<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 10, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INVITROGEN CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2836 33-0373077
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
1600 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008
(760) 603-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
JAMES R. GLYNN
CHIEF FINANCIAL OFFICER
INVITROGEN CORPORATION
1600 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008
(760) 603-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
DOUGLAS J. REIN MICHAEL W. HALL
PAUL E. HURDLOW EDMUND S. RUFFIN, JR.
Gray Cary Ware & Freidenrich LLP Venture Law Group
4365 Executive Drive, Suite 1600 2800 Sand Hill Road
San Diego, CA 92121 Menlo Park, CA 94025
(619) 677-1400 (650) 854-4488
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value........... 3,450,000 Shares $15.00 $51,750,000 $14,387
</TABLE>
(1) Estimated solely for the purposes of computing the registration fee in
accordance with Rule 457(o).
--------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION--JANUARY , 1999
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS
, 1999
[LOGO]-Registered Trademark-
---------------------------------------------
3,000,000 SHARES OF COMMON STOCK
----------------------------------------------------------------------
THE COMPANY:
- We develop, manufacture and sell research kits and provide services
designed to facilitate molecular biology research.
- Invitrogen
1600 Faraday Avenue
Carlsbad, California 92008
(760) 603-7200
www.invitrogen.com
PROPOSED NASDAQ NATIONAL MARKET
SYMBOL: IVGN
THE OFFERING:
- The Company is offering 3,000,000 shares.
- The underwriters have an option to purchase an additional 450,000 shares
from the Company to cover over-allotments.
- This is our initial public offering and no public market currently exists
for our shares.
- We plan to use the proceeds from this offering to redeem outstanding
preferred stock and common stock of a subsidiary, develop and manufacture
products and services and acquire products, technologies or companies.
- Closing: , 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE TOTAL
- ------------------------------------------------------------------------------------
Public offering price: $ $
Underwriting fees:
Proceeds to Company:
- ------------------------------------------------------------------------------------
</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
NATIONSBANC MONTGOMERY SECURITIES LLC
WARBURG DILLON READ LLC
<PAGE>
DESCRIPTION OF PICTURES APPEARING ON INSIDE COVER PAGE:
Large arrow pointing upward and tilted right containing four text boxes
describing product categories, which read (1) Gene Analysis. Molecular
Interaction Systems, GeneStorm-TM- Clones, Hybrid Hunter-TM- Systems. 18
products. (2) Gene Expression. Bacterial, Fungal, Insect & Mammalian Expression,
Expression Vectors, MaxBac-Registered Trademark- Baculovirus System,
Ecdysone-Inducible Expression. 76 products. (3) Gene Cloning. cDNA & PCR Cloning
Systems, TA Cloning-Registered Trademark-, TOPO-TM- TA
Cloning-Registered Trademark-, Zero Blunt-TM- PCR Cloning. 23 Products. Gene
Identification. mRNA Isolation & cDNA Synthesis Systems. FastTrack, Micro-Fast
Track-TM-, Discovery Line-TM-. 13 Products. Below the four text boxes is a
bulleted list of Market Drivers.
- Increased Government Funding
- Genome Sequencing Projects
- High-Throughput Technology
- Accelerated Investment in Commercial Research
Adjacent to the arrow is an open TOPO-TM- TA Cloning-Registered Trademark-
kit.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
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....................................... 27
<CAPTION>
PAGE
<S> <C>
Management..................................... 46
Certain Transactions........................... 54
Principal Stockholders......................... 55
Description of Capital Stock................... 57
Shares Eligible for Future Sale................ 59
Underwriting................................... 61
Legal Matters.................................. 62
Experts........................................ 62
Additional Information......................... 63
Index to Financial Statements.................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED BY MORE DETAILED INFORMATION APPEARING IN OTHER
SECTIONS OF THIS PROSPECTUS. THE OTHER INFORMATION IS IMPORTANT, SO PLEASE READ
THIS ENTIRE PROSPECTUS CAREFULLY. UNLESS OTHERWISE INDICATED, ALL INFORMATION
CONTAINED IN THIS PROSPECTUS (i) GIVES EFFECT TO THE CONVERSION OF ALL
OUTSTANDING SHARES OF THE COMPANY'S CONVERTIBLE REDEEMABLE PREFERRED STOCK INTO
2,202,942 SHARES OF COMMON STOCK AND 2,202,942 SHARES OF REDEEMABLE PREFERRED
STOCK UPON THE CLOSING OF THIS OFFERING, (ii) GIVES EFFECT TO THE REDEMPTION
PROMPTLY FOLLOWING COMPLETION OF THE OFFERING OF ALL OUTSTANDING SHARES OF
REDEEMABLE PREFERRED STOCK BY THE COMPANY FOR AN ESTIMATED $12.8 MILLION AND THE
PAYMENT OF AN ESTIMATED $1.4 MILLION OF ACCRUED DIVIDENDS ON THE CONVERTIBLE
PREFERRED STOCK, (iii) GIVES EFFECT TO THE FILING OF AN AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION UPON THE CLOSING OF THIS OFFERING AND (iv) ASSUMES
THE OVER-ALLOTMENT OPTION IS NOT EXERCISED.
INVITROGEN CORPORATION
Invitrogen develops, manufactures and markets research tools in kit form and
provides research services to corporate, academic and government entities. Our
research kits simplify and improve gene cloning, gene expression and gene
analysis techniques as well as other molecular biology activities that underlie
functional genomics and gene-based drug discovery. Our kits allow researchers to
perform experiments more accurately, efficiently and with greater
reproducibility compared to traditional research methods. Our kits have made
molecular biology research techniques more accessible to pharmaceutical,
biotechnology, agricultural, government and academic researchers with
backgrounds in a wide range of scientific disciplines. In order to commercialize
our recently developed high-throughput gene cloning and expression technology,
we established Invitrogenomics in 1998. We are utilizing this technology to
generate additional license, service and product opportunities for the Company.
Our leading position in gene cloning and expression has led to significant
historical revenue and net income growth. From 1994 through 1997, we have
experienced compound annual growth in revenue and net income of 29% and 63%,
respectively.
In 1997, according to independent market studies, researchers spent over
$1.2 billion on molecular biology products and supplies such as chemicals,
reagents, enzymes and kits. Gene cloning, expression and analysis kits represent
a rapidly emerging segment of the molecular biology product supply market.
According to independent market studies, sales of gene cloning and expression
kits are expected to grow approximately 21% in 1999, compared to approximately
11% growth in 1999 for the overall molecular biology product and supply market.
We believe the gene cloning, expression and analysis kit market will continue to
expand due to several factors, including:
- - Increasing levels of government funding for genomics and molecular biology
research
- - Increasing availability of new genomics data from the Human Genome Project and
other genome sequencing projects
- - Proliferation of high-throughput molecular biology research techniques
- - Accelerated investment in commercial research activities
We offer over 250 kits that researchers use to conduct key molecular biology
research activities. We design research kits that address the limitations and
complexities of traditional molecular biology techniques. Our kits make these
techniques easier, faster and more accessible to an increasingly broad community
of researchers. For example, as compared to standard cloning methods, our TOPO
TA Cloning technology reduces the time required for a key step in the gene
cloning process from 12 hours to five minutes, reduces total experiment
completion time from three to five days to one day and increases the cloning
success rate from 50-60% to over 90%. We estimate that researchers who used our
TOPO TA Cloning Kits saved over 2.5 million hours compared to standard cloning
methods.
3
<PAGE>
We believe we have assembled one of the broadest portfolios of gene cloning
and gene expression-related intellectual property in our industry. To date, we
have obtained 80 licenses, which provide us with access to over 200 patents
covering gene cloning, expression and analysis materials and techniques. In
addition, we have over 15 issued and pending patents that originated at
Invitrogen. We believe our intellectual property portfolio has established us as
a licensing partner of choice for corporate and academic researchers who wish to
commercialize their gene cloning and expression-related discoveries. We believe
our leadership position derives from our ability to rapidly enhance the value of
the technologies we license by combining them with our existing products and
licensed technologies.
We recently established Invitrogenomics to commercialize our high-throughput
gene cloning and expression technology developed by scaling up our TOPO TA
Cloning technology. We are using this new technology to rapidly clone and patent
full-length expression-tested genes, which we will then license or sell. In
addition, we will use this technology to provide gene cloning and expression
services on a contract basis to pharmaceutical, biotechnology and agricultural
companies that wish to reduce the time and costs associated with identifying and
validating new drug targets and developing novel therapeutics. To date, we have
assembled a collection of over 1,700 full-length cloned human genes that express
their encoded proteins.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered............................... 3,000,000 shares
Common stock to be outstanding after the
offering......................................... 12,613,960 shares(1)
Use of proceeds.................................... Redemption of the Redeemable Preferred
Stock, $.01 par value (the "Redeemable
Preferred Stock") issuable upon
conversion of the outstanding Series A
Convertible Redeemable Preferred Stock,
$.01 par value (the "Convertible
Preferred Stock"), payment of accrued
dividends on the Convertible Preferred
Stock, redemption of redeemable common
stock of a subsidiary of the Company
(the "Redeemable Subsidiary Common
Stock"), the continued development and
manufacture of existing Invitrogen
products and services, research and
development of additional products and
services, and working capital and other
general corporate purposes, including
potential acquisition of products,
technology or companies. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............. IVGN
</TABLE>
- ------------------------------
(1) Based on 7,411,018 shares of Common Stock outstanding as of November 30,
1998. Assumes the conversion of the Convertible Preferred Stock into
2,202,942 shares of Common Stock and 2,202,942 shares of Redeemable
Preferred Stock, and the redemption of such Redeemable Preferred Stock upon
the closing of this offering. Excludes (i) 3,192,652 shares of Common Stock
issuable upon the exercise of outstanding options at November 30, 1998 at a
weighted average exercise price of $4.12 per share, 1,568,193 of which were
exercisable as of that date; and (ii) 1,127,385 shares of Common Stock
reserved for future grant under the Company's stock option plans. See
"Capitalization", "Management--Stock Option Plans" and Note 16 to
Consolidated Financial Statements.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ----------------------
1995 1996 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE (UNAUDITED)
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................... $ 14,342 $ 19,121 $ 24,965 $ 18,263 $ 22,968
Cost of revenues................................... 4,743 5,818 7,989 5,657 6,346
--------- --------- --------- ----------- ---------
Gross margin....................................... 9,599 13,303 16,976 12,606 16,622
Operating expenses:
Sales and marketing.............................. 3,646 4,236 4,959 3,800 5,212
General and administrative....................... 2,542 3,880 3,763 2,620 2,879
Research and development......................... 2,043 2,659 4,416 3,058 5,320
--------- --------- --------- ----------- ---------
Total operating expenses........................... 8,231 10,775 13,138 9,478 13,411
Income from operations............................. 1,368 2,528 3,838 3,128 3,211
Net income......................................... $ 1,156 $ 1,744 $ 2,633 $ 1,995 $ 2,338
--------- --------- --------- ----------- ---------
Earnings per share(1):
Basic............................................ $ 0.10 $ 0.19 $ 0.25 $ 0.20 $ 0.20
--------- --------- --------- ----------- ---------
Diluted.......................................... $ 0.10 $ 0.16 $ 0.21 $ 0.16 $ 0.17
--------- --------- --------- ----------- ---------
Weighted average shares used in per share
calculation:
Basic............................................ 9,602 8,356 7,837 7,974 7,426
Diluted.......................................... 9,602 10,080 9,509 9,815 8,830
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
---------------------------------------
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........................ $ 5,868 $ 5,868 $ 32,768
Total assets............................................................. 20,851 20,851 47,751
Long-term capital leases................................................. 96 96 96
Redeemable Subsidiary Common Stock(4).................................... 1,541 1,541 1,541
Redeemable Preferred Stock............................................... -- 14,200 --
Convertible Preferred Stock.............................................. 15,916 -- --
Total stockholders' equity............................................... (355) 1,361 42,461
</TABLE>
- ------------------------------
(1) For an explanation of the calculations of earnings per share, see Note 14 to
Consolidated Financial Statements.
(2) Pro forma amounts as of September 30, 1998, as adjusted for the conversion
of the Redeemable Convertible Preferred Stock into Common Stock and
Redeemable Preferred Stock.
(3) As adjusted to reflect the sale by the Company of 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $15.00
per share and the application of the net proceeds therefrom. See "Use of
Proceeds."
(4) See Note 11 to Consolidated Financial Statements for a description of the
Redeemable Subsidiary Common Stock.
5
<PAGE>
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER
THESE RISK FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS, BEFORE YOU DECIDE WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.
SOME OF THE INFORMATION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. YOU CAN IDENTIFY
THESE STATEMENTS BY FORWARD-LOOKING WORDS SUCH AS "MAY," "WILL," "EXPECT,"
"ANTICIPATE," "BELIEVE," "ESTIMATE," AND "CONTINUE" OR SIMILAR WORDS. YOU SHOULD
READ STATEMENTS THAT CONTAIN THESE WORDS CAREFULLY BECAUSE THEY: (1) DISCUSS OUR
FUTURE EXPECTATIONS; (2) CONTAIN PROJECTIONS OF OUR FUTURE RESULTS OF OPERATIONS
OR OF OUR FINANCIAL CONDITION; OR (3) STATE OTHER "FORWARD-LOOKING" INFORMATION.
WE BELIEVE IT IS IMPORTANT TO COMMUNICATE OUR EXPECTATIONS TO OUR INVESTORS.
HOWEVER, THERE MAY BE EVENTS IN THE FUTURE THAT WE ARE NOT ABLE TO PREDICT
ACCURATELY OR OVER WHICH WE HAVE NO CONTROL. THE RISK FACTORS LISTED IN THIS
SECTION, AS WELL AS ANY CAUTIONARY LANGUAGE IN THIS PROSPECTUS, PROVIDE EXAMPLES
OF RISKS, UNCERTAINTIES AND EVENTS THAT MAY CAUSE OUR ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE EXPECTATIONS WE DESCRIBE IN OUR FORWARD-LOOKING STATEMENTS.
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THE OCCURRENCE
OF THE EVENTS DESCRIBED IN THESE RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, OPERATING RESULTS AND
FINANCIAL CONDITION.
EXPANSION OF OPERATIONS AND MANAGEMENT OF GROWTH
Our business has grown rapidly. Our net revenues increased from $14.3
million in 1995 to $25.0 million in 1997 and net revenues were $23.0 million for
the nine months ended September 30, 1998. During that same period we have
significantly expanded our operations in the United States and in the
Netherlands, headquarters for our European operations. Our number of employees
has increased from approximately 100 at December 31, 1995 to approximately 225
as of November 30, 1998.
It is very difficult to manage this rapid growth, and our future success
depends on our ability to implement:
- - Research and product development
- - Sales and marketing programs
- - Customer support programs
- - Operational and financial control systems
- - Recruiting and training new personnel
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We expect that we will need to continue to improve our
financial and managerial controls, reporting systems and procedures and to
expand and train our work force worldwide. We are in the process of implementing
a new, enterprise-wide financial and manufacturing information system. We expect
to begin using our new system sometime in the first half of 1999. If we fail to
successfully complete implementation of our new system we could experience
manufacturing and shipping delays which, in turn, could cause increased
manufacturing costs and deferred or lost sales.
Our future business growth depends in part on the success of
Invitrogenomics. In order to succeed in this business we may need to hire
additional senior managers. Moreover, operation of Invitrogenomics may present
unfamiliar management challenges that we might not successfully address. We may
not be able to locate or hire the necessary managers or successfully address the
potentially unfamiliar management issues that may occur in the Invitrogenomics
or other areas of our business.
6
<PAGE>
VARIABILITY OF QUARTERLY OPERATING RESULTS
Our revenues and results of operations may fluctuate from quarter to quarter
and are difficult to predict. If either our revenues or results of operations
fall below the expectations of investors or securities analysts, the price of
our common stock could fall dramatically. The timing and degree of fluctuation
depends on many factors including those listed below:
- - Our revenues depend in part on the levels of our customers' research
activities, the timing of their research and commercialization efforts and
their receipt of government research grants, which are difficult to project
- - We expect our competitors to introduce new products, which could affect the
demand for our products
- - The markets for many of our products are relatively new, and it is difficult
for us to reliably assess overall current or long-term customer demand
- - Demand for our new products may not be as strong as we expect
- - We could experience volatility in product sales or new product introductions
due, for instance, to air carrier strikes, quality control issues or
manufacturing errors
- - In connection with future introduction of new products, we may have to
establish or increase reserves or record changes for inventory obsolescence as
a result of unsold inventory
- - We could experience delays in new product introductions
- - We could have higher than expected research and development expenses or
marketing and sales expenses
- - Economic conditions generally as well as those specific to molecular biology
and related industries may affect our revenues
- - The mix of products we sell through direct sales channels and third party
distributors may vary
- - Sales are occasionally lost or deferred when we have difficulty obtaining raw
materials for our products
The majority of our operating expenses are relatively fixed and could not be
adjusted significantly in the short term to compensate for an unanticipated
decline in demand. In particular, due to the costs and difficulties associated
with recruiting and hiring the highly trained scientists that comprise a
significant portion of our employees, we would probably not address a short-term
reduction in demand by significantly reducing personnel expenses. Since our
expenses are largely of a fixed nature, variations in the timing of revenues can
cause significant variations in operating results from quarter to quarter.
We believe our operating results are subject to seasonal fluctuations,
primarily because a significant portion of our customers are academic
institutions which reduce their purchasing activity in the months of August and
December.
As a result of these factors, we believe that quarter-to-quarter comparisons
of our operating results are not necessarily indicative of future results. You
should not rely on our historical quarterly results to predict our future
performance.
DEPENDENCE ON RESEARCH AND DEVELOPMENT BUDGETS AND GOVERNMENT RESEARCH FUNDING
Our customers include researchers at pharmaceutical and biotechnology
companies, academic institutions and government and private laboratories.
Fluctuations in the research and development budgets of these researchers and
their organizations could have a significant effect on the demand for our
products. Research and development budgets fluctuate due to changes in available
resources, spending
7
<PAGE>
priorities and institutional budgetary policies. Our business could be seriously
damaged by any significant decrease in life sciences research and development
expenditures by pharmaceutical and biotechnology companies, academic
institutions or government and private laboratories.
A significant portion of our sales have been to researchers, universities,
government laboratories and private foundations whose funding is dependent upon
grants from government agencies such as the U.S. National Institutes of Health
("NIH") and similar domestic and international agencies. Also, a portion of our
direct revenues comes from NIH Small Business Innovation Research grant funds.
Although the level of research funding has increased during the past several
years, we cannot assure you that this trend will continue. Government funding of
research and development is subject to the political process, which is
inherently fluid and unpredictable. Also, government proposals aiming to reduce
or eliminate budgetary deficits have sometimes included reduced allocations to
the NIH and other government agencies that fund research and development
activities. A reduction in government funding for the NIH or other government
research agencies could seriously damage our business.
Our customers generally receive funds from approved grants at particular
times of the year, as determined by the federal government. Grants have, in the
past, been frozen for extended periods or have otherwise become unavailable to
various institutions without advance notice. The timing of the receipt of grant
funds affects the timing of purchase decisions by our customers and, as a
result, can cause fluctuations in our operating results.
DEPENDENCE ON LICENSING
Many of our products are manufactured or sold pursuant to license agreements
under which we pay royalties to the licensor based upon a percentage of the
sales of products containing the licensed materials or technology. Although we
have increasingly emphasized our own research and development in recent periods,
we believe our ability to in-license new technologies from third parties is and
will continue to be critical to our ability to offer new products. Our ability
to compete as an innovator in the development of molecular biology research
products and services depends in part on our ability to convince inventors that
we can successfully commercialize their new technologies. Our significant
licenses include:
TA CLONING. We co-own the patents on this cloning method with Molecular
Biology Resources, formerly Molecular Chimerics Corporation ("MBR") of
Milwaukee, Wisconsin. Ordinarily, patent owners in the United States may freely
exploit jointly-owned technologies independently of one another, without any
payments or accounting to the other. We have obtained from MBR the exclusive
rights to the technology anywhere in the world for cloning purposes in exchange
for an initial licensing fee and certain royalty payments based on sales of
vectors and kits which facilitate use of this cloning method.
TOPO CLONING. This patented technology significantly accelerates gene
cloning and is an enhancement to our TA Cloning products, among others. It was
invented by Dr. Stewart Shuman working at the Sloan-Kettering Institute for
Cancer Research ("SKI"), which owns the patents. In 1997 we obtained exclusive
worldwide rights to commercialize this technology for all purposes. We paid
certain initial fees to SKI, and continue to pay royalties on sales of products
designed to use this enhanced cloning method. These royalties depend in part on
the type of product sold and the level of annual sales. We have also committed
to minimum yearly royalty payments to SKI. Sublicenses may be granted to third
parties with a certain portion of the income payable to SKI. Additionally, we
have reimbursed SKI for certain costs of patent prosecution, and have agreed to
pay for future patent prosecution in exchange for the right to prepare and
control the ongoing patent applications.
ZEOCIN AND ZEOCIN RESISTANCE. In 1994, we obtained from CAYLA of Toulouse,
France, exclusive worldwide rights to use a patented gene which confers
resistance to certain antibiotics including Zeocin. We paid an up front fee to
CAYLA, and pay royalties on sales of kits and vectors containing this gene.
8
<PAGE>
We also made certain minimum royalty commitments to CAYLA, which grow at a fixed
rate from year to year, in exchange for the exclusive rights. In addition, we
purchase the Zeocin antibiotic from CAYLA at a price to be set each year, and
have agreed that our purchases will also grow, in order to obtain most-favored
pricing terms.
ZERO BACKGROUND. We licensed the CCDB or Zero Background gene, used for
selection of successful clones, from the Universite Libre de Bruxelles in 1995.
This license grants us exclusive rights to use this patented "lethal gene"
technology for commercial purposes in all fields worldwide. We paid an initial
license fee and reimbursed certain patent costs of the University and pay a
royalty on sales of products containing the lethal gene. In order to maintain
the exclusive rights, we pay certain minimum royalties each year. We are also
responsible for reimbursing the University's patent prosecution costs for this
technology, up to a fixed cap.
Taq AND PCR. Probably the most pervasive and essential tool in molecular
biology today, the Polymerase Chain Reaction (PCR) enables researchers to target
and amplify, or copy in large numbers, certain portions of DNA. This technique,
and certain aspects of TAQ polymerase, which is an essential reagent in PCR, are
patented and now owned by F. Hoffmann-La Roche, Ltd. of Basel, Switzerland. We
recently obtained a non-exclusive license to use TAQ polymerase and PCR in our
research efforts as well as the rights to make and sell TAQ to the research
community. We paid an initial license fee for these rights and also pay
royalties which are calculated using both sales of products and use or sale of
TAQ. We granted F. Hoffmann-La Roche the right to negotiate for a license to
make and sell any competing enzyme we may develop in the future. Prior to
obtaining this license, we purchased TAQ from authorized sources in order to
have the rights to use PCR for our research.
In addition to these licenses, we maintain a portfolio of exclusive,
co-exclusive and non-exclusive rights to make, use and/or sell many of the
various technologies underlying our products and services. Depending upon
factors including the scope of rights granted, the usefulness and commercial
potential of the technology and whether the rights are exclusive, we provide
various financial and other consideration to the patent holder or the holder of
senior license rights. Typically, our other licenses include an initial license
fee and continuing royalties. Some licenses also include payments at certain
milestones, E.G., at the first commercial sale of a product. Many licenses,
especially exclusive licenses, call for certain minimum royalty payments each
year. A license will often contain certain other undertakings by us, such as a
commitment to diligently pursue development and marketing of commercial products
utilizing the licensed technology.
We cannot assure you that we will be able to continue to identify
successfully new technologies developed by others. Even if we are able to
identify new technologies of interest, we may not be able to negotiate a license
on favorable terms, or at all. Some of our licenses do not run for the length of
the patent. We may not be able to renew our existing licenses on favorable
terms, or at all. If we lose the rights to patented technology, we may need to
redesign our products or we may lose a competitive advantage. Potential
competitors could in-license technologies that we fail to license and
potentially erode our market share for certain products.
Our licenses typically subject us to various commercialization, sublicensing
and other obligations. If we fail to comply with these requirements we could
lose important rights under a license, such as the right to exclusivity in a
certain market. In some cases, we could also lose all rights under a license. In
addition, certain rights granted under the license could be lost for reasons out
of our control. For example, the licensor could lose patent protection for a
number of reasons, including invalidity of the licensed patent. We typically do
not receive significant indemnification from a licensor against third party
claims of intellectual property infringement.
9
<PAGE>
DEPENDENCE ON NEW PRODUCTS; RAPID TECHNOLOGICAL CHANGE
The markets for our products and services are characterized by rapid
technological change and frequent new product introductions. Many of these
markets are new and rapidly changing. Our research kit products, for example,
could have a short product life cycle. Our future success will depend in part on
our timely development and introduction of new products that address evolving
market requirements. We believe successful new product introductions provide a
significant competitive advantage because customers make an investment of time
in selecting and learning to use a new product, and are reluctant to switch
thereafter. To the extent we fail to introduce new and innovative products we
will probably lose market share to our competitors, which will be difficult or
impossible to regain.
