16.
1.5 "Effective Date" shall have the meaning set forth in the first
paragraph of this Agreement.
1.6 "Exclusive Right" shall have the meaning set forth in Section 7.
2
<PAGE> 6
1.7 "Exclusive Right Period" shall mean the period commencing as of the
Effective Date and ending on (i) the date this Agreement is terminated if
this Agreement is terminated prior to September 30, 2000, (ii) September
30, 2001 if this Agreement is not terminated prior to September 30, 2000
and (a) the Term of the Project has not been extended pursuant to Section
11, or (b), if the Term of the Project has been extended pursuant to
Section 11, and the Goals of the Project have not been achieved during
such extension, or (iii) if this Agreement is not terminated prior to
September 30, 2000 and the Term of the Project has been extended pursuant
to Section 11, and the Goals of the Project have been achieved during such
extension, the date that is one year after the last day of the Term of the
Project, but in any event no later than March 31, 2002. Notwithstanding
the foregoing, if this Agreement is terminated by PRI pursuant to Section
11.3, and PRI has paid and pays all sums due and owing up to the effective
date of termination, the Exclusive Right Period shall be (A) the six month
period beginning with the effective date of termination if the notice of
termination is given on or prior to September 30, 1999 or (B) the one year
period beginning with the effective date of termination if the notice of
termination is given on or after October 1, 1999 but prior to the end of
the Term of the Project, but in any event the Exclusive Right Period shall
end no later than March 31, 2002.
1.8 "Extended Special Rights Period" shall have the meaning set forth in
Section 5.3.1.1(iii).
1.9 "Feasibility Agreements" shall have the definition set forth in
Whereas Clause D above.
1.9A "force majeure" shall have the meaning set forth in Section 20.
1.10 "Functional Requirements" shall have the meaning set forth in Section
2.4.
1.11 "Fully Burdened Manufacturing Cost" shall mean the "fully burdened
manufacturing cost" of a product or service as calculated in accordance
with general accepted accounting principles and the generally applied
principles, policies and procedures of the Party finally manufacturing the
product or performing the service. In general, fully burdened
manufacturing cost shall include the following:
(i) Material Cost, which shall mean the prices paid for raw material
components and purchased finished goods which are purchased from
outside vendors as well as any freight and duty where applicable.
Material Cost includes the quantity of the components included in the
bill of material times the purchase price and the waste factor (i.e.,
scrap percentage) included in the bill of materials. It also includes
the normal quality assurance sample quantity which is included in the
bill of materials.
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<PAGE> 7
(ii) Direct Labor Costs, which shall mean the standard labor hours
required for an operation according to standard operating procedures multiplied
by the direct labor rate for work centers within the relevant manufacturing
operating unit.
(iii) Overhead costs, which shall mean other costs associated with the
operating unit(s) manufacturing a product, provided, however, that such Overhead
Costs shall exclude costs associated with unused manufacturing capacity (unless
such unused manufacturing capacity is allocated principally to the manufacture
of the product in question) and any administrative costs (except as provided
below) other than indirect labor of the manufacturing department specifically
attributable to the product in question. PE and ACLARA agree that they shall
allocate manufacturing capacity reasonably, based upon business factors and
projections, and not for the purpose of creating idle manufacturing capacity to
artificially increase the amount of Overhead Costs. Overhead Costs shall include
expenses associated with quality assurance, manufacturing and engineering
associated with the operating unit(s) manufacturing product and shall include
depreciation and property taxes associated with the plant(s) manufacturing a
product. These costs shall be allocated to each product line in such operating
unit(s) or plant(s) whichever is applicable, based on specific criteria
consistent with the standard operating procedures for each product and work
center overhead rates of the Party performing the work determined and allocated
in a manner consistently applied within and across its operating units. Overhead
Costs shall also include the fully loaded allocation of the facility costs (such
as, without limitation, rent, taxes, heat, electricity and maintenance)
dedicated to manufacture the product and the allocated costs of manufacturing
administration.
(iv) Manufacturing Variances, which shall include:
(1) Purchase Price Variance, which shall mean the difference
between the actual price paid the vendor versus the standard cost
of such material, times the quantity received.
(2) Spending Variance, which shall mean the difference between
actual department spending and the budgeted spending included in
Fully Burdened Manufacturing Cost for the relavent manufacturing
operating unit.
(3) Absorption volume variances, which shall mean the difference
between actual product hours earned (or units produced) and the
hours budgeted for the period (or projected production units
used) in the
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development of Fully Burdened Manufacturing Costs times the
standard labor and overhead content of those units.
(4) Material usage, which shall mean the difference between the
actual quantity of component raw materials or work-in-process
used in the production of work-in-process or finished goods
versus the standard quantity included in the bill of materials
times the standard cost of the component or work-in-process item.
(5) Rework, which shall mean the additional standard cost of
components or work-in-process items used to turn rejected
inventory into usable inventory. No labor or overhead rate is
assigned to rework orders, only the additional value of the
inventory which is issued to the other. Additionally, no
production/absorption credit is generated for rework orders since
the credit was already generated the first time the production
occurred.
(v) The purchase of any capital item reasonably required by PE or
ACLARA to manufacture shall be PE's or ACLARA's obligation and
responsibility, as the case may be, except to the extent the
depreciation or amortization thereof is, according to generally
accepted accounting principles, properly included in manufacturing
cost.
(vi) During such periods as Microfluidic Chips and/or Commercial
Instruments are being manufactured for general commercial sale to the
public, but not at any other time, PE's and ACLARA's costs associated
with failed batches or batches that fail to meet Product Specification
in excess of the "yield factor" established from time to time in
connection with the manufacture of Microfluidic Chips or Commercial
Instruments, as the case may be, except where such failure is
attributable to PRI, shall not be included in the definition of
Standard Manufacturing Cost.
(vii) In the event that a Party, at its option, does not implement a
standard costing system, then the Parties will agree to a definition
for Fully Burdened Manufacturing Cost that makes reasonable allowances
for the above factors and meets generally accepted accounting
procedures.
1.12 "Fully Burdened Chip Manufacturing Cost".
1.12.1 If Microfluidic Chips are manufactured or finally assembled
and processed by ACLARA or PE, Fully Burdened Chip Manufacturing Cost
shall mean the Fully Burdened Manufacturing Cost of a Microfluidic
Chip, plus an appropriate portion of total manufacturing company's G&A
costs and interest expense allocated to the chip manufactured for PRI
incurred during the calendar quarter in which the chip furnished to
PRI was manufactured. The
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formula for determining the amount of G&A costs and interest expense to be added
to the price of each chip shall be set forth in the Microfluidic Chip Supply
Agreement, which formula shall incorporate the following factors: (i) G&A costs
shall mean costs not directly applicable to the production of product, excluding
R&D, such as, without limitation, executive compensation, general accounting,
secretarial, public relations, human resources and legal, and similar costs
having to do with the overall, general administration of the organization as a
whole; and (ii) interest expense shall mean interest and finance charges that
are recorded as such on the company's books in accordance with GAAP guidelines.
The determination of which such costs to include in G&A costs and interest
expense shall be agreed to by the Parties, with the advice and counsel of their
outside accountants. The determination of the basis for allocating such costs,
whether by proportion to costs, headcount, or otherwise, to Microfluidic Chips
manufactured for PRI shall also be determined by agreement of the Parties. G&A
costs and interest expense shall be estimated for each upcoming quarter based on
the immediately prior quarter's experience, and the change in per chip price
during such upcoming quarter shall be determined using such estimates and the
number of chips to be manufactured during such quarter estimated by PRI pursuant
to this Agreement. Within 30 days after the end of each quarter, or as soon
thereafter as is practical, the per chip price during the immediately previous
quarter shall be finally determined based on actual G&A costs and interest
expense incurred, and the actual number of chips manufactured. Any amounts paid
by PRI for chips in excess of the amount due based on actual G&A costs, interest
expense and number of chips manufactured shall be credited against future
invoices for chips purchased, or paid in cash to PRI if no further chips are
scheduled to be delivered within 120 days after the end of the quarter in
question. If amount are owed by PRI on account of underpayments, the amount owed
will be paid within 30 days after receipt of an invoice therefor from PE or
ACLARA. In no event shall the amount added to chip price by G&A costs and
interest expense exceed (i) [*] during any Chip Price Time Period in which the
maximum stated dollar cost per ship is [*], (ii) [*] during any Chip Price Time
Period in which the maximum stated dollar cost per chip is [*], or (iii) [*]
during any Chip Price Time Period in which the maximum stated dollar cost per
chip is [*]. Nothing in this Section 1.12 shall be deemed to increase the
maximum stated dollar chip prices set forth in Section 5.3.1, which shall remain
as set forth in Section 5.3.1 irrespective of the definition of Fully Burdened
Chip Manufacturing Cost.
1.12.2 If the manufacture and final assembly of Microfluidic Chips are wholly
contracted out, so that the third party manufacturer thereof furnishes ACLARA or
PE as the case may be, with completed Microfluidic Chips ready for customer use
with no further manufacturing, assembly or processing required, Fully Burdened
Manufacturing Cost and Fully Burdened Chip
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Manufacturing Cost shall mean the price paid by ACLARA or PE, as the case
may be, to the manufacturer for a Microfluidic Chip, plus costs of
transportation and insurance, FOB PE's or ACLARA's, as the case may be,
first point of receipt.
1.13 "FTEs" shall mean full time employee equivalents of labor, based on a
standard work day. One FTE shall be one person working one day, or eight hours
worked collectively by more than one person. One FTE for a year shall be one
person working each work day in a year, exclusive of holidays and vacation time
determined in accordance with PE's and ACLARA's, as the case may be, customary
policies and procedures. FTEs may be performed by employees, consultants,
contractors or other persons paid for by PE or ACLARA.
1.14 "High Throughput Screening" or "HTS" shall mean methods utilizing
Microfluidic Chips in which (i) [*] of candidate compounds are contacted with
the target, the result of which contact [*], said activity being determined
based upon subsequent analysis [*], or (ii) [*] of candidate compounds are
contacted with the target, the result of which contact [*] being determined
based upon [*].
1.15 "HTS Chip Device" shall mean a microfluidic high throughput screening
instrument developed as part of the Project, which may consist of one or more
components and peripherals, capable of performing approximately one hundred
thousand (100,000) individual assays per instrument per [*] day, that uses
Microfluidic Chips to perform High Throughput Screening for drug discovery.
1.15A "Initial Funding Agreement" shall have the meaning set forth in Whereas
Clause D.
1.16 "Intellectual Property" shall mean inventions, discoveries, improvements,
proprietary materials, compounds, biological substances, data, test results,
Know-how and trade secrets, whether or not patentable, including any negative
results (collectively, "Developments"), including all intellectual property
rights worldwide arising under statutory or common law, and whether or not
perfected with respect to Developments, including, without limitation, all (1)
patents, patent applications and patent rights (collectively, "Patent Rights");
(2) rights associated with works of authorship including copyrights, copyright
applications, copyright registrations, mask works, mask work applications, and
mask work registrations; (3) rights relating to the protection of trade secrets
and confidential information; (4) any right analogous to those set forth in
this definition and any other proprietary rights relating to intangible
property (other than trademark, trade
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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dress, or service mark rights); (5) divisions, continuations, renewals,
reissues, continuing prosecution, and extensions of the foregoing (to the extent
applicable) now existing, hereafter filed, issued or acquired; and (6) including
foreign equivalents of (1), (2), (3), (4) and (5) above.
1.17 "Joint Development" shall have the meaning set forth in Section 8.1.2.
1.18 "Know-how" shall mean confidential and/or proprietary substances,
materials, technical information, techniques, processes, methods, data, assays
and other information in a Party's possession that is not generally available to
the public, which are useful in connection with the Project.
1.19 "Low throughput Device" shall mean a microfluidic screening instrument,
which may consist of one or more components and peripherals, capable of
performing under normal operation up to [*] individual assays per instrument per
not less than [*] day, that uses Microfluidic Chips to perform screening for
drug discovery.
1.19A "Make Functional," "Making Functional," or "Made Functional" shall mean
setting up an HTS Chip Device for operation in accordance with normal and
customary procedures, and successfully performing the tests and procedures
customarily performed when installing for customer use instruments containing
fluid handling systems, or comparable tests and procedures relevant to an HTS
Chip Device established by PE in its reasonable discretion.
1.19B "Major Matter Notice" shall have the meaning set forth in Section 27.1.
1.20 "Microfluidic Chip" shall mean a device made of a substrate that [*], that
employs electric field driven fluidics combined with electrophoretic separation
in microchannels formed in such substrate that is intended to be used with HTS
Chip Devices or Low Throughput Devices, and that is developed as part of the
Project, and any improvements thereto that are developed by ACLARA or PE and are
incorporated and function as intended in a prototype thereof on or before [*].
The term Microfluidic Chip and improvements thereto shall exclude, without
limitation, increased or reduced capacity chips not developed as part of the
Project. For example, if a [*] assay point Microfluidic Chip is developed as
part of the Project, and after the end of the Term of the Project PE and/or
ACLARA develop a [*] assay point chip that would otherwise fall within the
definition of a Microfluidic Chip, the [*] assay point chip shall not be deemed
a Microfluidic Chip within the meaning of this Agreement. However, a [*] assay
point Microfluidic chip that has been improved as set forth above after the
termination of the Project up to [*] would be included within the definition of
a Microfluidic Chip.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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1.20A "Microfluidic Chip Supply Agreement" shall have the meaning set forth in
Recital Clause F.
1.21 "Milestones" shall mean the Project milestones set forth in Exhibit 2.3,
as they may be modified from time to time by the Steering Committee, and any
new Project milestones established by the Steering Committee.
1.21A "Milestone Completion Notice" shall have the meaning set forth in Section
2.3.
1.22 "Most Favored Price" shall mean a price no higher than the lowest price
paid by a customer prior to the date of receipt by PE (or ACLARA if the order
is placed directly with ACLARA) of an order for a product or service (a) that
is not an agency, department, division or other manifestation of a country,
federal, state or local government or (b) that did not receive a special price
based on a quantity discount or other special terms and conditions, unless PRI
purchases at least a substantially similar quantity on substantially the same
terms and conditions, in a transaction in which no consideration of material
value other than cash was exchanged for the product or service. Prices paid for
products or services for demonstration purposes, or demonstration products or
services provided for free or de minimus consideration, shall be excluded from
any calculation of Most Favored Price.
1.22A "Party" and "Parties" shall have the meaning set forth in the first
paragraph of this Agreement.
1.22B "Patent Rights" shall have the meaning set forth in Section 1.16.
1.22C "PE/ACLARA Extension Notice" shall have the meaning set forth in Section
11.1.
1.22D "PRI Extension Notice" shall have the meaning set forth in Section 11.1.
1.23 "Project" shall mean the collaborative effort between PE, ACLARA and PRI
to accomplish the Goals of the Project set forth in Section 2.1 of this
Agreement, in accordance with and pursuant to this Agreement.
1.24 "Prototype Completion Notice" shall have the meaning set forth in Section
5.1.
1.25 "Prototype HTS Chip Device" shall mean an HTS Chip Device developed to
the point of a prototype instrument, but not developed or certified as a
Commercial Instrument, that is functionally capable, when operated by trained
personnel under reasonable operating conditions, of performing with one or more
types or designs of Microfluidic Chips an assay in each of the following
categories: [*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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[*], at an assay throughput of approximately 100,000 assays per [*] day
with only reasonable process interruptions consistent with the prototype
nature of the instrument, that otherwise materially satisfies the
Functional Requirements. In the event that PRI determines to accept and
pay for Substitute Prototype Devices pursuant to Section 6.4 below, each
such Substitute Prototype Device shall be deemed to be Prototype HTS Chip
Device within the meaning of this Agreement. For the purposes of this
Agreement, Low Throughput Devices shall not be deemed to be Substitute
Prototype Devices.
1.26 "Research Plan" shall have the meaning set forth in Section 2.2.
1.27 "Special Rights Period" shall mean the period beginning with the
date that a Commercial Instrument is first offered for sale, and ending
[*] after such date. A Commercial Instrument shall be deemed to have been
first offered for sale on the date the availability of a Commercial
Instrument is first announced to the public by any means and a Commercial
Instrument is in fact available for sale.
1.28 "Steering Committee" shall have the meaning set forth in Section
4.1.1.
1.29 "Substitute Prototype Devices" shall have the meaning set forth in
Section 6.4.
1.30 "Term of the Project" shall mean the original [*] term of the
Project set forth in Section 11.1, and, if the original [*] term of the
Project is extended by PRI, or by PE and ACLARA, the "Term of the Project"
shall mean the original [*] term of the project plus such extended term.
If the Project is terminated by a Party, the "Term of the Project" shall
mean the period beginning as of October 1, 1998 and ending on the
effective date of termination.
1.31. "Unit Based Royalty" shall have the meaning set forth in Section 4A.
2. Description and Elements of the Project.
2.1 Goals, Level of Effort and Cooperation.
2.1.1 Goals. The goals of the Project ("Goals of the Project") are (i) to
design, develop, produce, and deliver to PRI [*] Prototype HTS Chip
Devices and (ii), to develop and produce one or more Microfluidic Chip
types capable of performing an assay in each of the following categories:
[*], at an assay throughput of approximately 100,000 assay points per [*]
hour day per instrument, with an approximately [*] fold reduction in
consumption, on a per assay, molar basis, of screening targets, chemical
libraries and substrates, as compared with the consumption of such
targets, libraries and substrates for substantially similar assays
currently performed by PRI, such current molar
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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consumption being those set forth on Exhibit 2.2.1. Any modifications of or
additions to the Goals of the Project must be approved by the Steering
Committee.
2.1.2 Notice of Achievement of Goals. No later than 30 days after the end of
the Term of the Project, PE and ACLARA shall notify PRI in writing whether the
Goals of the Project have been achieved, and shall provide to PRI reasonable
data and information demonstrating that the Goals of the Project have been
achieved. The delivery to PRI of the Prototype Completion Notice, as defined in
Section 5.1, may serve as PE's and ACLARA's statement that the Goals of the
Project have been achieved. If PRI disagrees that the Goals of the Project have
been achieved, it shall so respond to PR and ACLARA in writing within 10 working
days from the date of receipt of the notice of achievement of goals from PE and
ACLARA, and in such response PRI shall state in reasonable detail why PRI
believes the Goals of the Project have not been achieved. If PRI does not send
such response within said 10 day period, the Goals of the Project shall be
deemed to have been achieved. Notwithstanding anything continued in this Section
2.1.2 to the contrary, if PE and ACLARA deliver and PRI accepts the first two
Prototype HTS Chip Devices as provided in Section 5.1 below, or Substitute
Prototype Devices as provided in Section 6.4, the Goals of the Project shall be
deemed to have been achieved.
2.1.3 Cooperation and Obligation to use Commercially Reasonable Efforts. The
Parties agree that the successful execution of the Project will require the
collaborative use of the areas of expertise of PRI, PE and ACLARA, the free flow
of Project related information, and the prompt support, input and feedback of
PRI. PE, ACLARA and PRI will use commercially reasonable efforts, and will
cooperate and work together, to achieve the Goals of the Project and to achieve
such objectives and perform such tasks as are set forth in the Research Plan and
to achieve the Milestones. Without limiting the generality of the foregoing, PRI
will cooperate with PE and ACLARA toward accomplishing the Goals of the Project,
and respond as promptly as reasonably possible to PE's and ACLARA's requests for
materials, information, data and feedback. PE and ACLARA will use commercially
reasonable efforts to keep PRI up to date on the progress of the Project through
quarterly reports, site visits by PRI, and telephone and video conferences as
needed on reasonable request by a Party. In this connection PE and ACLARA
personnel shall be reasonably available to meet with PRI personnel, or discuss
issues by telephone or video conference (if feasible), at mutually agreeable
times and places during the Project in order to discuss progress and results,
provided that such meetings will be scheduled and reasonably limited so as to
not interfere with PE's and ACLARA's performance of the Project. Each Party will
attempt to accommodate any reasonable request of the other Party to send or
receive personnel for purposes of exchanging information and generally
achieving the Goals of the Project. To facilitate
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communication and the obtaining of information, PRI may communicate at its
discretion with PE and ACLARA individually.