We have made a substantial investment in Invitrogenomics. Invitrogenomics
has both a products and a services component. The products portion of
Invitrogenomics was launched commercially in 1998, and has not achieved
significant revenues. We expect to launch the services portion of the business
in the near future. We cannot be sure that Invitrogenomics will achieve any
commercial success or that revenues will equal or exceed the cost of our
investment.
In the past we have experienced, and we are likely to experience in the
future, delays in the development and introduction of products. We cannot assure
you that we will keep pace with the rapid rate of change in life sciences
research, or that our new products will adequately meet the requirements of the
marketplace or achieve market acceptance. Factors affecting the market
acceptance of our new products include:
- - Citation of the product in published research
- - The timing of introduction of the product relative to competitive products
- - General trends in life sciences research
An inability, for technological or other reasons, to successfully develop
and introduce new products could reduce our growth rates or damage the business.
DEPENDENCE ON KEY PERSONNEL
Our future success depends to a significant extent on the skills, experience
and efforts of our executive officers and key members of our scientific staff.
The loss of any or all of these individuals could damage our business.
In addition, our products and services are highly technical in nature. In
general only highly qualified and trained scientists have the necessary skills
to develop and market our products and provide our services. Our future success
depends significantly on our ability to attract, motivate and retain a
significant number of molecular biologists and other scientists, who are in
short supply. We face intense competition for these professionals from our
competitors and our customers, marketing partners and companies throughout our
industry. Any failure on our part to hire, train and retain a sufficient number
of qualified professionals would seriously damage our business. We do not
generally enter into employment agreements requiring these employees to continue
in our employment for any period of time. See "Management."
HIGHLY COMPETITIVE MARKET
The markets for our products are very competitive, and we expect the
intensity of competition to increase. Currently, we compete primarily with other
life sciences research products suppliers. Many of these competitors have
greater financial, operational, sales and marketing resources, and more
experience in research and development than we do. These and other companies may
have developed or could in the future develop new technologies that compete with
our products or even render our products obsolete.
10
<PAGE>
Competitors offer a broad range of equipment, laboratory supplies and other
products, including research products that compete with ours. We believe that
customers in our markets display a significant amount of loyalty to their
initial supplier of a particular product. Therefore, it may be difficult to
generate sales to customers who have purchased products from competitors.
Further, we believe that there is a significant competitive advantage in being
the first to introduce a new product to market. Accordingly, we believe that to
compete effectively, we will need to consistently be first to market with
important new research products and services. To the extent we are unable to be
the first to develop and supply new products, our competitive position will
suffer.
Certain of our academic and commercial customers have developed purchasing
initiatives to reduce the number of vendors they purchase from in order to lower
their supply costs. In some cases these accounts have established agreements
with large distributors, which include discounts and the distributors' direct
involvement with the purchasing process. These activities may limit our sales or
profit margins to these customers. For more information, see
"Business--Competition."
INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY FLUCTUATIONS
Our products are currently marketed in over 30 countries throughout the
world. Our international revenues, which include revenues from our Netherlands
subsidiary and export sales, represented 35% of product revenues for the nine
months ended September 30, 1998, 35% of our product revenues in 1997, 33% in
1996, and 30% in 1995. We expect that international revenues will continue to
account for a significant percentage of our revenues for the foreseeable future,
in part because we intend to expand our international operations.
A significant portion of our business is conducted in currencies other than
the U.S. dollar, which is our reporting currency. We recognize foreign currency
gains or losses arising from our operations in the period incurred. As a result,
currency fluctuations among the U.S. dollar and the currencies in which we do
business have caused and will continue to cause foreign currency transaction
gains and losses. We cannot predict the effects of exchange rate fluctuations
upon our future operating results because of the number of currencies involved,
the variability of currency exposures and the potential volatility of currency
exchange rates. We engage in foreign exchange hedging transactions to manage our
foreign currency exposure, but we can not assure you that our strategies will
adequately protect our operating results from the effects of exchange rate
fluctuations. For more information see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Currency Hedging and Foreign
Currency Translation."
There are a number of other risks arising from our international business,
including:
- - Uncertain effects of the movement in Europe to a unified currency
- - Slower growth in the European market before the unified currency is adopted
- - General economic conditions in the markets in which we operate
- - Potential increased costs associated with overlapping tax structures
- - Unexpected changes in regulatory requirements
- - The difficulties of compliance with a wide variety of foreign laws and
regulations
- - Longer accounts receivable cycles in certain foreign countries
- - Import and export licensing requirements
- - Potential trade restrictions and exchange controls
- - Changes in tariff and freight rates
- - More limited protection for intellectual property rights in some countries
- - Difficulties and costs associated with staffing and managing foreign
operations
- - Political and economic instability
11
<PAGE>
The Asia/Pacific region has experienced unstable economic conditions and
significant devaluation in its currencies during the last six months of 1997 and
throughout 1998. The economic situation in the region may result in slower
payments of outstanding receivable balances. To date this region has not
represented a significant portion of our revenues. However, to the extent the
Asia/Pacific region becomes increasingly important, or the extent the factors
affecting the region begin to affect other geographic locations, our business
could be damaged.
PATENTS AND PROPRIETARY TECHNOLOGIES
Our success depends to a significant degree upon our ability to develop
proprietary products and technologies. It is critically important to our success
that we adequately protect the intellectual property associated with these
products and technologies. We currently own two issued patents in the United
States, one of which is co-owned by a third party, four issued patents in other
countries, and own or control 15 pending patent applications. We intend to
continue to file patent applications as we develop new products and
technologies. Patents provide some degree of protection for our intellectual
property. However, the assertion of patent protection involves complex legal and
factual determinations and is therefore uncertain. In addition, the laws
governing the scope of patent coverage and the periods of enforceability of
patent protection continue to evolve, particularly in the areas of molecular
biology of interest to us.
Patent applications in the United States are maintained in secrecy until
patents issue. Also, publication of discoveries in the scientific or patent
literature tend to lag behind actual discoveries by at least several months. As
a result, we cannot assure you that patents will issue from any of our patent
applications or from applications licensed to us. We also cannot assure you that
the scope of any of our issued patents will be sufficiently broad to offer
meaningful protection. In addition, our issued patents or patents licensed to us
could be successfully challenged, invalidated or circumvented so that our patent
rights would not create an effective competitive barrier. Our intellectual
property positions involve complex legal factual questions and may be uncertain.
We rely in part on trade secret protection of our intellectual property. We
attempt to protect our trade secrets by entering into confidentiality agreements
with third parties, employees and consultants. However, these agreements can be
breached and, if they were, there may not be an adequate remedy available to us.
Also, our trade secrets might become known to a third party through means other
than by breach of our confidentiality agreements, or they could be independently
developed by our competitors.
RISK OF INTELLECTUAL PROPERTY LITIGATION
Litigation regarding patents and other intellectual property rights is
extensive in the biotechnology industry. We are aware that patents have been
applied for and in some cases issued to others claiming technologies which are
closely related to ours. We periodically receive requests for confirmation that
our technologies do not infringe others' patent rights. We attempt to follow
developments in our fields, and we do not believe that our technologies or
products infringe upon the intellectual property rights of third parties.
Nevertheless, our activities have been and could be challenged by third parties.
If challenged, we may not prevail. In addition, the intellectual property rights
of others could require us to alter our products and processes, pay license fees
or cease certain activities. Although we might under these circumstances attempt
to obtain a license to such intellectual property, we may not be able to do so
on favorable terms, or at all.
We use a large number of technologies and inventions in a wide variety of
products. As a result, and in part due to the ambiguities and evolving nature of
intellectual property law, we periodically receive notices of potential
infringement of patents held by others. Although we have to date successfully
resolved these types of claims, we may not be able to do so in the future. In
the event of an
12
<PAGE>
intellectual property dispute we may be forced to litigate. Such litigation
could involve proceedings declared by the U.S. Patent and Trademark Office or
the International Trade Commission, as well as affected third parties.
Intellectual property litigation can be extremely expensive, and such expense,
as well as the consequences should we not prevail, could seriously harm our
business. Among the potential consequences, we may be forced to discontinue an
important product or product line.
COLLABORATIVE COMMERCIAL RELATIONSHIPS
Our long-term business strategy includes entering into strategic alliances
or marketing and distribution arrangements with corporate partners. These
relationships could relate to the development, commercialization, marketing and
distribution of certain existing products as well as potential new products. We
cannot assure you that we will successfully establish any of these collaborative
relationships, or that if established they will be scientifically or
commercially successful. There is also a risk that our collaborative partners
will pursue or develop competing products or technologies on their own or in
collaboration with our competitors.
NO PRIOR PUBLIC MARKET; POSSIBLE STOCK PRICE VOLATILITY
There has been no public market for our common stock prior to this offering.
We and the underwriters of the offering will determine the initial public
offering price by negotiations, and this price may not be the price at which the
common stock will subsequently trade. See "Underwriting" for a discussion of
factors that could influence the initial public offering price. Although the
common stock will be quoted on the Nasdaq National Market, an active trading
market may not develop or be sustained after this offering. The market price of
our common stock may fluctuate substantially due to a variety of factors,
including:
- - Quarterly fluctuations in our operating results
- - Technological innovations or new product introductions by us or our
competitors
- - Litigation
- - Disputes concerning patents or proprietary rights
- - Changes in earnings estimates by market research analysts
- - Changes in accounting principles
- - Sales of common stock by existing holders
- - Loss of key personnel
- - Economic conditions
In addition, the stock market is subject to other factors outside our
control that can cause extreme price and volume fluctuations. Securities class
action litigation has often been brought against companies, including many
biotechnology companies, which then experience volatility in the market price of
their securities. Litigation brought against us could result in substantial
costs and a diversion of management's attention and resources, which could
seriously damage our business.
FUTURE SALES OF SHARES
The market price of our common stock could drop as a result of sales of a
large number of shares in the market after this offering or in response to the
perception that such sales could occur. All of the 3,000,000 shares sold in this
offering will be freely tradable, while the 9,613,960 other shares outstanding
after this offering will be "restricted securities" as defined in Rule 144
("Rule 144") of the Securities Act of 1933, as amended (the "Securities Act").
Approximately 9,539,500 of these restricted securities will be subject to
180-day lock-up agreements. After expiration of the lock-up period, all of such
shares will be eligible for immediate sale, in certain instances subject to the
volume limitations of
13
<PAGE>
Rule 144. Donaldson Lufkin & Jenrette can release shares from one or more of the
lock-up agreements without our approval. In addition, holders of 2,202,942
shares have the right to request that we register those shares for sale in the
public market. See "Shares Eligible for Future Sale."
DILUTION
Our common stock has in the past been sold at prices substantially less than
you will pay. You will therefore suffer immediate dilution of $11.70 per share
in pro forma net tangible book value. The exercise of outstanding options may
result in further dilution.
YEAR 2000 ISSUES
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, in less than one year,
computer systems and/or software used by many companies in a very wide variety
of applications will experience operating difficulties unless they are modified
or upgraded to adequately process information involving, related to or dependent
upon the century change.
We believe our manufacturing, financial and accounting systems are year 2000
compliant, meaning that they are capable of distinguishing 21st century dates
from 20th century dates. We intend to replace our existing computer system with
a new system which is year 2000 compliant, with implementation of the new system
expected to be completed by the first half of 1999. We are in the process of
testing our other internal systems, including embedded control systems in our
manufacturing and storage equipment. We currently believe these systems are year
2000 compliant. We have made inquiries of our suppliers to attempt to assess
their readiness for the year 2000. The failure of systems maintained by our
customers, distributors, and suppliers could reduce our revenues, cause us to
incur significant expenses to remedy any problems, or otherwise seriously damage
our business.
To date we have spent immaterial amounts to comply with accounting and
statutory requirements regarding the year 2000. We believe that we will incur
minimal additional costs for year 2000 issues in the foreseeable future. If we
discover year 2000 errors or defects in our internal systems, we could incur
substantial costs in making repairs. Year 2000 problems could seriously damage
our business.
CONTROL BY EXISTING STOCKHOLDERS
After this offering, our executive officers and directors collectively will
beneficially own approximately 72% of the outstanding common stock (69.5% if the
Underwriter's overallotment option is exercised in full). They will therefore
continue to control Invitrogen and, if they act together, could elect all of the
directors, appoint management and control all matters submitted to our
stockholders for a vote, including matters related to a change of control of the
Company. Such a concentration of ownership may have the effect of delaying or
preventing transactions resulting in a change of control of the Company,
including transactions where stockholders might otherwise receive a premium for
their shares over current market prices. See "Principal Stockholders."
HAZARDOUS MATERIALS
Portions of our operations require the controlled use of hazardous and
radioactive materials. Although we believe our safety procedures comply with the
standards prescribed by federal, state and local regulations, the risk of
accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, we could be liable for any damages
that result, which could seriously damage our business. Additionally, an
accident could damage our research and manufacturing facilities and operations.
14
<PAGE>
POTENTIAL PRODUCT LIABILITY EXPOSURE
We face a potential risk of liability claims based on our products or
services. We carry product liability insurance coverage which is limited in
scope and amount but which we believe to be adequate. We cannot assure you,
however, that we will be able to maintain this insurance at reasonable cost and
on reasonable terms. We also cannot assure you that this insurance will be
adequate to protect us against a product liability claim, should one arise.
ANTI-TAKEOVER PROVISIONS
Certain provisions of our certificate of incorporation and Delaware law
could be used by our incumbent management to make it substantially more
difficult for a third party to acquire control of the Company. In addition, at
the same time as this offering is declared effective by the SEC we plan to adopt
and approve a shareholder rights plan. These measures could discourage potential
takeover attempts and could adversely affect the market price of our common
stock. See "Description of Capital Stock."
ABSENCE OF DIVIDENDS
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, we do not currently anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy" and "Dilution."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby are estimated to be approximately $41,100,000
($47,378,000 if the Underwriters exercise their over-allotment option in full),
assuming an initial public offering price of $15.00 per share and after
deducting estimated underwriting discounts and commissions and estimated
offering expenses.
The Company expects to use approximately $12.8 million of the net proceeds
for redemption of the Redeemable Preferred Stock issuable upon the conversion of
the Convertible Preferred Stock (together with the Redeemable Preferred Stock,
the "Preferred Stock") upon the closing of this offering, and approximately $1.4
million for the payment of accrued dividends on the Convertible Preferred Stock.
The redemption price of the Redeemable Preferred Stock and the dollar amount of
the accrued dividends on the Convertible Preferred Stock may vary based on the
offering price and the closing date of this offering. The Company intends to use
the remainder of the net proceeds of this offering for the redemption of the
Redeemable Subsidiary Common Stock of its subsidiary, Invitrogen B.V., on April
7, 1999 in the amount of Netherlands Guilder ("NLG") 3,150,000 (USD $1,672,000
at September 30, 1998 exchange rates), the continued development and manufacture
of existing products and services, research and development of additional
products and services, working capital and other general corporate purposes,
including potential acquisition of products, technology or companies. While the
Company from time to time engages in preliminary discussions with respect to
such transactions, the Company is not a party to any agreements, understandings
or commitments with respect to such transactions. Pending such uses, the net
proceeds will be invested in short-term, interest bearing, investment grade
securities.
Based on its current operating plan, the Company anticipates that the net
proceeds of this offering, together with the Company's available cash and
expected interest income thereon and funds from operations, should be sufficient
to finance the Company's capital requirements for the foreseeable future. This
estimate is based on certain assumptions that could be negatively impacted by
the matters discussed in "Risk Factors" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying such cash dividends in the foreseeable
future. The Company currently anticipates that it will retain all of its future
earnings for use in the development and expansion of its business and for
general corporate purposes. Any determination to pay dividends in the future
will be at the discretion of the Company's Board of Directors and will depend
upon the Company's results of operation, financial condition and other factors
as the Board of Directors, in its discretion, deems relevant.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1998: (i) on an actual basis, (ii) on a pro forma basis to give
effect to the conversion of all outstanding shares of Convertible Preferred
Stock into shares of Common Stock and Redeemable Preferred Stock upon the
closing of this offering, and (iii) as adjusted to give effect to the receipt of
the net proceeds from the sale by the Company of 3,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $15.00 per
share, and the application of an expected $14.2 million of such net proceeds to
the redemption of the Redeemable Preferred Stock and the payment of accrued
dividends on the Convertible Preferred Stock. The table should be read in
conjunction with the Consolidated Financial Statements of the Company and
related notes thereto included elsewhere in this Prospectus. See "Use of
Proceeds" and "Certain Transactions."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term portion of capital lease obligations(1)............................ $ 96 $ 96 $ 96
--------- ----------- -----------
Redeemable Subsidiary Common Stock, 18,000 authorized and issued; full
liquidation value, $1,672,000(2)........................................... 1,541 1,541 1,541
--------- ----------- -----------
Convertible Preferred Stock, $0.01 par value per share: 2,202,942 authorized;
2,202,942 issued and outstanding actual; no shares authorized, issued or
outstanding pro forma and as adjusted(3)(4)................................ 15,916 -- --
--------- ----------- -----------
Redeemable Preferred Stock, $0.01 par value per share: 2,202,942 shares
authorized; no shares issued and outstanding actual; 2,202,942 shares
issued and outstanding pro forma; no shares issued and outstanding as
adjusted(4)................................................................ -- 14,200 --
--------- ----------- -----------
Stockholders' equity:
Preferred Stock, $0.01 par value: 2,000,000 shares authorized; no shares
issued and outstanding................................................... -- -- --
Common Stock, $.01 par value: 20,000,000 shares authorized and 7,411,018
shares issued and outstanding actual; 50,000,000 shares authorized and
9,613,960 shares issued and outstanding pro forma; 50,000,000 shares
authorized and 12,613,960 shares issued and outstanding as
adjusted(5)(6)........................................................... 74 96 126
Additional paid-in capital................................................... -- 1,694 42,764
Retained earnings (deficit).................................................. (490) (490) (490)
Total stockholders' equity (deficit)..................................... (355) 1,361 42,461
--------- ----------- -----------
Total capitalization..................................................... $ 17,198 $ 17,198 $ 44,098
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------------------------
(1) See Note 10 to Consolidated Financial Statements.
(2) See Note 11 to Consolidated Financial Statements.
(3) Upon completion of this offering and as presented on a pro forma basis, the
outstanding shares of Convertible Preferred Stock will convert into an
aggregate of 2,202,942 shares of Common Stock and 2,202,942 shares of
Redeemable Preferred Stock.
(4) All shares of Redeemable Preferred Stock will be redeemed for an aggregate
of $14.2 million in cash, representing approximately $12.8 million in
redemption value and approximately $1.4 million in accrued dividends and
retired as presented on an as adjusted basis. See "Use of Proceeds" and
"Certain Transactions."
(5) On November 20, 1998, the Company authorized an additional 30 million shares
of Common Stock.
(6) Based on 7,411,018 shares of Common Stock outstanding as of September 30,
1998 and assuming the conversion of 2,202,942 shares of Convertible
Preferred Stock into Common Stock, the offering of 3,000,000 shares of
Common Stock and 2,202,942 shares of Redeemable Preferred Stock and the
redemption of such Redeemable Preferred Stock upon the closing of this
offering. Excludes (i) 3,192,652 shares of Common Stock issuable upon
exercise of outstanding options at November 30, 1998 at a weighted average
exercise price of $4.12 per share, 1,568,193 of which were exercisable as of
that date; and (ii) 1,127,385 shares of Common Stock reserved for future
grant under the Company's stock option plans and Stock Purchase Plan. See
"Management--Stock Option Plans."
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<PAGE>
DILUTION
The Company's pro forma net tangible book value as of September 30, 1998 was
approximately $317,000 or $0.03 per share. Pro forma net tangible book value per
share represents the amount of the Company's pro forma stockholders' equity,
less intangible assets, divided by the pro forma number of shares of Common
Stock outstanding as of September 30, 1998 (after giving effect to the
conversion of the Convertible Preferred Stock into Common Stock and Redeemable
Preferred Stock). After giving effect to: (i) the automatic conversion of all
Convertible Preferred Stock into Common Stock and Redeemable Preferred Stock
upon the closing of this offering, (ii) the sale by the Company of the 3,000,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $15.00 per share and after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, and (iii)
the redemption of the Redeemable Preferred Stock and payment of accrued
dividends on the Convertible Preferred Stock, the pro forma net tangible book
value of the Company as of September 30, 1998 would have been $41,760,000, or
$3.30 per share. This represents an immediate increase in pro forma net tangible
book value of $3.27 per share to existing stockholders and an immediate dilution
in pro forma net tangible book value of $11.70 per share to investors purchasing
Common Stock in this offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $ 15.00
Pro forma net tangible book value per share before this offering........... $ 0.03
Increase per share attributable to new investors........................... 3.27
Pro forma net tangible book value per share after this offering(1)........... 3.30
---------
Dilution per share to new investors(1)....................................... $ 11.70
---------
---------
</TABLE>
The following table summarizes the total number of shares purchased from the
Company, the total consideration paid and the average price per share paid for
such shares by the existing stockholders and by new investors purchasing Common
Stock in this offering (based upon an assumed initial public offering price of
$15.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)......................... 9,613,960 76.2% $ 1,790,000 3.8% $ 0.19
New investors.................................... 3,000,000 23.8 45,000,000 96.2 15.00
------------ ----- ------------- -----
Total........................................ 12,613,960 100.0% $ 46,790,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
- ------------------------------
(1) If the Underwriters' over allotment option were exercised in full, the pro
forma net tangible book value per share after this offering would be $3.67,
resulting in immediate dilution of $11.33 per share to investors purchasing
shares in the offering.
(2) Based on 7,411,018 shares of Common Stock outstanding as of September 30,
1998 and assuming the conversion of 2,202,942 shares of Convertible
Preferred Stock into Common Stock and 2,202,942 shares of Redeemable
Preferred Stock and the redemption of such Redeemable Preferred Stock upon
the closing of this offering. Excludes (i) 3,192,652 shares of Common Stock
issuable upon exercise of outstanding options at November 30, 1998 at a
weighted average exercise price of $4.12 per share, 1,568,193 of which were
exercisable as of that date; and (ii) 1,127,385 shares of Common Stock
reserved for future grant under the Company's stock option plans and Stock
Purchase Plan. See "Management--Stock Option Plans."
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of the Company presented
below as of December 31, 1995, 1996 and 1997 and September 30, 1998, and for
each of the years in the three-year period ended December 31, 1997, and the
nine-month period ended September 30, 1998, are derived from the consolidated
financial statements of Invitrogen and its subsidiaries, which financial
statements have been audited by Arthur Andersen LLP, independent public
accountants. The consolidated financial statements as of December 31, 1996 and
1997 and September 30, 1998, and for each of the years in the three-year period
ended December 31, 1997, and the nine-month period ended September 30, 1998
(collectively, the "Consolidated Financial Statements"), and the report thereon,
are included elsewhere in this prospectus. The selected consolidated financial
data set forth below is qualified in its entirety by, and should be read in
conjunction with, the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $ 8,604 $ 11,754 $ 14,342 $ 19,121 $ 24,965 $ 18,263 $ 22,968
Cost of revenues................... 3,686 4,554 4,743 5,818 7,989 5,657 6,346
--------- --------- --------- --------- --------- ----------- ---------
Gross margin....................... 4,918 7,200 9,599 13,303 16,976 12,606 16,622
Operating expenses:
Sales and marketing................ 1,905 2,685 3,646 4,236 4,959 3,800 5,212
General and administrative......... 1,828 2,245 2,542 3,880 3,763 2,620 2,879
Research and development........... 1,333 1,623 2,043 2,659 4,416 3,058 5,320
--------- --------- --------- --------- --------- ----------- ---------
Total operating expenses......... 5,066 6,553 8,231 10,775 13,138 9,478 13,411
Income from operations............... (148) 647 1,368 2,528 3,838 3,128 3,211
Other income (expense), net.......... (197) (83) (6) 155 268 (17) 367
--------- --------- --------- --------- --------- ----------- ---------
Income before taxes.................. (345) 564 1,362 2,683 4,106 3,111 3,578
Benefit (Provision) for income
taxes.............................. (44) 45 (206) (939) (1,473) (1,116) (1,240)
--------- --------- --------- --------- --------- ----------- ---------
Net Income........................... $ (389) $ 609 $ 1,156 $ 1,744 $ 2,633 $ 1,995 $ 2,338
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
Earnings per share(1):
Basic.............................. $ (0.05) $ 0.05 $ 0.10 $ 0.19 $ 0.25 $ 0.20 $ 0.20
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
Diluted............................ $ (0.05) $ 0.05 $ 0.10 $ 0.16 $ 0.21 $ 0.16 $ 0.17
--------- --------- --------- --------- --------- ----------- ---------
--------- --------- --------- --------- --------- ----------- ---------
Weighted average shares used in per
share calculation:
Basic.............................. 8,490 9,268 9,602 8,356 7,837 7,974 7,426
Diluted............................ 8,490 9,268 9,602 10,080 9,509 9,815 8,830
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1996 1997 1998
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments................................. $ 78 $ 631 $ 587 $ 1,381 $ 9,152 $ 5,868
Total assets.................................. 4,092 4,642 5,992 8,258 18,056 20,851
Long-term capital leases...................... 1,043 838 433 110 144 96
Redeemable Subsidiary Common Stock............ -- -- 1,143 1,306 1,295 1,541
Convertible Preferred Stock................... -- -- -- -- 15,242 15,916
Total stockholders' equity (deficit).......... 652 1,111 2,298 3,779 (1,913) (355)
</TABLE>
- ------------------------------
(1) For an explanation of the calculations of earnings per share and per share
amounts, see Note 14 to Consolidated Financial Statements.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since its inception in 1987, the Company has been engaged primarily in the
development, manufacturing and marketing of research kits used to conduct
molecular biology research. Substantially all of the Company's revenue to date
has come from the sale of research kits and related products. The Company has to
date developed over 250 research kits and other products used by a variety of
scientific researchers to conduct gene cloning, expression and analysis
experiments. The Company's research kits are sold primarily in the United
States, Europe and Japan. The Company's products are used for research purposes
and their use is not regulated by the United States Food and Drug Administration
("FDA") or by any comparable international organization. The Company
manufactures the majority of its research kits in its manufacturing facility in
Carlsbad, California. In addition, the Company maintains selected arrangements
with third party manufacturers. The majority of the Company's sales activities
are conducted through a dedicated direct sales organization located in the
United States and Europe. The Company also conducts marketing and distribution
activities at its facility in the United States and at a facility owned by the
Company located in the Netherlands. The Company also completes a small
proportion of its sales to international distributors who resell the Company's
kits to researchers. These distributors are located in selected territories in
Europe, as well as in Japan and other territories in Asia. The Company currently
has no plans to establish a direct sales force in these territories, although
the Company may choose in the future to establish a direct sales organization in
additional territories. The Company conducts research activities in the United
States and business development activities in the United States and Europe. As
part of these activities the Company actively seeks to license intellectual
property from academic, government and commercial institutions relating to gene
cloning, expression and analysis technologies. To date, the Company has obtained
a total of 80 licenses, which provide the Company with access to over 200
patents covering gene cloning, expression and analysis materials and techniques.
In June 1998, the Company established Invitrogenomics to commercialize the
Company's high-throughput cloning and expression technology. Invitrogenomics
will provide licenses to its full-length clones to corporate development
partners, as well as sell selected clones as part of new research kits. In
addition, Invitrogenomics will seek to provide large-scale, high-throughput gene
cloning and expression services to corporate customers. Invitrogenomics has
generated limited revenues to date. The Company expects research and development
and sales and marketing expenditures related to Invitrogenomics to increase as
the Company continues to conduct activities to commercialize its high-throughput
gene cloning and expression technology.
The Company's revenues have increased significantly since its inception, and
from 1994 to 1997, the Company has experienced compound annual revenue growth of
29%. The increase in the Company's revenues to date has been due to several
factors, including the continued growth of the market for gene cloning and
expression kits, increasing market acceptance of the Company's gene cloning and
expression kits, the Company's introduction of new research kits for gene
cloning, expression and analysis, and the expansion of the Company's direct
sales and marketing efforts. The Company plans to continue to introduce new
research kits, as the Company believes continued new product development and
rapid product introduction is a critical competitive factor in the market for
molecular biology research kits. In order to support increased levels of sales
and to augment its long-term competitive position, the Company anticipates that
it will continue to increase expenditures in sales and marketing, manufacturing
and research and development.
The Company currently manufactures products for inventory and ships product
shortly after the receipt of orders, and anticipates that it will do so in the
future. Accordingly, the Company has not developed a significant backlog and
does not anticipate it will develop a material backlog in the future.
20
<PAGE>
The Company in the nine months ended September 30, 1998 realized significant
increases in research and development expenditures, both in absolute dollars and
as a percentage of sales. The increase in research and development expenses as a
percentage of sales was primarily related to the development of the Company's
high-throughput gene cloning and expression technology. The Company anticipates
that future research and development expenses will decline as a percentage of
sales in future periods to approach historical levels.
The Company has acquired a significant number of patent rights from third
parties as part of its business activities. These patent rights are used as a
basis for the development of the Company's research kits and the technologies
used by Invitrogenomics. The Company has historically paid and is obligated to
pay in the future to such third parties royalties relating to sales of certain
of its research kits and selected services. Royalty expense is recognized as a
cost of revenues as the related royalties are earned.
The Company anticipates that its results of operations may fluctuate due to
several factors, including changes in customer research budgets, competitive
product introductions, the Company's ability to successfully introduce or
transition the market to new products, market acceptance of existing or new
products, the Company's ability to manufacture its products efficiently and the
Company's ability to control or adjust research and development, marketing,
sales and general and administrative expenses in response to changes in
revenues. In addition, the Company's results of operations could be affected by
the timing of orders from distributors and the mix of sales among distributors
and the Company's direct sales force. Although the Company has experienced
growth in recent years, there can be no assurance that, in the future, the
Company will sustain revenue growth or remain profitable on a quarterly or
annual basis or that its growth will be consistent with predictions made by
securities analysts.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUE. Revenue increased $4.7 million, or 26%, from $18.3 million in the
nine months ended September 30, 1997 to $23.0 million in the nine months ended
September 30, 1998. For these same periods, revenues in the United States
increased $2.8 million, or 23%, from $12.3 million to $15.1 million, and revenue
outside the United States increased $1.9 million, or 32%, from $6.0 million to
$7.9 million. The overall increase in revenue was primarily attributable to
continued market growth for gene cloning and expression kits and increased
market penetration of Invitrogen's gene cloning and gene expression product
lines. In addition, in the nine months ended September 30, 1998 the Company's
new products contributed approximately $1.3 million in revenue. The Company
expects that future revenues will be affected by new product introductions,
competitive conditions, customer research budgets, and the rate of expansion of
the Company's customer base.
GROSS MARGIN. The Company's gross margin increased from $12.6 million in
the nine months ended September 30, 1997 to $16.6 million in the nine months
ended September 30, 1998. Gross margin as a percentage of revenues increased
from 69% to 72% for these periods. Gross margin improvements during the period
were primarily as a result of absorbing certain manufacturing labor and overhead
costs over an increased revenue base. The Company believes that gross margin for
future periods will be affected by sale volumes, competitive conditions, royalty
payments on licensed technologies, and foreign exchange factors. Foreign
currency fluctuations had a negligible impact during both periods. The
functional currency of Invitrogen B.V. is the Netherlands Guilder (NLG). The
translation from Guilders to Dollars for revenue and expenses is based on the
average exchange rate during the period; large increases or decreases in the
spread between currencies have affected and may continue to affect gross margin
and reported income. Invitrogen B.V. conducts its European business in the
currencies of its significant customers. Exchange gains or losses arising from
transactions denominated in these currencies are recorded using the actual
exchange differences on the date of the transaction.
21
<PAGE>
Large increases or decreases in these currency fluctuations could also impact
gross margin and reported profits.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 74%
from $3.1 million in the nine months ended September 30, 1997 to $5.3 million in
the nine months ended September 30, 1998. As a percentage of revenues, research
and development expenses increased from 17% to 23% for these periods. The
increases resulted primarily from the development of the Company's high-
throughput gene cloning and expression technology and greater personnel and
research supplies expense as the Company continued the expansion of its gene
cloning, expression, analysis and related products. The Company believes that
its research and development expenditures as a percentage of revenues will
generally decline toward historical levels. There can be no assurance that the
Company's research and development efforts will produce products or services
that achieve market acceptance or that produce acceptable margins.
SALES AND MARKETING. Sales and marketing expenses increased 37% from $3.8
million in the nine months ended September 30, 1997 to $5.2 million in the nine
months ended September 30, 1998. As a percentage of revenues, sales and
marketing expenses increased from 21% to 23% for these periods. These increases
resulted from growth of the Company's field sales force in the United States and
Europe. The Company expects to continue the expansion of its field sales force
in both the United States and Europe.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
10% from $2.6 million in the nine months ended September 30, 1998 to $2.9
million in the nine months ended September 30, 1998. As a percentage of
revenues, general and administrative expenses decreased from 14% to 13% for
these periods. The absolute increase resulted from the continued expansion of
administrative resources to support the Company's growth. The decline as a
percentage of revenues occurred as a fixed portion of the Company's general and
administrative expenses was spread over a larger revenue base. The Company
expects its aggregate general and administrative expenses to increase in 1999
due to the additional expenses associated with being a public company.
OTHER INCOME (EXPENSE). Other income, principally earned interest,
increased $0.4 million, from an expense of $17,000 in the nine months ended
September 30, 1997, to income of $0.4 million in the nine months ended September
30, 1998. This increase resulted primarily from the larger average balances of
cash and cash equivalents during the later period.
PROVISION FOR INCOME TAXES. The Company's effective tax rate decreased
slightly from 36% in the nine months ended September 30, 1997 to 35% in the nine
months ended September 30, 1998. The Company currently receives tax credits on
certain R&D expenditures; in the past, these tax credits have been authorized by
the U.S. Congress on a year by year basis and the Company has no assurance they
will be available in future years.
YEARS ENDED DECEMBER 31, 1997 AND 1996
REVENUES. Revenue increased $5.9 million, or 31%, from $19.1 million in
1996 to $25.0 million in 1997. Revenues in the United States increased $3.6
million, or 27%, from $12.9 million to $16.5 million, and revenue from outside
the United States increased $2.3 million, or 37%, from $6.2 million to $8.5
million. The overall increase in revenue was primarily attributable to increased
market penetration of Invitrogen's gene cloning and gene expression product
lines. In addition, in 1997 the Company's new products contributed $2.1 million
in revenue.
GROSS MARGIN. The Company's gross margin increased from $13.3 million in
1996 to $17.0 million in 1997. Gross margin as a percentage of revenues
decreased from 70% to 68% for these periods, primarily as a result of foreign
exchange impact on revenues and to a lesser extent increased royalty payments on
licensed technologies.
22
<PAGE>
RESEARCH AND DEVELOPMENT. Research and development expenses increased 66%
from $2.7 million in 1996 to $4.4 million in 1997. As a percentage of revenues,
research and development expenses increased from 14% to 18% for these periods.
These increases resulted primarily from the greater personnel and research
supplies expense as the Company continued the expansion of its gene cloning and
expression products and the development of its high-throughput gene cloning and
expression technologies.
SALES AND MARKETING. Sales and marketing expenses increased 17% from $4.3
million in 1996 to $5.0 million in 1997. As a percentage of revenues, sales and
marketing expense declined from 22% to 20% for these periods as certain costs
were spread over a larger revenue base.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
3% from $3.9 million in 1996 to $3.8 million in 1997. As a percentage of
revenues, general and administrative expenses decreased from 20% to 15% for
these periods. During 1996, the Company incurred a significant one-time expense
of $0.8 million for defending and resolving licensing and patent issues with a
competitor.
OTHER INCOME (EXPENSE). Other income, primarily interest earned, increased
73% from $0.2 million in 1996 to $0.3 million in 1997, primarily from higher
average cash balances.
PROVISION FOR INCOME TAXES. The Company's effective tax rate increased
slightly from 35% in 1996 to 36% in 1997, reflecting changes in the utilization
of tax credits.
YEARS ENDED DECEMBER 31, 1996 AND 1995
REVENUE. Revenue increased $4.8 million, or 33%, from $14.3 million in 1995
to $19.1 million in 1996. Revenues in the United States increased $2.8 million,
or 28%, from $10.1 million to $12.9 million, and revenue from outside the United
States increased $2.0 million, or 45%, from $4.2 million to $6.2 million. The
overall increase in revenue was primarily attributable to increased market
penetration of Invitrogen's gene cloning and gene expression product lines. In
addition, in 1996 the Company's new products contributed $2.0 million in
revenue.
GROSS MARGIN. The Company's gross margin increased from $9.6 million in
1995 to $13.3 million in 1996. Gross margin as a percentage of revenue increased
from 67% to 70% for these periods, primarily because certain fixed costs were
spread over a larger revenue base.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 30%
from $2.0 million in 1995 to $2.7 million in 1996. The increase resulted
primarily from the greater personnel expenses as the Company continued the
expansion of its new product development capabilities. As a percent of revenues,
research and development expenses were 14% for both periods.
SALES AND MARKETING. Sales and marketing expenses increased 19% from $3.6
million in 1995 to $4.3 million in 1996. As a percentage of revenues, sales and
marketing expenses decreased from 25% to 23% because certain fixed costs were
spread over a larger revenue base.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
53% from $2.5 million in 1995 to $3.9 million in 1996. As a percentage of
revenues, general and administrative expenses increased from 18% to 20% for
these periods. During 1996, the Company incurred a one-time expense of $0.8
million defending and resolving licensing and patent issues with a competitor.
OTHER INCOME (EXPENSE). Other income increased from an expense of $6,000 in
1995 to an income of $0.2 million in 1996, primarily from European currency
exchange differences and interest income from the Company's Netherlands
subsidiary.
PROVISION FOR INCOME TAXES. The Company's effective tax rate increased from
15% in 1995 to 35% in 1996 as a result of having utilized accumulated R&D tax
credits in 1995.
23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company generated net cash from operating activities of approximately
$2.2 million in the nine months ended September 30, 1998. The Company used
approximately $4.9 million in its investing activities, which included the
construction of a new building for its subsidiary in The Netherlands, the
purchase of hardware and software for the conversion to a new enterprise-wide
financial and manufacturing information system, and the development and
installation of high-throughput gene cloning and expression equipment. Since its
inception the Company has funded its business primarily through cash generated
from operations and debt. In addition, an aggregate of $16.0 million has been
raised from the sale of equity securities.
As of September 30, 1998 the Company had cash and cash equivalents and
short-term investments of approximately $2.4 million and $3.5 million,
respectively, and working capital of approximately $9.2 million. The Company had
lines of credit totaling approximately $10 million of which none was utilized as
of September 30, 1998. The Company's funds are currently invested in U.S.
Treasury and government agency obligations, investment-grade commercial paper
and interest-bearing securities.
At the closing of this offering, the Company will be required to redeem all
outstanding shares of the Redeemable Preferred Stock issuable upon conversion of
the outstanding shares of Convertible Preferred Stock and will be required to
pay accumulated dividends on the Convertible Preferred Stock. The redemption
price of the Redeemable Preferred Stock and the dollar amount of the accumulated
dividends on the Convertible Preferred Stock may vary based on the offering
price and the closing date of this offering. Assuming an initial public offering
price of $15.00 per share and the closing of the public offering in late January
1999, the aggregate redemption price for the Redeemable Preferred Stock will be
$12.8 million and the accumulated preferred dividends will be $1.4 million.
Additionally, the Company's subsidiary, Invitrogen B.V., has issued shares of
non-voting stock which are required to be redeemed on April 7, 1999 for NLG
3,150,000 ($1,672,000 at September 30, 1998 exchange rates).
The Company expects that the proceeds from this offering, its funds from
operations and its existing funds and interest income earned thereon, will be
sufficient to fund the Company's operations for the foreseeable future. The
Company's future capital requirements and the adequacy of its available funds
will depend on many factors, including scientific progress in its research and
development programs, the magnitude of those programs, the ability of the
Company to establish collaborative and licensing arrangements, the cost involved
in preparing, filing, prosecuting, maintaining and enforcing patent claims and
competing technological and market developments.
CURRENCY HEDGING AND FOREIGN CURRENCY TRANSLATION
In the normal course of business, Invitrogen B.V. from time to time
purchases exchange traded put options on U.S. dollars and U.K. pounds sterling
to mitigate foreign currency exposure. The maximum outstanding amounts of such
options have been less than $2 million and have been for less than one year in
duration.
Invitrogen conducts business transactions in U.S. Dollars with its
subsidiary in the Netherlands and with its foreign distributors, including those
in Asia. The functional currency for Invitrogen B.V. is the Netherlands Guilder
(NLG). The translation from NLG to the U.S. Dollar is translated for balance
sheet accounts using the current exchange rate in effect at the balance sheet
date and for revenues and expense accounts using the average exchange rate
during the period. The effects of translation are recorded as a separate
component of stockholder's equity. Invitrogen B.V. conducts its business with
significant customers in their local European currencies; exchange gains and
losses arising from these transactions are recorded using the actual exchange
differences on the date of the transaction.
24
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). This statement provides
guidance on accounting for the costs of computer software developed or obtained
for internal use and identifies characteristics of internal use software as well
as assists in determining when computer software is for internal use. SOP 98-1
is effective for fiscal years beginning after December 15, 1998, with earlier
application permitted. The Company has not determined the impact of the adoption
of SOP 98-1 as this is highly dependent upon the nature, timing and extent of
future internal use software development.
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
This Statement of Position provides guidance on the financial reporting of
start-up costs and organization costs. It requires that the cost of start-up
activities and organization costs be expensed as incurred. The SOP is effective
for financial statements for fiscal years beginning after December 15, 1998. The
Company does not expect adoption of this SOP to have a material impact on its
financial statements.
The Company will be required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and
Related Information." Statement 131 superseded SFAS No. 14, "Financial Reporting
for Segments of a Business Enterprise" and is effective for years beginning
after December 31, 1997. Statement 131 establishes standards for the way that
public business enterprises report selected information about operating segments
in financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of Statement 131 will not affect the Company's results of
operations or financial position, but may affect the disclosure of the segment
information in the future.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
statement changes the previous accounting definition of derivative--which
focused on freestanding contracts such as options and forwards (including
futures and swaps)--expanding it to include embedded derivatives and many
commodity contracts. Under the Statement, every derivative is recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. Earlier
application is allowed as of the beginning of any quarter beginning after
issuance. The Company does not anticipate that the adoption of SFAS 133 will
have a material impact on its financial position or results of operations.
YEAR 2000 ISSUES
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, in less than one year,
computer systems and/or software used by many companies in a very wide variety
of applications will experience operating difficulties unless they are modified
or upgraded to adequately process information involving, related to or dependent
upon the century change.
The Company believes its current manufacturing, financial and accounting
systems are Year 2000 compliant, meaning they are adequately capable of
distinguishing 21st century dates from 20th century dates. Also, the Company
intends to replace its existing system with a new system which is Year 2000
compliant, with implementation of the new system expected to be completed by the
first half of 1999. The Company is in the process of testing its other internal
systems, including embedded control systems in its manufacturing and storage
equipment and currently believes these systems are Year 2000 compliant. The
Company has also made inquiries of its suppliers to attempt to assess their
readiness for the Year 2000. The failure of systems maintained by customers,
distributors, and suppliers to be Year 2000
25
<PAGE>
compliant could reduce the Company's revenues, cause it to incur significant
expenses to remedy any problems, or otherwise seriously damage its business.
Costs to date in complying with accounting and statutory Year 2000
requirements have been immaterial and the Company believes that it will incur
minimal additional costs for this purpose in the foreseeable future. If the
Company discovers other Year 2000 errors or defects in its internal systems, it
could incur substantial costs in making repairs. The resulting disruption of its
operations could seriously damage its business.
ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION
On January 1, 1999, certain member states of the European Economic Community
(the "EEC"), including the Netherlands, will fix their respective currencies to
a new currency, the Euro. On that day, the Euro will become a functional legal
currency within these countries. During the three years beginning on January 1,
1999, business in these EEC member states will be conducted in both the existing
national currency, such as the Netherlands guilder, French franc or deutsche
mark, and the Euro. Companies operating in or conducting business in EEC member
states will need to ensure that their financial and other software systems are
capable of processing transactions and properly handling the existing
currencies, as well as the Euro. The Company is still assessing the impact that
the Euro will have on its internal systems and its products. While the Company
believes its enterprise-wide financial and manufacturing information system will
be Euro compliant, this system has not yet been tested by the Company. The
Company has not determined the costs related to any problems that may arise in
the future. Any such problems may materially adversely affect the Company's
business, operating results and financial condition.
26
<PAGE>
BUSINESS
THE COMPANY
Invitrogen develops, manufactures and markets research tools in kit form and
provides research services to corporate, academic and government entities. The
Company's kits simplify and improve gene cloning, gene expression and gene
analysis as well as other molecular biology activities that underlie functional
genomics and gene-based drug discovery. The Company's kits allow researchers to
perform experiments more accurately, efficiently and with greater
reproducibility compared to traditional research methods. As a result, the
Company's kits have made molecular biology research techniques more accessible
to pharmaceutical, biotechnology, agricultural, government and academic
researchers with backgrounds in a wide range of scientific disciplines. In order
to commercialize the Company's recently developed high-throughput gene cloning
and expression technology, the Company established Invitrogenomics in 1998.
Invitrogenomics will seek to utilize this technology to generate additional
license, service and product opportunities for the Company. The Company's
leadership position in gene cloning and expression has led to significant
historical revenue and net income growth. From 1994 to 1997, the Company
experienced compound annual growth in revenues and net income of 29% and 63%,
respectively.
In 1997, according to independent market studies, researchers spent over
$1.2 billion on molecular biology products and supplies such as chemicals,
reagents, enzymes and kits. Gene cloning, expression and analysis kits represent
a rapidly emerging segment of the overall molecular biology product and supply
market. According to independent market studies, sales of gene cloning and
expression kits are projected to grow approximately 21% in 1999, compared to
approximately 11% growth in 1999 for the overall molecular biology product and
supply market. The Company believes that the market for gene cloning, expression
and analysis kits will continue to expand due to several factors, including (i)
increasing levels of government funding for genomics and molecular biology
research, (ii) the increasing availability of new genomics data from the Human
Genome Project and other genome sequencing projects, (iii) the proliferation of
high-throughput molecular biology techniques, and (iv) accelerated investment in
commercial research activities.
The Company offers over 250 research kits that researchers use to conduct
key molecular biology research activities. The Company designs research kits to
overcome limitations and complexities of traditional molecular biology
techniques, by making these activities easier, faster and more accessible to an
increasingly broad community of researchers. For example, as compared to
standard cloning methods, the Company's proprietary TOPO TA Cloning technology
has reduced the time required for a key step in the gene cloning process from 12
hours to five minutes, has reduced total experiment completion time from a range
of three to five days to one day and has increased the cloning success rate from
50-60% to over 90%. The Company estimates that researchers who used the
Company's TOPO TA Cloning Kits in 1997 saved over 2.5 million hours relative to
standard cloning methods.
The Company believes it has assembled one of the broadest portfolios of gene
cloning and expression-related intellectual property in the industry. To date,
the Company has obtained 80 licenses, providing the Company with access to over
200 patents covering gene cloning, expression and analysis materials and
techniques. In addition, the Company has over 15 issued and pending patents. The
Company believes that these licenses and patents have established it as a
licensing partner of choice for corporate and academic researchers who wish to
commercialize their gene cloning and expression-related discoveries. The Company
believes this position derives from its ability to enhance the value of licensed
technologies by combining them with its existing products and licensed
technologies.
The Company established Invitrogenomics to commercialize its
high-throughput, gene cloning and expression technology developed by scaling up
its TOPO TA Cloning technology. Invitrogenomics is using this high-throughput
technology to rapidly clone and patent full-length expression-tested genes
27
<PAGE>
and subsequently licensing and selling those genes to its academic, governmental
and corporate customers. In addition, the Company plans to use its
high-throughput gene cloning and expression technology to provide services on a
contract basis to pharmaceutical, biotechnology and agricultural companies that
wish to reduce the time and cost associated with identifying and validating new
drug targets and developing novel therapeutics. To date, the Company has
assembled a collection of over 1,700 full-length cloned human genes that express
their encoded proteins.
SCIENTIFIC OVERVIEW
All living cells are largely comprised of proteins and contain long chains
of deoxyribonucleic acid, better known as DNA. The entire DNA content of an
organism is called its genome. Genomics is the term used for the study of the
genome. A gene is a specific sequence of DNA that codes for a particular
protein. It is estimated that genes make up only 3% of the human genome; the
function of the remaining DNA is not well understood but is believed to regulate
the amount and timing of the proteins that are expressed from the genes.
Functional genomics is the study of the function of genes, including how
expression of a particular gene is regulated and the function of the protein the
gene encodes.
The DNA molecule is comprised of two linear sequences, or strands, of four
nucleotide bases, commonly known as C, G, A and T. It is estimated that there
are 3 billion nucleotide base pairs in the human genome. The individual DNA
strands are held together by chemical bonds between the nucleotide bases on each
strand. Only certain pairs of nucleotide bases can form these bonds: C always
pairs with G, and A always pairs with T. Such paired strands are said to be
complementary. When two DNA strands are complementary, they can bind together to
form a double helix in a process called hybridization. DNA itself does not
produce proteins. Instead, the double strand of the DNA helix unwinds and
complementary nucleotide bases are attracted to the separated strands of DNA,
forming messenger ribonucleic acid, or mRNA. The mRNA molecules typically move
to a different area of the cell where they are used as templates for protein
synthesis, or expression.
Proteins and their interactions are responsible for all of the biochemical
and physical properties of a cell, as well as the variations among different
types of cells. Proteins take various forms including enzymes, hormones,
antibodies and receptors. As noted above, genes code for proteins. By studying
the proteins that genes express, researchers can study topics such as the way a
particular gene and the protein it encodes impact an organism's susceptibility
or resistance to disease. Virtually all drugs on the market today interact with
about 500 specific protein targets. As the functions of additional proteins
become better understood, hundreds or thousands more such targets may be
identified, creating new opportunities for drug development by pharmaceutical
companies.