2.1.4 Minimum Number of FTEs. PE and ACLARA have been performing work toward the
Goals of the Project since October 1, 1998, and they collectively agree,
effective the date of execution of this Agreement, or as promptly as feasible
thereafter, to allocate and expend not less than an average of [*] FTEs per
working day during the balance of the Term of the Project toward achieving the
Goals of the Project. Fewer or more than [*] FTEs may be expended during a given
time period, provided that the average number of FTEs devoted during such date
and the end of the original [*] Term of the Project shall be not less than
[*] FTEs per working day. A reasonable number of such FTEs shall be performed by
employees who are devoted substantially full time to the Project, and such FTEs
shall include, to the extent appropriate to the state of the Project, FTEs with
relevant experience and expertise. PE and ACLARA shall be deemed to have
satisfied their obligations set forth in this Agreement to use commercially
reasonable efforts if they collectively have allocated and expended at least an
average of [*] FTEs per working day on accomplishing the Goals of the Project.
PE and ACLARA may allocate more than [*] FTEs to the project in each of their
sole discretion, but shall not be required to do so, and, unless otherwise
agreed in writing, will not be compensated by PRI for doing so.
22. Research Plan. Attached as Exhibit 2.2 is a research plan (the "Research
Plan") setting forth anticipated phases of the Project and the objectives of
each phase. The Research Plan may be amended from time to time by the Steering
Committee.
2.3 Milestones. Attached hereto as Exhibit 2.3 are Project Milestones. PE and
ACLARA shall use commercially reasonable efforts to achieve each Milestone, and
such additional Milestones, if any, as may be established by the Steering
Committee, on or before the date indicated for each milestone. Any modifications
of or additions to the Milestones must be approved by the Steering Committee. In
the event that PE or ACLARA believe that any Milestone has been achieved, it
shall so notify PRI in writing and shall provide PRI reasonable data and
information demonstrating that the Milestone has been achieved (a "Milestone
Completion Notice"). If PRI disagrees, it shall so respond to PE and ACLARA in
writing within 10 working days from the date of receipt of the Milestone
Completion Notice from PE and ACLARA, and in such response shall state in
reasonable detail why PRI believes the Milestone has not been achieved. If PRI
does not send such response within said 10 working day period, the Milestone
shall be deemed to have been achieved.
2.4 Functional Requirements. Promptly after the execution of this Agreement,
the Parties shall confer to establish functional requirements for the HTS Chip
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Device (the "Functional Requirements") at such level of detail as PE and
ACLARA may reasonably request and as may be determined by the Steering
Committee, with a goal of establishing the Functional requirements by
April 1, 1999. Criteria for the Functional Requirements, and any changes
thereto, will include consideration of design alternatives, feasibility,
and commercial reasonableness. The Functional Requirements shall be deemed
established when approved by the Steering Committee. Any changes to the
Functional Requirements after they are established must be approved by the
Steering Committee.
2.5 Certain Responsibilities of PRI. Without limiting other PRI
responsibilities, in connection with the Project, PRI shall be responsible for
providing PE and ACLARA the following at its cost:
(i) sufficient information regarding PRI's database and data handling
systems, including format and structure, to permit PE and ACLARA to
adapt its software so that data can be transferred to PRI's data
handling system.
(ii) reasonable assay data, assay reagents, materials and other Know-how
and assay support; and reasonable pharmacology support and reagents
necessary to accomplish the Goals of the Project.
3. Reports. Within 30 days after the end of each calendar quarter, beginning
with the calendar quarter ending [*], PE and ACLARA will furnish PRI with a
quarterly written report summarizing the results of the Project to date, which
will include PE's and ACLARA's assessment of whether each Milestone is likely to
be completed on the scheduled milestone date. Beginning with the report for the
quarter ending [*], such reports shall include, to the extent known and if
capable of being estimated, the then current estimates, for Microfluidic Chips,
of Fully Burdened Manufacturing Cost and Fully Burdened Chip Manufacturing Cost.
At the discretion of the Steering Committee, a quarterly presentation or other
presentation given to PRI after the end of a quarter may constitute the
quarterly report for a quarter.
4. Steering Committee and Project Structure; Third Party Licenses
4.1 Steering Committee.
4.1.1. Steering Committee Structure and Role. The Parties shall establish
a Steering Committee (the "Steering Committee") consisting of three
representatives of each of PRI, PE and ACLARA, or such other number from
each Party as all three Parties may agree upon. Each Party shall appoint
its representatives, and shall inform the other Parties of its
representatives in writing. Substitutes or alternates may be appointed at
any time by notice in writing to the other Parties. The role of the
Steering Committee will be to monitor the Project and provide a formal
mechanism for communication, exchange of information, status updates and
discussing and reviewing recommendations
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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relating to various Project matters, including the Goals of the Project
and general Project direction and integration, to approve the designation
by PRI of the particular assays of each category set forth in Section
2.1.1 to which Microfluidic Chip design will be directed, to establish the
Functional Requirements, and to approve changes to the Research Plan,
Milestones and Functional Requirements. The Steering Committee will meet
at least quarterly. The Steering Committee will also meet at such other
times as may be reasonably requested by any Party. A representative from
ACLARA will serve as Chairperson of the Steering Committee through the
period ending December 31, 1999, and a representative from PE will serve
as the Chairperson from and after January 1, 2000. PRI will have the right
to approve the Steering Committee Chairperson, which approval will not be
unreasonably withheld or delayed.
4.1.2 Steering Committee Proceedings. Meetings of the Steering Committee
may be in person, or by video conference or by teleconference, at times and
places agreeable to all of the Parties. Each Party shall be represented at
each meeting of the Steering Committee by at least one of its Steering
Committee members. At Steering Committee meetings, at least one member of
each of PRI, PE and ACLARA shall constitute a quorum. Decisions of the
Steering Committee may act without a formal meeting by a written memorandum
signed by at least one member from each of the Parties. The Steering
Committee will require the unanimous vote of all three Partners. The
Steering Committee may invite other representatives of the Parties to
attend the meetings, but only the designated representatives of the Parties
shall be members of the Steering Committee and shall have the power to
represent a Party with respect to any formal action of the Steering
Committee. A recording secretary, who need not be a member of the Steering
Committee, shall be appointed at each meeting to record and distribute
formal actions of the Steering Committee. Draft minutes will be circulated
to all members of the Steering Committee for review, comment and approval,
and will be issued in final form only with the approval of all three
Parties, which shall be evidenced by the signature of at least one member
of the Steering Committee from each Party on the minutes. At the
commencement of each Steering Committee meeting, each Party shall designate
one of its members present as the individual having the power to act for
such Party with respect to all formal actions of the Steering Committee at
such meeting, and such person shall have the power to cast votes or
otherwise act for such Party at the meeting. If the members of a Party
present at a meeting do not designate one among them to act for such Party,
the member of such Party having the highest overall corporate title shall
be the member having the power to act for such Party. Each Party shall bear
all expenses of their representatives. A disagreement of the Steering
Committee relating to the Project that cannot be resolved by the Steering
Committee may be designated a major matter pursuant to Section 27.1 and we
be subject to the dispute resolution process set forth in Section 27.1,
unless otherwise expressly provided in this Agreement.
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4.2 Project Structure. The Chairperson of the Steering Committee shall
serve as the overall manager of the Project, and shall have responsibility
for overall Project coordination. PE and ACLARA each will appoint a site
director, who will coordinate the work of their respective companies with
the Chairperson of the Steering Committee.
4A. Third party Licenses and Steering Committee Approval of Third Party
Licenses.
4A.1 If during the Term of the Project PRI, PE or ACLARA believe that the
acquisition of Intellectual Property from a third party is necessary or
desirable for the development or manufacture of Prototype HTS Chip Devices,
Commercial Instruments or Microfluidic Chips, PRI, PE or ACLARA, as the
case may be, may present the matter to the Steering Committee. If the
Steering Committee agrees that such Intellectual Property should be
obtained, any royalties payable for the right to use such Intellectual
Property that are calculated on a per unit basis, whether on the
manufacture, use or sale of the unit in question or otherwise (herein
called "Unit Based Royalties"), shall be included in Fully Burdened
Manufacturing Cost and Fully Burdened Chip Manufacturing Cost. However,
notwithstanding anything contained in this Agreement to the contrary, in
determining pricing of Microfluidic Chips to PRI pursuant to Section
5.3.1.1 below, [*] shall be applied to any such Unit Based Royalties,
rather only the actual cost thereof shall be included. For example, if a
price payable by PRI for Microfluidic Chip was [*] Fully Burdened
Manufacturing Cost, and all components thereof except the Unit Based
Royalty were [*], and the Unit Based Royalty component was [*], the price
payable by PRI would be [*] per chip (that is, [*]). The Steering Committee
shall have the right to approve any terms and conditions of any such
License that are applicable to the Exclusive Right Period. Any payments
required to obtain rights to any such third party Intellectual Property
other than Unit Based Royalties, such as, for example, any fixed up front
payment not based on unit sales, shall not be included as a part of Fully
Burdened Manufacturing Cost or Fully Burdened Chip Manufacturing Cost, and,
as between PRI on the one hand and PE and ACLARA on the other, shall be
paid by PE and ACLARA.
4A.2 If during the Term of the Project PE and ACLARA determine that it is
necessary or desirable for the development or manufacture of Prototype HTS
Chip Devices, Commercial Instruments or manufacture of Prototype HTS Chip
Devices, Commercial Instruments or Microfluidic Chips to license or
otherwise obtain the rights to any third party Intellectual Property and so
inform the Steering Committee, but PRI does not agree, and PE and ACLARA
none-the-less proceed to license or otherwise obtain the right to use such
Intellectual Property, (i) PE and ACLARA may afford PRI the benefit of such
Intellectual Property, in which case [*] with respect thereto shall be
included as part of Fully Burdened Manufacturing Cost and Fully Burdened
Chip Manufacturing Cost (but in determining pricing of Microfluidic
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Chips to PRI pursuant to Section 5.3.1.1 below, no multiple of such [*]
shall be applied, rather, only the actual amount thereof shall be
included), or (ii) PE and ACLARA may elect that PRI shall not be entitled
to the benefit of such Intellectual Property, and PRI shall not have the
right to obtain any Prototype HTS Chip Device, Commercial Instrument or
Microfluidic Chip with respect to which any such [*] is payable,
notwithstanding anything contained in this Agreement to the contrary.
Nothing in this Section 4A.2 shall be deemed to relieve PE and ACLARA from
their obligation to use commercially reasonable efforts to achieve the
Goals of the Project, as set forth in this Agreement.
4A.3 If at any time after the end of the Term of the Project but before the
end of the Extended Special Rights Period, any third party threatens or
commences legal proceedings on the basis that, or claims that, the
manufacture, use, importation, sale or other distribution of Commercial
Instruments or Microfluidic Chips infringes patent claims or other rights
in Intellectual Property owned or licensed by it, or to which it otherwise
has rights, and if PE and/or ACLARA determine that they wish to obtain a
license or other right to use such Intellectual Property, PE and/or ACLARA
shall so inform PRI. If PE and ACLARA conclude in their sole discretion
that obtaining a license or other right to use such Intellectual Property
is necessary to settle or resolve the claim or legal proceeding, prior to
execution of any such license or other agreement, they will deliver to PRI
in writing a copy of the license or other agreement by which rights to such
Intellectual Property are to be obtained and request PRI's approval of such
license or other agreement. If PRI responds to PE and ACLARA in writing
within 30 days of its receipt of the copy of such license or other
agreement that it approves same, such license or other agreement shall be
deemed a license of Intellectual Property from a third party that has been
approved by the Steering Committee, and any Unit Based Royalties payable on
account thereof shall be included in Fully Burdened Manufacturing Cost and
Fully Burdened Chip Manufacturing Cost, and otherwise subject to the terms
set forth above in Section 4A.1. If PRI responds in the negative, or does
not respond within said 30 day period, PRI shall not be entitled to the
benefit of the Intellectual Property which is the subject of such license
or other agreement, and shall not have the right to obtain any Prototype
HTS Chip Device, Commercial Instrument or Microfluidic Chip with respect to
which any such Unit Based Royalty is payable, notwithstanding anything
contained in this Agreement to the contrary.
4A.4 If PRI obtains the right to manufacture Microfluidic Chips or
otherwise manufactures or has manufactured Microfluidic Chips pursuant to
this Agreement, PRI shall pay or reimburse PE and/or ACLARA, as the case
may be, [*] payable by PRI or by PE and/or ACLARA, as the case may be, for
the exercise of any rights with respect to which [*] are to be included as
part of Fully Burdened Manufacturing Cost or Fully Burdened Chip
Manufacturing Cost, or which PRI
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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has agreed to pay pursuant to Sections 4A.1, 4A.2 or 4A.3 above, including
without limitation for manufacture, sale, import, or use, with respect to
Microfluidic Chips manufactured by or for PRI.
5. Deliverables.
5.1 Prototypes. PE and ACLARA, by employing at least the FTEs required by this
Agreement, will use commercially reasonable efforts to develop,
manufacture, assemble, deliver and install and Make Functional [*]
Prototype HTS Chip Devices to PRI on or before the end of the Term of the
Project, or promptly thereafter, at a location in the United States
designated by PRI. PE and ACLARA shall determine in their sole discretion,
and shall notify PRI in writing on or before the end of the Term of the
Project, as to whether development of the Prototype HTS Chip Device,
including Microfluidic Chips, has been completed {such notice is herein
called the "Prototype Completion Notice"}. If PE and ACLARA furnish such
notice during the Term of the Project, then PE and ACLARA shall deliver,
install and Make Functional [*] Prototype HTS Chip Devices to PRI as soon
as feasible during or after the expiration of the Term of the Project. In
the event that a Commercial Instrument is not available on or before [*],
but a Prototype HTS Chip Device was completed and [*] Prototype HTS Chip
Devices were delivered to PRI, installed and Made Functional pursuant to
this Agreement, and if the experience of the Parties with the [*] delivered
prototypes demonstrate to the Parties that they function as intended with
commercially reasonable levels of service and support, PE and ACLARA will
deliver [*] additional Prototype HTS Chip Devices to PRI on or before [*],
at such location or locations in the Continental United States or, with
respect to up to [*] of such devices, Europe, as may be designated by PRI,
at a time or times to be agreed upon by the Parties. If PRI designates a
location in Europe for any of such additional devices, PRI shall be
responsible for obtaining and paying for any necessary approvals and
permits for importation, and shall reimburse PE and ACLARA the costs of
insurance and transportation of such device(s) to the designated
location(s) in Europe, and for travel time of the installer(s) and initial
trainer(s) to and from Europe.
5.2 Commercial Instruments. If PE has completed the development of a
Commercial Instrument on or before [*]:
(i) If requested by PRI by written notice given to PE during the Special
Rights Period, PE shall deliver, install and Make Functional to PRI up to
[*] standard Commercial Instruments, exclusive of options and accessories
that are offered by PE as optional items, at no cost to PRI, no later than
three months after PRI delivers written notice to PE of its desire to
obtain such Commercial Instrument or Instruments. PRI shall not be required
to request all [*] Commercial Instruments at one time, but may request one
or more any time during the Special Rights Period. If PRI desires any
optional items, it may purchase same
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE> 21
at the lower of [*] off list price or the Most Favored Price therefor. Each
such Commercial Instrument shall be accompanied, delivered, installed and Made
Functional, and accepted by PRI, subject and pursuant to PE's then customary
limited warranties and other terms and conditions applicable to the retail sale
of Commercial Instruments.
(ii) PRI shall have the right, by written notice given to PE during the Special
Rights Period, to purchase from PE up to an additional [*] Commercial
Instruments, including options offered to the public, at a price to PRI equal to
the lower of (a) [*] of PE's Fully Burdened Manufacturing Cost of the instrument
and any options selected or (b) the Most Favored Price therefor, such
instruments to be delivered, installed and Made Functional no later than three
month after PRI delivers written notice to PE of its desire to obtain such
Commercial Instrument or Instruments. PRI shall not be required to request all
[*] such Commercial Instruments at one time, but may request [*] any time during
the Special Rights Period. Each such Commercial Instrument shall be accompanied
by and accepted by PRI pursuant to PE's then customary limited warranties and
other terms and conditions applicable to the retail sale of Commercial
Instruments.
(iii) PRI shall have the right, during the Special Rights Period and during the
period ending [*] years after the last day of the Special Rights Period, but in
any event not after [*], to purchase up to [*] additional Commercial Instruments
at the Most Favored Price therefor.
(iv) PE shall have the right to substitute a Commercial Instrument for one or
both of the Prototype HTS Chip Devices delivered to PRI pursuant to Section 5.1
above, upon not less than 60 days prior written notice to PRI, by delivering,
installing and Making Functional the Commercial Instrument at the same location
as the Prototype HTS Chip Device for which the Commercial Instrument is being
substituted. Any such substitute Commercial Instrument shall be provided to PRI
without cost to PRI, and shall be accompanied and accepted by PRI pursuant to
PE's then customary limited warranties and other terms and conditions
applicable to the retail sale of Commercial Instruments. If requested in
writing by PE, PRI shall return to PE the Prototype HTS Chip Device for which
the commercial grade instrument is being substituted, and transfer title
thereto, to PE in its then "as is" condition, within 30 days after receipt of
the substituting Commercial Instrument, at PE's cost. PRI may remove at its
cost any additions or modifications made by it to the prototypes prior to
returning same to PE. Notwithstanding anything contained in this Agreement to
the contrary, whether or not PE requires PRI to return any of the prototypes,
neither PE nor ACLARA shall have any obligation to provide support or service
with respect to any Prototype HTS Chip Device for which a Commercial Instrument
has been substituted after the date of installation of the substituting
Commercial Instrument
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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to PRI. A Commercial Instrument substituted pursuant to this Section 5.2
(iv) shall not reduce PRI's rights under Section 5.2 (i), (ii) or (iii)
above.
5.3 Microfluidic Chips.
5.3.1 Purchase Rights.
5.3.1.1 Pricing. If PE and ACLARA furnish the Prototype Completion Notice
during the Term of the Project, and PRI accepts the first [*] Prototype
HTS Chip Devices or Substitute Prototype Devices and pays the [*] called
for by Section 6.4 below, PRI will have the right to purchase Microfluidic
Chips at the prices set forth below:
(i) during the Exclusive Right Period and until the earlier of
the date that is six months after the end of the Exclusive Right
Period or the beginning of the Special Rights Period, at the lower
of (a) [*] or (b) [*] per Microfluidic Chip,
(ii) during the Special Rights Period at the lower of (a) [*] times
Fully Burdened Manufacturing Cost (subject to Section 4A with
respect to any Unit Based Royalties), (b) [*] per Microfluidic Chip,
(c) [*] of retail list price for Microfluidic Chips in effect at the
time the order is placed or (d) the Most Favored Price therefor,
(iii) for a period of [*] years after the end of the Special Rights
Period (the "Extended Special Rights Period"), for the lower of (a)
[*] Fully Burdened Manufacturing Cost (subject to Section 4A with
respect to any Unit Based Royalties), (b) [*] per Microfluidic Chip,
(c) [*] of retail list price for Microfluidic Chips in effect at the
time the order is placed or (d) the Most Favored Price therefor,
(iv), during the one year period after the end of the Extended
Special Rights Period, the Most Favored Price therefor, and
(v), if PE and ACLARA furnish the Prototype Completion Notice
during the Term of the Project, but the Special Rights Period does
not commence on or before the date that is six months after the end
of the Exclusive Right Period, during the period beginning with the
date that is six months after the end of the Exclusive Right Prior
and ending on the earlier of the first day of the Special Rights
Period or the date that is 18 months after the end of the Exclusive
Right Period, PRI shall have the right to purchase Microfluidic
Chips at the lower of (a) [*] times Fully Burdened Manufacturing
Cost (subject to Section 4A with respect to any Unit Based
Royalties) or (b) [*] per Microfluidic Chip.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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In all cases the determination of price shall be made as of the date an order is
placed by PRI, provided that if a Microfluidic Chip is ordered during one of the
five time periods provided for above (the "Chip Price Time Periods") and
pursuant to said order is scheduled to be delivered during a subsequent time
period, the price for such chip shall be the price applicable to the period that
would result in the higher price, provided that the maximum time between order
dates and delivery dates for [*] or less Microfluidic Chips, as set forth in the
Microfluidic Chip Supply Agreement, does not exceed 90 days. If different types
of Microfluidic Chips are produced, and Fully Burdened Manufacturing Cost, Fully
Burdened Chip Manufacturing Cost, retail list price or the Most Favored Price is
different for different types of Microfluidic Chips, each such cost or price
shall be calculated independently for each type of Microfluidic Chip. In
calculating retail Microfluidic Chip prices, if reduced retail prices are
generally available to the public for bulk purchases, the retail price to PRI
for such bulk purchases shall be such bulk purchase price generally available to
the public. PE will be the distributor of the Microfluidic Chips to PRI, unless
the Parties otherwise agree in writing. PRI will provide PE (or ACLARA, if PE is
not the distributor of the Microfluidic Chips) with reasonably estimated
Microfluidic Chip requirements starting at least six months prior to the
scheduled date for the end of the Term of the Project. Such estimates will be
updated quarterly thereafter.
5.3.1.2 Pricing Assumptions. It is understood and agreed that the pricing for
Microfluidic Chips set forth in Section 5.3.1.1 above is based on the assumption
that the Microfluidic Chip is a single use, disposable 96 well plate equivalent
chip. The maximum stated dollar price for a Microfluidic Chip to be paid by PRI
pursuant to Section 5.3.1.2, but not the multiple of manufacturing cost, the
discount off retail or the Most Favored Price, shall be adjusted proportionately
if the Microfluidic Chip is not a single use, disposable 96 well plate
equivalent chip. For example, if a Microfluidic Chip sold to PRI is a 48 well
plate equivalent chip, that stated maximum dollar price per Microfluidic Chip
shall be reduced proportionately to [*], respectively. If the Microfluidic Chip
sold to PRI is a 384 well plate equivalent chip, the stated maximum dollar price
per Microfluidic Chip shall be increased proportionately to [*], respectively.
5.3.2 Inability or Determination not to manufacture Chips; License to PRI.
5.3.2.1. Notwithstanding anything contained in this Section 5.3 to the contrary,
(i) PE and ACLARA shall not be required to manufacture and supply Microfluidic
Chips to PRI if manufacture or supply is prevented by reasons of force majeure;
and (ii) PE and ACLARA shall have the right to decline to manufacture and supply
Microfluidic Chips to PRI at any time, at PE's and ACLARA's sole discretion, in
the event that (a) Fully Burdened Chip Manufacturing Cost is or is reasonably
estimated to be more than the maximum dollar price of [*], respectively, set
forth in Section 5.1.1 above for any calendar quarter of the
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Chip Price Time Period to which the maximum dollar price is applicable, or (b)
at any time after the end of the Exclusive Right Period, PE or ACLARA are not
manufacturing or having manufactured, or have ceased to manufacture or offer
Microfluidic Chips for general commercial sale to the public, except that PRI
shall remain entitled to purchase at the applicable price set forth in Section
5.3.1 any Microfluidic Chips that PE and ACLARA may have available in inventory
after the manufacture thereof has been terminated, that have not been committed
to any third party, and are otherwise available for sale to PRI, at the time an
order therefor is placed by PRI. PE and ACLARA shall exercise their right to
decline to manufacture and supply Microfluidic Chips to PRI by sending at least
30 days prior written notice to such effect to PRI, in which case, effective
the date set forth in such notice, PE and ACLARA shall be relieved of their
obligations set forth in section 5.3.1 above. PRI shall not order any chips
during the foregoing 30 day notice period, unless PE and ACLARA otherwise
agree. PE and ACLARA will notify PRI in writing when Microfluidic Chips are
being sold by PE or ACLARA as a commercial product generally available to the
public.
5.3.2.2. If PE and ACLARA exercise a right not to manufacture Microfluidic
Chips, or if PE and ACLARA have failed to meet PRI's reasonably projected volume
requirements for Microfluidic Chips, despite PE's and ACLARA's commercially
reasonable efforts, for at least forty five (45) days after PRI has given PE and
ACLARA notice of such failure (which notice may not be given unless and until
such failure has in fact incurred), PRI shall have the right to manufacture its
requirements for Microfluidic Chips itself, or have such Microfluidic Chips
manufactured by a third party, for internal drug discovery purposes, and PE and
ACLARA shall grant to PRI and its Affiliates, and PRI and its Affiliates shall
have, a limited, non-exclusive, non-transferable and non-sublicenceable license
(i) to use Developments and other Intellectual Property owned or licensed by PE
or ACLARA, or PE and ACLARA, that is necessary to manufacture Microfluidic Chips
in the form manufactured or required by this Agreement to be manufactured by
ACLARA or PE prior to the date that PRI obtains the right to manufacture same
pursuant to this Agreement, to manufacture or have manufactured such chips and
(ii) under Intellectual Property owned by PE or ACLARA, or PE and ACLARA, to use
such Microfluidic Chips with Prototype HTS Chip Devices or Commercial
Instruments for internal drug discovery purposes. The right and license granted
by this Section 5.3.2.2 shall be irrevocable, unless the reason for PE and
ACLARA's failure to meet PRI's reasonably projected volume requirements is by
reason of force majeure, in which case PE or ACLARA may revoke such right and
license by giving PRI not less than six (6) months' prior written notice,
provided PE and ACLARA resume manufacture of Microfluidic Chips for PRI pursuant
to this Agreement. It is expressly understood and agreed that all Microfluidic
Chips manufactured by or for PRI pursuant to and under the rights granted by
this Section 5.3.2.2 may only be used with Prototype HTS Chip Devices or
Commercial Instruments obtained
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by PRI pursuant to this Agreement, and only for internal drug discovery
purposes.
5.3.2.3 In consideration of the licenses granted pursuant to Section 5.3.2.2
above, PRI shall pay PE and ACLARA (collectively, not to each) a royalty of [*]
of PRI's Fully Burdened Manufacturing Cost of each chip used or manufactured by
PRI during any period in which PRI has a right to manufacture Microfluidic
Chips. In the event that PRI has Microfluidic Chips manufactured by a third
party during any such period, PRI's Fully Burdened Manufacturing Cost shall be
deemed to be the price paid by PRI to the third party for such chips, less costs
of insurance and transportation of such chips to PRI's initial point of receipt.
5.3.2.4 Notwithstanding anything contained in this Section 5.3.2 to the
contrary, if PE and/or ACLARA are required to pay royalties, fees or other
compensation to a third party for or in connection with any license or other
rights granted to PRI pursuant to Section 5.3.1 above, PRI shall pay [*] of
such royalties, fees or other compensation if the obtaining of such rights was
approved by the Steering Committee. If the obtaining of such rights was not
approved by the Steering Committee, PRI shall not be required to pay or
reimburse PE or ACLARA any such royalties, fees or other compensation, and the
amount(s) thereof shall not be included as components of Fully Burdened
Manufacturing Cost or Fully Burdened Chip Manufacturing Cost.
5.3.3 Expiration of License. Notwithstanding anything contained in this
Agreement to the contrary, unless and except to the extent as may be otherwise
set forth in the Microfluidic Chip Supply Agreement, any licenses granted in
Section 5.3.2.2 above, and PRI's rights to manufacture Microfluidic Chips, shall
expire [*] years after the last day of the Term of the Project, unless (i)
during the [*] period immediately preceding the end of such [*] year period PE
and/or ACLARA did not sell any Commercial Instruments and (ii) as of the end of
such [*] year period PE and/or ACLARA are not in the business of manufacturing
Microfluidic Chips, and PE and ACLARA have not notified PRI in writing prior to
such date that they or either of them is capable, and ready, willing and able if
PRI and PE and/or ACLARA can agree on prices and terms and conditions of
manufacture and sale, to manufacture or have manufactured Microfluidic Chips for
PRI of the type required by this Agreement to be supplied to PRI (that is, one
or more types of Microfluidic Chips capable of performing one assay of each of
the four assay types listed in Section 2.1.1) or the type actually manufactured
by or for PRI for any commercially significant period during the year preceding
the end of such [*] year period.
5.3.4 Minimum and Maximum Quantities. Notwithstanding anything contained in
this Section 5.3 to the contrary, if PE and ACLARA furnish the Prototype
Completion Notice during the Term of the Project and PRI accepts the first [*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Prototype HTS Chip Devices or Substitute Prototype Devices and pays the [*]
called for by Section 6.4 below and PRI has the right to purchase Microfluidic
Chips pursuant to Section 5.3 of this Agreement, PRI agrees to purchase (i) not
less than [*] Microfluidic Chips during the Exclusive Right Period, at the rate
of not less than [*] Microfluidic Chips during each three month period of the
Exclusive Right Period, (ii) not less than [*] Microfluidic Chips per year
during the Special Rights Period, at the rate of not less than [*] Microfluidic
Chips during each three month period of the Special Rights Period, and (iii) not
less than [*] Microfluidic Chips per year during the Extended Special Rights
Period, at a rate of not less than [*] Microfluidic Chips during each three
month period of the Extended Special Rights Period. Also notwithstanding
anything contained in this Agreement to the contrary, except with the express
written consent of PE and ACLARA, PRI shall have no right to purchase from PE
and/or ACLARA, and PE and ACLARA shall not be required to sell PRI, more than
[*] Microfluidic Chips during the Exclusive Right Period and any period
thereafter up to the Special Rights Period; more than [*] Microfluidic Chips per
year during the Special Rights Period, or more than [*] Microfluidic Chips per
year during the Extended Special Rights period.
5.3.5 Use of Chips. All Microfluidic Chips manufactured or furnished to PRI
pursuant to this Agreement shall be used only by PRI and its Affiliates on
Prototype HTS Chip Devices, Commercial Instruments or Low Throughput Devices
acquired by PRI pursuant to this Agreement for internal drug discovery purposes.
5.3.6 Supply Agreement. Microfluidic Chips will be purchased by PRI
pursuant to a Microfluidic Chip Supply Agreement containing the terms set forth
above in this Section 5.3, and other terms and conditions intended to be
negotiated by the Parties prior to the end of the Term of the Project. Such
Supply Agreement shall also set forth other appropriate terms and conditions
relating to the manufacture of Microfluidic Chips by PRI or a third party,
maintaining Intellectual Property relating to the manufacture of Microfluidic
Chips and making necessary Know how and other information available to PRI and
any third party manufacturer, qualifying a third party manufacturer for the
manufacture of Microfluidic Chips at an appropriate time or times in accordance
with reasonable and customary procedures, the providing by PE and ACLARA, as
appropriate, of reasonable assistance to PRI and any third party manufacturer
in implementing manufacturing Know-how, and confidentiality and use provisions
relating to Intellectual Property to protect PE's and ACLARA's rights therein.
5.4 General Terms of Sale. Commercial Instruments and Microfluidic Chips
shall be furnished or sold to PRI in accordance with PE's standard terms and
conditions of sale, provided that in any event all prices shall be F.O.B. PE's
manufacturing plant, freight and insurance prepaid and added to the invoice, and
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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it is agreed that any purchase price payable by PRI does not include any
federal, state or local taxes that may be applicable. When PE has the legal
obligation to collect such taxes, the appropriate amount shall be added to PRI's
invoice and paid by PRI. If PE's general terms and conditions of sale for
Commercial Instruments do not include a warranty or other certification or
statement as to Year 2000 compliance, the delivery of Commercial Instruments
pursuant to this Agreement shall include delivery to PRI of a Statement of Year
2000 Conformity in the form or substantially in the form of the Statement of
Year 2000 Conformity attached as Exhibit 5.4. PE and ACLARA, as the case may be,
will provide to PRI reasonable documentation supporting its calculation of Fully
Burdened Manufacturing Cost and Fully Burdened Chip Manufacturing Cost upon
written request from PRI given no more than once in any twelve month period. If
PRI manufactures Microfluidic Chips pursuant to this Agreement and royalties are
due PE and ACLARA thereon, PRI will provide to PE and ACLARA reasonable
documentation supporting its calculation of Fully Burdened Manufacturing Cost
and Fully Burdened Chip Manufacturing Cost, or its cost of purchase from its
third party manufacturer; upon written request from PE or ACLARA given no more
than once in any twelve month period. No more frequently than once a year, at a
mutually agreeable time and place, PRI shall have the right to have a certified
independent accountant, reasonably satisfactory to PE and ACLARA, examine the
accounting books and records of PE and/or ACLARA, whichever is the manufacturer
of the product the pricing of which is the subject of the review, to review the
manner of calculation of Fully Burdened Manufacturing Cost or Fully Burdened
Chip Manufacturing Cost, as the case may be. Any such audit shall be conducted
under reasonable confidentiality provisions required by PE or ACLARA, as the
case may be. In the event that PRI manufacturers or has manufactured
Microfluidic Chips pursuant to the provisions of this Agreement, PE and ACLARA
shall have the right to audit PRI's accounting books and records relating to the
Manufacture of Microfluidic Chips, or purchase of Microfluidic Chips from a
third party, on the same terms and conditions set forth in this Section 5.4 as
are applicable to PRI's audit rights.
5.5 Post Delivery Installation, Training, Support and Service.
5.5.1 Basic Prototype Support and Service. PE and ACLARA will install, use
commercially reasonable efforts to Make Functional, and provide to PRI support
and training in the use of, and during the [*] period after delivery of each of
such [*] prototypes will provide service on, each of the first [*] Prototype HTS
Chip Devices delivered pursuant to the first sentence of Section 5.1 above,
including initial system installation and initial operational training to assist
PRI in the utilization of such devices, training and support in the use and
implementation of the assays developed as part of the Project and in the use of
the associated Microfluidic Chips, all to the extent set forth in Section 5.5.2
below, at no cost to PRI, except reimbursement of reasonable travel, meals and
lodging expenses after the third site visit by PE personnel to provide any such
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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services with respect to either of the first [*] prototypes. PE and ACLARA
shall be responsible for the cost of travel, meals and lodging for the first
three prototype site visits. For the purposes of the preceding sentence, the
visit for the initial installation of and to Make Functional each Prototype HTS
Chip Device, and any site visit made at the instigation of PE or ACLARA, as the
case may be, without being requested by PRI, shall not be included as a site
visit with regard to reimbursement of travel, meals and lodging. If Commercial
Instruments are not available for purchase by PRI at the end of the [*] period
referred to in the preceding sentence, until such time, if ever, as Commercial
Instruments are available, PE shall continue to provide service on each of the
first [*] Prototype HTS Chip Devices for a period not to exceed under any
circumstances [*] years after the end of each such [*] period at [*] of Fully
Burdened Manufacturing Cost of performing the service, until Commercial
Instruments are available for purchase by PRI. If any of the [*] additional
Prototype HTS Chip Devices in addition to the first [*] are delivered pursuant
to Section 5.1, PE and ACLARA (i) will install and Make Functional such
additional prototypes at no cost to PRI, and (ii) will provide service, but not
support and training, at no cost to PRI except reimbursement for reasonable
travel, meals and lodging expenses, on each such additional prototype from the
date of delivery of the prototype to the end of the [*] period following the
delivery of the [*] Prototype HTS Chip Devices delivered pursuant to the first
sentence of Section 5.1, but in any event for a period of not less than three
(3) months after delivery of each additional Prototype HTS Chip Device; and, for
any balance remaining of the one year period after delivery of each such
additional Prototype HTS Chip Device, will provide service on each such
prototype for [*] of Fully Burdened Manufacturing Cost of performing the
service. After the expiration of the periods of support, training and service
provided for in this Section 5.5.1, neither PE nor ACLARA shall have any
obligation to provide further support, training or service to PRI, except
service and support as provided in this Agreement for any Commercial Instruments
that are delivered to or purchased by PRI pursuant to this Agreement, unless the
Parties otherwise agree in writing.
5.5.2 Extent of Support, Training and Service for Prototypes. PE and ACLARA
shall provide the support, training and service called for by this Agreement at
the location of the Prototype HTS Chip Devices, provided that neither PE nor
ACLARA shall be required to travel outside of the continental United States to
provide support, service or training, except, if PRI so requests as set forth
herein, to up to two locations in Europe. PE and ACLARA each shall have
available one full-time engineer employed by them designated to provide support
as provided herein to PRI during the Exclusive Right Period, and such employees
will be generally available during business hours during the Exclusive Right
Period to respond to telephone inquiries. PRI shall seek to resolve issues
through telephone inquiries first, before requesting on-site visits. Exclusive
of the time required for initial installation and to Make Functional, PE and
ACLARA
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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collectively shall not be required to provide during the period ending [*]
after the delivery of the [*] Prototype HTS Chip Device to PRI more than an
aggregate of 40 days of support, training and/or service at all PRI
locations collectively, of which no more than ten days shall be required
during the first month after delivery of the first prototype delivered to
PRI, no more than five days during each of the next four months, and no
more than three days during each month thereafter, until the expiration of
the [*] period following delivery of the [*] prototype delivered to PRI.
Thereafter, excluding the time for installing and to Make Functional the
[*] additional Prototype HTS Chip Devices, PE and ACLARA shall not be
required to spend more than one day per month at a PRI location to satisfy
its requirement to provide support, training and service. The Parties shall
work cooperatively to schedule installation, and on site support and
training, at mutually convenient times. PE and ACLARA shall provide PRI
with reasonable amounts of telephone support for prototypes. Service
provided by PE with respect to Prototype HTS Chip Devices shall be on a
commercially reasonable best efforts basis, shall be as reasonably
requested by PRI, and shall be of a kind and extent customarily afforded by
PE pursuant to its standard service agreement for commercial grade
instruments that include fluid handling systems.
5.5.3 Support For Commercial Instruments. During the Special Rights
Period, PE and ACLARA shall provide to PRI, at Fully Burdened Manufacturing
Cost, support and service on Commercial Instruments delivered or purchased
by PRI pursuant to this Agreement at least as comprehensive as PE provides
to customers of Commercial Instruments who purchase PE's basic Commercial
Instrument service plan. During the [*] period after the end of the
Special Rights Period, PRI shall have the right to purchase any service
contract on Commercial Instruments offered generally to the public by PE at
a Most Favored Price.
5.6 Quarterly Reports and Final Report. PE and ACLARA shall deliver to
PRI the quarterly reports (and any interim quarterly reports requested by
PRI) called for by Section 3 above, and, within 60 days after the last day
of the Term of the Project, shall deliver to PRI a final report summarizing
the results and achievements of the Project.
6. Project Funding and Levels of Effort. In consideration of the work to be
performed by PE and ACLARA, PRI shall pay PE and ACLARA collectively the
aggregate sum of [*], of which [*] has previously been paid pursuant to the
Initial Funds Agreement, in accordance with the following schedule:
6.1 [*] within ten days after the signing of this Agreement;
6.2 [*] on each of April 1, 1999, July 1, 1999 and October 1, 1999;
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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6.3 [*] on each of January 1, 2000, April 1, 2000 and July 1,
2000; and
6.4 [*] within 30 days after the delivery and installation of the [*]
Prototype HTS Chip Devices to be delivered to PRI pursuant to this
Agreement; or if prototype HTS chip devices that do not meet all the
requirements of Prototype HTS Chip Devices are offered to PRI by PE as
substitutes for Prototype HTS Chip Devices, and PRI in its sole discretion
determines to accept same, within 30 days after delivery and installation
of the second substitute prototype HTS chip device. The decision as to
whether to accept any such substitute prototype HTS chip devices
("Substitute Prototype Device") shall be in PRI's sole discretion.
All payments due from PRI under this Agreement, including the payments called
for by this Section 6 and any royalty payments due from PRI, shall be made by
PRI directly to PE, in the full amount of the payment due. PE shall be
responsible for distributing payments received as between itself and ACLARA.
Payments made will be nonrefundable, and all payments due under this Section 6
shall be made, except only payments due after the effective date of termination
of this Agreement, if this Agreement has been terminated pursuant to the
provisions of this Agreement. PE and ACLARA shall not be required to
collectively exceed the level of effort specified in Section 2.1.4 above, and
PRI shall not be required to fund the Project in excess of the amount specified
above. Nothing herein contained shall be construed to prevent PE and ACLARA from
exceeding such level of effort at their own expense, if they wish to do so in
their sole discretion. PE and ACLARA agree to provide PRI access, upon
reasonable advance request, to reasonable documentation customarily maintained
by them evidencing the FTEs expended by them on the Project.