Molecular biology techniques are used to study how a cell uses its genetic
information to direct the production of its proteins and regulate its biological
activities. Researchers use molecular biology techniques to identify the
functions or interactions of proteins and to develop new drugs, diagnostic
techniques, therapies for disease and useful variations of species, including
crops and livestock. As a result, molecular biology has emerged as a key
scientific discipline and is used by a wide variety of researchers at
pharmaceutical, biotechnology and agricultural companies, as well as at
government and academic research institutions.
Five frequently used molecular biology techniques are DNA sequencing, gene
identification, gene cloning, gene expression and gene analysis. DNA sequencing
is used to determine the linear order of nucleotide bases in a DNA fragment. The
other techniques listed above are used to analyze the data obtained by DNA
sequencing and to determine the role and function of proteins encoded and
regulated by the sequence data. Each of the five techniques generates data and
results that are used by the subsequent technique in the above list. Ultimately,
gene analysis provides information about additional
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genetic material that should be sequenced. The five techniques and their
applications are illustrated and described below:
[CHART]
[Diagram illustrates in a clockwise circle a sequence of steps performed for
molecular biological research, including DNA sequencing, gene identification,
gene cloning, gene expression and gene analysis. A box illustrating the
"sequence" step contains a graphic depiction of a cell and chromosomes. Text in
it reads "The total genetic information carried by an organism is called its
genome, which is a linear sequence of nucleotide bases. An illustration of
arrows in a circle is labelled "Discovery Cycle." A box illustrating the
"Identify" step contains a graphic depiction of a chromosome and a DNA sequence.
Text in it reads "A gene is a specific functional unit of nucleotide bases that
code for a particular protein." A box illustrating the "clone" step contains a
graphic depiction of an expression vector including a cloned gene. Text in it
reads "Genes are cloned into vectors so they can be replicated in cells and used
in other studies, such as gene expression." A box illustrating the "express"
step contains a graphic depiction of DNA and protein. Text in it reads "cloned
genes are used to express proteins in a variety of host organisms." A box
illustrating the "analyze" step contains a graphic depiction of a sequencing gel
and a family tree. Text in it reads "Expressed proteins are studied to determine
their function. This analysis provides information about other genes that need
to be cloned and expressed to understand cellular functions."
- - DNA SEQUENCING. DNA sequencing is the technique used by researchers to
determine the linear order of nucleotide bases (I.E. the order of C's, G's,
A's and T's) in a DNA fragment. Sequencing is performed because it provides
researchers with the core information they need to identify, clone, express
and analyze specific genes and their encoded proteins. The first step in
sequencing involves isolating DNA from a sample (such as cells, tissue, blood,
hair or the leaf of a plant). Next, the isolated DNA is used in four different
reactions that occur in buffers containing salts, a mixture of the four
nucleotide bases, a nucleotide primer and an enzyme. Each of the four
reactions also contains one of the four nucleotide bases that has been
specifically modified for use in sequencing.
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The nucleotide primer is a short, single strand of DNA with a known sequence
that is complementary to the strand to be sequenced. After the isolated DNA is
placed in the buffer, it is heated to separate the DNA strands, then cooled
rapidly. Rapid cooling forces the DNA to hybridize, or bind, to the primer
rather than to its opposite DNA strand. The enzyme in the buffer then
elongates the complementary strand, one base at a time, starting from the
primer. When the modified sequencing nucleotide in the buffer incorporates
into the growing strand, the elongation process stops. Running the four
different reactions side by side on a sequencing gel then creates a visual
layout that the researcher uses to determine the actual nucleotide sequence of
the DNA.
High-throughput automated DNA sequencing is a recent innovation that has made
it possible to sequence all of the DNA in a genome. The United States
government is funding the sequencing of the human genome to provide
researchers with the building blocks to be used for further medical and
pharmaceutical research. Similarly, governments and major corporations have
begun agricultural genome projects to study and improve crops like rice, corn,
soybeans, and tomatoes. Genomes of organisms like fruit flies, mice, flatworms
and yeast are also being sequenced for the indirect understanding that
comparisons among organisms provides.
- - GENE IDENTIFICATION. Gene identification is the process of determining the
specific nucleotide sequence of the protein-encoding region of a gene. It is
required because, while DNA sequencing provides researchers with the entire
linear nucleotide sequence of a DNA molecule, it does not provide any
information about which portions of a sequence are genes or which part of
these genes code for proteins. Because many researchers are interested in
determining how proteins exert their influence, gene identification techniques
are used to determine the coding sequences that lie within the genomic
sequence.
One method for gene identification involves mRNA isolation and complementary
DNA ("cDNA") synthesis. Genes use mRNA as an intermediary that is translated
into protein. Thus, an mRNA molecule indicates a DNA sequence that codes for a
protein. But mRNA degrades very quickly and cannot be replicated for further
studies. Because of this, researchers have developed a method to synthesize
cDNA from isolated mRNA. cDNA can then be used in various experiments like
gene identification, gene cloning and gene expression.
Another method used to perform gene identification, called bioinformatics,
utilizes computer programs that attempt to predict which DNA sequences code
for genes. Entire genomic sequences are entered into databases and
sophisticated algorithms search for specific DNA sequences that are usually
found at the beginning and end of a gene. When these are found, there is a
high probability that a gene has been identified.
- - GENE CLONING. Gene cloning is a process used to move a selected gene or other
piece of DNA into a cloning vector for use in other techniques. A cloning
vector is a circular DNA molecule used to capture foreign DNA and carry it
into other organisms, usually bacteria, where it can replicate. Cloning gives
scientists the ability to produce sufficient quantities of a specific DNA
fragment for use in further studies, like gene expression and gene analysis.
Using cloned DNA can simplify research because the host organisms and
conditions in which a clone can replicate are far simpler to work with than
those in which the cloned DNA normally resides. The ability to perform gene
expression and analysis studies under these controlled, simplified conditions,
increases the ability of researchers to determine how genes and their encoded
proteins function.
There are several methods used for cloning. Researchers choose among methods
depending upon how the piece of DNA to be cloned was generated and what
information is known about it. When a researcher does not know the sequence of
the DNA to be cloned, two frequently used methods are genomic library and cDNA
library construction. In genomic library construction, the entire DNA of a
cell is isolated and broken into smaller pieces using a technique called
shearing. These pieces are then cloned into vectors and either sequenced or
screened to find DNA fragments that have some
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property that the researcher wishes to study. cDNA library construction is
similar; however, the researcher first isolates mRNA from the cells, then
reverse transcribes it into cDNA prior to cloning. Genomic libraries contain
all of the DNA in a genome, whereas cDNA libraries only contain genes that
encode proteins. Various screening methods enable researchers to identify
specific genes from among the many in the library.
When researchers have some information about the sequence of a DNA fragment
they wish to clone, they can use a type of protein called a restriction
enzyme. Restriction enzymes recognize specific DNA sequences, called
restriction sites, and cut the DNA strands in a manner that leaves nucleotide
overhangs, or "sticky ends." When some of the sequence of the DNA fragment to
be cloned is known, researchers can choose a restriction enzyme that cuts
isolated DNA at known restriction sites, then use the generated sticky ends to
hybridize the specific, cleaved DNA fragment into a cloning vector.
Blunt-ended cloning is a technique that is used when the DNA fragment to be
cloned does not contain sticky overhangs, which is termed as being blunt. Some
restriction enzymes leave blunt ends when they cut. Cloning blunt-ended DNA
fragments is a very inefficient process because there are no exposed
nucleotide bases with which to form base pairs. Blunt ends, however, have a
slight affinity for one another, which makes it possible for researchers to
clone these fragments into blunt-ended cloning vectors.
PCR cloning is another method that can be used to clone a DNA fragment when
some information about its sequence is known. PCR, or polymerase chain
reaction, is one of the most popular techniques used in molecular biology
because it quickly generates large amounts of specific DNA fragments.
Researchers use restriction enzymes, blunt-ended cloning, TA Cloning or other
methods to clone these PCR-produced fragments.
- - GENE EXPRESSION. Gene expression is a collection of techniques that are used
to produce proteins from genes that have been cloned into expression vectors
and introduced into various host organisms. Most expression studies involve
expressing the cloned gene in a variety of hosts, including bacteria, fungi,
insects and mammalian cells, under various growth conditions. The protein that
a DNA sequence expresses can vary slightly depending upon the host in which it
is expressed and the growth conditions used. By compiling the results of
multiple experiments, researchers develop an understanding of how a gene and
its encoded protein function and are regulated in the context of an entire
organism.
Generally, gene expression experiments fall into two categories: those in
which the goal is to produce a large amount of protein that will be purified
for use in other studies and those in which the goal is to monitor the host
for physiological changes caused by expression of the foreign protein.
Specific hosts and expression vector elements provide functions for these
different experiment types. Complete expression systems can facilitate each
type of experiment.
Gene expression relies on expression vectors, which, like cloning vectors, are
circular DNA molecules. Expression vectors contain various elements of DNA
that, at a minimum, enable the vector to replicate in the host and cause the
cloned gene to express its encoded protein. Usually, expression vectors also
contain antibiotic resistance genes to facilitate selection. Each particular
host organism requires expression vectors with specific elements that function
in that host, as well as methods for introducing the vector into the host, and
detecting and purifying the expressed protein. Other gene expression
techniques involve specifically mutating DNA sequences that code for protein,
using only portions of a DNA sequence, or creating gene fusions that use more
than one DNA sequence.
Gene expression analysis is used to identify which genes cause a difference
between two cell types, for example the differences in genes being expressed
in a healthy cell as opposed to those in a diseased cell. One relatively new
technique involves placing thousands of partial gene sequences, or
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tags, onto different glass slides, or chips. mRNA isolated from different cell
types is then applied to identical chips. Comparison of the chips reveals that
many tags, sometimes hundreds, bind mRNA on one chip but not the other. These
indicate genes that were being expressed in one cell type but not the other.
The sequences of these tags are then used to identify, clone, express and
analyze full-length genes to determine which are responsible for the observed
differences in the cell types. Thus, the availability of chip technology both
expands the need for gene identification, cloning, expression and analysis
tools and ultimately provides targets that can be used for drug discovery.
- - GENE ANALYSIS. Gene analysis techniques are used to determine the function or
role of an encoded protein, or if a given protein interacts with other
proteins or nucleic acids. Because most cellular processes are mediated
through pathways that involve many proteins and nucleic acids, determining
which proteins or nucleic acid molecules can interact with a given protein is
one of the keys to understanding its function in the context of the entire
cell.
Molecular interaction studies are one method that can be used to determine
protein function. A given protein is expressed from an expression vector that
can indicate whether the expressed protein binds to other proteins that are
expressed from a second vector. Both expression vectors contain specific
elements that enable detection of interactions. Researchers can express one
gene or an entire library of genes from the second vector. When an interaction
is indicated, researchers then isolate the gene in the second vector and begin
to study the two genes and their proteins to determine exactly how they bind
to one another, if other proteins are involved in the binding and the events
that precede and follow this molecular interaction. With an estimated 100,000
genes in a human cell, each capable of producing several different mRNA
molecules and proteins due to differential splicing, there are billions of
potential protein and nucleic acid interactions. For this reason, gene
analysis studies to date have been more of a starting than an ending point in
understanding a protein's function. The information provided by these studies
indicates which additional genes must be identified, cloned, expressed and
analyzed before the function of the entire pathway is understood.
MARKET OVERVIEW
According to independent market studies, in 1997 over $1.2 billion was spent
on molecular biology products and supplies such as chemicals, reagents, enzymes
and kits. The market for these products and for related services consists of the
academic market, comprised of universities and government institutions, and the
commercial market, comprised of pharmaceutical, biotechnology and agricultural
companies. It is estimated that there are over 300,000 scientists worldwide
engaged in molecular biology research.
Gene cloning, expression and analysis kits represent a rapidly emerging
segment of the overall molecular biology product and supply market. According to
independent market studies, sales of gene cloning and expression kits are
projected to grow approximately 21% in 1999, compared to approximately 11% for
the overall molecular biology product and supply market. Several factors are
driving market growth and the need for gene cloning, expression and analysis
kits and services:
- - INCREASING GOVERNMENT FUNDING. The National Institutes of Health is the
largest purchaser of research products and services in the world. In October
1998, the U.S. Congress approved a 15% increase in NIH funding, raising its
1999 budget to $15.7 billion. The U.S. Congress has stated its intention to
double the NIH budget in the next five to seven years. Other governments are
similarly increasing funding for biomedical research. In the past, funding
increases of this nature have resulted in a corresponding increase in the
purchase of molecular biology research products and services.
- - HIGH-THROUGHPUT SEQUENCING AND GENOME SEQUENCING PROJECTS. High-throughput
automated DNA sequencing is a recent innovation that has made it both
technically possible and economically feasible to sequence all of the DNA in a
genome. The U.S. government launched the Human Genome Project in October 1990,
at which time it committed $3.3 billion to the project to determine the DNA
sequence of the estimated 3 billion nucleotide base pairs contained in the
human genome. To date, only 6% of the estimated 100,000 genes have been fully
sequenced. In order to complete the
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project as scheduled in 2005, the number of genes identified and sequenced
needs to grow at rate of 49% per year. Similarly, governments and major
corporations worldwide have begun agricultural genome sequencing projects to
study and improve crops like rice, corn, soybeans and tomatoes. The Company
believes that the market for gene cloning, gene expression and gene analysis
technologies will continue to expand as researchers attempt to determine the
function of the many genes for which sequence data is becoming available.
- - PROLIFERATION OF HIGH-THROUGHPUT MOLECULAR BIOLOGY TECHNIQUES. The advent of
high-throughput technologies for DNA sequencing and gene expression analysis
has exponentially increased the number of genes that need to be analyzed. In
addition, these technologies have enabled research to be performed on a much
larger scale. For example, while researchers used to study genes one or two at
a time, the emergence of chip technologies provides information on tens or
hundreds of genes that might need to be cloned and studied to accurately
determine the cause of a genetically-based disease. For increasing numbers of
research organizations, especially those that wish to use personnel with
limited training in molecular biology techniques, the availability of
easy-to-use molecular biology methods, or kits, enables research to be
performed more efficiently, conveniently and cost-effectively than
conventional techniques. The Company believes that the increased numbers of
researchers using molecular biology techniques and the increased number of
experiments being performed will accelerate the tendency of researchers to
convert from conventional techniques to easy-to-use kits.
- - ACCELERATED INVESTMENT IN COMMERCIAL RESEARCH. As more genes of the human and
other genomes are sequenced, the Company believes that the focus of research
will shift toward discovering the specific functions of each gene, especially
of those implicated in disease states. Companies wishing to develop
economically viable therapeutic and diagnostic products based on such
discoveries hope to rapidly establish and protect intellectual property rights
by obtaining patents or licenses covering these full-length genes and their
encoded proteins. These companies are competing with one another to be the
first to identify, clone and express the finite number of genes thought to be
of commercial importance. The desire to secure proprietary positions
increasingly leads companies to seek a competitive advantage by adopting
methods that can accelerate their research, including outsourcing of research
tasks to companies with demonstrated expertise.
INVITROGEN TECHNOLOGY AND CAPABILITIES
The Company believes that many conventional molecular biology research
methods described above are time consuming, require the use of hard-to-obtain or
hazardous materials or require considerable scientific training and experience
to generate accurate, reproducible results. The Company has developed a diverse
line of kits and services that address these limitations and make molecular
biology research techniques faster, easier and more cost-effective. In addition,
the Company's offerings make these techniques available to a broader range of
researchers with varying skill levels. For example, the conventional PCR cloning
method requires researchers to perform several steps between the PCR and
ligation reactions to prepare the PCR products for cloning. The Company's TOPO
TA Cloning Kit enables researchers to clone the PCR products directly, bypassing
all intermediate steps, which both saves time and improves the cloning
efficiency. Whereas the conventional method requires three to five days and
generates a 50-60% cloning efficiency, the TOPO TA Cloning Kit requires only one
day and increases the cloning efficiency to over 90%. The Company's FastTrack
Kit is another example of a product that provides researchers with significant
advantages over conventional research methods. Whereas mRNA isolation methods
typically took two days to complete and required the use of hazardous reagents,
the Company's method is completed in only three hours and does not involve the
use of any hazardous materials. The Company's broad portfolio of gene expression
vectors and systems also provide scientific as well as ease-of-use advantages to
researchers. Specifically, the Company offers complete protocols with all of its
expression vectors, which enables researchers to perform their experiments more
easily. In addition, the Company offers the broadest line of expression systems
available, a number of which can only be obtained from the Company.
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The Company has developed significant expertise in identifying molecular
biology techniques that could be simplified and improved by their development as
research kits. The Company has a consistent track record of identifying new
technologies, licensing or applying for the necessary patents and rapidly
introducing new or enhanced products based on those technologies to the market.
The Company has an established business development group of four professionals,
each with significant molecular biology research expertise. In addition, the
Company's sales and technical service representatives are experienced molecular
biologists who work with the Company's customers to identify emerging molecular
biology techniques or potential new product and service opportunities.
Specifically, the Company's business development, sales and technical service
groups have identified and obtained rights to over 200 patents to date. Since
the beginning of 1997, the Company's new product development teams introduced
over 50 new or enhanced research kits to the market.
BUSINESS STRATEGY
Invitrogen's business strategy is to commercialize a comprehensive portfolio
of products and services based on its expertise in gene cloning and gene
expression technologies. The Company's business strategy includes the following
key elements:
- - MAINTAIN AND ENHANCE LEADERSHIP POSITION IN GENE CLONING AND GENE
EXPRESSION. Invitrogen believes it is a worldwide leader in gene cloning and
gene expression technologies. The Company believes that the competitive
advantages offered by its innovative products and technologies for gene
cloning and expression and the comprehensive nature of its product line will
allow it to continue to increase its market share. The Company seeks to
enhance its position through investing significant resources in research and
development and in-licensing efforts to continually introduce novel products
and expand its product line. In addition, the Company is actively expanding
its direct worldwide sales force to increase market penetration of its
products.
- - DEVELOP NEW PRODUCTS AND MARKETS BASED UPON CORE EXPERTISE. The Company will
continue to develop and launch novel product lines related to gene cloning and
expression, such as gene transfer and gene analysis technologies. For example,
the Company has utilized its capabilities in cloning and expression to launch
its GeneStorm product line, which facilitates functional genomics studies. By
continuing to introduce new, complementary products the Company believes it
can enhance its position in its current core markets while targeting
additional high-growth market segments.
- - CAPTURE ADDITIONAL VALUE THROUGH SERVICES AND OUT-LICENSING. The Company
believes its technologies in gene cloning and expression provide significant
opportunities to develop high margin services and out-licensing arrangements.
Through Invitrogenomics, the Company will continue to use its high-throughput
gene expression technology to develop a proprietary library of full-length
genes, which can be licensed and sold to corporate partners for drug discovery
and other commercial development activities. In addition, the Company plans to
utilize its high-throughput capabilities to rapidly clone and expression test
thousands of genes for corporate customers in drug development and
agriculture.
The Company seeks to carry out its business strategies by locating and
in-licensing, or by developing on its own, promising technologies that can be
rapidly commercialized as products or services. The Company also intends to
out-license its technologies to customers wishing to use them in other fields of
use, as well as combining its own research and development expertise with the
technologies of corporate partners to participate in processes such as drug
discovery. In addition, the Company will consider acquisitions of complementary
companies or technologies.
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INVITROGEN PRODUCTS AND SERVICES
The Company currently offers over 250 gene identification, gene cloning,
gene expression and gene analysis products and services. The following table
describes the Company's top ten products, as well as the leading product lines
in its key areas of focus:
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------------------------------------------------------
GENE IDENTIFICATION PRODUCTS
FastTrack 2.0 Kit This kit simplifies isolation of pure, full-length mRNA directly
from cells or tissue in three hours, as opposed to the two days
required for conventional methods.
Micro-FastTrack Kit This kit is a modified version of the FastTrack Kit, optimized
for improved results when isolating mRNA from small sample
sizes.
Discovery Line Northern Territory mRNA and total RNA blots, Gene Pool cDNA and
Discovery Line mRNA, total RNA and premade cDNA libraries have
been created from a variety of hard-to-obtain human normal,
fetal and tumor tissue sources and are sold ready-to-use,
enabling researchers not trained in these gene identification
techniques to begin their studies with high quality materials.
-------------------------------------------------------------------------------------------
GENE CLONING PRODUCTS
TA Cloning Kit This kit enables fast, efficient cloning of PCR products
generated using TAQ polymerase, which is used by the majority of
researchers, by eliminating intermediate steps required by
conventional PCR cloning methods, like special PCR primers,
modifying enzymes, DNA purification and restriction digestion.
TOPO TA Cloning Kit This improved version of the TA Cloning Kit utilizes
topoisomerase in the ligation reaction, reducing the time
required for this step from 12 hours to only 5 minutes.
TOPO TA Cloning Kit-- The cloning vector in this version of the TOPO TA Cloning Kit
Dual Promoter contains promoters in opposite orientations, enabling
researchers to generate both sense and anti-sense transcripts of
their cloned PCR product.
Zero Blunt PCR Cloning This kit enables researchers to efficiently clone blunt-ended
Kit PCR products by employing a lethal gene that prevents bacterial
growth unless the cloning reaction was successful.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
-------------------------------------------------------------------------------------------
GENE EXPRESSION PRODUCTS
Expression Vectors These kits comprise the world's largest collection of expression
vectors for bacterial, yeast, insect and mammalian cells.
Choices in each host type include various promoters, selectable
markers, epitope tags and targeting sequences.
MaxBac Baculovirus This complete kit provides researchers with all required
Expression System components to perform gene expression in insect cells (including
vectors, cell lines, viral stocks, growth media, transfection
reagents and protocols).
Ecdysone-Inducible This system provides tightly controlled, inducible expression in
Mammalian Expression mammalian cells, allowing researchers to study the effects of a
System particular protein by turning on and off its expression whenever
desired.
-------------------------------------------------------------------------------------------
GENE ANALYSIS PRODUCTS
GeneStorm Expression- Researchers can purchase the exact gene they wish to study,
Ready Clones already cloned into a quality vector and tested to verify that
it expresses protein.
Hybrid Hunter Systems These systems are complete kits for the IN VIVO detection of
protein-protein and RNA-Protein interactions and have been
designed to help reduce false positives.
-------------------------------------------------------------------------------------------
SUPPORT PRODUCTS
One Shot INVALPHAF', These three different bacterial strains are sold ready-to-use
TOP10F' and TOP10 for cloning and expression experiments to transfer vectors into
Competent E. COLI bacteria. They are packaged in convenient, single-use aliquots
to prevent loss of efficiency caused by freeze-thaw cycles.
Zeocin Antibiotic This antibiotic quickly and completely kills mammalian, yeast
and bacterial cell lines, enabling researchers to eliminate all
cells that do not contain vectors with the SH BLE antibiotic
resistance gene.
-------------------------------------------------------------------------------------------
RESEARCH SERVICES
Invitrogenomics Invitrogenomics offers a variety of functional genomics and
molecular biological services, including high-throughput gene
cloning and gene expression.
</TABLE>
GENE IDENTIFICATION PRODUCTS
FASTTRACK 2.0 AND MICRO-FASTTRACK KITS. These kits provide researchers with
all of the reagents needed to quickly isolate mRNA directly from cells, tissue
or total RNA samples. The two products differ from one another in that the
protocol and materials configuration of the Micro-FastTrack Kit have been
optimized for isolation from small sample sizes. These kits contain all required
buffers, oligo(dT) cellulose resin and spin columns.
For each product, the researcher begins by placing the sample in Lysis
Buffer to break open the cells. The inside material, or cell lysate, is applied
to an oligo(dT) cellulose resin, which binds the mRNA. This resin is transferred
to a spin column, then Wash Buffer is added and spun through the resin with a
microcentrifuge to remove materials other than the mRNA. An Elution Buffer is
then spun through the resin to remove the mRNA and complete the procedure.
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These products were the first to enable researchers to isolate mRNA directly
from cells and tissue, eliminating the need to first isolate total RNA, which
has reduced the time required from two days to three hours. The kits have also
eliminated the use of hazardous chemicals like guanidinium isothiocyanate and
the need for expensive equipment like ultracentrifuges.
THE DISCOVERY LINE. One of the first steps for researchers performing gene
identification studies is to isolate mRNA from a chosen sample. However, if the
sample is of poor quality or the mRNA isolation done improperly, downstream
experiments that rely on undegraded mRNA will not provide accurate results.
Invitrogen has recognized the absolute necessity for using quality materials and
responded by providing researchers with Discovery Line mRNA and total RNA,
Northern Territory mRNA and total RNA blots, Gene Pool cDNA and Discovery Line
pre-made cDNA libraries. Isolations of mRNA and total RNA are performed from
hard-to-obtain human normal, fetal and tumor tissue samples. The mRNA and total
RNA is then sold ready-to-use or used to create ready-to-use Northern blots,
cDNA for PCR and cDNA libraries. This enables researchers to use high quality
materials and to study the similarities and differences between normal, fetal
and cancerous tissues. These products save researchers time and effort because
the upstream experiments required to prepare these materials as well as the
failures caused by working with inferior materials are eliminated.
GENE CLONING PRODUCTS
TA CLONING KIT. This kit enables researchers to clone Taq
polymerase-generated PCR products quickly and efficiently. The kit contains
prepared cloning vector, competent cells for transferring the vector into after
the cloning reaction and all required buffers and enzyme for cloning.