7. Exclusive Right. Provided that (i) PRI has paid all funds scheduled to be
paid under Section 6 through and including the payment to be made on [*], and
provided that if the [*] Prototype HTS Chip Devices to be delivered pursuant to
the first sentence of Section 5.1 have been delivered and installed (or
Substitute Prototype Devices in lieu thereof have been delivered and installed
as provided in Section 6.4) and PRI has paid PE the [*] to be paid upon
such event, or (ii) PRI has terminated this Agreement on account of the failure
of PE and ACLARA to achieve a Milestone as set forth in Section 11.3 below, PRI
shall have the exclusive right (the "Exclusive Right") during the Exclusive
Right Period, except as to PE and ACLARA and their respective Affiliates for
purposes other than the commercial screening of compounds for drug discovery, to
obtain and use HTS Chip Devices (and functional equivalents thereof) and
Microfluidic Chips used with HTS Chip Devices (but specifically excluding,
without limitation, Low Throughput Devices and Microfluidic Chips used with Low
Throughput Devices) for the High Throughput Screening of compounds for drug
discovery employing any of the assay categories described in Section 2.2.1, and
during the Exclusive Right Period neither PE or ACLARA shall sell, donate or
otherwise distribute HTS Chip Devices (or any functional equivalents, but
excluding Low Throughput Devices) to any third party for High Throughput
Screening of
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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compounds for drug discovery employing any of the assay categories described in
Section 2.1.1.
8. Intellectual Property
8.1. Intellectual Property Ownership and Rights
8.1.1 All data and test results generated during the performance of the
Project (except data relating directly to PRI's proprietary drugs and drug
candidates, which data will be owned solely by PRI), shall be jointly owned by
PRI, PE and ACLARA, and PE and ACLARA shall be free to use such jointly owned
data and the results of the Project, except as otherwise expressly set forth in
this Agreement, for such purposes as each of them desires. PRI shall be free to
use such jointly owned data and the results of the Project only for internal
research and development purposes for high throughput screening of compounds for
drug discovery; provided, however, that PRI shall not be entitled to use such
data or results for the manufacture, assembly or fabrication of HTS Chip
Devices or Microfluidic Chips, or components thereof, except that PRI may use
same solely insofar as such use is necessary or useful in connection with the
manufacture by it or its third party manufacturer of Microfluidic Chips under
the conditions and as set forth in Section 5.3 above, or as is necessary or
useful to repair Prototype HTS Chip Devices and Commercial Instruments.
8.1.2. Each Party shall have sole and exclusive ownership of all right,
title and interest on a worldwide basis in and to any Intellectual Property
developed solely by such Party or its consultants or agents, as a result of work
on the Project or work performed pursuant to the Feasibility Agreements, with
full rights to license or sublicense without accounting to any other Party,
subject only to the rights expressly granted to one or more other Parties under
this Agreement. If one Party make a Development jointly with another Party as a
result of work on the Project or work performed pursuant to the Feasibility
Agreements (a "Joint Development"), the ownership thereof shall be as set forth
in this Section 8.1.2. PRI shall own all Intellectual Property, including
without limitation, Patent Rights and Know-how with respect to all Joint
Developments that constitute or relate to composition or synthesis of
inhibitors, activators, modulators, or any other potential drug candidate.
Subject to PRI's rights granted in this Agreement, PE and ACLARA shall own all
Intellectual Property, including without limitation Patent Rights and Know-how,
with respect to, relating to or constituting all Joint Developments that do not
relate to inhibitors, activators, modulators, or any other potential drug
candidates, including with limitation, any Joint Developments that are
incorporated into or relate to or arose of the development of Prototype HTS Chip
Devices, HTS Chip Devices or Microfluidic Chips or any component or predecessor
component thereof.
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8.1.3 PRI shall own any Prototype HTS Chip Devices, Commercial Instruments and
Microfluidic Chips delivered to PRI pursuant to this Agreement.
8.1.4 PRI shall have and will receive a [*] license to use on, or in connection
with the use of, all Prototype HTS Chip Devices and Commercial Instruments
received or purchased by PRI pursuant to this Agreement, and Microfluidic Chips
used with such devices and instruments, any Developments made PE or ACLARA, as
well as any Joint Developments made by PE and ACLARA, as a result of work on the
Project during the term of this Agreement and the Feasibility Agreements to
perform assays of the types described in Section 2.1.
8.1.5 The provisions of this Section 8 shall supercede and replace Section 4 of
the PerSeptive Feasibility Agreement and Section 4 of the ACLARA Feasibility
Agreement.
8.1.6 Right to Intellectual Property as between PE and ACLARA shall be governed
by a separate agreement between PE and ACLARA.
9. Responsibility for Certain Matters, Indemnification.
9.1 Injury to Employees; Responsibility for Certain Matters. The Parties
recognize and agree that instruments and devices, including components thereof,
particularly in experimental and prototype form, and chemicals and other
materials used in connection therewith, may be dangerous, toxic or otherwise
hazardous. Each Party shall be solely responsible for the use, and the
consequences of use, resulting from the receipt or use by it of tangible or,
except as otherwise expressly set forth herein, intangible property such as
Intellectual Property, obtained from another Party or created or generated as a
result of the work on the Project, and each Party shall be solely responsible
for the health and safety of its own employees, agents and consultants in
connection with, and shall bear all risk to its employees, agents and
consultants resulting from, their use of instruments and devices delivered or
purchased, or possessed or used, and chemicals and other substances possessed or
used, pursuant to or in connection with the Project, except to the extent injury
or damage is caused by the gross negligence or willful misconduct of a Party.
Each Party agrees that it will indemnify and hold the other Parties and their
Affiliates harmless from and against any and all liability, damage, loss or
expense, including without limitation reasonable attorney's fees and expenses of
litigation or arbitration, incurred by or imposed upon any other party or its
Affiliates, in connection with any claims, suits, actions, demands or judgments
for personal or other injury to any of its employees, agents or consultants, or
damage or destruction to property, arising out of or in connection with the
performance of the Project, even if arising from the negligence of a Party,
except to the extent such claims, suits, actions, demands or judgments result
from the gross negligence or willful misconduct of
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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the Party or Affiliate seeking indemnification hereunder. In addition, each
Party hereby releases the other Parties from any claims, including, without
limiting the generality of the term "claims," claims for property damage,
resulting from the use, and the consequences of use, of tangible or, except as
otherwise expressly set forth herein, intangible property such as Intellectual
Property, obtained from another Party or created or generated as a result of the
work on the Project, except for liabilities and claims resulting from the gross
negligence or willful misconduct of a Party. Each Party acknowledges that it is
familiar with Section 1542 of the California Civil Code, which reads as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
Each Party acknowledges and agrees that it is releasing unknown claims and
waives all rights that it has or may have under Civil Code Section 1542 or under
any other statute or common law principle of similar effect.
9.2 Indemnity by PRI in connection with Use of Devices and Substances. To the
fullest extent permitted by law, except solely with respect to Claims (as
defined below) arising from the infringement of intellectual property rights of
third parties not constituting or relating to particular applications of HTS
Chip Devices or Microfluidic Chips of which PE or ACLARA had actual knowledge
and as to which PE or ACLARA breached its warranty set forth in Section 9.3.1
below, PRI agrees to indemnify and hold PE and ACLARA, and their Affiliates,
harmless from and against any and all claims, demands, obligations, costs,
expenses (including reasonable attorney's fees and expenses) and liabilities
(collectively, "Claims") including; without limitation, those arising from
violations of local, state, or federal food and drug, environmental, health and
safety and other laws, codes and regulations, arising out of the possession by
PRI of Prototype HTS Chip Devices, HTS Chip Devices, Commercial Instruments,
Microfluidic Chips, or other instruments or components thereof or chemicals or
other substances delivered to or used by PRI in connection with the Project, or
created or generated by PRI or any of its Affiliates as a result of work
performed in connection with the Project, or arising out of the use by PRI or
any of its Affiliates of any of the foregoing, including without limitation the
loss, operation or failure to operate of any of the foregoing, even if caused in
part by the negligence of PE or ACLARA or their Affiliates, as the case may be,
except to the extent resulting from the gross negligence or willful misconduct
of PE or ACLARA, or their Affiliates, as the case may be.
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9.3 Patent and Copyright Indemnification.
9.3.1 Neither PRI, PE nor ACLARA warrant the validity or enforceability of any
Intellectual Property relating to any products. PE and ACLARA, however, shall
each warrant severally, but not jointly and severally, that at the time of
delivery to or purchase by PRI of any Prototype HTS Chip Devices, Commercial
Instruments or Microfluidic Chips pursuant to this Agreement, PE or ACLARA, as
the case may be, shall not have actual knowledge of violation of any patents or
patent applications or other intellectual property rights owned by third parties
which would prevent PRI from using such products to conduct the assays developed
pursuant to the Project, except to the extent PRI is otherwise informed in
writing by PE or ACLARA at or prior to the time of such delivery or purchase.
PRI agrees to promptly inform PE and ACLARA in writing in the event that it
receives actual knowledge of any claim that any such devices or Microfluidic
Chips, or the use thereof by PRI, infringes the intellectual property rights of
any third party.
9.3.2 PE as to Prototype HTS Chip Devices, HTS Chip Devices excluding
Microfluidic Chips and Low Throughput Devices and PE and ACLARA as to
Microfluidic Chips, shall have the sole and exclusive right to evaluate any
suit, claim or proceeding brought against PRI alleging that any such product
obtained or purchased by PRI from PE or ACLARA infringes any Intellectual
Property of others with respect to which PE and/or ACLARA breached its warranty
set forth in Section 9.3.1 above and to take any and all legal action PE or
ACLARA, as the case may be, shall deem appropriate with respect thereto at PE
and/or ACLARA's expense. PRI shall have the right to participate and be
represented in any such suit by its own counsel at its own expense, but PRI
shall not agree to, and neither PE nor ACLARA shall have any liability for, any
settlement, compromise or dismissal of such suit, or costs incurred in
connection therewith, without PE's or ACLARA's consent, as the case may be, such
consent not to be unreasonably withheld or delayed. Should the use of HTS Chip
Devices or Microfluidic Chips by PRI be enjoined for reasons other than the use
by PRI of any such devices for a particular application of HTS Chip Devices or
Microfluidic Chips as to which PRI has afforded PE and ACLARA an indemnity
pursuant to Section 9.2 above, or if PE or ACLARA believes that the use of any
such products may infringe the Intellectual Property of others, PE may, at its
option, require PRI to discontinue the use of the allegedly infringing product
and, if the product is a Prototype HTS Chip Device, Commercial Instrument or
Microfluidic Chip that has been purchased by PRI for consideration in addition
to the consideration provided for in Section 6 of this Agreement, shall either
(i) substitute an equivalent non-infringing product (and PRI shall promptly
return the infringing or allegedly infringing product to PE at PE's expense,
(ii) modify the product so that it no longer infringes but remain equivalent,
(iii) obtain for PRI, at PE's own expense for Prototype HTS Chip Devices and
Commercial Instruments, and at ACLARA's expense for Microfluidic Chips, the
right to
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continue use of such product, or (iv) refund the purchase price for such
product (or repurchase the Prototype HTS Chip Device for $25,000 in the
case of a Prototype HTS Chip Device). It is expressly understood and agreed
that neither PE nor ACLARA shall have any responsibility or liability for
the use by PRI of any such device or Microfluidic Chip for any particular
application of HTS Chip Devices or Microfluidic Chips as to which PRI
affords PE and ACLARA an indemnity pursuant to Section 9.2 that infringes
the Intellectual Property of any third party. The foregoing states the
entire liability of PE and ACLARA for Intellectual Property infringement
resulting from PRI's ownership, possession or use of Prototype HTS Chip
Devices, Commercial Instruments or other HTS Chip Devices and Microfluidic
Chips provided pursuant to this Agreement.
9.3.3 PRI shall promptly in writing notify PE as to Prototype HTS Chip
Devices, HTS Chip Devices excluding Microfluidic Chips and Low Throughput
Devices, and PE and ACLARA as to Microfluidic Chips, of any suit, claim or
proceeding brought against PRI or any of its Affiliates alleging that any
such product obtained or purchased by PRI from PE or ACLARA infringes any
Intellectual Property of others.
9.3.4 Neither PE nor ACLARA shall have any obligations to PRI under this
Section 9 if infringement results from alteration or modification by PRI
not expressly authorized in writing by PE and ACLARA of Prototype HTS Chip
Devices, Commercial Instruments or other HTS Chip Devices or Microfluidic
Chips.
9.3.5 During the Term of this Agreement and during the Exclusive Right
Period, each Party agrees to promptly notify the other Parties in writing
in the event such Party receives notice of infringement or misappropriation
of any alleged rights asserted by any third party in connection with the
ownership, manufacture, sale, importation or use of Prototype HTS Chip
Devices, Commercial Instruments or Microfluidic Chips.
10. Confidentiality.
10.1 Any proprietary or confidential information or materials belonging to
or generated by a Party or data generated by a Party in performing work in
connection with the Project ("Disclosing Party") which is furnished or
disclosed to or observed by (herein collectively "disclosed") another Party
("Receiving Party") in connection with the Project or negotiations
undertaken in connection with this Agreement (hereinafter "Confidential
Information") will be maintained by Receiving Party as confidential and
held in trust by Receiving Party for the exclusive benefit of Disclosing
Party. Such Confidential Information: (a) will be used by the Receiving
Party solely for the conduct of the Project and any such negotiations; and
(b) will not be disclosed by the Receiving Party to anyone except its
employees and consultants (and those of Affiliates of PRI, PE and
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ACLARA who are bound by the obligations set forth in this Section
10 or obligations substantively equivalent thereto), on a
need-to-know basis, unless previously authorized in writing by the
Disclosing Party. The foregoing restrictions on use and disclosure
shall not apply to any information which: (i) was known to the
Receiving Party prior to its being disclosed hereunder, with
such knowledge being obtained without any obligation of
confidentiality to the Disclosing Party; (ii) is public knowledge
at the time of its being disclosed, or subsequently becomes public
knowledge through no act or omission by or on behalf of the
Receiving Party; (iii) is lawfully disclosed or made available to
the Receiving Party by a third party having no obligation to the
Disclosing Party to maintain the confidentiality of such
information; or (iv) is disclosed to the extent required by law or
legal process, provided that the Receiving Party takes reasonable
and lawful actions to avoid or minimize the extent of such
disclosure and notifies the Disclosing Party as promptly as
feasible of the requirement for such disclosure so that the
Disclosing Party may take actions to prevent or minimize the
extent of such disclosure. The provisions of this Section 10 shall
remain effective for a period of ten (10) years from the
termination or expiration of this Agreement and shall survive the
termination or expiration of this Agreement.
10.2 Each Party represents to the others that all of its employees
and all of the employees of its Affiliates, and any consultant to
such Party or Affiliate, participating in the Project or otherwise
having access to any other Party's Confidential Information are
bound by written agreements to maintain Confidential Information in
confidence and not to use such information except as permitted
herein. Each Party agrees to use its best efforts to enforce
confidentiality obligations to which its employees and consultants
(and those of its Affiliates) are obligated to prevent unauthorized
disclosure or use of Confidential Information of another Party
hereto.
11. Term and Termination.
11.1 Unless earlier terminated or extended in accordance with the
following provisions, the term of the Project shall be the [*]
period commencing as of [*] and ending [*], unless extended by
written agreement of the Parties. PE and ACLARA shall have the
right to extend the term of the Project for up to an aggregate of
[*], by giving PRI written notice of their determination to extend
the original [*] term of the Project at least fifteen days prior to
[*] (the "PE/ACLARA Extension Notice"). Any such PE/ACLARA
Extension Notice may be given more than once as long as the
aggregate of all extensions is no later than [*]. Each such
PE/ACLARA Extension notice will state the date, not later than [*],
to which the Term of the Project is extended. If PE and ACLARA do
not deliver a Prototype Completion Notice to PRI on or before [*],
or, if the Term of the Project has been extended by PE and ACLARA
pursuant to
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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the proceeding sentence to any date earlier than [*], on or before the end of
the extended term of the Project, PRI shall have the right to extend the Term of
the Project for a period of up to [*] additional months, but in any event to no
later than [*], by delivering written notice (the "PRI Extension Notice") after
[*] but before [*] to PE and ACLARA of its election to so extend the Term of the
Project, or, if PE and ACLARA have extended the Term of the Project as set forth
above, by delivering such PRI Extension Notice to PE and ACLARA at any time
prior tot he last day of the extended Term of the Project. In such event, the
Term of the Project shall be extended to the earlier of the date that PE and
ACLARA deliver the Prototype Completion Notice or the date specified in the PRI
Extension Notice, but in no event to later than [*]. During such extended term,
PE and ACLARA shall be relieved of their obligation to allocate [*] FTEs to the
Project set forth in Section 2.1.4, but rather, during any such extended Term of
the Project, shall be required to allocate such reasonable number of FTEs as
they feel is necessary to accomplish the Goals of the Project, but not more than
[*] FTEs, unless they wish to allocate more in each of their sole discretion. If
the Term of the Project has been extended by PRI pursuant to a PRI Extension
Notice, but PE and ACLARA have not agreed, on or prior to [*], that the
application of the number of months of additional commercially reasonable
efforts for which PRI has the right to extend the Term of the Agreement and the
application of [*] FTEs of effort with then existing employees of PE and ACLARA
is likely to result in the Goals of the Project being achieved during the
extended Term of the Project, PRI shall pay PE and ACLARA, at the rates set
forth in this Agreement, for [*] of the FTEs expended by PE and ACLARA during
any period of the extended Term of the Project occurring on or after [*] and PE
and ACLARA shall continue to work on accomplishing the Goals of the Project as
set forth in this Agreement. If the Steering Committee has agreed to such
matter, PRI shall not be required to so reimburse PE and ACLARA. The question of
whether such additional effort is likely to result in the achievement of the
Goals of the Project shall be a matter brought before, discussed by and, if
possible, determined by the Steering Committee at a meeting that may be called
by any Party and that shall be held within the two month period ending on the
last day of the Term of the Project. If all three Parties are not unanimous in
their determination of such question, or the question has not been decided by
the last day of the Term of the Project, the question shall be referred to the
General Manager of PE's PerSeptive Biosystems Center of Excellence, the
President of ACLARA and the President of the R.W. Johnson Pharmaceutical
Research Institute, for resolution. If the matter is not resolved by such
individuals by the 10th day after the end of the Term of the Project, PE and
ACLARA shall be deemed not to have agreed that the application of such number of
months of additional commercially reasonable effort is likely to result in the
Goals of the Project being achieved during the extended Term of the Project,
and, accordingly, PRI shall be required pay PE and ACLARA [*] of the FTEs
expended by PE and ACLARA during any
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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period of the extended Term of the Project occurring on or after [*], as set
forth above.
11.2 If the Term of the Project has been extended pursuant to Section 11.1
above, but the Goals of the Project are not achieved during such extended term,
the Parties shall meet promptly after the expiration of the extended Term of the
Project to discuss and consider whether they wish to further extend the Term of
the Project, whether PRI and/or PE and ACLARA wish to provide further funding
therefor, or what other arrangements they may wish to make. No party shall have
any obligation beyond those set forth in this Agreement to agree to continue to
work or to agree to continue funding, or to agree to any other matter.
11.3 PRI shall have the right to terminate this Agreement on not less than
forty five (45) days prior written notice to PE and ACLARA if any Milestone is
not achieved prior to the end of the ninety (90) day period following the
originally scheduled date for the achievement of the Milestone. Such notice may
be given at any time during the period beginning forty five (45) days after the
Milestone date in question and ending on the fifteenth day after the end of the
last day of the applicable 90 day notice period, unless PE and ACLARA notify PRI
in writing that in their opinion the Milestone in question is not likely to be
achieved on or before the expiration of such 90 day period, in which case PRI
shall be required to give such notice of termination within thirty (30) days
after its receipt of such opinion. If PRI does not give such notice of
termination during the period set forth in the preceding sentence, PRI shall be
deemed to have irrevocably waived its right to give such notice and terminate
this Agreement, but only with respect to the Milestone in question, without
modifying any other Milestone or date for accomplishing such Milestone.
11.4 Except as otherwise specifically provided in this Agreement, either PRI on
the one hand, and PE and ACLARA on the other, may terminate this Agreement upon
written notice to the other in the event of any default by the other, which
default is not cured within 30 days after receipt of written notice thereof by
the non-defaulting Party.
11.5 Either PRI on the one hand, or PE and ACLARA on the other, may terminate
this Agreement by written notice to the other Parties in the event that PRI on
the one hand, or both PE and ACLARA on the other, file in any court or agency
pursuant to any statute or regulation of any state or country, a petition in
bankruptcy or insolvency or for reorganization or for an arrangement or for the
appointment of a receiver or trustee of the Party or of its assets, or if PRI on
the one hand, or both PE and ACLARA on the other, propose(s) a written agreement
of composition or extension of its debts, or is served with an involuntary
petition against it, filed in any insolvency proceeding, and such petition is
not dismissed within sixty days after the filing thereof, or if PRI on the one
hand, or both PE and ACLARA on the other, propose or is (are) a party to any
dissolution or
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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liquidation, or if PRI on the one hand, or both PE and ACLARA on the
other, make an assignment for the benefit of creditors. All rights to
Intellectual Property and licenses granted by PE and/or ACLARA under or
pursuant to this Agreement are, for all purposes of Section 365(n) of
Title 11 of the U.S. Code ("Title 11"), licenses of rights to intellectual
property as defined in Title 11. If a case is commenced by or against
Licensor under Title 11, then, unless and until this Agreement is rejected
as provided in Title 11, Licensor (in any capacity, including
debtor-in-possession) and its successors and assigns (including, without
limitation, a Title 11 trustee) shall either perform all of the
obligations provided in this Agreement to be performed by Licensor or
provide to the licensed Party (hereinafter referred to as "Licensee") all
such intellectual property (including all embodiments thereof) held by
Licensor and such successors and assigns to the extent it is reasonably
feasible to do so, as Licensee may elect in a written request, immediately
upon such request. If a Title 11 case is commenced by or against Licensor,
and this Agreement is rejected as provided in Title 11 and Licensee elects
to retain its rights hereunder as provided in Title 11, then Licensor (in
any capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 trustee) shall provide
to Licensee all such intellectual property (including all embodiments
thereof) held by Licensor and such successors and assigns, to the extent
it is feasible to do so, immediately upon Licensee's written request
therefor. All rights, powers and remedies of Licensee provided herein are
in addition to and not in substitution for any and all other rights,
powers and remedies now or hereafter existing at law or in equity
(including, without limitation, Title 11) in the event of the commencement
of a Title 11 case by or against Licensor. Licensee, in addition to the
rights, powers and remedies expressly provided herein, shall be entitled
to exercise all other such rights and powers and resort to all other such
remedies as may now or hereafter exist at law or in equity (including
Title 11) in such event.
11.6. Upon termination of this Agreement, unless the Parties otherwise
agree, all Parties shall be relieved of any further covenants and
obligations set forth in this Agreement, provided that termination of this
Agreement for any reason shall not relieve either Party from any payment
obligation accrued prior to the date of such termination; and further
provided that the convents and obligations set forth in the following
Sections of this Agreement shall survive in accordance with their
respective terms: Sections 7 (but only if this Agreement is terminated by
PRI for failure to reach a Milestone), 8.1.1, 8.1.2, 9.1, 9.2, 10, 12, 14
through 19, inclusive, 21, 22, 25, 26, 27, 28 and 31.
12. Relationship of the Parties. The relationship between PRI, PE and ACLARA
under this Agreement is that of parties to an arms length negotiated contract
and, with respect to the work hereunder, PE and ACLARA each shall be deemed to
be an independent contractor. Nothing in this Agreement is intended or is to be
construed so as to create between any Party to this Agreement the relationship
of partners or joint
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ventures, or to establish any Party as the employee or agent of any other
Party. No Party hereto has any express or implied right or authority under this
Agreement to make any statements or commitments of any kind or to assume or to
create any obligations on behalf of or in the name of any other Party, or to
bind any other Party hereto to any contract, agreement or undertaking with any
third party or any other Party hereto.
13. Publicity. The Parties contemplate announcing the execution and delivery
of this Agreement shortly after its signing, and may announce or disclose the
successful completion of Milestones. However, no Party shall issue any such
announcement or any other publicity, news releases or other public
announcements, written or oral, whether relating to performance under this
Agreement or the existence of any arrangement between the Parties, without
consulting with the other Parties to this Agreement and obtaining their prior
written approval of such publication, which approval shall not be unreasonably
withheld or delayed.
14. No Implied Licenses or Other Intellectual Property Rights. Other than
expressly stated herein, no licenses or other intellectual property rights
either by estoppel, implication or otherwise, are granted herein.
15. Limitation of Liability. IN NO EVENT SHALL PRI, PE OR ACLARA BE LIABLE,
WHETHER IN CONTRACT, TORT, WARRANTY, OR UNDER ANY STATUTE (INCLUDING WITHOUT
LIMITATION ANY TRADE PRACTICE, UNFAIR COMPETITION OR OTHER STATUTE OF SIMILAR
IMPORT) OR ON ANY OTHER BASIS, FOR, INDIRECT, PUNITIVE, MULTIPLE, INCIDENTAL,
EXEMPLARY, CONSEQUENTIAL OR SPECIAL DAMAGES WHATSOEVER, WHETHER OR NOT
FORESEEABLE AND WHETHER OR NOT A PARTY IS ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, INCLUDING, WITHOUT LIMITATION, DAMAGES ARISING FROM OR RELATED TO LOSS
OF USE, LOSS OF DATA, FAILURE OR INTERRUPTION IN THE OPERATION OF ANY EQUIPMENT
OR SOFTWARE, BUSINESS INTERRUPTION, DELAY IN REPAIR OR REPLACEMENT, FOR LOSS OF
REVENUE OR PROFITS, LOSS OF GOODWILL, LOSS OF BUSINESS OR OTHER ECONOMIC LOSS.
16. No Guarantees or Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, NO PARTY MAKES ANY REPRESENTATION, WARRANTY OR GUARANTY WITH
RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF
THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE
FOREGOING. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, IT IS EXPRESSLY
UNDERSTOOD AND AGREED THAT NO PARTY MAKES ANY WARRANTY, REPRESENTATION OR
GUARANTEE THAT THE GOALS OF THE PROJECT, OR ANY OBJECTIVES OR MILESTONES, WILL
BE ACHIEVED. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, NEITHER PE NOR
ACLARA SHALL HAVE ANY OBLIGATION TO DEVELOP, MARKET OR SELL, OR
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USE ANY EFFORTS TO DEVELOP, MARKET OR SELL, COMMERCIAL INSTRUMENTS. THE DECISION
AS TO WHETHER TO SEEK TO DEVELOP, MARKET OR SELL COMMERCIAL INSTRUMENTS SHALL
BE IN PE'S AND ACLARA'S SOLE DISCRETION.
17. Several Liability of PE and ACLARA. PE's and ACLARA'S liability to PRI
hereunder shall be several, but not joint and several. Each of PE and ACLARA
shall be liable, as and to the extent set forth in this Agreement, to PRI for
breach of Agreement, but PE shall not be liable or responsible for any breach
by ACLARA of any of ACLARA's obligations under this Agreement and ACLARA shall
not be responsible or liable for any breach by PE of any of PE's obligations
under this Agreement.
18. Other Work. The Parties hereto understand and agree that nothing in this
Agreement is intended to preclude any Party from designing, developing,
manufacturing or selling, or otherwise dealing with, instruments and devices,
including devices for electric field driven fluidics on microchannels, and
nothing herein shall be construed as prohibiting, inhibiting or limiting any
Party's right to do so or from carrying out such businesses as a Party elects,
subject only to the express provisions of this Agreement as to Prototype HTS
Chip Devices, Commercial Instruments, Microfluidic Chips and functional
equivalents.
19. Prohibition on Hiring. During the Team of the Project and for a period of
two years thereafter, neither PRI nor any of its Affiliates, nor PE and ACLARA
or any of their respective Affiliates shall, without the employer Party's
express written consent, solicit directly or indirectly or hire any person who
is or within six months of the date of any solicitation or hiring was an
employee of PRI, PE or ACLARA, as the case may be, whether such person is
solicited or sought to be hired as an employee, investigator, independent
contractor or otherwise.
20. Force Majeure. No Party to this Agreement will be liable for any failure
to perform any of its obligations hereunder, except the payment of money,
during any period in which such performance is prevented or delayed by fire,
flood, war, riot, embargo, organized labor stoppage, earthquake, acts of civil
and military authorities or any other acts beyond its reasonable control
(collectively, "force majeure"), provided that the Party suffering such delay
promptly notifies the other Party of the delay.
21. Expenses. Except for the payments provided for in Section 6 or as
otherwise expressly set forth herein, each Party shall bear its own expenses in
attending and participating in meetings, and generally in carrying out work on
the Project.
22. Severability. If any provisions of this Agreement, or any application
thereof to any person, place or circumstance, shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder of
this Agreement and such provisions as apply to other persons, places and
circumstances shall remain in full force.
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23. Performance of Work by Affiliates of PE. It is understood and agreement
that work performed by PE under this Agreement may be performed by or under the
direction of Affiliates if PE, including and in particular PerSeptive
Biosystems, Inc., a Center of Excellence of PE.
24. Low Throughput Devices.
24.1 ACLARA and PE, or either of them, may proceed with the development,
and ultimately the commercialization, of Low Throughput Devices. Without
intending to limit any other rights PE and/or ACLARA may have, the
Parties agree that PE and/or ACLARA shall be free to do so, without
obligation or constraint under this Agreement or the Feasibility
Agreements, and that PRI's only rights therein or with respect thereto
shall be as set forth in this Paragraph 24. Neither PE nor ACLARA shall
have any obligation to develop Low Throughput Devices, and the decision
as to whether or not to do so, or to proceed with commercialization,
shall be in each of PE's and ACLARA's absolute and sole discretion.
24.2 If PE and/or ACLARA develop and offer to the public Low Throughput
Devices for commercial sale, and if this Agreement is not terminated
prior to September 30, 2000, and if the Goals of the Project are not
achieved and PRI declines to accept Substitute Prototype Devices in lieu
of Prototype HTS Chip Devices as provided in Section 6.4, PRI shall have
the following rights with respect to Low Throughput Devices and
Microfluidic Chips used therewith:
(i) By written notice given to PE on or before December 31, 2003, the
right to obtain up to [*] Low Throughput Devices [*] PRI (except payment
or reimbursement of transportation and insurance, FOB manufacturing
facility), and three additional Low Throughput Devices at [*] of PE's
Fully Burdened Manufacturing Cost, all such instruments to be in the base
form and configuration first announced to the public, exclusive of options
and accessories that are offered by PE as optional items. If PRI desires
any optional items, it may purchase same at [*] off list price. Each such
Low Throughput Devices shall be accompanied and delivered, and accepted by
PRI, subject and pursuant to PE's then customary limited warranties and
other terms and conditions applicable to the retail sale of commercial Low
Throughput Devices. If PE's general terms and conditions of sale for Low
Throughput Devices do not include a warranty or other certification or
statement as to Year 2000 compliance, delivery of Low Throughput Devices
pursuant to this Agreement shall include a Statement of Year 2000
Conformity in the form or substantially in the form of the Statement of
Year 2000 Conformity attached as Exhibit 5.4.
(ii) If PRI has obtained or purchased Low Throughput Devices in exercise
of the rights afforded under Subsection (i) of this Section 24.2, the
right to purchase
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Microfluidic Chips, for use only with the maximum of [*] Low Throughput Devices
obtained or purchased in exercise of such rights, during the period beginning
with the acquisition of the first such Low Throughput Device and ending [*] for
the most Favored Price therefor. In all cases the determination of price shall
be made as of the date an order is placed by PRI. Microfluidic Chips purchased
pursuant to this Section 24.2(ii) will be purchased by PRI pursuant to a
microfluidic chip supply agreement containing the terms set forth above in this
Section 24.2(ii), and other terms and conditions to be negotiated by the
Parties.
(iii) If PRI has obtained or purchased Low Throughput Devices in exercise of the
rights afforded under Subsection (i) of this Section 24.2, (a) during the period
beginning with the acquisition of the first such Low Throughput Device and
ending [*], PE and ACLARA shall provide to PRI, at Fully Burdened Manufacturing
Cost, support and service on such Low Throughput Devices at least as
comprehensive as PE provides to commercial customers of Low Throughout Devices
who purchase PE's basic commercial instrument service plan applicable to Low
Throughput Devices. During calendar years [*], PRI shall have the right to
purchase any service contract on commercial Low Throughput Devices offered
generally to the public by PE at a Most Favored Price, for service on any Low
Throughput Devices obtained or purchased by PRI in exercise of the rights
afforded under Section 24.2(i) above.
(iv) Commercial Low Throughput Devices and Microfluidic Chips furnished or sold
to PRI pursuant to this Section 24.2 shall be furnished and sold as set forth
in this Section 24, and as set forth Section 5.4 of this Agreement.
(v) Notwithstanding anything contained in this Section 24.2 to the contrary,
PRI shall not have a right to purchase Low Throughput Devices or Microfluidic
Chips from PE and ACLARA except during periods that such devices and chips are
being sold by PE or ACLARA as a commercial product generally available to the
public or, as to any particular type of Microfluidic Chips that may be
available in inventory, PE and ACLARA have on hand an inventory of such chips
not committed to any third party and otherwise available for sale to PRI. PE
and ACLARA will notify PRI in writing when Low Throughput Devices and
Microfluidic Chips therefor are being sold by PE or ACLARA as a commercial
product generally available to the public. PE will be the distributor of such
devices and chips to PRI, unless the Parties otherwise agree in writing. PRI
will provide PE with reasonably estimated chip requirements with at least six
months lead time to the extent feasible. Estimates will be updated quarterly.
24.3 If PE and/or ACLARA develop and offer to the public Low Throughput Devices
for commercial sale prior to the end of the Term of the Project, PRI shall have
the right to buy [*] Low Throughput Devices at [*] of Fully Burdened
Manufacturing Cost, such right to expire on [*]. If PRI
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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purchases Low Throughput Devices in exercise of the right granted in the
preceding sentence, and then obtains the right to acquire Low Throughput
Devices pursuant to Section 24.2(i), the number of Low Throughput Devices
that PRI has a right to acquire at [*] of Fully Burdened Manufacturing
Cost under Section 24.2(i) shall be reduced by the number of Low Through
Devices acquired in exercise of the right granted by the preceding
sentence.
25. Due Authority and Execution. PE and ACLARA, severally but not jointly and
severally, represent and covenant that the execution, delivery and performance
of this Agreement have been duly authorized by all necessary corporate actin,
and that to the best of each of its knowledge and belief, the execution,
delivery and performance of this Agreement does not and will not conflict with
or contravene any provision of any charter document or by-law, or any other
agreement or obligation to which PE or ACLARA, as the case may be, is bound. PRI
represents and covenants that the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action, and that
to the best of its knowledge and belief the execution, delivery and performance
of this Agreement do not and will not conflict with or contravene any provision
of any charter document or by-law, or any other agreement or obligation to which
PRI is bound.
26. Documentation. At the request of any Party, the other Party or Parties
shall execute and deliver such bills of sale, assignments, licenses and other
documents as may be necessary to fully vest in the Party entitled thereto all
right, title and interest to which it is entitled pursuant to this Agreement.
27. Dispute Resolution.
27.1 Steering Committee. If the Steering Committee is unable to come to
unanimous agreement on any matter presented to it by a Party which any
Party declares and notifies the other Parties in writing is a major matter
as to which the Steering Committee as been unable to come to agreement (a
"Major Matter Notice"), such matter shall be referred to the General
Manage of PE's PerSpective Biosystems Center of Excellence, the President
of ACLARA and the President of the R.W. Johnson Pharmaceutical Research
Institute, for resolution. If the matter is not resolved by such
individuals within fifteen (15) days from the date of the Major Matter
Notice, and the Steering Committee had previously taken a position on such
matter (such as having approved the Research Plan, Functional Requirements
or Project Milestones), the matter shall remain in status quo.
27.2 Other Controversies and Claims. Any claim arising out of or relating
to this Agreement or the validity, enforcement, or breach thereof, shall
be first referred to the General Manager of PE's PerSeptive Biosystems
Center of Excellence, the President of ACLARA and the President of the
R.W. Johnson Pharmaceutical Research Institute, for resolution. If such
individuals cannot
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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resolve the matter by agreement of the Parties within fifteen (15) days of
the matter being referred to them by any Party, the controversy or claim
may be referred to arbitration upon written request by any Party given to
the other Parties, and, if referred to arbitration, settled by arbitration
before a single arbitrator in accordance with the Commercial Arbitration
Rules of the American Arbitration Association ("AAA") then pertaining,
except where those rules conflict with this provision, in which case this
provision controls. The Parties hereby consent to the jurisdiction of the
Federal District Court for the Northern District of California for the
enforcement of these provisions and the entry of judgment on any award
rendered hereunder. Should such court for any reason lack jurisdiction, any
court with jurisdiction may enforce this clause and enter judgment on any
award. The arbitrator shall be an attorney specializing in business
litigation who has at least 15 years of experience with a law firm of over
25 lawyers or who was a judge of a court of general jurisdiction. The
arbitration shall be held in San Francisco, California and the arbitrator
shall apply the substantive law of State of California, except that the
interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. Within 30 days of initiation of
arbitration, the Parties shall reach agreement upon and thereafter follow
procedures assuring that the arbitration will be concluded and the award
rendered within no more than six months from selection of the arbitrator.
Failing such agreement, the AAA will designate and the Parties will follow
such procedures. Each Party has the right before or during the arbitration
to seek and obtain from the appropriate court provisional remedies such as
attachment, preliminary injunction, replevin, etc., to avoid irreparable
harm, maintain the status quo or preserve the subject matter of the
arbitration. THE ARBITRATOR SHALL NOT AWARD ANY PARTY INDIRECT, PUNITIVE,
MULTIPLE, INCIDENTAL, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES, AND,
WITHOUT LIMITING THE GENERALITY OF SECTION 15 OF THIS AGREEMENT, EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH DAMAGES.
28. Notices. All notices required to be sent by a Party under this Agreement
shall be deemed given: (i) when sent by confirmed facsimile or telecopy; (ii)
one business day after being sent by commercial overnight courier with written
verification of receipt; or (iii) when received after being mailed, postage
prepaid, by certified or registered mail, return receipt requested, to the
Party being notified, at the respective addresses set forth in the first
paragraph of this Agreement, or at such other address which may hereinafter be
designated in writing. All such notices shall be addressed to "President or
General Counsel." Fax numbers for notices shall be as follows, unless changed
by a Party by written notice:
PRI Fax No. 908-704-9468
PE Fax No. 508-833-7468
ACLARA Fax No. 510-293-1859
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Copies of all notices to PRI shall be sent as provided above to:
Office of the General Counsel
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Fax No: 732-524-2808
29. Counterparts. This Agreement may be executed in one or more counterparts,
each of which when executed shall be an original, but all of which taken
together shall constitute one of the same instrument.
30. Waiver. The delay or failure of any Party at any time or times to require
performance of any provisions of this Agreement shall in no manner affect the
rights at a later time to enforce the same. No waiver by any Party of any
condition or of the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed to be, or
considered as, a further or continuing waiver of any such condition or of the
breach of such term or any other term of this Agreement.
31. No Third Party Beneficiaries. No third party, including any employee or
consultant of any Party to this Agreement, shall have or acquire any rights by
reason of this Agreement.
32. Miscellaneous. This Agreement sets forth the entire understanding of PE,
PRI and ACLARA concerning the subject matter hereof and supersedes any prior or
contemporaneous agreements relating thereto, including, without limitation,
the Feasibility Agreements. This Agreement may not be amended except by a
writing duly signed on behalf of PE, PRI and ACLARA. This Agreement shall be
binding upon and inure to the benefit of the Parties and their respective legal
representatives, successors and permitted assigns. No Party may assign its
rights or obligations hereunder without prior written consent of the other
Parties, which consent shall not be unreasonably withheld or delayed. Section
and subsection headings are inserted for convenience of reference only and do
not form a part of, and shall not be used in the construction or interpretation
of, this Agreement. This Agreement shall be governed by the laws of the State
of California, U.S.A., without regard to its choice or conflict of law
principles.