To clone with the TA Cloning Kit, researchers perform a normal PCR reaction,
add a portion of it to a tube that contains TA Cloning vector and T4 DNA ligase
in a ligation buffer, then incubate this ligation reaction for 10-12 hours, or
overnight. This reaction is then added to a tube of competent bacteria, which
are then plated onto an agar plate. The plates are incubated for a day to allow
colonies to form. Colonies are then picked based on a color selection
method--positive colonies, or those that have incorporated PCR product, are
white, while negatives are blue. DNA is then isolated from positive colonies to
verify that the cloning was successful and to determine the orientation of the
PCR product that inserted into the vector.
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The TA Cloning Kit is faster and more efficient than conventional PCR
cloning techniques because it takes advantage of the single base A overhangs
that are added automatically to PCR products by TAQ polymerase, the polymerase
most frequently used for PCR, rather than relying on additional steps to remove
these overhangs or add sticky overhangs. Among these steps are the addition of
extra bases to the PCR primers to add restriction sites, which makes these
primers more expensive and less specific than normal primers, purification of
the PCR products after they are generated, restriction digestion of the PCR
products and inactivation of the restriction enzyme. Moreover, the restriction
method requires that the entire sequence of PCR products be known prior to
cloning. The TA Cloning Kit offers a better cloning efficiency than the
restriction method, as well as providing blue/white color to indicate positive
clones. Quality Control specifications for the TA Cloning Kit require that each
manufactured lot achieve a minimum cloning efficiency of 90%, whereas the
restriction method typically yields only 50-60%.
The Company is a co-owner of a granted patent to the TA Cloning method with
Molecular Biology Resources, Inc. and has exclusive rights to its use for
commercial purposes.
TOPO TA CLONING AND TOPO TA CLONING--DUAL PROMOTER KITS. These two kits are
improved versions of the TA Cloning Kit. They both contain prepared cloning
vector, competent cells for transferring the vector into after the cloning
reaction and all required buffers for cloning.
Both of these kits use and take advantage of the TA Cloning method described
above, but also utilize a technology called TOPO Cloning. This method uses an
enzyme called topoisomerase to mediate the ligation of PCR products into the
cloning vector, rather than T4 DNA ligase. This reduces the ligation step to
only five minutes, as opposed to a 12 hour or overnight ligation. TOPO Cloning,
therefore, saves researchers a full day as they are able perform their ligation
reaction and transform it into bacteria on the same day. The TOPO Cloning--Dual
Promoter Kit has a vector that contains transcriptional promoters in both
orientations, which enables researchers to make both sense and anti-sense RNA
transcripts from the same cloned insert. In other vectors, to achieve this the
insert would need to be cloned twice, once in each direction, a less efficient
and lower yield process. Invitrogen is the exclusive worldwide licensee to all
rights in all fields to a patent granted to Sloan-Kettering Institute for Cancer
Research for the TOPO Cloning method.
ZERO BLUNT PCR CLONING KIT. When DNA fragments do not contain sticky
overhangs, which is termed as being blunt, they do not have exposed nucleotide
bases with which to form base pairs with a cloning vector. This makes
blunt-ended cloning a very inefficient process. Invitrogen has solved this
problem through the use of the lethal ccdB gene, or control of cell death, which
prevents colonies from growing unless they have successfully incorporated a DNA
fragment. Incorporation occurs in the middle of the lethal gene, so these clones
can grow because they have disrupted expression of the lethal gene. While the
actual cloning efficiency remains low, because the negative colonies cannot
grow, the effective efficiency is very high. The Zero Blunt PCR Cloning Kit
enables researchers to clone blunt-ended PCR products, which are generated by
thermostable polymerase like Pfu. It contains a prepared cloning vector,
competent cells for transferring the vector into after the cloning reaction and
all required buffers.
Using the Zero Blunt PCR Cloning Kit is much like using the TOPO TA Cloning
Kits. Researchers perform PCR as normal, add the PCR products to the prepared
cloning vector, wait five minutes, transform the competent bacteria, then plate
out the bacteria and wait overnight for colony growth. Because of the lethal
gene, nearly all colonies that grow contain an insert. DNA is then isolated from
the colonies to verify that the cloning was successful. The advantage of the
Zero Blunt PCR Cloning Kit is that it improves the effective cloning efficiency
of blunt-ended cloning and prevents researchers from having to use other, more
difficult techniques.
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GENE EXPRESSION PRODUCTS
EXPRESSION VECTORS. The Company provides researchers with an extensive
collection of gene expression vectors and complete expression systems, enabling
researchers to express genes in a variety of host organisms, as well as IN
VITRO. Because of their differing posttranslational modification
characteristics, different hosts produce a slightly different variant of the
same protein. By combining results obtained from experiments performed in
different hosts, researchers can slowly piece together how a gene's expression
is regulated and what functions its protein performs in the context of the
entire organism. The kit contains an expression vector, another expression
vector with a cloned reporter gene that serves as a positive control, a vial of
bacteria, complete protocols and the entire vector sequence.
Depending on their purpose, expression vectors can contain many different
elements, each of which provides a specific function. Various combinations of
the individual elements are used to create vectors with unique functions. The
Company offers the broadest line of expression vectors in the market, providing
researchers with the ability to perform various types of experiments in
different hosts to reach a conclusion. In addition, several of the Company's
vectors contain elements that are available exclusively from the Company.
MAXBAC BACULOVIRUS EXPRESSION SYSTEM. This kit is a complete system that
provides researchers with all of the reagents needed to express protein in
insect cells using recombinant baculovirus. This includes expression vectors,
insect cell lines, baculovirus stocks, growth media, transfection reagents and
complete protocols.
Insect cells are chosen as a host organism because they produce high-levels
of protein and are simple and inexpensive to grow. Also, the posttranslational
modifications performed by insect cells are well understood and are similar to
those of mammalian cells. This enables researchers to study proteins using a
system that is similar to, but simpler and cheaper to use, than mammalian cells.
ECDYSONE-INDUCIBLE MAMMALIAN EXPRESSION SYSTEM. This system provides
tightly controlled, inducible expression in mammalian cells, allowing
researchers to study the effects of a particular protein by turning on and off
its expression whenever desired. The kits contain an expression vector, a
control vector, sequencing primers, a supply of Zeocin antibiotic, an inducing
agent and a complete protocol. The system utilizes a promoter that has an
extremely low basal level of expression until an inducing agent is added to the
media. Protein expression then increases over 200-fold.
The advantage of inducible expression is that it enables researchers to
study the effects of the expression of a particular protein. Most promoters used
in expression vectors cause protein to be expressed constitutively, or all the
time. Inducible promoters allow researchers to study the physiological effects
caused by the recombinant protein by turning expression on and off and observing
how the cells respond.
GENE ANALYSIS PRODUCTS
GENESTORM EXPRESSION-READY CLONES. The Company has created a large
collection of cloned yeast and human genes with its high-throughput gene cloning
and expression technology. The entire yeast genome, over 6,000 genes, has been
cloned into both yeast and mammalian expression vectors. These vectors are then
tested for protein expression. The Company is currently cloning human gene
families that are likely to be of importance in various disease states, like
kinase genes involved in cell signaling pathways. To date the Company has
assembled a collection of over 1,700 full-length cloned human genes that express
their encoded proteins.
GeneStorm Clones enable researchers to purchase the exact gene they wish to
study and go directly to expression studies, bypassing the laborious procedures
required to clone and test the gene for expression. The genes are cloned into
the same high quality, multi-functional expression vectors the Company sells to
its customers and uses in Invitrogenomics research.
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HYBRID HUNTER SYSTEMS. Molecular interaction is a technique used to
determine if various molecules are able to bind to, or interact with one
another. Because most cellular processes are mediated through pathways of many
proteins, determining if a given protein interacts with other proteins or
nucleic acid molecules is one of the keys to understanding its function. The
Company offers products for determining both protein-protein and protein-RNA
interactions. These studies are performed in yeast because its cells are similar
to, but far simpler than, mammalian cells. The kit contains "bait" and "prey"
expression vectors, yeast strains, positive and negative control vectors,
sequencing primers, a supply of Zeocin antibiotic and complete protocols.
Molecular interaction systems work by using reporter genes that are
expressed only if an interaction occurs. The gene for the protein being studied
is cloned into a "bait" vector that also contains the reporter gene. A second
gene, or an entire library of genes, is cloned into a second vector, called a
"prey" vector. The prey vector contains a transcriptional activator. If the
proteins expressed from the bait and prey vectors interact with one another, the
transcriptional activator is brought into close proximity of the reporter gene.
This causes the reporter gene to express its protein. Cells that express the
reporter gene indicate that they contain a prey vector that is interacting with
the bait. The gene in the prey vector is then isolated and used for further
expression and molecular interaction studies.
With an estimated 100,000 genes in a human cell, each capable of producing
several different mRNA molecules and proteins due to differential splicing,
there are billions of potential nucleic acid and protein interactions. Designing
methods that are sensitive enough to detect actual interactions, yet that do not
signal false interactions, has challenged suppliers of gene analysis systems.
Because the study of each interaction is extremely time consuming, researchers
need assays which are highly sensitive yet extremely accurate, or they will
waste their time, money and efforts trying to study interactions that do not
actually exist. Invitrogen's Hybrid Hunter Systems have been designed using
technologies that help prevent the occurrence of false interactions.
SUPPORT PRODUCTS
ONE SHOT INVALPHAF', TOP10F' AND TOP10 COMPETENT E. COLI. Nearly all
molecular biology techniques, including gene cloning and gene expression,
require that researchers be able to propagate vector in E. COLI bacteria.
Invitrogen sells many different bacterial strains, each with different
characteristics used by researchers depending on the experiment to be performed.
Invitrogen's best selling bacteria are competent, meaning that they have been
processed in a manner that makes them able to bring vector in from outside their
cell wall.
Placing a vector into bacteria is termed transformation. The most common
method to do this is to make cells chemically competent by growing them in a
series of buffers. After this procedure, competent cells can be frozen and
stored for later use. Competent cells can take up vector from outside their cell
wall. All that researchers need to do to transform competent bacteria is to thaw
them and combine the vector and the competent bacteria in a test tube. Vectors
usually contain an antibiotic resistance gene, so an antibiotic is then used to
kill the cells that did not take up vector.
Invitrogen's One Shot Competent E. COLI are sold ready-to-use and are
packaged in convenient, single-use aliquots. Researchers thaw the bacteria and
add vector directly to the tube, using the tube's entire contents. This prevents
the researcher from having to aliquot competent cells into tubes and refreezing
the unused cells. Aliquoting and freeze-thaw cycling greatly reduce the
competency of bacteria, so this convenient packaging not only saves time, it
ensures better results. Because of this, One Shot Competent E. COLI are included
in all of the Company's PCR Cloning Kits. The popularity of One Shot products
stems in great part from researchers first using the Company's PCR Cloning Kits,
then buying the One Shot products separately for all of their transformation
procedures.
ZEOCIN ANTIBIOTIC. This antibiotic quickly and completely kills mammalian,
yeast and bacterial cell lines. Researchers buy it to use for selection of the
many different expression vectors the Company sells
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that contain the Sh ble antibiotic resistance gene. Invitrogen also sells
cassette vectors that enable researchers to easily move the Sh ble gene into
other vectors.
After transformation or transfection, which is transformation of
non-bacterial cells, researchers add Zeocin to the media to kill cells that have
not taken up vector with a Sh ble gene. The cells that grow are homogeneous in
that they all contain vector. Having a homogeneous population is important when
performing expression experiments because cells without vector will have
different characteristics than those that do, causing inaccurate results.
The Zeocin antibiotic offers researchers advantages over other antibiotics.
Its selection is relatively fast, enabling the researcher to begin expression
studies with a homogeneous, or stable, cell line sooner. Because the antibiotic
and the gene of interest may be causing physiological effects during selection,
it is advantageous for it to occur as quickly as possible. Secondly, Zeocin and
the Sh ble gene function in bacteria as well as yeast and mammalian cells. Most
antibiotics function in only one host type. This forces the construction of
vectors that contain one resistance gene for bacteria and another for the other
host, which increases the size of the vector. Increased vector size makes nearly
everything that is done with vectors (including propagation, cloning,
transformation and transfection) less efficient. Finally, Zeocin uses a
different mode of action than other commonly used antibiotics, like G418 and
hygromycin B. This enables researchers to select more than one vector at the
same time.
INVITROGENOMICS
The Company has developed a high-throughput gene cloning and expression
technology by scaling up the Company's proprietary TOPO TA Cloning technology.
The Company believes this technology can provide significant opportunities to
develop new license, service and product opportunities. Through Invitrogenomics,
the Company plans to utilize its high-throughput capabilities to rapidly clone
and expression test thousands of genes for corporate customers in drug
development and agriculture. To date, the Company has assembled a collection of
over 1,700 full-length cloned human genes that express their encoded proteins.
The Company will continue to use its technologies to develop a proprietary
library of full-length genes, which can be sold and licensed to corporate
partners for drug discovery and other commercial development activities.
The Company intends to focus the activities and technology of
Invitrogenomics on two important business opportunities. First, as genome
sequencing efforts accelerate, pharmaceutical, biotechnology and agricultural
firms will wish to analyze the large amounts of data to isolate gene targets of
relevance as quickly as possible. To do so, these companies will need to conduct
cloning and expression testing on a large scale. Invitrogenomics will use its
high-throughput technology and personnel to provide gene cloning and expression
services for corporate partners on a contract basis. Second, as Invitrogen
builds upon its library of patented cloned full-length genes and expression
vectors for use in drug and agricultural biotechnology discovery efforts, the
Company expects licensing and research kit revenue opportunities to increase.
The Company's Invitrogenomics effort is currently staffed with 24 personnel,
primarily in research and development, manufacturing and marketing. Business
development activities are conducted primarily by the senior management of
Invitrogen.
TECHNOLOGY AND PRODUCT DEVELOPMENT
Invitrogen focuses its technology and product development on expanding its
existing product lines and developing innovative new products in areas where it
has expertise and has identified substantial unmet market needs. The Company
seeks to introduce products that can be manufactured and marketed profitably by
continuing to develop products that are not regulated by government agencies
such as the Food and Drug Administration ("FDA"). In addition to the Company's
internal technology and product development programs, the Company aggressively
in-licenses and acquires technology and
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intellectual property. Research institutions seeking to license their
technologies are attracted to Invitrogen's ability to package innovations as
convenient and cost-effective research kits and to introduce those kits to the
market. Company employees also actively stay abreast of industry developments to
identify and acquire innovative technologies from researchers and research
institutions throughout the world.
The Company spent $5.3 million, $4.4 million and $2.6 million on research
and development activities during the nine months ended September 30, 1998 and
the years ended December 31, 1997 and 1996, respectively. No material portion of
this investment in research and development was sponsored by customers.
SALES AND MARKETING
Invitrogen currently markets its products in over 30 countries throughout
the world. The Company and its subsidiary, Invitrogen B.V., sell its products
directly to customers in the United States, Canada, Germany, France, the United
Kingdom and 16 other countries throughout the world. In addition, the Company
utilizes specialized distributors to market its products in more than 13 other
countries. As of November 30, 1998 Invitrogen employed 55 highly trained and
skilled people in its sales and marketing department to market its products and
provide customer support and service. Over 70% of the sales and marketing staff
have degrees in biological sciences and over 40% have advanced degrees.
Invitrogen's sales strategy has been to employ scientists to work as its
technical sales representatives. Due to the highly technical nature of its
products, the Company believes that scientists trained to work with customers
are far more valuable than salespeople trained to sell scientific products. Each
technical sales representative has an extensive background in molecular biology,
including time spent in the laboratory doing research prior to being hired by
the sales department. A thorough knowledge of molecular biological techniques
and an understanding of the research process allows the Company's sales
representatives to become advisors, acting in a consultative role with their
customers. Invitrogen's use of technical sales representatives also enables the
Company to better identify unmet market needs and new technologies that the
Company can license and develop into new products.
Invitrogen's marketing departments at its U.S. and European headquarters
combine various types of media and methods to inform customers of new product
developments and enhancements to existing products. The Company advertises in
the most prominent scientific journals, publishes a yearly catalog, a bi-monthly
newsletter, and conducts direct mail campaigns to researchers in the U.S. and
Europe. The Company also reaches a broad range of scientists by hosting an
annual symposium, presenting at scientific seminars and exhibiting at scientific
meetings. The Company's website allows researchers to view an on-line catalog,
place orders, download all of the Company's technical manuals and vector
sequences, read the Company newsletter and participate in interactive forums and
discussion groups.
MANUFACTURING
Invitrogen's U.S. manufacturing facilities occupy approximately 15,000
square feet of its Carlsbad, California facility. Its seven manufacturing cells
are responsible for the complete production, quality testing and process
improvements of the products they produce. The plant engineering department
supports the manufacturing department with equipment maintenance and repair. The
manufacturing processes include Quality Control testing of all products to
ensure that every product meets or exceeds its minimum specifications and
Quality Assurance testing of purchased materials that will be used in products.
TECHNOLOGY LICENSING
Many of the Company's products are manufactured or sold pursuant to license
agreements under which it pays royalties to the licensor based upon a percentage
of the sales of products containing the licensed materials or technology.
Although the Company has increasingly emphasized its own research and
development in recent periods, it believes its ability to in-license new
technologies from third parties is and will continue to be critical to its
ability to offer new products. The Company's ability to
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compete as an innovator in the development of molecular biology research
products and services depends in part on its ability to convince inventors that
it can successfully commercialize their new technologies. The Company's
significant licenses or exclusivity rights expire at various times during the
next fifteen years. These licenses include:
TA CLONING. The Company co-owns the patents on this cloning method with
Molecular Biology Resources ("MBR"), formerly Molecular Chimerics Corporation,
of Milwaukee, Wisconsin. Ordinarily, patent owners in the United States may
freely exploit jointly-owned technologies independently of one another, without
any payments or accounting to the other. Invitrogen has obtained from MBR the
exclusive rights to the technology anywhere in the world for cloning purposes in
exchange for an initial licensing fee and commitments to make royalty payments
based on sales of vectors and kits which facilitate use of this cloning method.
TOPO CLONING. This patented technology significantly accelerates gene
cloning and is an enhancement to the Company's TA Cloning products, among
others. It was invented by Dr. Stewart Shuman working at the Sloan-Kettering
Institute for Cancer Research ("SKI"), which owns the patents. In 1997 the
Company obtained exclusive worldwide rights to commercialize this technology for
all purposes. The Company paid certain initial fees to SKI, and continues to pay
royalties on sales of products designed to use this enhanced cloning method.
These royalties depend in part on the type of product sold and the level of
annual sales. The Company has also committed to minimum yearly royalty payments
to SKI. Sublicenses may be granted to third parties with a portion of the
sublicense income payable to SKI. Additionally, the Company has reimbursed SKI
for costs of patent prosecution, and has agreed to pay for future patent
prosecution in exchange for the right to prepare and control the ongoing patent
applications.
ZEOCIN AND ZEOCIN RESISTANCE. In 1994, the Company obtained from CAYLA of
Toulouse, France, exclusive worldwide rights to use a patented gene that confers
resistance to certain antibiotics including Zeocin. The Company paid an up-front
fee to CAYLA, and pays royalties on sales of kits and vectors containing this
gene. The Company also made minimum royalty commitments to CAYLA, which grow at
a fixed rate from year to year, in exchange for the exclusive rights. In
addition, the Company purchases the Zeocin antibiotic from CAYLA at a price to
be set each year, and has agreed that its purchases will also grow, in order to
obtain most-favored pricing terms.
ZERO BACKGROUND. Invitrogen licensed the CCDB or Zero Background gene, used
for selection of successful clones, from the Universite Libre de Bruxelles in
1995. This license grants the Company exclusive rights to use this patented
"lethal gene" technology for commercial purposes in all fields worldwide. The
Company paid an initial license fee and reimbursed certain patent costs of the
University and pays a royalty on sales of products containing the lethal gene.
In order to maintain the exclusive rights, the Company pays minimum royalties
each year. The Company is also responsible for reimbursing the University's
patent prosecution costs for this technology, up to a fixed cap.
Taq AND PCR. Probably the most pervasive and essential tool in molecular
biology today, the Polymerase Chain Reaction (PCR), enables researchers to
target and amplify, or copy in large numbers, certain portions of DNA. This
technique, and certain aspects of TAQ polymerase, which is an essential reagent
in PCR, are patented and now owned by F. Hoffmann-La Roche, Ltd. of Basel,
Switzerland. The Company recently obtained a non-exclusive license to use TAQ
polymerase and PCR in its research efforts as well as non-exclusive rights to
make and sell TAQ to the research community. The Company paid an initial license
fee for these rights and also pays royalties which are calculated using both
sales of products and the use or sale of TAQ. The Company granted F. Hoffmann-La
Roche the right to negotiate for a license to make and sell any competing enzyme
the Company may develop in the future. Prior to obtaining this license, the
Company purchased TAQ from authorized sources in order to have the rights to use
PCR for its research.
In addition to these licenses, the Company maintains a portfolio of
exclusive, co-exclusive and non-exclusive rights to make, use and/or sell many
of the various technologies underlying its products and
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services. Depending upon factors including the scope of rights granted, the
usefulness and commercial potential of the technology and whether the rights are
exclusive, the Company provides various financial and other consideration to the
patent holder or the holder of senior license rights. Typically, the Company's
other licenses include an initial license fee and continuing royalties. Some
licenses also include payments at certain milestones, E.G., at the first
commercial sale of a product. Many licenses, especially exclusive licenses, call
for certain minimum royalty payments each year. A license will often contain
other undertakings by the Company, such as a commitment to diligently pursue
development and marketing of commercial products utilizing the licensed
technology.
There can be no assurance that the Company will be able to continue to
successfully identify new technologies developed by others. Even if the Company
is able to identify new technologies of interest, it may not be able to
negotiate a license on favorable terms, or at all. Some of the Company's
licenses do not run for the length of the patent. The Company may not be able to
renew its existing licenses on favorable terms, or at all. If the Company loses
the rights to patented technology, it may need to redesign its products or it
may lose a competitive advantage. Potential competitors could in-license
technologies that the Company fails to license and potentially erode its market
share for certain products.
The Company's licenses typically subject it to various commercialization,
sublicensing and other obligations. If the Company fails to comply with these
requirements it could lose important rights under a license, such as the right
to exclusivity in a certain market. In some cases, the Company could also lose
all rights under a license. In addition, certain rights granted under the
license could be lost for reasons out of the Company's control. For example, the
licensor could lose patent protection for a number of reasons, including
invalidity of the licensed patent. The Company does not receive significant
indemnification from a licensor against third party claims of intellectual
property infringement.
PATENTS AND PROPRIETARY TECHNOLOGIES
Invitrogen considers the protection of its proprietary technologies and
products for molecular and cellular biology research to be important to the
success of its business. The Company relies on a combination of patents,
licenses and trademarks to establish and protect its proprietary rights in its
technologies and products. The Company currently owns two issued patents in the
United States and four issued patents in other major industrialized nations, and
owns or controls over 15 pending patent applications. Generally, U.S. patents
have a term of 17 years from the date of issue for patents issued from
applications submitted prior to June 8, 1995 and 20 years from the date of
filing of the application in the case of patents issued from applications
submitted on or after June 8, 1995. Patents in most other countries have a term
of 20 years from the date of filing the patent application.
The Company's success depends to a significant degree upon its ability to
develop proprietary products and technologies. It is critically important to the
Company's success that it adequately protect the intellectual property
associated with these products and technologies. The Company intends to continue
to file patent applications as it develops new products and technologies.
Patents provide some degree of protection for the Company's intellectual
property. However, the assertion of patent protection involves complex legal and
factual determinations and is therefore uncertain. In addition, the laws
governing the scope of patent coverage and the periods of enforceability of
patent protection continue to evolve, particularly in the areas of molecular
biology of interest to the Company.
Patent applications in the United States are maintained in secrecy until
patents issue. Also, publication of discoveries in the scientific or patent
literature tend to lag behind actual discoveries by at least several months. As
a result, there can be no assurance that patents will issue from any of the
Company's patent applications or from applications licensed to the Company.
There can be no assurance that the scope of any of its issued patents will be
sufficiently broad to offer meaningful protection. In addition, the Company's
issued patents or patents licensed to the Company could be successfully
challenged, invalidated or circumvented so that the Company's patent rights
would not create an
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effective competitive barrier. The Company's intellectual property positions
involve complex legal factual questions and may be uncertain.
The Company relies in part on trade secret protection of its intellectual
property. It attempts to protect the Company's trade secrets by entering into
confidentiality agreements with third parties, employees and consultants.
However, these agreements can be breached and, if they were, there may not be an
adequate remedy available to the Company. Also, the Company's trade secrets
might become known to a third party through means other than by breach of the
Company's confidentiality agreements, or they could be independently developed
by the Company's competitors.
COMPETITION
The markets for the Company's products are very competitive. The Company
expects the intensity of competition to increase. Currently, the Company
competes primarily with other life sciences research products suppliers. Many of
its competitors have greater financial, operational, sales and marketing
resources, and more experience in research and development than the Company.
These competitors and other companies may have developed or could in the future
develop new technologies that compete with the products of the Company or which
could render the Company's products obsolete.