[Signature page follows.]
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IN WITNESS WHEREOF, and intending to be legally bound, the Parties hereto have
caused this Agreement to be executed by their duly authorized representatives
as of the first date written above.
THE R.W. JOHNSON
PHARMACEUTICAL RESEARCH
INSTITUTE, A DIVISION OF ORTHO-
THE PERKIN-ELMER CORPORATION McNEIL PHARMACEUTICAL, Inc.
(PE BIOSYSTEMS DIVISION)
By: /s/ [signature illegible] By: /s/ [signature illegible]
----------------------------- ------------------------------
Name: JOSEPH E. MALANDRAKIS Name: [Illegible]
--------------------------- -----------------------------
Title: Vice President Title: President
--------------------------- ----------------------------
Date: Date: March 23, 99
---------------------------- ----------------------------
ACLARA BIOSCIENCES, INC.
By: /s/ JOSEPH M. LIMBER
-----------------------------
Name: Joseph M. Limber
---------------------------
Title: President, CEO
---------------------------
Date: March 24, 1999
----------------------------
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EXHIBIT 2.2.1
CURRENT MOLAR CONSUMPTION OF SCREENING TARGETS,
CHEMICAL LIBRARIES AND SUBSTRATES
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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EXHIBIT 2.2
RESEARCH PLAN
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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EXHIBIT 2.3
PROJECT MILESTONES
[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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[*]
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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EXHIBIT 5.4
STATEMENT OF YEAR 2000 CONFORMITY
A YEAR 2000 READINESS DISCLOSURE
The (product) has been functionally tested and found to perform successfully in
accordance with PE Biosystem's internal quality test plan requirements for Year
2000 compliance which utilize, as their basis, the British Standards
Institution's (BSI) DISC PD2000-1(1), A definition of Year 2000 Conformity
Requirements, which states, as more fully set forth therein: Year 2000
conformity shall mean that neither performance nor functionality is affected by
dates prior to, during and after the year 2000 In particular.
Rule 1. No value for current date will cause any interruption in
operation.
Rule 2. Date-based functionality must behave consistently for dates
prior to, during and after year 2000.
Rule 3. In all interfaces and data storage, the century in any date must
be specified either explicitly or by unambiguous algorithms or
inferencing rules.
Rule 4. Year 2000 must be recognized as a leap year.
This Year 2000 Readiness Disclosure does not extend to dates beyond the year
2019, is limited to the product listed above, and specifically excludes any Year
2000 related compliance problems which are introduced or caused by (i) any
hardware not developed by PE, (ii) any computer BIOS, (iii) any computer
operating system, or (iv) any application software not developed by PE
Biosystems.
In the event that this Year 2000 Readiness Disclosure is incorrect, PE
Biosystems will, at its option, repair or replace any defective components or
software, provide conforming software upgrades, notify the customer of a
commercially reasonable workaround, or provide a pro-rated refund of the
purchase price upon return of the product. The foregoing sets forth the
customer's sole and exclusive remedy for any Year 2000 non-conformance. This
Year 2000 Readiness Disclosure is subject in all respects to, and is limited
by, PE Biosystems' standard product warranties and limitations of remedies and
liability as set forth in PE Biosystems' standard terms and conditions of sale.
This Year 2000 Readiness Disclosure is PE Biosystems' sole statement regarding
Year 2000 conformance and supercedes and replaces any statement, certification,
verification, representation, warranty, or other agreement that is more
extensive than, contrary to, or inconsistent with, this statement.
________________
Signature
Title, etc.
(1) DISC PD2000-1, A definition of Year 2000 Conformity Requirements. DISC is
a part of the British Standards Institution, BSI, 389 Chiswick High Road,
London W4 4AL, United Kingdom.
(2) Perkin-Elmer has defined the Year 2019 as the upper limit for assuring
Year 2000 Compliance.
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EXHIBIT 10.14
COLLABORATION AGREEMENT
This Collaboration Agreement ("Agreement") dated as of the 25th day of
April, 1998 between SOANE BIOSCIENCES, INC., 3906 Trust Way, Hayward, California
94545-3716 (hereinafter "SBio") and THE PERKIN-ELMER CORPORATION, having its PE
Applied Biosystems Division at 850 Lincoln Centre Drive, Foster City, CA 94404
(hereinafter "Perkin-Elmer").
WHEREAS, SBio has proprietary technology and know-how with respect to
microfluidic electrophoresis devices; and
WHEREAS, SBio has certain skills and know-how related to the manufacture
of such devices; and
WHEREAS, Perkin-Elmer has certain skills and know-how related to genetic
analysis systems utilizing electrophoresis, and the marketing, sales and
support of products incorporating such systems; and
WHEREAS, SBio and Perkin-Elmer desire to enter into a collaboration with
the objective of developing genetic analysis systems incorporating such
microfluidic electrophoresis devices; and
WHEREAS, both Parties recognize that each has rights to pre-existing
intellectual properties which may directly or indirectly contribute to the
commercialization of such genetic analysis systems and understand that in the
process of developing the genetic analysis systems contemplated by the
collaboration, both parties will reveal to each other relevant intellectual
property that existed prior to the effective date of the collaboration under
appropriate confidentiality and nondisclosure provisions, irrespective of
whether the intellectual property is an issued patent, a pending patent
application, a trade secret, know-how or otherwise; and
WHEREAS, SBio desires to manufacture such microfluidic electrophoresis
devices and supply Perkin-Elmer's requirements therefor; and
WHEREAS, SBio is willing to grant exclusive rights to Perkin-Elmer to make
and sell genetic analysis systems; and
WHEREAS, SBio is willing to grant co-exclusive rights to Perkin-Elmer to
use such genetic analysis systems; and
WHEREAS, the Parties have entered into a certain Series E Redeemable
Preferred Stock Purchase Agreement at a later date (the "Equity Agreement").
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<PAGE> 2
NOW THEREFORE, in considerations of the mutual covenants and promises
contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
1.1. "Affiliates" will mean any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly
owns, is owned by or is under common ownership with a Party to this
Agreement, as the case may be, to the extent of at least fifty
percent of the equity (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular
jurisdiction) having the power to vote on or direct the affairs of
the entity.
1.2. "Intellectual Property Rights" will mean all intellectual property
rights worldwide arising under statutory or common law, and whether
or not perfected, including, without limitation, all (1) patents,
patent applications and patent rights; (2) rights associated with
works of authorship including copyrights, copyright applications,
copyright registrations, mask works, mask work applications, mask
work registrations; (3) rights relating to the protection of trade
secrets and confidential information, (4) any right analogous to
those set forth in this definition and any other proprietary rights
relating to intangible property (other than trademark, trade dress,
or service mark rights); and (5) divisions, continuations, renewals,
reissues, continuing prosecution, and extensions of the foregoing (as
and to the extent applicable) now existing, hereafter filed, issue or
acquired.
1.3. "Pre-Collaboration SBio Intellectual Property" will mean all
Intellectual Property Rights relating to Microfluidic Eletrophoresis
Devices that are owned by, either partially or wholly, or licensed
to, SBio as of the Effective Date. In particular, Pre-Collaboration
SBio Intellectual Property will include U.S. Patent No. 5,126,022 and
any Related Patents.
1.4. "Collaboration SBio Intellectual Property" will mean all Intellectual
Property Rights arising out of work performed pursuant to the
obligations of this Agreement, conceived and/or reduced to practice
during the Contact Period solely by one or more employees or agents
of SBio.
1.5. "Collaboration Joint Intellectual Property" will mean all
Intellectual Property Rights arising out of work performed pursuant
to the obligations of this Agreement, which is jointly conceived and/
or reduced to practice during the Contract Period by one or more
employees or agents of SBio, and by one or more employees or agents
of Perkin-Elmer.
1.6. "Collaboration Perkin-Elmer Intellectual Property" will mean all
Intellectual Property Rights arising out of work performed pursuant
to the
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<PAGE> 3
obligations of this Agreement, conceived and/or reduced to practice
during the Contract Period solely by one or more employees or agents
of Perkin-Elmer.
1.7. "Contract Period" or "Contract Term" will mean the term beginning on
the Effective Date and ending on the date of termination.
1.8. "Effective Date" will mean the date of this Agreement first written
above or such later date as the Parties will determine by mutual
agreement.
1.9. "Net Sales" will mean (1) with respect to sales by a Party, or an
Affiliate of a Party, or a distributor of a Party to non-affiliated
third party purchasers, the actual amount of gross sales of Licensed
Product(s) to a third party, less: trade, cash and quantity discounts
granted at the time invoice, if any, actually allowed, amounts
refunded for faulty or defective product, returns, rejections,
freight, insurance and other transportation costs (except income
taxes), tariffs, duties and similar governmental charges paid, to the
extent included in gross sales price, (2) with respect to sales by a
Party made to any Affiliate or to any person, firm or corporation
enjoying a special course of dealing with a Party, the Net Sales will
be determined based on the first resale in a bona fide arms-length
transaction of Licensed Product(s) by such Affiliate, person, firm or
corporation to third parties, and (3) with respect to Licensed
Product(s) which are used by a Party, or an Affiliate of a Party, to
supply services or information to a third party for commercial
purposes, or are otherwise disposed of, the Net Sales shall be
determined as if such Licensed Product(s) has been sold at the
average Net Sales for such Licensed Product(s) during the past one
hundred and twenty days.
1.10. "Party" will mean SBio or Perkin-Elmer and, when used in the plural,
will mean SBio and Perkin-Elmer.
1.11. "Licensed Patent" will mean any patent or patent application claiming
or disclosing Pre-Collaboration SBio Intellectual Property,
Collaboration SBio Intellectual Property, and/or Collaboration Joint
Intellectual Property, including any Related Patents.
1.12. "Licensed Product" will mean any product for use in the Licensed
Field which, but for the license granted hereunder, manufacture, use
or sale thereof would infringe at least one Valid Claim of a Licensed
Patent.
1.13. "Valid Claim" will mean a claim of a patent which has not been held
invalid or otherwise unenforceable by a court of competent
jurisdiction or has not otherwise finally been held unpatentable by
an appropriate.
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administrative agency.
1.14. "Prosecute" will mean, in the context of prosecuting pending Patent
Applications, taking necessary actions, including conducting
oppositions and interferences, to perfect the patent rights to an
invention.
1.15. "Genetic Analysis Field" will mean any method comprising an
analysis of nucleic acids [*].
1.16. "Licensed Field" means the Genetic Analysis Field.
1.17. "Microfluidic Electrophoresis Device" will mean a device [*], glass
or plastic, which, but for the license granted hereunder,
manufacture, use or sale thereof would infringe at least one Valid
Claim of a Licensed Patent.
1.18. "Genetic Analysis Systems" will mean instrument systems for
performing Genetic Analysis which utilize a Microfluidic
Electrophoresis Device.
1.19. "Related Patent" will mean a patent or patent application which
(1) discloses and/or claims substantially the same subject matter
as a Licensed Patent, (2) discloses and/or claims improvements to
inventions disclosed or claimed in a Licensed Patent and requires
rights under the Licensed Patent to exploit such improvements,
and/or (3) claims priority to a Licensed Patent, including but not
limited to continuation applications and patents,
continuation-in-part applications and patents, divisional
applications and patents, reexamination applications and patents,
reissue applications and patents, and continuing prosecution
applications and patents, and (4) any foreign equivalents of
Licensed Patents.
1.20. "Start Development Checkpoint" will mean that point in a project at
which a report is produced which documents that the following
parameters have been established with respect to a Licensed
Product(s): [*].
1.21. "Technology Access Partners" will mean third parties who receive
early access to Genetic Analysis Systems and Microfluidic
Electrophoresis Devices developed under the Work Plan for their
internal use only, pursuant to a Technology Access Agreement.
1.22. "Technology Access Agreement" will mean an agreement between one or
both Parties and a Technology Access Partner defining the terms and
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE> 5
conditions under which the Technology Access Partner receives early
access to Genetic Analysis Systems and Microfluidic Electrophoresis
Devices.
1.23. "Confidential Information" will include confidential knowledge,
know-how, practices, processes, equipment or information which (1)
is obtained or generated during the course of this work and (2) is
related thereto and, except for generated information (3) is
identified at the time of disclosure as "CONFIDENTIAL" and, in the
case of disclosures in non-written form, is identified in writing
within thirty days as confidential. Notwithstanding the above,
Confidential Information will not include, and nothing in Section 6
will in any way restrict the rights of either SBio or Perkin-Elmer
to use, disclose or otherwise deal with, any information which:
(a) can be demonstrated to have been in the public domain
as of the Effective Date or comes into the public domain during the
term of this Agreement through no act of the recipient; or
(b) can be demonstrated to have been independently known to
the recipient prior to the receipt thereof, or made available to
the recipient as a matter of lawful right by a third party; or
(c) can be demonstrated to have been rightfully received by
the recipient from a third party who did not require the recipient
to hold it in confidence or limit its use and who did not acquire
it, directly or indirectly, from the other Party to this Agreement
under a continuing obligation of confidentiality; or
(d) will be required for disclosure to any governmental
regulatory agencies pursuant to approval for use; or
(e) is independently conceived, invented or acquired by
researchers of the recipient who have not been personally exposed
to the information provided to the recipient hereunder; or
(f) is published by a governmental agency as part of the
normal patent filing and prosecution process.
2. FEASIBILITY PHASE
2.1 Purpose. During the "Feasibility Phase" the Parties will work both
jointly and independently to establish the technical and commercial
feasibility of all proposed Licensed Product(s). All proposed
Licensed Product(s), whether under this Agreement or otherwise,
must be approved by the Joint Steering Committee per Section 4. The
Feasibility Phase of a project will
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<PAGE> 6
continue until a Start Development Checkpoint has been achieved for
that product.
2.2 Work Plan. Feasibility of Licensed Product(s) will be established by
the Parties in accordance with a Work Plan. The Work Plan will set
forth a plan of action to achieve a Start Development Checkpoint. The
Work Plan will be defined and modified as required from time to time
by the Joint Steering Committee.
2.3 Commitment of Resources. Each Party will commit at least [*] over a
period of four years to the execution of the Work Plan.
2.4 Feasibility Teams. Each Party will assign personnel to its feasibility
team with the appropriate skills and experience to accomplish the work
established in the Work Plan. It is expected that such teams will work
together to accomplish the objective of the collaboration including,
if appropriate, conducting efforts at the same facility.
2.5 Technology Access Program. Funding for the Work Plan may be obtained
through Technology Access Agreements between one or both Parties and a
Technology Access Partner. A Technology Access Agreement must be
mutually agreed to by the Parties. Neither Party will enter into a
Technology Access Agreement without the prior written consent of the
other Party. However, terms and conditions relating directly to the
purchase of equity in SBio will be at the sole discretion of SBio.
3. COMMERCIALIZATION PHASE
3.1 Purpose. The purpose of this phase of the collaboration is the
facilitation of a cost effective manufacturing program for Licensed
Product(s) and the development and implementation of a plan for the
marketing, sales and support of Licensed Product(s). This
"Commercialization Phase" with respect to each Licensed Product, will
commence upon reaching a Start Development Checkpoint for the Licensed
Product.
3.2 Marketing, Sales and Support. In order to effectively market Licensed
Product(s) the Parties agree that:
3.2.1. Licensed Product(s) will be exclusively marketed, sold and
supported (including customer training and application
support of customers) through the sales and service
organization of Perkin-Elmer, its Affiliates and
distributors, in accordance with a marketing plan to be
developed by Perkin-Elmer.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE> 7
3.2.2. Perkin-Elmer will be responsible for all expenses
related to the marketing, sales and support of Licensed
Product(s); and
3.2.3. Perkin-Elmer will include appropriate statements in its
marketing literature concerning Licensed Product(s) to
indicate that such Licensed Product(s) is being
manufactured under a license from SBio.
3.3 Sale and Purchase. Subject to the terms and conditions of this
Agreement, SBio will sell to Perkin-Elmer and Perkin-Elmer will
purchase from SBio units of the Microfluidic Electrophoresis
Devices.
3.3.1. Supply Agreement. Upon the Parties reaching a
Start Development Checkpoint, the Parties will
develop and enter into a supply agreement which,
consistent with this Agreement, will govern the
purchase and sale of Microfluidic
Electrophoresis Devices by SBio to Perkin-Elmer.
Such supply agreement will contain provisions
which, in addition to customary warranty,
representations and indemnification provisions,
will (1) set forth a commercially reasonable
plan for SBio to supply Microfluidic
Electrophoresis Devices to Perkin-Elmer in
satisfaction of Perkin-Elmer's requirements as
to volume, cost, physical specifications,
regulatory requirements and schedule, and (2)
obligate SBio to provide technical support to
Perkin-Elmer (but not directly to Perkin-Elmer's
customers). Reasonable minimum purchase
quantities will be negotiated between the
Parties in good faith.
3.3.1.1. Transfer Price. The transfer price of
the Microfluidic Electrophoresis
Devices will be determined before their
development by the Joint Steering
Committee. In the event a price change
of a Microfluidic Electrophoresis
Device becomes necessary for any
reason, such as a model change, a major
change of the competitive situation
with respect to price performance or
any other reasonable cause, the Parties
will, in good faith, negotiate,
primarily through the Joint Steering
Committee, to establish a reasonable
transfer price.
3.3.2. SBio Unwilling or Unable to Supply Microfluidic
Electrophoresis Devices to Perkin-Elmer. If SBio
is unable or unwilling to supply Microfluidic
Electrophoresis Devices to Perkin-Elmer in
accordance with Section 3.3.1, such Microfluidic
Electrophoresis Devices will be made by
Perkin-Elmer or its designate and SBio will
receive a share of Net Sales of such
Microfluidic Electrophoresis Devices as set
forth in Section 3.3.2.1 below, provided,
however, that SBio will
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<PAGE> 8
have [*] following notice by Perkin-Elmer, to
remedy any cause for non-compliance with the
requirements of Section 3.3.1.
3.3.2.1. Share of Net Sales. Where SBio is not
the supplier of Microfluidic
Electrophoresis Devices as provided in
Section 3.3.2, Perkin-Elmer will pay
SBio a revenue share of [*] of Net
Sales of Microfluidic Electrophoresis
Devices sold by Perkin-Elmer, its
Affiliates, distributors and
sublicensees. Following
commercialization of Licensed
Product(s), after the end of each
fiscal month, Perkin-Elmer will provide
SBio with a report of the estimated Net
Sales of Microfluidic Electrophoresis
Devices sold during the previous month,
including information concerning total
units sold during the month. Based upon
this report, Perkin-Elmer will submit
payment of an estimated revenue share
to SBio within thirty days after the
end of each month. Within sixty days
after the end of each fiscal quarter,
Perkin-Elmer will provide SBio with a
report of actual Net Sales of
Microfluidic Electrophoresis Devices
for that fiscal quarter and shall
compute an actual revenue share owed by
Perkin-Elmer to SBio. Payment of such
actual revenue share will accompany
this report. In the event that there is
a difference between the estimated Net
Sales and the actual Net Sales of
Microfluidic Electrophoresis Devices,
for a given fiscal quarter, the Parties
will make an adjustment to the actual
revenue share to reflect this
difference.
3.3.3. Payments. All payments under this Section 3.3
shall be made in United States dollars by wire
transfer to a bank account designated by SBio in
full, without deductions of taxes charges and
any other duties that may be imposed. For
converting payments due on sales made in
currencies other than United States dollars into
United States dollars, Perkin-Elmer will convert
such payments at the closing commercial sell
rate of exchange for United States dollars and
each currency involved as quoted by Citibank,
N.A., or any successor thereto, in New York on
the last business day of the relevant period.
3.4. Perkin-Elmer Contributes to Manufacture of Microfluidic
Electrophoresis Device. In the event that the manufacture of
Microfluidic Electrophoresis Devices requires the participation
of Perkin-Elmer, the Parties will negotiate the terms of such
participation in good faith.
3.5. Provision of Genetic Analysis Systems to SBio.
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE> 9
3.5.1. Perkin-Elmer will provide prototype Genetic Analysis Systems
to SBio at Perkin-Elmer's internal transfer cost, for SBio's
internal use only, as such systems become available. The
number of systems so provided will be determined by the
Parties.