Competitors offer a broad range of equipment, laboratory supplies and other
products, including research products that compete with those of the Company.
The Company believes that customers in its markets display a significant amount
of loyalty to their initial supplier of a particular product. Therefore, the
Company may experience difficulties in generating sales to customers who
initially purchased products from competitors. Similarly, the Company believes
that there is a significant competitive advantage in being the first to
introduce a new product to market. Accordingly, the Company believes that to
compete effectively, it will need to consistently be first to market with
important new research products and services. To the extent that it is unable to
be the first to develop and supply new products, its competitive position will
suffer. See "Risk Factors--Highly Competitive Market."
GOVERNMENT REGULATION
Invitrogen is not subject to direct governmental regulation other than the
laws and regulations generally applicable to businesses in the jurisdictions in
which it operates, including those governing the handling and disposal of
hazardous wastes and other environmental matters. Invitrogen's research and
development activities involve the controlled use of small amounts of hazardous
materials, chemicals and radioactive compounds. Although the Company believes
that its safety procedures for handling and disposing of such materials comply
with applicable regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for resulting damages; such liability
could have a material adverse effect on the Company. However, the Company does
not expect that compliance with the governmental regulations to which it is
subject will have a material effect on its capital expenditures, earnings or
competitive position.
EMPLOYEES
As of November 30, 1998, Invitrogen employed 225 persons, of whom 34 hold
Ph.D. or M.D. degrees and 22 hold other advanced degrees. Approximately 61
employees are engaged in research and development, 55 in sales and marketing, 63
in manufacturing and 46 in supporting business development, intellectual
property, finance and other administrative functions.
The Company's success will depend in large part upon its ability to attract
and retain employees. Invitrogen faces competition in this regard from other
companies, research and academic institutions, government entities and other
organizations. The Company believes that it maintains good relations with its
employees.
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FACILITIES
The Company leases an approximately 60,000 square foot facility in Carlsbad,
California for its headquarters, as well as the base for marketing and product
support operations, research and development and manufacturing activities. The
Company believes that adequate facilities will be available upon the conclusion
of its lease. The Company also owns an approximately 17,000 square foot facility
in the Netherlands to support sales and distribution in Europe.
LEGAL PROCEEDINGS
From time to time the Company has been and expects to be involved in legal
proceedings arising from its ordinary business operations. None of the
proceedings that are currently pending are expected to have a material adverse
effect on the Company or its business operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning directors and executive
officers of the Company as of November 30, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Lyle C. Turner...................... 45 President, Chief Executive Officer and Chairman of the Board of
Directors
Theodore J. DeFrank................. 37 Chief Operations Officer
Joseph M. Fernandez................. 39 Senior Vice President of Business Development, Secretary and Director
James R. Glynn...................... 52 Senior Vice President, Chief Financial Officer and Director
Donald W. Grimm..................... 57 Director
Kurt R. Jaggers(1)(2)............... 40 Director
Bradley G. Lorimier................. 53 Director
Jay M. Short, Ph.D.(2).............. 40 Director
Lewis J. Shuster(1)................. 43 Director
</TABLE>
- ------------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
LYLE C. TURNER, a founder of the Company, has served as President, Chief
Executive Officer and Director since February 1988. Previously, Mr. Turner
served as Director of Sales and Marketing at Stratagene, a life science research
company, from January 1987 through February 1988, and as Technical Sales
Specialist at Boehringer Mannheim Corp., a pharmaceutical company, from June
1985 to January 1987. From September 1981 through May 1985, Mr. Turner worked at
Syntro Corporation, an animal health company, at which his final position was
Manager of Business Development. Mr. Turner received his B.A. in Chemistry from
the University of California, San Diego.
THEODORE J. DEFRANK joined the Company as its Chief Operations Officer in
January 1996. From September 1986 to December 1995 Mr. DeFrank was employed by
Stratagene in various positions including Vice President/Director of Operations,
New Product Manager and Manufacturing Manager. Mr. DeFrank received his B.A. in
biochemistry from the University of California, San Diego.
JOSEPH M. FERNANDEZ, a founder of the Company, has served as Senior Vice
President, Business Development since February 1993. He has been a member of the
Board of Directors and an executive officer of the Company since April 1988.
From April 1988 through February 1993, Mr. Fernandez served as Director of Sales
and Marketing for Invitrogen. From September 1987 to April 1988 he served as a
Research Associate at Scripps Clinic and Research Foundations, a non-profit
research organization. From May 1986 to September 1987 Mr. Fernandez was
employed at Stratagene where he managed Technical Services in the Marketing
Department. Mr. Fernandez received his B.A. in Biology at Hiram College in Ohio
and did graduate work in the Microgenetics Department at Bowling Green State
University, also in Ohio.
JAMES R. GLYNN has served as Senior Vice President, Chief Financial Officer
and Director of the Company since June 1998 and served as Director in 1995. From
July 1995 to May 1997 he served as Senior Vice President and Chief Financial
Officer and from May 1997 to July 1998 as Chief Operating Officer, Chief
Financial Officer and Director of Matrix Pharmaceutical, Inc., a company
focusing on the treatment of cancer. Mr. Glynn served as Executive Vice
President, Chief Financial Officer and
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Director of Mycogen Corporation, an agribusiness and biotechnology company, from
April 1987 to February 1995. From 1982 to 1987 Mr. Glynn was Vice President,
Finance and Treasurer of Lubrizol Enterprises, Inc., a venture development
company. He is currently a Director of Matrix Pharmaceutical, Inc. in addition
to his positions with the Company. Mr. Glynn received his B.B.A. in accounting
from Cleveland State University. Mr. Glynn is currently a Director of a private
company.
DONALD W. GRIMM has served as Director of the Company since June 1998. Mr.
Grimm retired from Eli Lilly & Company, a research-based pharmaceutical company,
after 23 years of service. Mr. Grimm held positions at Eli Lilly as Director of
Worldwide Pharmaceutical Pricing, Director of Pharmaceutical Market Research,
and Director of Sales. From September 1987 to December 1993, Mr. Grimm served as
President, CEO and Chairman of Hybritech, Inc., a company involved in physical
and biological research. From June 1994 to December 1994, Mr. Grimm served as
President, CEO and Director of Telios Pharmaceuticals, a pharmaceutical company.
Mr. Grimm received his B.S. in Pharmacy and M.B.A. from the University of
Pittsburgh. Mr. Grimm is currently a Director of several private companies and
non-profit organizations.
KURT R. JAGGERS has served as a Director of the Company since June 1997. Mr.
Jaggers has served as a Managing Director of TA Associates, Inc. ("TA
Associates"), an equity investment firm, since January 1997. He has also served
as a Principal for TA Associates from 1993 to 1996, and as Vice President of
that firm from 1990 to 1992. Mr. Jaggers attended Stanford University, receiving
a B.S. degree and M.S. degree in electrical engineering, and a M.B.A. degree. He
is currently a Director of JDA Software Group, Inc., a software development
company, as well as several private companies.
BRADLEY G. LORIMIER has served as a Director of the Company since November
1998. Mr. Lorimier has been retired since July 1997. From March 1994 to July
1997 Mr. Lorimier served as Senior Vice President, Business Development and
Director of Human Genome Sciences, Inc., a pharmaceutical company. From July
1991 to March 1994 Mr. Lorimier served as Vice President, Corporate Development
of Ortho-McNeil Pharmaceutical, Inc., a subsidiary of Johnson & Johnson, a
pharmaceutical manufacturing company. He is also currently a Director of Matrix
Pharmaceutical, Inc. as well as several private companies.
JAY M. SHORT has served as Director of the Company since February 1995. Dr.
Short presently serves as President, Chief Technology Officer and Director of
Diversa Corporation, a biotechnology research company. From September 1985 to
September 1994 Dr. Short held various positions at Stratagene including Vice
President, Research and Development & Operations and Senior Staff Scientist.
Previously, he was President of Stratacyte Inc., a molecular biology company.
Dr. Short received his Ph.D. in Biochemistry from Case Western Reserve
University. Dr. Short is currently a Director of StressGen Biotechnologies
Corporation, a biopharmaceutical company, and Diversa Corporation.
LEWIS J. SHUSTER has served as a Director of the Company since June 1998.
Mr. Shuster is presently Executive Vice President and Chief Financial Officer of
Pharmacopeia, Inc., a pharmaceutical and biotechnical research company, a
position he has held since November 1994. From September 1992 to November 1994
Mr. Shuster served as Executive Vice President, Operations and Finance of Human
Genome Sciences, Inc., a pharmaceutical company. Mr. Shuster received his M.B.A.
from Stanford University Graduate School of Business and his B.A. from
Swarthmore College. He is currently a Director of US Biomaterials Corporation, a
private biomedical company.
The Company currently has authorized nine directors. In accordance with the
terms of the Company's Restated Certificate of Incorporation (the
"Certificate"), 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 1999 or special
meeting held in lieu thereof, Class II, whose term will expire at the annual
meeting of stockholders to be held in 2000 or special
47
<PAGE>
meeting held in lieu thereof, and Class III, whose term will expire at the
annual meeting of stockholders to be held in 2001 or special meeting held in
lieu thereof. 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. 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 the Company.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee, which consists of Mr. Jaggers and Mr. Shuster,
reviews the results and scope of the annual audit and meets with the Company's
independent auditors to review the Company's internal accounting policies and
procedures. The Compensation Committee, which consists of Mr. Jaggers and Dr.
Short, makes recommendations to the Board of Directors with respect to general
and specific compensation policies and practices of the Company and administers
the Company's 1997 Stock Option Plan (the "1997 Plan") and 1995 Stock Option
Plan (the "1995 Plan").
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In March 1997 the Company made an initial investment of $500,000 to acquire
shares of preferred stock of MorphaGen, Inc., a start-up company engaged in the
business of researching and developing Morphatides, a special type of nucleic
acid. The President of MorphaGen, Heidi Short, is the spouse of Dr. Jay M.
Short, a member of the board of directors of the Company. During 1997, the
Company performed research services for MorphaGen for which it was paid
approximately $81,000. In November 1998, the Company acquired all of the
outstanding shares of MorphaGen not already owned by the Company in exchange for
a grant of options to purchase 50,000 shares of the Company's Common Stock to
Heidi Short, payment of royalties contingent upon certain milestones, the
assumption of outstanding options of MorphaGen employees and the assumption of
certain liabilities. There were no other interlocks or other relationships among
the Company's executive officers and directors that are required to be disclosed
under applicable executive compensation disclosure requirements.
COMPENSATION OF DIRECTORS
The Company does not currently provide cash compensation to directors for
services in such capacity, other than to Mr. Short, who receives up to $1,500
per meeting. Directors may be reimbursed for certain expenses in connection with
attendance at Board of Directors and committee meetings. After November 19,
1998, directors who are not employees of the Company will receive annual grants
of options to purchase 10,000 shares of Common Stock in accordance with the 1997
Plan. Options to purchase 8,000 shares of Company stock were granted to
directors of the Company during the Company's fiscal year ended December 31,
1997. See "Stock Option Plans".
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
Pursuant to provisions of Delaware General Corporation Law ("DGCL"), the
Company has adopted provisions in its Certificate, which provide that directors
of the Company shall not be personally liable for monetary damages to the
Company or its stockholders for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a
48
<PAGE>
knowing violation of law; (iii) under Section 174 of the DGCL relating to
improper dividends or distributions; or (iv) for any transaction from which the
director derived an improper personal benefit. Such limitation of liability does
not affect the availability of equitable remedies such as injunctive relief or
rescission.
The Company's By-laws authorize the Company to indemnify its officers,
directors, employees and agents to the extent permitted by the DGCL. Pursuant to
Section 145 of the DGCL, which empowers the Company to enter into
indemnification agreements with its officers, directors, employees and agents,
the Company has entered into separate indemnification agreements with its
directors and executive officers which may, in some cases be broader than the
specific indemnification provisions contained in the DGCL. The indemnification
agreements may require the Company, among other things, to indemnify such
executive officers and directors against certain liabilities that may arise by
reason of their status or service as directors or executive officers (other than
liabilities arising from acts or omissions not in good faith or willful
misconduct) and to advance expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted and the Company is not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by the
Company's Chief Executive Officer and the Company's other four most highly
compensated executive officers, each of whose aggregate compensation during the
fiscal year ended December 31, 1998 exceeded $100,000 (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
SHARES OF
COMMON STOCK
ISSUABLE UPON
NAME AND 1998 EXERCISE OF
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS
<S> <C> <C> <C> <C>
Lyle C. Turner .................................... 1997 $ 258,405 $ 640,690 --
President and Chief Executive Officer 1998 -- --
Theodore J. DeFrank ............................... 1997 121,000 40,084 30,000
Chief Operations Officer 1998 -- -- --
Joseph M. Fernandez ............................... 1997 155,043 247,018 --
Senior Vice President of Business Development and 1998 -- -- --
Secretary
James R. Glynn .................................... 1998 -- -- --
Senior Vice President and Chief Financial Officer
</TABLE>
49
<PAGE>
1998 OPTION GRANTS
The following table contains information about the stock option grants to
the Named Executive Officers in 1998:
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(4)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(3) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Theodore J. DeFrank.................. 35,000 2.8 $ 5.60 5/28/08 $ 123,200 $ 312,200
35,000 2.8 12.00 11/20/08 264,250 669,200
James R. Glynn....................... 250,000 20.3 5.60 7/01/08 880,000 2,230,000
</TABLE>
- ------------------------------
(1) Options are granted under the Company's 1995 and 1997 Stock Option Plans.
Such options expire 10 years from the date of grant, or earlier upon
termination of employment. See "Management--Stock Option Plans."
(2) Based on an aggregate of 1,233,500 options granted by the Company during
1998 to employees of and consultants to the Company, including the Named
Executive Officers.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors.
(4) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming that the stock price of the date of grant appreciates
at the specified annual rates of appreciation, compounded annually over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the time of such
exercise and the future performance of the Company's Common Stock.
50
<PAGE>
YEAR-END VALUES
The table below provides information about the number and value of options
held by the Named Executive Officers at December 31, 1998.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT DECEMBER 31, OPTIONS AT DECEMBER
1998 31, 1998(1)
------------------------ ----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Theodore J. DeFrank...................... 62,000 178,000 $ 807,250 $1,813,280
Joseph M. Fernandez...................... 159,607 -- $2,260,035 --
James R. Glynn........................... 70,833 179,167 $ 665,830 $1,684,170
</TABLE>
- ------------------------------
(1) There was no public trading market for the Common Stock as of December 31,
1998. Accordingly, these values have been calculated on the basis of an
initial public offering price of $15.00 per share, less the applicable
exercise price.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The Company and Mr. DeFrank entered into an employment agreement effective
November 20, 1995. The employment agreement is not for a set term and may be
terminated by Mr. DeFrank or the Company at any time with or without notice. If
the Company terminates Mr. DeFrank's employment, Mr. DeFrank will be entitled to
one month of severance pay for each year of his employment with the Company.
STOCK OPTION PLANS
The Company has adopted a 1995 Stock Option Plan (the "1995 Plan") and a
1997 Stock Option Plan (the "1997 Plan"), as amended November 20, 1998. The 1995
Plan originally provided for the grant of options to purchase up to 500,000
shares, subject to adjustment upon changes in the number of outstanding shares
of Common Stock of the Company. Due to such adjustments, as of the adoption of
the 1997 Plan, an aggregate of 3,125,794 shares of Common Stock were issuable
under the 1995 Plan. Options to purchase substantially all of these shares have
been granted, and the Company expects that future options will be granted under
the 1997 Plan. The 1997 Plan originally provided for the issuance of options to
purchase up to 609,685 shares of Common Stock, but was subsequently amended to
provide for the issuance of options to purchase an additional 750,000 shares of
Common Stock. With that amendment, the 1995 Plan and the 1997 Plan together
allow for the issuance of options to purchase up to 4,485,479 shares of Common
Stock.
Under the 1997 Plan, all employees of the Company or any subsidiary, all
directors who are not employees of the Company or any subsidiary ("Outside
Directors") and any independent contractor or advisor who performs services for
the Company or a subsidiary, are eligible to receive grants of nonstatutory
stock options ("NSOs"). Employees are also eligible to receive grants of
incentive stock options ("ISOs") intended to qualify under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"). The 1997 Plan is
administered by a committee of the Board of Directors of the Company, which
selects the persons to whom options will be granted, determines the number of
shares to be made subject to each grant, and prescribes other terms and
conditions, including the type of consideration to be paid to the Company upon
exercise and vesting schedules, in connection with each grant. The committee's
recommendations are forwarded to the full Board of Directors for approval. The
1995 Plan similarly makes employees, officers, directors and consultants
eligible for NSOs and provides that employees are eligible for ISOs. The 1995
Plan may be administered by the Board of Directors or a committee.
Under the 1997 Plan, after November 19, 1998, Outside Directors receive an
initial grant of 10,000 NSOs when they are first appointed or elected to the
Board of Directors. In addition, acting Outside Directors (including Outside
Directors that were formerly employees of the Company) will be automatically
granted an option to purchase 10,000 shares of Common Stock at each annual
meeting of
51
<PAGE>
stockholders after their election, provided such director has served at least
six months. The exercise price of the options in all cases will be equal to the
fair market value of the Common Stock on the date of grant. Options granted to
Outside Directors generally vest over three years and must be exercised within
ten years.
With respect to NSOs granted under the 1997 Plan at the discretion of the
Board of Directors upon committee recommendation, the exercise price generally
must be at least 85% of the fair market value of the Common Stock on the date of
grant. The exercise price under ISOs cannot be lower than 100% of the fair
market value of the Common Stock on the date of grant and, in the case of ISOs
granted to holders of more than 10% of the voting power of the Company, not less
than 110% of such fair market value. The term of an option cannot exceed ten
years, and the term of an ISO granted to a holder of more than 10% of the voting
power of the Company cannot exceed five years. Options generally expire not
later than 90 days following a termination of employment, 12 months following
the optionee's disability, or not later than 12 months following the optionee's
death. The terms for options granted under the 1995 Plan are substantially
similar to those granted under the 1997 Plan except that the 1995 Plan provides
that in the event of a merger or consolidation in which the Company is not the
surviving corporation or in the event that shares of the Company are converted
by merger into other property, (a) the surviving corporation shall assume the
options or substitute similar options or (b) the time the options are
exercisable shall be accelerated so that they may be exercised immediately
before the merger or consolidation.
As of November 30, 1998, there were outstanding options to purchase an
aggregate of 3,192,652 shares of Common Stock at exercise prices ranging from
$.8357 to $12.00 per share, or a weighted average exercise price per share of
$4.12 under the 1995 Plan and the 1997 Plan. Options to acquire 254,755 shares
have been exercised. As of November 30, 1998 a total of 1,127,385 shares of
Common Stock were available for future option grants under the 1995 Plan and the
1997 Plan. If any option granted under the 1997 Plan expires, terminates or is
canceled for any reason, or if shares of stock issued subject to a right of
repurchase are repurchased by the Company, the shares allocable to the
unexercised option or the repurchased shares will become available for
additional option grants under the 1997 Plan. The 1995 Plan similarly allows the
shares allocable to expired or terminated options to be made available for
additional option grants, but does not explicitly discuss the acquisition by the
Company of shares subject to repurchase.
EMPLOYEE STOCK OWNERSHIP PLAN
In 1989 The Board of Directors adopted the Invitrogen Corporation Employee
Stock Ownership Plan (ESOP), as amended January 1, 1993, January 1, 1996 and
November 24, 1998. The ESOP's purpose is to reward eligible employees for
service with the Corporation by providing them with retirement benefits. The
ESOP is a qualified retirement plan designed to comply with provisions of
sections 4975(e)(7) and 401(a) of the Code, the Employment Retirement Income
Security Act of 1974 and applicable regulations ("ERISA"). Each year the Company
makes certain contributions to a trust fund (the "ESOP Trust") whose assets are
invested primarily in Company stock.
Under the ESOP, the Company makes two types of contributions to the ESOP
Trust: discretionary stock bonus contributions determined annually by the Board
of Directors ("Stock Bonus Plan") and fixed money purchase pension contributions
("Money Purchase Pension Plan"), equal to 2% of eligible employees'
compensation. Effective August 31, 1997, the ESOP was amended such that certain
highly-compensated employees, those employees whose compensation in the
preceding year exceeded $75,000, do not receive a contribution. Both types of
contributions are made in the form of Company stock, as valued by an independent
valuation firm and are allocated based on the participants' compensation.
Employees are eligible to participate in the ESOP after one year of service.
Employees become vested in their share of the ESOP Trust over five years
beginning with the completion of two years of service (an employee is 25% vested
after two years of service). An employee is fully vested after five
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<PAGE>
years of service, or upon reaching normal retirement age or upon the employee's
death or total and permanent disability. All participants are also fully vested
upon termination of the ESOP.
Distributions from the ESOP Trust to vested employees occur upon their
retirement, death, disability or termination. An employee may elect to receive
distributions in the form of cash or Company stock and may elect to receive the
distribution in a lump sum or over a period of years, not to exceed his/her
assumed life expectancy. Company stock distributed to beneficiaries is subject
to a right of first refusal in the Company. Participants receive two 60-day put
options with respect to Company stock distributed under the ESOP, the first
beginning on the day following distribution from the ESOP, the second beginning
the first day of the fifth month in the next calendar year following
distribution. Under the put option, participants have the right to sell the
Company stock received from the ESOP back to the Company at a value determined
by an independent valuation firm. The put option does not apply if the Company
stock is regularly traded on a national securities market at the time of
distribution from the ESOP.
The ESOP trustees are Lyle C. Turner and Joseph M. Fernandez. The trustees
vote all Company stock held by the ESOP Trust, except that individual
beneficiaries may direct the voting of stock allocated to their accounts (i)
with respect to any merger, recapitalization, dissolution, sale of substantially
all of the Company's assets, and the like; (ii) with respect to all corporate
matters if the Company stock is a "registration-type" class of security. The
ESOP may be amended or terminated by the Company at any time, subject to certain
restrictions, the Code and ERISA.
As of November 30, 1998 the ESOP Trust held 1,195,717 shares of Company
stock as well as approximately $462,000 invested in various mutual and
money-market funds. The Company terminated contributions to the ESOP Trust as of
December 31, 1998, thereby accelerating vesting of all participants.
1998 EMPLOYEE STOCK PURCHASE PLAN
A total of 250,000 shares of the Company's Common Stock have been reserved
for issuance under the Company's 1998 Employee Stock Purchase Plan (the
"Purchase Plan"), none of which has been issued. The Purchase Plan permits
eligible employees to purchase Common Stock at a discount through payroll
deductions, during concurrent 24-month offering periods. Each offering period
will be divided into eight consecutive three-month purchase periods. The price
at which stock is purchased under the Purchase Plan is equal to 85% of the fair
market value of the Common Stock on the first day of the offering period or the
last day of the purchase period, whichever is lower. The initial offering period
will commence on the effective date of this offering.
SECTION 401(k) PLAN
Effective June 1, 1994, the Company adopted a 401(k) tax-deferred savings
plan for the benefit of its employees (the "Plan"). The Plan is intended to be a
qualified retirement plan under section 401(a) of the Code. Employees of the
Company are eligible to make salary deferral contributions to the Plan upon the
completion of three months of employment and to participate in employer
non-elective and matching contributions to the Plan upon the completion of 1,000
hours of service. Participants may make salary deferral contributions to the
Plan of up to 15% of compensation, subject to the limitations imposed under the
Code. The Company may, but is not required to, make matching contributions to
the Plan based on the participants' salary deferral contributions. Company
contributions are subject to a graduated vesting schedule based upon an
employee's years of service with the Company. All contributions to the Plan are
held in a trust which is intended to be exempt from income tax under Section
501(a) of the Code. The Plan's trustees are Lyle C. Turner and Joseph M.
Fernandez. Participants may direct the investment of their contributions among
specified Salomon Smith Barney investment funds. The Plan may be amended or
terminated by the Company at any time, subject to certain restrictions imposed
by the Code and ERISA.
53
<PAGE>
CERTAIN TRANSACTIONS
In June 1997, the Company sold a total of 2,202,942 shares of Convertible
Preferred Stock at $6.8091 per share, for an aggregate purchase price of
approximately $15 million to three accredited investors, each of which are
affiliates of TA Associates. Kurt R. Jaggers, a director of the Company, is a
Managing Director of TA Associates. Concurrently with the sale of the
Convertible Preferred Stock, the Company repurchased and retired 1,101,471
shares of Common Stock at $6.8091 per share, for an aggregate purchase price of
approximately $7.5 million, from Mr. Lyle Turner, Mr. Joseph Fernandez, Mr. Anh
Nguyen and Mr. Malcolm Finlayson, executive officers and former executive
officers of the Company. In this transaction, the TA Associates affiliates
acquired registration rights with respect to the Common Stock issued or issuable
upon conversion of the Convertible Preferred Stock. At the closing of this
offering, the Convertible Preferred Stock will be converted into an equal number
of shares of Common Stock and Redeemable Preferred Stock, and such Redeemable
Preferred Stock will be redeemed by the Company out of proceeds of this offering
at an expected cost of approximately $12.8 million. Additionally, holders of the
Convertible Preferred Stock will receive accumulated dividends of approximately
$1.4 million. See "Description of Capital Stock."