4. JOINT STEERING COMMITTEE
4.1. Purpose. A Joint Steering Committee will be established to oversee the
collaboration throughout the term of this Agreement. The purpose of
the Joint Steering Committee will be:
(a) to oversee all aspects of the collaboration, including
development and implementation of the Work Plan, manufacturing
(supply), marketing, sales, and support of Licensed Product(s);
(b) to review and evaluate progress under the Work Plan with
respect to the development of Licensed Product(s), including annual
budgets;
(c) to recommend and ensure implementation of changes to the
Work Plan as appropriate; and
(d) to organize the Feasibility Team(s) and oversee and direct
their activities.
4.2. Membership. The Joint Steering Committee will be comprised of four
employees each from SBio and Perkin-Elmer, appointed at the sole
discretion of the respective Parties. Substitute employees may be
appointed at any time. The Joint Steering Committee will be chaired in
the first year by a senior representative from SBio, and thereafter on
a rotating annual basis, by a senior representative from SBio or
Perkin-Elmer.
4.3. Meetings. The Joint Steering Committee will meet as often as is
reasonably necessary to accomplish its purpose but at least quarterly,
on a mutually agreeable date and at a place selected initially by SBio
and then by each party in turn thereafter. Representatives of SBio or
Perkin-Elmer, or both, in addition to members of the Joint Steering
Committee, may attend such meetings at the invitation of either Party.
4.4. Joint Steering Committee Decisions and Dispute Resolution. Decisions
regarding Development and Commercialization of Licensed Product(s)
will be made by consensus. If the Joint Steering Committee is unable
to reach agreement, within ten days the matter will be submitted for
resolution to the President of SBio and the President of the PE
Applied
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<PAGE> 10
Biosystems Division of Perkin-Elmer. In the event that the Presidents
for each Party cannot reach agreement within ten days after receiving
notice from the Joint Steering Committee, which period may be extended
by mutual agreement of the Parties, then either Party may initiate
arbitration in accordance with this section under the rules of the
American Arbitration Association then in effect. A Party will notify
the other in writing should it intend to arbitrate. The Parties will
select, by mutual agreement, a neutral expert from the National Panel
of Arbitrators of the AAA, within thirty days after receipt of such
notice. Should no arbitrator be chosen within the above period, the
AAA will appoint the arbitrator within thirty days after the end of
such period. The laws of the State of California will apply to the
arbitration proceedings. The decision of the arbitrators with respect
to this agreement will be final and binding on the Parties and their
legal successors.
4.5 Expenses. The Parties shall each bear all expenses of their respective
members related to their participation on the Joint Steering
Committee.
5. INTELLECTUAL PROPERTY; PATENT PROSECUTION AND LITIGATION; LICENSES
5.1. Ownership of Intellectual Property
5.1.1. Pre-Collaboration SBio Intellectual Property and Collaboration
SBio Intellectual Property. All rights and title to
Pre-Collaboration SBio Intellectual Property and Collaboration
SBio Intellectual Property, whether patentable or copyrighted
or not, will belong to SBio and will be subject to the terms
and conditions of this Agreement.
5.1.2. Collaboration Joint Intellectual Property. All rights and title
to Collaboration Joint Intellectual Property, whether
patentable or copyrightable or not, will belong jointly to
Perkin-Elmer and SBio and will be subject to the terms and
conditions of this Agreement.
5.1.3. Collaboration Perkin-Elmer Intellectual Property. All rights
and title to Collaboration Perkin-Elmer Intellectual Property,
whether patentable or copyrightable or not, will belong to
Perkin-Elmer. Such Perkin-Elmer Intellectual Property will be
subject to the terms and conditions of this Agreement.
5.2. Invention Disclosures. SBio and Perkin-Elmer agree to use reasonable
efforts to report inventions conceived and/or reduced to practice that
are within the scope of the collaboration intellectual property
described in Sections 1.3, 1.4, 1.5 and 1.6 within thirty days of
their identification
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thereof.
5.3 Filing of Patent Applications.
5.3.1. Collaboration SBio Intellectual Property. SBio will have the
first right, using in-house or outside legal counsel selected
by SBio's sole discretion, to prepare, file, Prosecute,
maintain and extend patent applications for Collaboration SBio
Intellectual Property in countries of SBio's choosing, and SBio
will bear all costs relating to such activities which occur at
SBio's request or direction. SBio will solicit Perkin-Elmer's
advice and review of SBio applications relating to Licensed
Product(s) and take into consideration Perkin-Elmer's advice
thereon. If SBio elects not to prepare, file, Prosecute or
maintain certain of such patent applications or certain claims
encompassed within such applications, in one or more countries,
SBio will give Perkin-Elmer notice thereof within a reasonable
period prior to allowing such patents or claims to lapse or
become abandoned or unenforceable, and Perkin-Elmer will
thereafter have the right, at its sole expense, to prepare,
file, Prosecute, and maintain such applications in its own name
in such one or more countries. SBio will, at SBio's expense,
provide reasonable assistance to Perkin-Elmer to facilitate the
filing and prosecution of all such applications and will
execute all documents deemed necessary or desirable therefor.
Perkin-Elmer and SBio will each hold all information it
presently knows or acquires under this Section as confidential
information in accordance with Section 6.
5.3.2. Collaboration Perkin-Elmer Intellectual Property. Perkin-Elmer
will have the first right, using in-house or outside legal
counsel selected by Perkin-Elmer's sole discretion, to prepare,
file, Prosecute, maintain and extend patent applications for
Collaboration Perkin-Elmer Intellectual Property in countries
of Perkin-Elmer's choosing, and Perkin-Elmer will bear all
costs relating to such activities which occur at Perkin-Elmer's
request or direction. Perkin-Elmer will solicit SBio's advice
and review of Perkin-Elmer's applications relating to Licensed
Product(s) and take into consideration SBio's advice thereon.
If Perkin-Elmer elects not to prepare, file, Prosecute or
maintain certain of such patent applications or certain claims
encompassed within such applications, in one or more countries,
Perkin-Elmer will give SBio notice thereof within a reasonable
period prior to allowing such patents or claims to lapse or
become abandoned or unenforceable, and SBio will thereafter
have the right, at its sole expense, to prepare, file,
Prosecute, and maintain such applications
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<PAGE> 12
in its own name in such one or more countries. Perkin-Elmer
will, at Perkin-Elmer's expense, provide reasonable
assistance to SBio to facilitate the filing and prosecution
of all such applications and will execute all documents
deemed necessary or desirable therefor. Perkin-Elmer and SBio
will each hold all information it presently knows or acquires
under this Section as confidential information in accordance
with Section 6.
5.3.3. Collaboration Joint Intellectual Property. With respect to
Collaboration Joint Intellectual Property, Perkin-Elmer and
SBio will jointly determine the advisability of filing a
patent application or application for other intellectual
property thereon. The Joint Steering Committee, as
appropriate, will appoint one of the Parties the
responsibility to prepare, file, Prosecute diligently and
maintain such application(s). The Parties will share equally
all reasonable costs incurred in connection with such
activities (the non-prosecuting Party will promptly reimburse
the prosecuting Party); provided that either Party may avoid
its responsibility for such costs by assigning its rights in
such Collaboration Joint Intellectual Property to the other
Party. If either Party assigns to the other its rights in
such Collaboration Joint Intellectual Property as set forth
above, the other Party will be free to decide, in its sole
discretion, whether or not to file or continue prosecution or
maintain any such application(s), and whether or not to
maintain any protection issuing thereon in the U.S. and in
any foreign country. Any such filing, prosecution or
maintenance will then be at the assignee's sole expense.
5.4. SBio's License of Intellectual Property to Perkin-Elmer.
5.4.1. Exclusive License. SBio grants to Perkin-Elmer an exclusive
license under Licensed Patents to make, have made, offer to
sell and sell Licensed Product(s) in the Licensed Field,
subject to SBio's rights set forth in Section 3.3 and the
exclusion of Section 5.4.3.
5.4.2. Co-Exclusive License. SBio grants to Perkin-Elmer a
co-exclusive license under the Licensed Patents to use
Licensed Product(s) in the Licensed Field, including the
right to grant a sublicense to customers to use Licensed
Product(s), subject to the exclusion of Section 5.4.3.
5.4.3. [*] Exclusion From Licenses. The exclusive license
granted in Section 5.4.1 and the co-exclusive license granted
in Section
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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5.4.2 expressly exclude the sale of Licensed Product(s)
[*].
5.4.4. Grantback from Perking-Elmer to SBio. In the event that the
Joint Steering Committee decides, pursuant to Section 2.1,
that SBio will independently develop Licensed Product(s)
outside of a Workplan, Perkin-Elmer grants to SBio a
non-exclusive license under Licensed Patents to make, have
made, offer to sell and sell such independently-developed
Licensed Product(s) in the Licensed Field.
5.5. PATENT LITIGATION.
5.1.1. In the event of the institution of any suit by a third party
against SBio or Perkin-Elmer alleging that the manufacture,
use, sale, distribution or marketing of Licensed Product(s)
infringes a third party patent, the Party sued will promptly
notify the other Party in writing. The other Party will have
the right but not the obligation to defend or participate in
the defense of such suit at its own expense. SBio and
Perkin-Elmer will assist one another and cooperate in any
such litigation at the other's reasonable request without
expense to the requesting Party. The Party conducting such
action will have full control over its conduct, including
settlement thereof provided such settlement will not be made
without the prior written consent of the other Party if it
would adversely affect the rights of the other Party, such
consent not to be unreasonably withheld or delayed.
5.5.2. In the event that SBio or Perkin-Elmer becomes aware of
actual or threatened infringement of a patent resulting from
Collaboration SBio Intellectual Property, Collaboration
Perkin-Elmer Intellectual Property, or Collaboration Joint
Intellectual Property, that Party will promptly notify the
other Party in writing. Either owner of a patent resulting
from such intellectual property will have the first right
but not the obligation to bring, at its own expense, an
infringement action against any third party and to use the
other Party's name in connection therewith. If an owner of
the patent does not commence a particular infringement
action within ninety (90) days, the other Party, after
notifying the owner in writing, will be entitled to bring
such infringement action at its own expense. The Party
conducting such action will have full control over its
conduct, including settlement thereof provided such
settlement will not be made without the prior written
consent of the other Party if it would adversely affect the
rights of the other Party, such consent not to be
unreasonably withheld or delayed. In any event, SBio and
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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<PAGE> 14
Perkin-Elmer will assist one another and cooperate in any
such litigation at the other's reasonable request
without expense to the requesting Party.
5.5.3 SBio and Perkin-Elmer have the right to recover their
respective actual out-of-pocket expenses, or equitable
proportions thereof, associated with any litigation or
settlement thereof from any recovery made by any Party. Any
excess amount will be shared between Perkin-Elmer and SBio
in an amount proportional to their respective expenses.
5.5.4 The Parties must keep one another reasonably informed of the
status of their respective activities regarding any such
litigation or settlement thereof.
5.6 Effect of Bankruptcy. All rights and licenses granted under or
pursuant to this Agreement by one Party to the other Party are, and
will irrevocably be deemed to be, "intellectual property" as defined
in Section 101(56) of the Bankruptcy Code. In the event of the
Commencement of a case by or against either Party under any Chapter of
the Bankruptcy Code, this Agreement will be deemed an executory
contract and all rights and obligations hereunder will be determined
in accordance with Section 365(n) thereof.
5.7 Trademarks and Non-Proprietary Names
5.7.1. Perkin-Elmer, at its expense, will be responsible for the
selection, registration and maintenance of all trademarks
which it employs in connection with Licensed Product(s),
except for Microfluidic Electrophoresis Devices, and will
own and control such trademarks. Nothing in this Agreement
will be construed as a grant of rights, by license or
otherwise, to SBio to use such trademarks for any purpose
other than co-promotion as provided in this Agreement.
5.7.2. Perkin-Elmer, at its expense, will be responsible for the
selection of non-proprietary names for Licensed Product(s)
sold by Perkin-Elmer.
5.7.3 SBio, at its expense, will be responsible for the selection,
registration and maintenance of all trademarks that it
employs in connection with Microfluidic Electrophoresis
Devices, and will own and control such trademarks. Nothing
in this agreement will be construed as a grant of rights, by
license or otherwise, to Perkin-
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Elmer to use such trademarks for any purpose other than
co-promotion as provided in this Agreement.
6. CONFIDENTIALITY
6.1 Duties of Confidentiality. Because SBio and Perkin-Elmer will be
cooperating with each other in this collaboration, each may reveal
Confidential Information to the other in the course of this program.
The Parties agree, by using the same degree of care as each uses for
information of like importance, but not less than a reasonable degree
of care (1) to hold in confidence any Confidential Information
disclosed by the other Party hereunder, and (2) not to disclose same
to any third party without the express written consent of the other,
or, except as may be required for purposes of advancing the
developing, manufacturing or marketing of Licensed Product(s), or to
carry out any litigation concerning the same, provided that each such
third party is informed of the confidentiality of such information and
that each said third party agrees to be bound to at least the same
degree of confidentiality as the Parties are bound under this
Agreement. This confidentiality requirement will remain in force for a
period of three years following termination of this Agreement.
6.2 Responsibility over Employees and Agents. Each of the Parties agrees
to assume individual responsibility for the actions and omissions of
its respective employees, agents and assigns in conjunction with this
research, and to inform same of the responsibilities for
confidentiality and disclosure under this Agreement, and to obtain
their Agreement to be bound in the same manner that the Party is
bound.
6.3 Affiliates. Nothing herein will be construed as preventing either
Party from disclosing any information to an Affiliate of Perkin-Elmer
or SBio or to a sub-licensee, distributor or joint venture or other
associated company of either Party for the purpose of developing or
commercializing Licensed Product(s), provided such Affiliate,
sub-licensee, distributor or joint venture or other associated company
has undertaken a similar obligation of confidentiality with respect to
the Confidential Information.
6.4 Bankruptcy. All Confidential Information disclosed by one Party to the
other will remain the intellectual property of the disclosing Party.
In the event that a court or other legal or administrative tribunal,
directly or through an appointed master, trustee or receiver, assumes
partial or complete control over the assets of a Party to this
Agreement based on the insolvency or bankruptcy of such Party, the
bankrupt or insolvent Party will promptly notify the court or other
tribunal (1) that Confidential Information received from the other
Party under this Agreement remains
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the property of the other Party and (2) of the confidentiality
obligations under this Agreement. In addition, the bankrupt or
insolvent Party will, to the extent permitted by law, take all
steps necessary or desirable to maintain the confidentiality of
the other Party's Confidential Information and to ensure that
the court, other tribunal or appointed maintains such
information in confidence in accordance with the terms of this
Agreement.
6.5. Publication. Neither Perkin-Elmer nor SBio will submit for
written or oral publication any manuscript, abstract or the like
which includes data or other information generated and provided
by the other Party or otherwise developed by either Party in the
performance of activities in furtherance of this Agreement
without first obtaining the prior written consent of the other
Party, which will not be unreasonably withheld, except that the
foregoing will not apply to the customary literature which is
prepared for marketing and sales purposes.
6.6. Publicity. Within thirty days following the Effective Date, the
Parties will agree on the form and language of a joint press
release related to this agreement.
6.7. Compliance with Statutory Requirements. For the avoidance of
doubt, nothing in this Agreement will be construed as
preventing or in any way inhibiting either Party from complying
with statutory and regulatory requirements governing the
development, manufacture, use and sale or other distribution of
products in any manner which it reasonably deems appropriate,
including, for example, by disclosing to regulatory authorities
Confidential Information or other information received from a
Party or third parties. The Parties will take reasonable
measures to assure that no unauthorized use or disclosure is
made by others to whom access to such information is granted.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1. Each Party represents, warrants and covenants to the other
Party that:
7.1.1. it has the corporate power and authority and legal
right to enter into this Agreement and to perform its
obligations hereunder;
7.1.2. the execution and delivery of this Agreement and the
performance of the transactions contemplated thereby
have been duly authorized by all necessary corporate
action of such Party;
7.1.3. the execution and delivery of this Agreement and the
performance by such Party of any of its obligations
under this Agreement do not and will not (1) conflict
with, or constitute a breach or violation of,
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any other contractual obligation to which it is a
party, any judgment of any court or governmental body
applicable to such Party or its properties or, to such
Party's knowledge, any statute, decree, order, rule or
regulation of any court or governmental agency or body
applicable to such Party or its properties, and (2)
with respect to the execution and delivery of the
Agreement, require any consent or approval of any
governmental authority or other person;
7.1.4. each Party will to the best of its knowledge without
undertaking a special investigation, disclose to the
other Party any material adverse proceedings, claims or
actions that arise, relating to their technology which
would materially interfere with that Party's
performance of its obligations under this Agreement;
7.1.5. each Party's employees have executed or will execute
agreements whereby all right, title and interest in any
technology and invention(s) will be assigned to their
respective employers.
8. INDEMNIFICATION
8.1. Perkin-Elmer Indemnification of SBio. Perkin-Elmer will defend,
indemnify and hold harmless SBio, Affiliates of SBio, and their
respective directors, officers, shareholders in their capacity
as shareholders, agents and employees, from and against any and
all liability, loss, damages and expenses (including attorneys'
fees) as the result of claims, demands, costs or judgments
which may be made or instituted against any of them by a third
party arising out of (1) the untruth, inaccuracy, breach, or
nonfulfillment of any representation or warranty or any
covenant or agreement of Perkin-Elmer contained in or made
pursuant to this Agreement or (2) the manufacture,
distribution, sale or other disposition by or through
Perkin-Elmer or its Affiliates of Licensed Product(s) or part
thereof. Perkin-Elmer's obligation to defend, indemnify and
hold harmless will include claims, demands, costs or judgments,
whether for money damages or equitable relief by reason of
alleged personal injury (including death) to any person or
alleged property damage, provided, however, the indemnity will
not extend to any claims against an indemnified Party which
results (i) from the negligence or willful misconduct of such
indemnified Party, or (ii) a claim of patent infringement.
Perkin-Elmer will have the exclusive right to control the
defense of any action which is to be indemnified in whole by
Perkin-Elmer hereunder, including the right to select counsel
acceptable to SBio to defend SBio and to settle any claim,
provided that, without the written consent of SBio (which will
not be unreasonably withheld or delayed), Perkin-Elmer will not
agree to settle any claim against SBio to the extent such claim
has a material
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adverse effect on SBio. The provisions of this Section will survive
and remain in full force and effect after any termination,
expiration or cancellation of this Agreement and Perkin-Elmer's
obligations hereunder will apply whether or not such claims are
rightfully brought.
8.2. SBio Indemnification of Perkin-Elmer. SBio will defend, indemnify
and hold harmless Perkin-Elmer, Affiliates of Perkin-Elmer and
their respective directors, officers, shareholders in their
capacity as shareholders, agents and employees, from and against
any and all liability, loss, damages and expenses (including
attorneys' fees) as the result of claims, demands, costs or
judgments which may be made or instituted against any of them by a
third party arising out of (1) the untruth, inaccuracy, breach, or
nonfulfillment of any representation or warranty or any covenant or
agreement of SBio contained in or made pursuant to this Agreement
or (2) the manufacture by or through SBio or its Affiliates of any
Licensed Product(s) or part thereof. SBio's obligation to defend,
indemnify and hold harmless will include claims, demands, costs or
judgments, whether for money damages or equitable relief by reason
of alleged personal injury (including death) to any person or
alleged property damage, provided, however, the indemnity will not
extend to any claims against an indemnified Party which results (i)
from the negligence or willful misconduct of such indemnified
Party, or (ii) a claim of patent infringement, or (iii) where such
claims result from a modification of Licensed Product(s) by
Perkin-Elmer which was not approved by SBio. SBio will have the
exclusive right to control the defense of any action which is to be
indemnified in whole by SBio hereunder, including the right to
select counsel acceptable to Perkin-Elmer to defend Perkin-Elmer and
to settle any claim, provided that, with the written consent of
Perkin-Elmer (which will not be unreasonably withheld or delayed),
SBio will not agree to settle any claim against Perkin-Elmer to the
extent such claim has a material adverse effect on Perkin-Elmer. The
provisions of this Section will survive and remain in full force and
effect after any termination, expiration or cancellation of this
Agreement and SBio's obligations hereunder will apply whether or not
such claims are rightfully brought.