At December 31, 1996, the Company had notes receivable from Mr. Turner and
Mr. Fernandez, executive officers of the Company, in the amount of $323,000 and
$92,000, respectively. These full recourse notes were secured by pledges of the
Common Stock and paid interest of 6.0% and 6.37%, respectively. The notes were
repaid in 1997. At December 8, 1998, the Company accepted a note receivable from
Mr. Turner, an executive officer of the Company, in the amount of $150,000. The
note is secured by a pledge of Common Stock, is due in December 1999 and bears
interest of 6.5%.
In February 1997, the Company made an initial investment of $500,000 to
acquire shares of preferred stock of MorphaGen, Inc., a start-up company engaged
in the business of researching and developing Morphatides, a special type of
nucleic acid. The president of MorphaGen, Heidi Short, is the spouse of Dr. Jay
M. Short, a member of the board of directors of the Company. Additionally, the
Company committed an additional $2.5 million to MorphaGen in exchange for
warrants to purchase shares of Series B Preferred Stock of MorphaGen. However,
the commitment and warrant expired without any further funding or purchase of
shares. During 1997, the Company performed research services for MorphaGen for
which it was paid approximately $81,000. In November 1998, the Company acquired
all of the outstanding shares of MorphaGen not already owned by the Company in
exchange for a grant of options to purchase 50,000 shares of the Company's
Common Stock to Heidi Short, payment of royalties contingent upon certain
milestones, the assumption of outstanding options of MorphaGen employees and the
assumption of certain liabilities.
During 1997 and 1998, the Company leased an airplane from Turner Aviation, a
company controlled by Mr. Lyle Turner, for $7,200 per month. The Company had
also advanced $150,000 to Turner Aviation to assist in the acquisition of the
plane. The lease agreement was terminated and the advance was repaid through the
December 8, 1998 note receivable described above.
The Company has entered into indemnification agreements with each of its
officers and directors containing provisions which may require the Company,
among other things, to indemnify its officers and directors against certain
liabilities that may arise by reasons of their status or service as officers or
directors and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. The Company also intends to
execute such agreements with its future directors and executive officers. See
"Management--Limitation of Liability and Indemnification Matters."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of the shares of the Company's Common Stock as of November 30, 1998,
and as adjusted to give effect to the sale of 3,000,000 shares of Common Stock
in this offering assuming (a) conversion of all of the Company's outstanding
shares of Convertible Preferred Stock into Common Stock and (b) no exercise of
the Underwriters' over-allotment option, (i) by each person the Company knows to
be the beneficial owner of 5% or more of the outstanding shares of Common Stock
(together with the affiliates of such person), (ii) each Named Executive Officer
listed in the Summary Compensation Table, (iii) each director of the Company
(who, where applicable, is listed under the name of the principal stockholder
with which he is affiliated), and (iv) all officers and directors of the Company
as a group. Except pursuant to applicable community property laws or as
indicated in the footnotes to this table, the Company believes that each
stockholder identified in the table possesses sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by such
stockholder. The address of the individuals listed below is the address of the
Company appearing on the cover of the Registration Statement of which this
Prospectus is part.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF PERCENTAGE OF
BENEFICIALLY SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED PRIOR TO THE OWNED AFTER THE
BENEFICIAL OWNER OFFERING(1) OFFERING(2) OFFERING(2)
<S> <C> <C> <C>
TA Associates(3) ...................................... 2,202,942 22.9% 17.5%
Kurt R. Jaggers
70 Willow Road, Suite 100
Menlo Park, California 94025
ESOP Trust Fund(4) .................................... 1,195,717 12.4 9.5
1600 Faraday Avenue
Carlsbad, California 92008
Lyle C. Turner(5)...................................... 4,678,096 48.7 37.0
Joseph M. Fernandez(6)................................. 1,888,338 19.6 15.0
Theodore F. DeFrank(7)................................. 90,000 * *
Bradley G. Lorimier(8)................................. 2,500 * *
Jay M. Short(9)........................................ 117,400 1.2 *
Donald W. Grimm(10).................................... 10,000 * *
Lewis J. Shuster(11)................................... 7,500 * *
James R. Glynn(12)..................................... 87,499 * *
All Directors and Officers as a group (ten
persons)(13)......................................... 9,085,522 94.5 72.0
</TABLE>
- ------------------------------
* Less than 1%.
(1) Except pursuant to applicable community property laws or as indicated in
the footnotes to this table, to the Company's knowledge, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
(2) Percentage of ownership is based on: (i) before the offering, 9,613,960
shares of Common Stock outstanding, including 7,411,018 shares of Common
Stock outstanding on November 30, 1998 and 2,202,942 shares of Common Stock
issuable upon conversion of Convertible Preferred Stock, and (ii) after the
offering, 12,613,960 shares of Common Stock outstanding (assuming no
exercise of the Underwriter's over-allotment option). Shares of Common
Stock that an individual or group has the right to acquire within 60 days
of January 29, 1999, pursuant to the exercise of options or pursuant to
stock purchase agreements are deemed to be outstanding for the purposes of
computing the percentage ownership of such
55
<PAGE>
individual or group, but are not deemed to be outstanding for the purpose
of computing the percentage ownership of any other person shown in the
table.
(3) Includes 1,824,382 shares held by TA/Advent VIII, L.P., 342,072 shares held
by Advent Atlantic and Pacific III, L.P., and 36,488 shares held by TA
Venture Investors L.P. TA/Advent VIII, L.P., Advent Atlantic and Pacific
III, L.P. and TA Venture Investors L.P. are part of an affiliated group of
investment partnerships referred to collectively as TA Associates Group.
The general partner of TA/Advent VIII, L.P. is TA Associates VIII LLC. The
general partner of Advent Atlantic and Pacific III, L.P. is TA Associates
AAP III Partners. The general partner of each of TA Associates VIII LLC and
TA Associates AAP III Partners is TA Associates, Inc. In such capacity, TA
Associates, Inc. exercises sole voting and investment power with respect to
all of the shares held of record by the named investment partnerships, with
the exception of those shares held by TA Venture Investors, L.P.;
individually no stockholder, director or officer of TA Associates, Inc., is
deemed to have or share such voting or investment power. Principals and
employees of TA Associates, Inc. (including Mr. Jaggers, a director of the
Company) comprise the general partners of TA Venture Investors, L.P. In
such capacity, Mr. Jaggers may be deemed to share voting and investment
power with respect to the 36,488 shares held of record by TA Venture
Investors, L.P. Mr. Jaggers disclaims beneficial ownership of such shares,
except to the extent of any pecuniary interest he may have therein.
(4) As co-trustees of the Company's ESOP Trust Fund, Mr. Turner and Mr.
Fernandez share certain voting and investment power with respect to the
1,195,717 shares held of record by the ESOP. Mr. Turner and Mr. Fernandez
disclaim beneficial ownership of such shares, except with respect to the
162,599 shares and 113,390 shares in the ESOP as to which Mr. Turner and
Mr. Fernandez hold a pecuniary interest, respectively.
(5) Mr. Turner is President, Chief Executive Officer, and Chairman of the Board
of Directors of the Company. Includes 162,599 shares held of record by the
ESOP as to which Mr. Turner holds a pecuniary interest.
(6) Mr. Fernandez is Senior Vice President of Business Development, Secretary
and a Director of the Company. Includes 159,607 shares subject to options
which are exercisable within 60 days of the date of this offering. Includes
113,390 shares held of record by the ESOP as to which Mr. Fernandez holds a
pecuniary interest.
(7) Mr. DeFrank is Chief Operations Officer of the Company. Consists of 90,000
shares subject to options which are exercisable within 60 days of the date
of this offering.
(8) Mr. Lorimier is a Director of the Company. Consists of 2,500 shares subject
to options which are exercisable within 60 days of the date of this
offering.
(9) Mr. Short is a Director of the Company. Consists of 117,400 shares subject
to options which are exercisable within 60 days of the date of this
offering. Includes options to purchase 5,000 shares held of record by Mr.
Short's spouse which are exercisable within 60 days of the date of this
offering.
(10) Mr. Grimm is a Director of the Company. Consists of 10,000 shares subject
to options which are exercisable within 60 days of the date of this
offering.
(11) Mr. Shuster is a Director of the Company. Consists of 7,500 shares subject
to options which are exercisable within 60 days of the date of this
offering.
(12) Mr. Glynn is Senior Vice President, Chief Financial Officer and a Director
of the Company. Consists of 87,499 shares subject to options which are
exercisable within 60 days of the date of this offering.
(13) Includes 475,773 shares subject to options which are exercisable within 60
days of the date of this offering. Includes 275,989 shares held by
entities affiliated with certain directors as described in notes (3) and
(4) above.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, par value $0.01 per share, and 6,405,884 shares of Preferred
Stock, par value $0.01 per share. Each outstanding share of Convertible
Preferred Stock will be automatically converted into one share of Common Stock
and one share of Redeemable Preferred Stock upon the closing of this offering.
Upon the conversion, the Convertible Preferred Stock will be canceled and
retired and the Redeemable Preferred Stock will be redeemed and retired. The
following summary of certain provisions of the Common Stock and the Preferred
Stock of the Company does not purport to be complete and is subject to, and
qualified in its entirety by, the amended and restated Certificate to be filed
contemporaneously with this offering and the By-laws of the Company that are
included as exhibits to the Registration Statement of which this Prospectus
forms a part and the provisions of applicable law.
COMMON STOCK
As of November 30, 1998 there were 9,613,960 shares of Common Stock
outstanding held by 15 stockholders of record. Such amounts assume the
conversion of each outstanding share of Convertible Preferred Stock upon the
closing of this offering.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of the Company, holders of the Common Stock and the Preferred Stock
are entitled to share ratably on an as-converted basis in all assets remaining
after payment of liabilities and the liquidation preference of any then
outstanding Preferred Stock. The Common Stock has no preemptive or conversion
rights or other subscription rights and there are no redemptive or sinking funds
provisions applicable to the Common Stock. All outstanding shares of Common
Stock are, and the Common Stock to be outstanding upon completion of this
offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Board of Directors has the authority, without further action by the
stockholders, to issue from time to time the Preferred Stock in one or more
series and to fix the number of shares, designations, preferences, powers, and
relative, participating, optional or other special rights and the qualifications
or restrictions thereof. The preferences, powers, rights and restrictions of
different series of Preferred Stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions, and purchase funds and other matters. The
issuance of Preferred Stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or affect adversely the
rights and powers, including voting rights, of the holders of Common Stock, and
may have the effect of delaying, deferring or preventing a change in control of
the Company. The Company has no present plan to issue any additional shares of
Preferred Stock. See Note 12 to Consolidated Financial Statements for a
description of the currently outstanding Preferred Stock.
REGISTRATION RIGHTS
Pursuant to a Stock Purchase and Stockholders' Agreement dated June 20,
1997, the holders of approximately 2,202,942 shares of Common Stock issued upon
conversion of the Company's Convertible Preferred Stock, (the "Registrable
Shares"), or their permitted transferees, are entitled to certain rights with
respect to the registration of such shares under the Securities Act. If the
Company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other security holders, holders
of Registrable Shares are entitled to notice of such registration and are
entitled to include, at the Company's expense, such Registrable Shares therein,
provided, among other
57
<PAGE>
conditions, that the underwriters of any such offering have the right to limit
the number of shares included in such registration. In addition, after the
effective date of this offering, holders of at least 50% of the Registrable
Shares then outstanding may require the Company to prepare and file a
registration statement under the Securities Act, at the Company's expense,
covering such Registrable Shares, and the Company is required to use its best
efforts to effect such registration, subject to certain conditions and
limitations. The Company is not obligated to effect more than two of these
stockholder-initiated registrations. Further, holders of Registrable Shares may
require the Company to file additional registration statements on Form S-3,
subject to certain conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware Law,
an anti-takeover law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (with certain
exceptions) the business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed manner. A "business
combination" includes a merger, asset or stock sale or other transaction
resulting in financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years prior, did own) 15% or more of the corporation's outstanding voting stock.
This provision may have the effect of delaying, deterring or preventing a change
of control of the Company without further actions by the stockholders.
Upon the closing of this offering, the Company's Certificate will be amended
to require that any action permitted to be taken by stockholders of the Company
must be effected at a duly-called annual or special meeting of stockholders and
will not be able to be effected by a consent in writing. The Board of Directors
will be composed of a classified board where only one-third of the directors are
eligible for election in any given year. The classification system of electing
directors may tend to discourage a third party from making a tender offer or
otherwise attempting to obtain control of the Company and may maintain
incumbents on the Board of Directors, as it generally makes it more difficult
for stockholders to replace a majority of the directors. The Company's
Certificate will also be amended to require the approval of at least two-thirds
of the total number of authorized directors in order to adopt, amend or repeal
the Company's Bylaws. In addition, the Company's Certificate will similarly be
amended to permit the stockholders to adopt, amend or repeal the Company's
Bylaws only upon the affirmative vote of the holders of at least two-thirds of
the voting power of all then outstanding shares of stock entitled to vote.
Lastly, the foregoing provisions of the Certificate and certain other provisions
pertaining to the limitation of liability and indemnification of directors will
be able to be amended or repealed only with the affirmative vote of the holders
of at least two-thirds of the voting power of all then outstanding shares of
stock entitled to vote. These provisions may have the effect of deterring
hostile takeovers or delaying changes in control or management of the Company,
which could have an adverse effect on the market price of the Company's Common
Stock.
Upon the closing of this offering, the Company's Bylaws will also be amended
to contain certain of the above provisions found in the Company's Certificate.
The Company's Bylaws, as amended (the "Restated Bylaws"), will not permit
stockholders to call a special meeting. In addition, the Company's Restated
Bylaws will establish an advance notice procedure with regard to the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors and with regard to certain matters to be brought before an
annual meeting of stockholders of the Company. Also, a director will be
removable only for cause. In addition, the Restated Bylaws will provide that the
business permitted to be conducted in any annual meeting or special meeting of
stockholders will be limited to business properly brought before the meeting.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is BankBoston, N.A.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
As described below, only a limited number of shares will be available for sale
shortly after this offering due to certain contractual and legal restrictions on
resale. Nevertheless, sales of substantial amounts of Common Stock of the
Company in the public market after the restrictions lapse could adversely affect
the prevailing market price at such time and the ability of the Company to raise
equity capital in the future.
Upon the closing of this offering, the Company will have outstanding an
aggregate of approximately 12,613,960 shares of Common Stock based on the number
of shares of Convertible Preferred Stock and Common Stock outstanding as of
December 31, 1998, and assuming no exercise of the Underwriters over-allotment
option. Of these shares, the 3,000,000 shares of Common Stock to be sold hereby
will be freely tradable without restriction or further registration under the
Securities Act, unless such shares are held by "affiliates" of the Company as
such term is defined in Rule 144 of the Securities Act. All remaining shares
held by existing stockholders of the Company were issued and sold by the Company
in private transactions ("Restricted Shares") and are eligible for public sale
if registered under the Securities Act or sold in accordance with Rule 144 or
Rule 701 thereunder, which rules are summarized below.
The Company's directors, executive officers and certain stockholders, who
collectively hold an aggregate of approximately 9,539,500 shares of Common Stock
(after giving effect to conversion of the Convertible Preferred Stock), have
agreed pursuant to certain lock-up agreements that they will not sell any Common
Stock owned by them for a period of 180 days from the date of this Prospectus
(the "Lock-up Period") without the prior written consent of Donaldson, Lufkin &
Jenrette ("DLJ"). When determining whether or not to release shares from the
lock-up agreements, DLJ will consider, among other factors, the stockholder's
reasons for requesting the release, the number of shares for which the release
is being requested and market conditions at the time. As a result of lock-up
agreements with DLJ and the provisions of Rule 144 and 701, additional shares
will be available for sale in the public market as follows: (i) approximately
37,560 shares will be eligible for immediate sale on the date of this
Prospectus, (ii) approximately 9,601,040 outstanding shares of Common Stock will
be eligible for sale upon expiration of the Lock-up Period, and (iii) the
remainder of the shares of Common Stock will be eligible for sale from time to
time thereafter upon expiration of the holders' respective holding periods.
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 (i) 1% of the then outstanding shares of
Common Stock (126,139 shares immediately after the offering) or (ii) the average
weekly trading volume of the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding such sale, subject to the filing of a Form 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. In addition, a person who is not
deemed to have been an "affiliate" of the Company 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. Therefore, unless otherwise
restricted, "144(k) shares" may be sold immediately following completion of the
offering. In general, under Rule 701 of the Securities Act as currently in
effect, any employee, consultant or advisor of the Company who purchased shares
from the Company in connection with a compensatory stock or option plan or
written employment agreement is eligible to resell such shares 90 days after the
effective date of the offering in reliance on Rule 144, but without compliance
with certain restrictions, including the holding period conditions, contained in
Rule 144.
59
<PAGE>
The Company intends to file registration statements on Form S-8 under the
Securities Act to register approximately 6,000,000 shares of Common Stock issued
under its Employee Stock Ownership Plan and its Stock Option and Employee Stock
Purchase Plans. Such registration statements are expected to be filed soon after
the date of this Prospectus and will automatically become effective upon filing.
Accordingly, shares registered under such registration statement will be
available for sale in the open market, unless such shares are subject to vesting
restrictions with the Company or the contractual restrictions described above.
On the date 90 days from the effective date of this offering, options to
purchase approximately 500,000 shares of Common Stock not subject to lock-up
agreements will be vested and exercisable and upon exercise may be sold pursuant
to Rule 701.
In addition, after this offering, the holders of approximately 2,202,942
shares of Common Stock issued upon the conversion of the Convertible Preferred
Stock will be entitled to certain rights to cause the Company to register the
sale of such shares under the Securities Act. Registration of such shares under
the Securities Act would result in such shares becoming freely tradable without
restriction under the Securities Act (except for shares purchased by affiliates
of the company) immediately upon the effectiveness of such registration. See
"Description of Capital Stock".
60
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement, dated
, 1999 (the "Underwriting Agreement"), the Underwriters named below,
who are represented by Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), NationsBanc Montgomery Securities LLC and Warburg Dillon Read LLC (the
"Representatives"), have severally agreed to purchase from the Company the
respective number of shares of Common Stock set forth opposite their names
below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation..............................
NationsBanc Montgomery Securities LLC............................................
Warburg Dillon Read LLC..........................................................
----------
Total..........................................................................
----------
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The Underwriters are obligated to purchase and
accept delivery of all the shares of Common Stock offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased.
The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including the
Underwriters) at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, to certain
other dealers a concession not in excess of $ per share. After the initial
offering of the Common Stock, the public offering price and other selling terms
may be changed by the Representatives at any time without notice. The
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase, from time to time, in whole
or in part, up to an aggregate of 450,000 additional shares of Common Stock at
the initial public offering price less underwriting discounts and commissions.
The Underwriters may exercise such option solely to cover overallotments, if
any, made in connection with the offering. To the extent that the Underwriters
exercise such option, each Underwriter will become obligated, subject to certain
conditions, to purchase its pro rata portion of such additional shares based on
such Underwriter's percentage underwriting commitment as indicated in the
preceding table.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
Each of the Company, its executive officers and directors and certain
stockholders of the Company has agreed, subject to certain exceptions, not to
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise)
61
<PAGE>
for a period of 180 days after the date of this Prospectus without the prior
written consent of DLJ. In addition, during such period, the Company has also
agreed not to file any registration statement with respect to, and each of its
executive officers, directors and certain stockholders of the Company has agreed
not to make any demand for, or exercise any right with respect to, the
registration of any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock without DLJ's prior written
consent.
Prior to the offering, there has been no established trading market for the
Common Stock. The initial public offering price for the shares of Common Stock
offered hereby will be determined by negotiation among the Company and the
Representatives. The factors to be considered in determining the initial public
offering price include the history of and the prospects for the industry in
which the Company competes, the past and present operations of the Company, the
historical results of operations of the Company, the prospects for future
earnings of the Company, the recent market prices of securities of generally
comparable companies and the general condition of the securities markets at the
time of the offering.
Other than in the United States, no action has been taken by the Company or
the Underwriters that would permit a public offering of the shares of Common
Stock offered hereby in any jurisdiction where action for that purpose is
required. The shares of Common Stock offered hereby may not be offered or sold,
directly or indirectly, nor may this Prospectus or any other offering material
or advertisements in connection with the offer and sale of any such shares of
Common Stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this Prospectus
comes are advised to inform themselves about and to observe any restrictions
relating to the offering of the Common Stock and the distribution of this
Prospectus. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any shares of Common Stock offered hereby in any
jurisdiction in which such an offer or a solicitation is unlawful.
In connection with the offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may overallot the offering, which would involve
syndicate sales in excess of the offering size, creating a syndicate short
position. The Underwriters may bid for and purchase shares of Common Stock in
the open market to cover such syndicate short position or to stabilize the price
of the Common Stock. In addition, the underwriting syndicate may reclaim selling
concessions from syndicate members if the syndicate repurchases previously
distributed Common Stock in syndicate covering transactions, in stabilization
transactions or otherwise. These activities may stabilize or maintain the market
price of the Common Stock above independent market levels. These transactions
may be effected on Nasdaq National Market or otherwise and, if commenced, may be
discontinued any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Gray Cary Ware & Freidenrich LLP, San Diego, California. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Venture Law Group, a Professional Corporation, Menlo Park,
California.
EXPERTS
The consolidated financial statements as of December 31, 1996 and 1997 and
September 30, 1998 and for the three years in the period ended December 31, 1997
and the nine months ended September 30, 1998 included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
62
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement (which term shall include any amendments thereto) on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement. As
used herein, the term "Registration Statement" means the initial Registration
Statement (including the exhibits, schedules, financial statements and notes
filed as part thereof) and any and all amendments thereto. This Prospectus omits
certain information contained in the Registration Statement as permitted by the
rules and regulations of the Commission. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements herein concerning the contents of any
contract or other document are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed with the
Commission as an exhibit to the Registration Statement, each such statement
being qualified by and subject to such reference in all respects. With respect
to each such document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved.
As a result of the offering hereunder, the Company will become subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith, will file reports and other information
with the Commission. Reports, registration statements, proxy statements, and
other information filed by the Company with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the Commission's Regional Offices: 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, New York, New York 10048.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. The Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov.
The Company intends to furnish holders of the Common Stock with annual
reports containing, among other information, audited financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited condensed financial information for the first three
quarters of each fiscal year. The Company intends to furnish such other reports
as it may determine or as may be required by law.