8.3. Notice; Choice of Attorney. A Party that intends to claim
indemnification under this Section 8 (the "Indemnitee") will
promptly notify the other Party (the "Indemnitor") of any loss,
claim, damage, liability or action in respect of which the
Indemnitee intends to claim such indemnification, and the
Indemnitor, after it determines that indemnification is required of
it, will assume the defense thereof with counsel mutually
satisfactory to the Parties; provided, however, that an Indemnitee
will have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor if Indemnitor does not assume
the defense; or, if representation of such Indemnitee by the
counsel retained by the Indemnitor would be
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inappropriate due to actual or potential differing interests
between such Indemnitee and any other Party represented by such
counsel in such proceedings. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any
such action, if prejudicial to its ability to defend such action,
will relieve such Indemnitor of any liability to the Indemnitee
under this Section 8, but the omission so to deliver notice to the
Indemnitor will not relieve it of any liability that it may have to
any Indemnitee otherwise than under this Section 8.
8.4. Consent Required. The indemnity agreement in this Section 8 will
not apply to amounts paid in settlement of any loss, claim, damage,
liability or action if such settlement is effected without the
consent of the Indemnitor, which consent will not be withheld
unreasonably.
8.5. Cooperation. The Indemnitee under this Section 8, its employees and
agents, will cooperate fully with the Indemnitor and its legal
representatives in the investigations of any action, claim or
liability covered by this indemnification. In the event that each
Party claims indemnity from the other and one Party is finally held
liable to indemnify the other, the Indemnitor will additionally be
liable to pay the reasonable legal costs and attorneys' fees
incurred by the Indemnitee in establishing it claim for indemnity.
9. TERM AND TERMINATION
9.1. Term. Unless terminated earlier as provided herein, this Agreement
will commence on the Effective Date and will remain in full force
until terminated as provided herein.
9.2. Termination. This Agreement may be terminated as follows:
9.2.1. by mutual written agreement of SBio and Perkin-Elmer,
effective as of the time specified in such written
agreement; or
9.2.2. by either Party,
9.2.2.1. in the event the other Party will file in any court
or agency pursuant to any statute or regulation of
any state or country, a petition in bankruptcy or
insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or
trustee of the Party or of its assets, or if the
other Party proposes a written agreement of
composition or extension of its debts, or if the
other Party will be served with an involuntary
petition against it, filed in any insolvency
proceeding, and such petition will not be dismissed
within
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sixty days after the filing thereof, or if the other Party
will propose or be a Party to any dissolution or
liquidation, or if the other Party will make an assignment
for the benefit of creditors.
9.2.2.2. upon any material breach of this Agreement by the other
Party; provided that the Party alleging such breach must
first give the other Party written notice thereof, which
notice must state the nature of the breach in reasonable
detail and the Party receiving such notice must have failed
to cure such alleged breach within sixty days after receipt
of such notice.
9.3. Survival of Obligations. Upon any termination of this Agreement,
neither Party will be relieved of any obligations incurred prior to
such termination. Notwithstanding any termination of this Agreement,
the obligations of the Parties under Sections 3.3, 5, 6, 7, 8, 9.3,
and 11, as well as under any licenses which are maintained in effect
and any other provisions which by their nature are intended to
survive any such termination, will survive and continue to be
enforceable. With respect to the survival of licenses granted in
Section 5.4, if termination of this Agreement is a result of a
material breach of this Agreement by Perkin-Elmer, such licenses will
not survive the termination of this Agreement to the extent that such
licenses relate to Licensed Product(s) which have not yet been
commercialized.
10. CHANGE OF CONTROL OF SBio
10.1. Notice of Offer. SBio will promptly notify Perkin-Elmer in writing of
any written offer to acquire control of SBio ("control" being defined
herein as the acquisition of a majority of the outstanding voting
securities of SBio), such notice to be provided at least forty five
days before a closing date for the acquiring transaction. Such notice
will contain the name of the Party offering to acquire control of
SBio and a description of the offer including the price and other
material terms and conditions. Information contained in the notice
will be considered Confidential Information.
11. MISCELLANEOUS
11.1. Force Majeure. If the performance of any part of this Agreement by
either Party, or of any obligation under this Agreement, is
prevented, restricted, interfered with or delayed by reason of any
cause beyond the reasonable control of the Party liable to perform,
unless conclusive evidence to the contrary is provided, the Party so
affected will, upon giving written notice to the other Party, be
excused from such performance to the extent of such
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prevention, restriction, interference or delay, provided that the
affected Party will use its reasonable best efforts to avoid or
remove such causes of non-performance and will continue performance
with the utmost dispatch whenever such causes are removed. When such
circumstances arise, the Parties will discuss what, if any,
modification of the terms of this Agreement may be required in order
to arrive at an equitable solution.
11.2. Governing Law. This Agreement will be deemed to have been made in the
State of California and its form, execution, validity, construction
and effect will be determined in accordance with the laws of the
State of California.
11.3. Separability.
11.3.1. In the event any portion of this Agreement will be held
illegal, void or ineffective, the remaining portions hereof
will be interpreted to maintain the intent of the Parties.
11.3.2. If any of the terms or provisions of this Agreement are in
conflict with any applicable statute or rule of law, then
such terms or provisions will be deemed inoperative to the
extent that they may conflict therewith and will be deemed to
be modified to conform with such statute or rule of law.
11.4. Entire Agreement. The Agreement and the Equity Agreement constitute
the sole agreements between the Parties relating to the subject
matter hereof and supersede all previous writings and understandings.
Confidential disclosures made pursuant to previously executed
Confidentiality Agreements between SBio and Perkin-Elmer will remain
subject to the terms of those Confidentiality Agreements. No terms or
provisions of this Agreement will be varied or modified by any prior
or subsequent statement, conduct or act of either of the Parties,
except that the Parties may amend this Agreement by written
instruments specifically referring to and executed in the same manner
as this Agreement.
11.5. Assignment. This Agreement and the licenses herein granted will be
binding upon and inure to the benefit of the successors in interest
of the respective Parties. Neither this Agreement nor any interest
hereunder will be assignable by either Party without the written
consent of the other provided, however, that Perkin-Elmer or SBio may
assign this Agreement or any of its rights or obligations hereunder
to any Affiliate or to any third party with which it may merge or
consolidate, or to which it may transfer all or substantially all of
its assets to which this Agreement relates, without obtaining the
consent of the other Party, subject to the other Party assuming all
liabilities and obligations under the Agreement and, in the
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case of SBio, subject to Perkin-Elmer's right of notice pursuant 10.
11.6. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart will be deemed an original
instrument, but all such counterparts together will constitute but
one agreement.
11.7. Notices. Any notice required or permitted under this Agreement will
be sent by air mail, postage pre-paid, to the following addresses of
the Parties:
<TABLE>
<S> <C> <C>
If to SBio:
Soane BioSciences, Inc. with copy to Venture Law Group
3906 Trust Way 2800 Sand Hill Road
Hayward, CA 94545-3716 Menlo Park, CA 94025
Attn.: President Attn.: Mark Medeaus
If to Perkin-Elmer:
The Perkin-Elmer Corp. with copy to The Perkin-Elmer Corp.
850 Lincoln Centre Drive 850 Lincoln Centre Drive
Foster City, CA 94404 Foster City, CA 94404
Attn.: Michael Albin Attn.: Legal Department
</TABLE>
IN WITNESS WHEREOF, the Parties, through their authorized officers, have
executed this Agreement as of the date first written above.
SOANE BIOSCIENCES, INC. THE PERKIN-ELMER CORPORATION,
THROUGH ITS PE APPLIED
BIOSYSTEMS DIVISION
By: /s/ JOSEPH M. LIMBER By: /s/ MICHAEL HUNKAPILLER
-------------------- -----------------------
Name: Joseph M. Limber Name: Michael Hunkapiller
------------------ ---------------------
Title: President, C.E.O. Title: Vice President
----------------- --------------------
22
<PAGE> 1
EXHIBIT 10.15
Customer No. 1261
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of May 27, 1999, is made by ACLARA
Biosciences, Inc. (the "Borrower"), a Delaware corporation having its principal
place of business and chief executive office at 3906 Trust Way, Hayward,
California, 94545 in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office 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 other day that banks in New York City, New York or Chicago, Illinois are
authorized by law to be closed.
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 Equipment.
Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.
Equipment shall have the meaning specified in Section 2.
Equipment Loans shall mean all Loans the proceeds of which are used to finance
the costs of Equipment.
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.
<PAGE> 2
Intellectual Property shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) now or in
the future owned or possessed by the Borrower.
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 present and future documents, agreements, certificates, and instruments
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, 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, operations, results of operations, assets,
liabilities, or condition (financial or otherwise) of such Person taken as a
whole.
Note shall mean each Equipment Loan Promissory Note in the form of Exhibit B
attached hereto or Tenant Improvement Promissory Note in the form of Exhibit C
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
Notes or any note, guaranty or other 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 a 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 Encumbrances shall mean any recorded or unrecorded matter affecting
the real property known as 1288 Pear Avenue, Mountain View, California ("Real
Property") or the Lease between Borrower and The Pear Avenue Group dated March
1, 1999 ("Lease") existing on the date hereof, and any subsequent encumbrance on
the Real Property which does not materially affect the use of the Real Property
for the purposes contemplated by the Lease except, in each case, any lien or
encumbrance on Borrower's leasehold interest under the Lease, or other lien or
encumbrances arising as a result of the Borrower's actions or inactions.
Permitted Indebtedness shall mean all (a) indebtedness under the Loan Documents,
(b) trade or other similar indebtedness incurred in the ordinary course of
business (but not for borrowed money) and (i) not more than 75 days past due, or
(ii) being contested good faith by appropriate proceedings, (c) indebtedness to
The Pear Avenue Group not to exceed the amount permitted pursuant to the
original Lease.
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
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<PAGE> 3
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 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 the Borrower or the value of the Equipment; and (d) attachment or
judgment liens that do not otherwise constitute an Event of Default, so long as
an appeal or proceeding for review is being diligently prosecuted in good faith
and reserves, bonds or other security acceptable to Lender have been
established or provided to Lender or are fully covered by insurance; (e) a lien
on any item of equipment created substantially simultaneously with the
acquisition of such equipment for the purpose of financing such acquisition
provided that such lien will only attach to the equipment acquired; and (f)
Permitted Encumbrances.
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 as to which such
Person's solvency 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.
Tenant Improvements shall mean any additions, accessions, improvements,
replacements and attachments financed with the Loans and made to the Real
Property.
Tenant Improvement Loans shall mean all Loans the proceeds of which are used to
finance the costs of Tenant Improvements.
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
(i) 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, substitutions, 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 and (ii) all leasehold rights and interests of the Borrower in the
Real Property as described in the Lease. Notwithstanding the foregoing, Lender
shall not file fixture financing statements with respect to the Collateral
constituting Tenant Improvements.
SECTION 3. THE CREDIT FACILITY.
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SECTION 3.1. BORROWINGS. At the Borrower's request, Lender,
subject to the terms of this Agreement, agrees to make Loans to the Borrower of
$5,000,000 in the aggregate. Such Loans shall also be limited to $2,700,000 for
Tenant Improvement Loans and $2,300,000 for Equipment Loans. Each Loan shall be
in an amount not less than $100,000, 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 herein 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 Sections 3.3 and 3.4 are
satisfied. The timing and financial scope of Lender's obligation to make Loans
hereunder are limited as set forth in a commitment letter executed by Lender
and Borrower, dated as of March 4, 1999 and attached hereto as Exhibit A (the
"Commitment Letter"). In the event of any inconsistency between the terms and
conditions of this Agreement and the Commitment Letter, this Agreement shall
control.
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 and Tenant
Improvements or the reimbursement of the Borrower for its purchase,
acquisition, installation or upgrading of Equipment and Tenant Improvements.
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 statement (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 to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing the
amount of such Loan;
(iv) a leasehold mortgage or an assignment of leases and
rentals in connection with a lease dated March 1, 1999 between
Borrower and The Pear Avenue Group, as lessor in such form as
Lender shall deem necessary or desirable in its sole discretion and
a Collateral Access Agreement duly executed by the lessor or
mortgagee, as the case may be, of each premises where the Equipment
is located;
(v) 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;
(vi) 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 true, 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
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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 (E)
that attached to the Secretary's Certificate of the Borrower is a valid
Certificate of Good Standing issued by the Secretary of the State of the
Borrower's state of incorporation;
(vii) 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
(viii) 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 reasonably be
expected to have a Material Adverse Effect in the good faith business 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 (iii and 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) if the Loan is an Equipment Loan, 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 subject only to Permitted Liens;
(c) if the Loan is a Tenant Improvement Loan, the Lender shall have
received a certificate signed by an authorized officer of the Borrower
certifying that the requested Loan will be used to pay the cost of Tenant
Improvements incurred or to be incurred pursuant to Section 3.2.
(d) 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;
(e) no Event of Default or event which with the giving of notice or the
passage of time, as both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making
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of the requested Loan as of the date of such request; and
(f) 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 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 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 material 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 enforceabilty 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.
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 constituting Equipment 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.
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to sell or dispose of the collateral or any part thereof after the occurrence of
an Event of Default, except in connection with contractual obligations
constituting Permitted Liens.
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, constituting Equipment, to the extent a security interest
can be perfected by such filing, securing the payment of all Obligations subject
only to Permitted Liens. This Agreement creates a valid and, upon completion of
the recordation of the Leasehold Deed of Trust, a perfected first priority
security interest in the Collateral constituting the Lease, to the extent a
security interest can be perfected by such recording, securing the payment of
all the Obligations subject only to Permitted Liens.
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, (a) 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 (b) do not and will not omit to
state any material fact necessary to make such data, reports, and information
not misleading as of the date so dated or certified. 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 data, report or information previously furnished by the borrower to the
Lender.
SECTION 4.12. PRICE OF EQUIPMENT. The price of each item of
Equipment paid by Borrower does not exceed the fair and usual price for such
type of equipment purchased in like quantity and, to the Borrower's knowledge
after inquiry, 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.
SECTION 4.13. YEAR 2000 COMPLIANCE. 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
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 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, losses, 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 Business 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 $150,000 in
the aggregate, (b) any contract that is terminated or amended and which has had
or could reasonably be expected to have a Material
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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) of 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; and (f) of 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 $50,000 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 a good faith estimate of the damage, destruction, loss or
diminution in value.
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 reasonably 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 with reasonable prior notice, 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 reasonably
satisfactory to the Lender (such policies of Insurance covering the Collateral,
the "Policies"). 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 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 Policies, the Lender may, upon two Business Days'
notice, 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 the
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 be necessary to effect the
collection, compromise, or settlement of any claims under any 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 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, or if any lien shall be claimed therefor
(other than Permitted Liens ), 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
adverse to the Borrower or the Lender. 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
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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 reasonably satisfactory to the
Lender) reasonably necessary or, in the reasonable 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
constituting Equipment shall be operated by competent, qualified personnel in
connection with the Borrower's business purposes, for the purpose for which the
Equipment 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 Equipment 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, 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 such
Equipment. 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 reasonably 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 reasonably
satisfactory to the Lender), mark any chattel paper, deliver any chattel paper
or instruments to the Lender, and take any other actions that are reasonably
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 subject to Permitted Liens, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement subject to Permitted Liens. 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, 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.
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SECTION 5.11. NO LIMITATIONS 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
material part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to 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 reasonably 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 interest 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 reasonable 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 two 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.
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. INTELLECTUAL PROPERTY. The 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.
SECTION 5.17. LIMITATION ON ADDITIONAL INDEBTEDNESS. Borrower shall
not incur additional indebtedness without the prior consent of the Lender, which
will not be unreasonably withheld. Notwithstanding the foregoing, Borrower may
incur additional indebtedness, to the extent that such indebtedness (a) is
secured by specific items of newly acquired equipment and any lien for such
equipment shall attach only to the equipment acquired or (b) to the extent that
it is Permitted Indebtedness.
SECTION 5.18. NEGATIVE COVENANTS. 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 its Intellectual Property in
connection with any indebtedness of the Borrower. Notwithstanding the foregoing,
Borrower shall not be prohibited from (i) pledging or otherwise committing its
Intellectual Property in order to engage in a joint venture or in connection
with a merger or acquisition which has been consented to by the Lender or (ii)
granting licenses to use its Intellectual Property to third parties in the
ordinary course of business.
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SECTION 5.19. ADDITIONAL REQUIREMENTS. The Borrower shall take all
such further actions and execute all such further documents and instruments as
the Lender may reasonably request to effect the transactions contemplated by
this Agreement.
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, audited by
an independent certified public accountant 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 material 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) 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;
(e) 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;
(f) 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;
(g) the Borrower shall default in (i) the payment of principal or
interest on any
11
<PAGE> 12
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 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; or (iii) any loan or other agreement under which the
Borrower has received financing from Transamerica Corporation or any of its
affiliates;
(h) the Borrower suffers or sustains Material Adverse
Change;
(i) 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;
(j) 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;
(k) 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 in writing
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 and not remedied to Lender's satisfaction
within three (3) business days after notice; or
(l) 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.
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 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,
12
<PAGE> 13
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 any claim or 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
14
<PAGE> 14
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 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 have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date first set forth above.
ACLARA BIOSCIENCES, INC.
By: /s/ WENDY R. HITCHCOCK
-------------------------------------
Name: Wendy R. Hitchcock
Title: Vice President Finance & CFO
Federal Tax ID:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
-------------------------------------
Name:
Title:
15
<PAGE> 15
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF
AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
NO. 1
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
ACLARA BIOSCIENCES, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: MAY 27, 1999
THIS CERTIFIES THAT for value received, TBCC FUNDING TRUST II or its
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, Ninety-Two
Thousand Five Hundred Ninety-Three (92,593) shares of common stock, $.001 par
value, of the Company (the "Common Stock"), at the Warrant Price, payable as
provided herein. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions herein contained, and may be exercised
in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.001 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as amended
from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on May 27, 1999.
WARRANT PRICE - $2.70 per share, subject to adjustment in accordance with
Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued in
connection with a Commitment Letter dated March 4, 1999 executed by the Company
and Transamerica Business Credit Corporation (the "Commitment Letter") to the
original holder of this Warrant, or any transferees from such original holder
or this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
<PAGE> 16
SECTION 2. EXERCISE OF WARRANT.
2.1 PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 12 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company, wire transfer of funds to the
Company's account, or evidence of any indebtedness of the Company to the Holder
(or any combination of any of the foregoing) in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. Notwithstanding any
provisions herein to the contrary, if the Current Market Price (as defined in
Section 5) is greater than the Warrant Price (at the date of calculation, as set
forth below), in lieu of exercising this Warrant as hereinabove permitted, the
Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the Holder
WCS equals the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being exercised (at the date of such
calculation)
CMP equals the Current Market Price (at the date of such calculation)
WP equals the Warrant Price (as adjusted to the date of such calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time.
The person in whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2 TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii)
- 2 -
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 12, 1999 relating to the financial statements of ACLARA
BioSciences, Inc., which appears in such Registration Statement. We also consent
to the references to us under the headings "Experts" and "Selected Financial
Data" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
--------------------------------------
San Jose, California
January 20, 2000
<PAGE> 1
Exhibit 23.3
CONSENT OF MEMBER-ELECT OF THE BOARD OF DIRECTORS
I consent to being named as a member-elect of the board of directors of
ACLARA BioSciences, Inc. in the Registration Statement on Form S-1 filed by
ACLARA BioSciences, Inc. and in all amendments thereto.
/s/ ERIC S. LANDER
-----------------------
Eric S. Lander
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,863
<SECURITIES> 2,976
<RECEIVABLES> 455
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,640
<PP&E> 4,909
<DEPRECIATION> 1,046
<TOTAL-ASSETS> 17,274
<CURRENT-LIABILITIES> 2,243
<BONDS> 3,150
30,535
0
<COMMON> 1,117
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,274
<SALES> 0
<TOTAL-REVENUES> 2,080
<CGS> 0
<TOTAL-COSTS> 7,194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (113,651)
<INCOME-PRETAX> (4,930)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,930)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,930)
<EPS-BASIC> 10.07
<EPS-DILUTED> 10.07
</TABLE>