63
<PAGE>
INVITROGEN CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets for the Years Ended December 31, 1996, 1997 and Nine Months Ended September 30,
1998..................................................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1995, 1996 and 1997 and for the Nine
Month Periods Ended September 30, 1997 and 1998.......................................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income for the Years Ended
December 31, 1996 and 1997 and for the Nine Month Period Ended September 30, 1998........................ F-6
Consolidated Statement of Cash Flows for the Years Ended December 31, 1996 and 1997 and for the Nine Month
Periods Ended September 30, 1997 and 1998................................................................ F-8
Notes to Consolidated Financial Statements................................................................. F-10
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Invitrogen Corporation:
We have audited the accompanying consolidated balance sheets of Invitrogen
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1996
and 1997 and September 30, 1998 and the related consolidated statements of
income, stockholders' equity (deficit) and comprehensive income and cash flows
for each of the three years in the period ended December 31, 1997 and for the
nine month period ended September 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Invitrogen
Corporation and subsidiaries as of December 31, 1996 and 1997 and September 30,
1998 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 and for the nine month period
ended September 30, 1998 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Diego, California
November 20, 1998
F-2
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997 AND SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1997 1998
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 1,381 $ 5,375 $ 2,404
Short-term investments............................................. -- 3,777 3,464
Accounts receivable, net of $113, $124 and $124, respectively...... 1,803 2,255 3,325
Current portion of notes receivable-officers....................... 173 -- --
Inventories........................................................ 1,901 1,914 2,444
Deferred income taxes.............................................. 198 740 517
Prepaid expenses and other current assets.......................... 336 413 657
------ ------------ -------------
Total current assets............................................. 5,792 14,474 12,811
Property and equipment, net.......................................... 1,589 2,459 6,711
Notes receivable--officers, less current portion..................... 242 -- --
Intangible assets, net............................................... 584 770 1,044
Other assets......................................................... 51 353 285
------ ------------ -------------
Total assets..................................................... $ 8,258 $ 18,056 $ 20,851
------ ------------ -------------
------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997 AND SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1998 1998
(UNAUDITED)
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Line of credit.................................. $ -- $ -- $ --
Current portion of obligations under capital
leases........................................ 311 121 71
Accounts payable................................ 816 1,275 2,067
Accrued expenses................................ 1,130 1,334 1,119
Income taxes payable............................ 616 559 396
------ ------------ -------------
Total current liabilities..................... 2,873 3,289 3,653
------ ------------ -------------
Line of credit.................................... 190 -- --
------ ------------ -------------
Obligations under capital leases, less current
portion......................................... 110 144 96
------ ------------ -------------
Commitments and contingencies
Redeemable Subsidiary Common Stock: authorized and
issued-- 18,000 shares. Full liquidation value
of $1,672 (NLG 3,150)........................... 1,306 1,295 1,541
------ ------------ -------------
Series A Convertible Redeemable Preferred Stock:
$0.01 par value; 6,405,884 shares authorized;
2,202,942 issued and outstanding in 1997 and
1998, none in 1996, 6% redeemable convertible,
liquidation value of $16,150.................... -- 15,242 15,916
------ ------------ -------------
Redeemable Preferred Stock, $0.01 par value per
share: 2,202,942 shares authorized; no shares
issued or outstanding; 2,202,942 shares pro
forma........................................... -- -- -- $14,200
------ ------------ ------------- -------------
Stockholders' equity (deficit):
Common stock; $0.01 par value, 50,000,000 shares
authorized; 7,426,702 and 7,411,018 shares
issued and outstanding in 1997 and 1998,
respectively, none authorized, issued or
outstanding in 1996 and 9,613,960 shares pro
forma......................................... -- 74 74 96
Series A common stock; no par value, 63,000,000
shares authorized; 7,226,373 shares issued and
outstanding in 1996; none authorized, issued
or outstanding in 1997 and 1998, no shares pro
forma......................................... -- -- -- --
Series B common stock, nonvoting, no par value
7,000,000 shares authorized; 1,188,040 shares
issued and outstanding in 1996; none
authorized, issued or outstanding in 1997 and
1998, no shares pro forma..................... -- -- -- --
Additional paid-in-capital...................... 1,263 -- -- 1,694
Value of common stock designated pursuant to
Employee Stock Ownership Plan................. 100 100 75 75
Foreign currency translation adjustment......... (29) (130) (14) (14)
Retained earnings (deficit)..................... 2,445 (1,957) (490) (490)
------ ------------ ------------- -------------
Total stockholders' equity (deficit).......... 3,779 (1,913) (355) 1,361
------ ------------ ------------- -------------
Total liabilities and stockholders' equity.... $8,258 $18,056 $20,851
------ ------------ -------------
------ ------------ -------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- --------------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................... $ 14,342 $ 19,121 $ 24,965 $ 18,263 $ 22,968
Cost of revenues........................... 4,743 5,818 7,989 5,657 6,346
------------ ------------ ------------ ------------ ------------
Gross margin........................... 9,599 13,303 16,976 12,606 16,622
------------ ------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing...................... 3,646 4,236 4,959 3,800 5,212
General and administrative............... 2,542 3,880 3,763 2,620 2,879
Research and development................. 2,043 2,659 4,416 3,058 5,320
------------ ------------ ------------ ------------ ------------
Total operating expenses............... 8,231 10,775 13,138 9,478 13,411
------------ ------------ ------------ ------------ ------------
Income from operations................. 1,368 2,528 3,838 3,128 3,211
------------ ------------ ------------ ------------ ------------
Other income (expense):
Gain (loss) on foreign currency
transactions........................... (25) 172 145 (126) 101
Interest expense......................... (207) (87) (88) (69) (24)
Interest and other income................ 226 70 211 178 290
------------ ------------ ------------ ------------ ------------
(6) 155 268 (17) 367
------------ ------------ ------------ ------------ ------------
Income before provision for income
taxes................................ 1,362 2,683 4,106 3,111 3,578
Provision for income taxes................. 206 939 1,473 1,116 1,240
------------ ------------ ------------ ------------ ------------
Net income............................. $ 1,156 $ 1,744 $ 2,633 $ 1,995 $ 2,338
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Basic earnings per share................... $ 0.10 $ 0.19 $ 0.25 $ 0.20 $ 0.20
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Diluted earnings per share................. $ 0.10 $ 0.16 $ 0.21 $ 0.16 $ 0.17
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average shares used in basic
earnings per share calculation........... 9,602,173 8,356,270 7,837,248 7,974,097 7,426,377
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Weighted average shares used in diluted
earnings per share calculation........... 9,602,173 10,079,755 9,509,457 9,815,392 8,829,670
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE
INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------
COMMON STOCK SERIES A SERIES B ADDITIONAL
----------------------- ---------------------- ---------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995.... -- $ -- 8,528,113 $ -- 1,188,040 $ -- $ 2,171
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ -- -- 277,145 -- -- -- 277
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- -- -- -- -- -- --
Repurchase of common
stock..................... -- -- (29,393) -- -- -- (25)
Exchange for notes
receivable from
shareholders for series A
common stock.............. -- -- (1,633,107) -- -- -- (1,253)
Foreign currency translation
adjustment................ -- -- -- -- -- -- --
Accretion of redemption
value over stated value on
subsidiary common stock
issued to NOM............. -- -- -- -- -- -- --
Net income.................. -- -- -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31,
1995........................ -- -- 7,142,758 -- 1,188,040 -- 1,170
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ -- -- 111,552 -- -- -- 199
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- -- -- -- -- -- --
Exercise of stock options... -- -- 70,000 -- -- -- 68
Repurchase of common
stock..................... -- -- (97,937) -- -- -- (174)
Foreign currency translation
adjustment................ -- -- -- -- -- -- --
Accretion of redemption
value over stated value on
subsidiary common stock
issued to NOM............. -- -- -- -- -- -- --
Net income.................. -- -- -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31,
1996........................ -- -- 7,226,373 -- 1,188,040 -- 1,263
Recapitalization of stock... 8,414,413 84 (7,226,373) -- (1,188,040) -- (84)
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ 22,939 -- -- -- -- -- 100
(CONTINUED)
<CAPTION>
RECEIVABLE OWNERSHIP FOREIGN TOTAL
FROM PLAN CURRENCY RETAINED STOCKHOLDERS' COMPREHENSIVE
STOCKHOLDERS CONTRIBUTION TRANSLATION EARNINGS EQUITY INCOME
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995.... $ (1,253) $ 277 $ 90 $ (174) $ 1,111 $ --
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ -- (277) -- -- -- --
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- 199 -- -- 199 --
Repurchase of common
stock..................... -- -- -- -- (25) --
Exchange for notes
receivable from
shareholders for series A
common stock.............. 1,253 -- -- -- -- --
Foreign currency translation
adjustment................ -- -- (33) -- (33) (33)
Accretion of redemption
value over stated value on
subsidiary common stock
issued to NOM............. -- -- -- (110) (110) --
Net income.................. -- -- -- 1,156 1,156 1,156
------------ ------------ ----------- --------- ------------- -------------
Balance at December 31,
1995........................ -- 199 57 872 2,298 1,123
-------------
-------------
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ -- (199) -- -- -- --
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- 100 -- -- 100 --
Exercise of stock options... -- -- -- -- 68 --
Repurchase of common
stock..................... -- -- -- -- (174) --
Foreign currency translation
adjustment................ -- -- (86) -- (86) (86)
Accretion of redemption
value over stated value on
subsidiary common stock
issued to NOM............. -- -- -- (171) (171) --
Net income.................. -- -- -- 1,744 1,744 1,744
------------ ------------ ----------- --------- ------------- -------------
Balance at December 31,
1996........................ -- 100 (29) 2,445 3,779 1,658
-------------
-------------
Recapitalization of stock... -- -- -- -- -- --
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ -- (100) -- -- -- --
</TABLE>
F-6
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE
INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK
----------------------------------------------
COMMON STOCK SERIES A SERIES B ADDITIONAL
----------------------- ---------------------- ---------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
<S> <C> <C> <C> <C> <C> <C> <C>
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- -- -- -- -- -- --
Exercise of stock options... 178,955 2 -- -- -- -- 158
Repurchase of common
stock..................... (88,134) (1) -- -- -- -- (333)
Repurchase of common stock
relating to stock purchase
agreement................. (1,101,471) (11) -- -- -- -- (1,104)
Preferred stock dividends
declared and accretion of
redemption value over
stated value on subsidiary
common stock issued to
NOM....................... -- -- -- -- -- -- --
Foreign currency translation
adjustment................ -- -- -- -- -- -- --
Net income.................. -- -- -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at December 31,
1997........................ 7,426,702 74 -- -- -- -- --
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ 12,920 -- -- -- -- -- 100
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- -- -- -- -- -- --
Exercise of stock options... 5,800 -- -- -- -- -- 5
Repurchase of common
stock..................... (34,404) -- -- -- -- -- (105)
Preferred stock dividends
declared and accretion of
redemption value over
stated value on subsidiary
common stock issued to
NOM....................... -- -- -- -- -- -- --
Foreign currency translation
adjustment................ -- -- -- -- -- -- --
Net income.................. -- -- -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at September 30,
1998........................ 7,411,018 $ 74 -- $ -- -- $ -- $ --
----------- ---------- ---------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
RECEIVABLE OWNERSHIP FOREIGN TOTAL
FROM PLAN CURRENCY RETAINED STOCKHOLDERS' COMPREHENSIVE
STOCKHOLDERS CONTRIBUTION TRANSLATION EARNINGS EQUITY INCOME
<S> <C> <C> <C> <C> <C> <C>
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- 100 -- -- 100 --
Exercise of stock options... -- -- -- -- 160 --
Repurchase of common
stock..................... -- -- -- -- (334) --
Repurchase of common stock
relating to stock purchase
agreement................. -- -- -- (6,385) (7,500) --
Preferred stock dividends
declared and accretion of
redemption value over
stated value on subsidiary
common stock issued to
NOM....................... -- -- -- (650) (650) --
Foreign currency translation
adjustment................ -- -- (101) -- (101) (101)
Net income.................. -- -- -- 2,633 2,633 2,633
------------ ------------ ----------- --------- ------------- -------------
Balance at December 31,
1997........................ -- 100 (130) (1,957) (1,913) 2,532
-------------
-------------
Issuance of common stock
pursuant to Employee Stock
Ownership Plan............ -- (100) -- -- -- --
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan...................... -- 75 -- -- 75 --
Exercise of stock options... -- -- -- -- 5 --
Repurchase of common
stock..................... -- -- -- (45) (150) --
Preferred stock dividends
declared and accretion of
redemption value over
stated value on subsidiary
common stock issued to
NOM....................... -- -- -- (826) (826) --
Foreign currency translation
adjustment................ -- -- 116 -- 116 116
Net income.................. -- -- -- 2,338 2,338 2,338
------------ ------------ ----------- --------- ------------- -------------
Balance at September 30,
1998........................ $ -- $ 75 $ (14) $ (490) $ (355) $ 2,454
------------ ------------ ----------- --------- ------------- -------------
------------ ------------ ----------- --------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ----------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 1,156 $ 1,744 $ 2,633 $ 1,995 $ 2,338
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 756 737 732 630 714
Loss (gain) on disposal of property and equipment...... (169) -- 11 -- --
Non-cash write-off of investments...................... -- 330 -- --
Employee stock ownership plan contribution............. 199 100 100 80 75
Foreign currency translation adjustment................ (33) (86) (101) (67) 180
Deferred income taxes.................................. (135) (63) (543) (49) 223
Deferred rent expense.................................. (49) (13) -- -- --
Changes in operating assets and liabilities:
Accounts receivable.................................. (317) (284) (452) (847) (1,412)
Inventories.......................................... (587) (722) (13) (39) (188)
Prepaid expenses and other current assets............ 118 (185) (77) (1,029) (244)
Other assets......................................... (58) 42 (302) (164) 67
Accounts payable..................................... 224 280 459 838 792
Accrued expenses..................................... (100) 592 204 -- (215)
Income taxes payable................................. 220 396 (57) 409 (163)
--------- --------- --------- ----------- ---------
Net cash provided by operating activities.......... 1,225 2,538 2,924 1,757 2,167
--------- --------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................... (368) (742) (1,642) (1,114) (4,883)
Proceeds from sale of property and equipment............. -- -- 25 -- --
Payments for intangible assets........................... (105) (381) (186) (133) (355)
Sale (purchase) of short term investments................ -- -- (3,777) -- 312
Advances made on notes receivable from officers.......... (390) (150) -- -- --
Principal payments received on notes receivable from
officers............................................... 12 125 415 415 --
Investment in related party.............................. -- -- (500) (500) --
--------- --------- --------- ----------- ---------
Net cash used in investing activities.............. (851) (1,148) (5,665) (1,332) (4,926)
--------- --------- --------- ----------- ---------
</TABLE>
(CONTINUED)
F-8
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997 AND
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- ----------------------
1995 1996 1997 1997 1998
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of preferred stock.................... -- -- 14,766 14,766 --
Principal payments on capital lease obligations.......... (397) (432) (157) (81) (98)
Repurchase of common stock............................... (25) (174) (7,834) (7,906) (150)
Proceeds from exercise of stock options.................. -- 68 160 160 5
Principal payments on line of credit, net................ (210) (50) (190) (190) --
Borrowings under convertible debt........................ 415 -- -- -- --
Repayment of bank overdraft.............................. (201) -- -- -- --
--------- --------- --------- ----------- ---------
Net cash provided by (used in) financing
activities....................................... (418) (588) 6,745 6,749 (243)
--------- --------- --------- ----------- ---------
Effect of exchange rate changes on cash.................... -- (8) (10) -- 31
--------- --------- --------- ----------- ---------
Net increase (decrease) in cash and cash equivalents....... (44) 794 3,994 7,174 (2,971)
Cash and cash equivalents, beginning of year............... 631 587 1,381 1,381 5,375
--------- --------- --------- ----------- ---------
Cash and cash equivalents, end of year..................... $ 587 $ 1,381 $ 5,375 $ 8,555 $ 2,404
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................... $ 256 $ 85 $ 88 $ 69 $ 25
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Cash paid for income taxes............................... $ 119 $ 117 $ 1,266 $ 1,254 $ 1,240
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Preferred dividends declared............................. $ -- $ -- $ 475 $ 250 $ 675
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Accretion of redemption value for redeemable common
stock.................................................. $ 110 $ 171 $ 175 $ 131 $ 151
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Series A common stock acquired in exchange for notes
receivable from stockholders........................... $ 1,253 $ -- $ -- $ -- $ --
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
Redeemable subsidiary common stock issued for convertible
debt................................................... $ 1,033 $ -- $ -- $ -- $ --
--------- --------- --------- ----------- ---------
--------- --------- --------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
Invitrogen Corporation (the "Company") was incorporated in the state of
California on September 29, 1989. The Company develops, manufactures and sells
products designed to facilitate molecular biology research. The Company sells
its products to researchers at universities, corporations, and research
institutions throughout North America, the Pacific Rim and Europe. In 1997, the
Company changed its state of incorporation to Delaware.
Invitrogen B.V., a 100% controlled subsidiary of the Company, commenced
operations in The Netherlands in April 1993. It sells and distributes the
Company's products to the European markets.
Invitrogen Export Company, LTD, a wholly-owned subsidiary of the Company,
was incorporated in 1996 and is a foreign sales corporation.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Invitrogen B.V. and Invitrogen Export
Company, LTD. All significant intercompany accounts and transactions have been
eliminated in consolidation.
UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited interim statements of income and cash flows and related notes
for the nine months ended September 30, 1997 have been prepared on the same
basis as the audited financial statements and, in the opinion of management,
include all adjustments, consisting of only normal recurring entries, necessary
for the presentation of the Company's consolidated financial position and
results of operations in accordance with generally accepted accounting
principles. Results for the interim period are not necessarily indicative of
results to be expected for the entire fiscal year.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET PRESENTATION
The unaudited pro forma consolidated balance sheet is presented to show the
effects on the September 30, 1998 balance sheet of the conversion of all
outstanding shares of Convertible Redeemable Preferred Stock into 2,202,942
shares of common stock and 2,202,942 shares of Series A Redeemable Preferred
Stock with a redemption value of $14,200,000 which will occur upon filing of the
Company's proposed initial public offering as if the conversion took place on
September 30, 1998.
F-10
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONCENTRATIONS OF RISKS
REVENUES (EXCLUSIVE OF GRANTS AND ROYALTIES)
Revenues for each of the three years ended December 31, 1997, and during the
nine month periods ended September 30, 1997 and 1998, were earned from sales to
customers in the following geographic regions (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1995 1996 1997 1997 1998
<S> <C> <C> <C> <C> <C>
North America.......................... $ 9,937 $ 12,496 $ 15,751 $ 11,861 $ 14,632
Europe................................. 3,263 4,620 6,286 4,341 6,012
Pacific Rim............................ 993 1,570 2,257 1,711 1,887
--------- --------- --------- --------- ---------
Total revenue.......................... $ 14,193 $ 18,686 $ 24,294 $ 17,913 $ 22,531
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
Certain countries in the Pacific Rim have recently been experiencing
significant volatility in their currencies. While the Company sells principally
in U.S. dollars to customers in these countries, the volatility in the
countries' currencies may have an adverse impact on the Company's revenue and
profit in the future. The Company did not have any material accounts receivable
from customers in this region in any of the years presented.
CUSTOMERS
Approximately $5,800,000, $6,800,000, $8,300,000, $6,300,000, and
$7,600,000, or 41%, 36%, 34%, 35%, and 34% of the Company's revenues during the
years ended December 31, 1995, 1996, 1997, and during the nine month periods
ended September 30, 1997 and 1998, respectively, were derived from university
and research institutions which management believes are, to some degree,
directly or indirectly supported by the U.S. Government. A change in current
research fundings, particularly with respect to the National Institute of
Health, and may have an adverse impact on the Company's future results of
operations.
REVENUE RECOGNITION
Revenues from product sales are recognized upon shipment to the customer.
Grant revenue is recorded as earned, as defined within the specific agreements.
Cost of grant revenue is included in research and development.
CASH AND CASH EQUIVALENT AND SHORT-TERM INVESTMENTS
The company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash equivalents at
December 31, 1996 and 1997 and September 30, 1998 consist primarily of
commercial paper. All other investments are classified as held to maturity
short-term investments and consist of commercial paper and mature through
February 1, 1999. Short term investments are carried at cost and approximate
market value.
F-11
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at lower of cost (first-in, first-out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and depreciated over the estimated
useful lives of the assets (3 to 39 years) using the straight-line method.
Amortization of leasehold improvements is computed on the straight-line method
over the shorter of the lease term or the estimated useful lives of the assets.
Maintenance and repairs are charged to operations as incurred. When assets are
sold, or otherwise disposed of, the cost and related accumulated depreciation
are removed from the accounts and any gain or loss is included in operations.
INTANGIBLE ASSETS
Intangible assets, representing patents and license agreements, are recorded
at cost and amortized on a straight-line basis over estimated useful lives of 5
to 17 years. Costs related to these intangible assets are written off to expense
at the time such costs are deemed to have no continuing value.
LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets". The statement requires
that long-lived assets and certain identifiable intangibles to be held and used
by an entity be reviewed for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. The Company periodically re-evaluates the original assumptions and
rationale utilized in the establishment of the carrying value and estimated
lives of its long-lived assets. The criteria used for these evaluations include
management's estimate of the asset's continuing ability to generate income from
operations and positive cash flow in future periods as well as the strategic
significance of any intangible asset in the Company's business objectives.
RESEARCH AND DEVELOPMENT COSTS
All research and development costs are charged to operations as incurred.
INCOME TAXES
The Company uses the liability method of accounting for income taxes in
accordance with Statement of Financial Statement Accounting Standards No. 109,
"Accounting for Income Taxes". Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes,
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
F-12
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FOREIGN CURRENCY TRANSLATION
The functional currency for Invitrogen B.V. is the Netherlands Guilder
(NLG), the applicable foreign currency. The translation from the applicable
foreign currency to the U.S. dollar is translated for balance sheet accounts
using the current exchange rate in effect at the balance sheet date and for
revenue and expense accounts using an average exchange rate during the period.
The effects of translation are recorded as a separate component of stockholders'
equity. Exchange gains and losses arising from transactions denominated in
foreign currencies are recorded using the actual exchange differences on the
date of the transaction.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all financial instruments such as foreign cash
accounts, accounts receivable, accounts payable and accrued expenses are
reasonable estimates of their fair value because of the short maturity of these
items. The Company believes the carrying amounts of the Company's notes
receivable from officers, line of credit and obligations under capital leases
approximate fair value because the interest rates on these instruments are
subject to change with, or approximate, market interest rates.
COMPUTATION OF EARNINGS PER SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS No. 128"), "Earnings Per Share." SFAS No. 128 requires
companies to compute basic and diluted per share data for all periods for which
an income statement is presented. Basic earnings per share was computed by
dividing net income by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflects the potential dilution
that could occur if the income were divided by the weighted-average number of
common shares and potential common shares from outstanding stock options.
Potential common shares were calculated using the treasury stock method and
represent incremental shares issuable upon exercise of the Company's outstanding
options. Diluted earnings per share does not consider the impact of the
conversion of outstanding redeemable convertible preferred stock as its
inclusion would be anti-dilutive for all periods presented.
UNAUDITED PROFORMA EARNINGS PER SHARE
Effective with the filing of the initial public offering, all outstanding
shares of convertible redeemable preferred stock will convert into 2,202,942
shares of common stock. These shares were not considered in the calculation of
basic and dilluted earnings per share, as their impact would be anti-dillutive.
However, had they been converted as of their initial issuance, basic and diluted
earnings per share for the year ended December 31, 1997 and for the nine month
periods ended September 30, 1997 and 1998 would have been $0.28, $0.23, $0.21,
$0.18, $0.23 and $0.20, respectively.
COMPREHENSIVE INCOME
The Company has implemented Statement of Financial Accounting Standards No.
130 "Comprehensive Income". This statement requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that
F-13
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
is displayed with the same prominence as other financial statements.
Accordingly, in addition to reporting net income under the current rules, the
Company is required to display the impact of any fluctuations in its foreign
currency translation adjustments as a component of comprehensive income and to
display an amount representing total comprehensive income for each period
presented. In interim financial results, this information is allowed to be
presented in the notes to the financial statements. For the nine month period
ended September 30, 1997, other comprehensive income was $98,000, and total
comprehensive income was $1,897,000.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). This statement provides
guidance on accounting for the costs of computer software developed or obtained
for internal use and identifies characteristics of internal use software as well
as assists in determining when computer software is for internal use. SOP 98-1
is effective for fiscal years beginning after December 15, 1998, with earlier
application permitted. The Company has not determined the impact of the adoption
of SOP 98-1 as this is highly dependent upon the nature, timing and extent of
future internal use software development.
In March 1998, the Accounting Standards Executive Committee issued AICPA
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
This Statement of Position provides guidance on the financial reporting of
start-up costs and organization costs. It requires that the cost of start-up
activities and organization costs be expensed as incurred. The SOP is effective
for financial statements for fiscal years beginning after December 15, 1998. The
company does not expect adoption of this SOP to have a material impact on its
financial statements.
The Company will be required to adopt Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information." Statement 131 superseded SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise" and is effective for years beginning after
December 31, 1997. Statement 131 establishes standards for the way that public
business enterprises report selected information about operating segments in
financial reports. Statement 131 also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The adoption of Statement 131 will not affect the Company's results of
operations or financial position, but may affect the disclosure of the segment
information that will be disclosed in the Company's annual financial statements
for the year ended December 31, 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement changes the previous
accounting definition of derivative--which focused on
F-14
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
freestanding contracts such as options and forwards (including futures and
swaps)--expanding it to include embedded derivatives and many commodity
contracts. Under the Statement, every derivative is recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999. Earlier application is
allowed as of the beginning of any quarter beginning after issuance. The Company
does not anticipate that the adoption of SFAS 133 will have a material impact on
its financial position or results of operations.
2. RELATED PARTY TRANSACTIONS
AIRCRAFT
The Company has $150,000 on deposit, included in other assets, for an
airplane owned by a company controlled by an officer of the Company. The Company
has a lease agreement for the use of the airplane for $7,200 per month through
January 15, 2000. The lease agreement was terminated and the advance was paid
off subsequent to the date of the balance sheet.
INVESTMENT IN MORPHAGEN, INC.
In February 1997, the Company entered into an agreement with MorphaGen,
Inc., a start-up company, for an initial investment of $500,000 in exchange for
109,850 shares of Series A Preferred Stock of MorphaGen, Inc. The president of
MorphaGen, Inc. is the spouse of a member of the board of directors of the
Company. Subsequent to September 30, 1998 the Company acquired all of the
outstanding common stock of MorphaGen, Inc. which the Company did not already
own for 63,000 options to purchase company stock at $8.50 per share. Neither the
assets of MorphaGen, Inc. nor the results of operations are material to the
Company.
F-15
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
3. INVENTORIES
Inventories include material, labor and overhead costs and consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
<S> <C> <C> <C>
Raw materials and components............................... $ 406 $ 291 $ 396
Work in process............................................ 605 503 613
Finished goods............................................. 890 1,120 1,435
--------- --------- ------
$ 1,901 $ 1,914 $ 2,444
--------- --------- ------
--------- --------- ------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
<S> <C> <C> <C>
Land..................................................... $ -- $ -- $ 215
Building................................................. -- -- 2,187
Machinery and equipment.................................. 3,990 4,823 7,368
Leasehold improvements................................... 206 223 253
Construction in process.................................. 247 221 128
--------- --------- -------------
4,443 5,267 10,151
Accumulated depreciation and amortization................ (2,854) (2,808) (3,440)
--------- --------- -------------
$ 1,589 $ 2,459 $ 6,711
--------- --------- -------------
--------- --------- -------------
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
<S> <C> <C> <C>
Licensing agreements (see Note 7).......................... $ 404 $ 574 $ 834
Patents and trademarks..................................... 257 362 457
Non-compete agreement...................................... 10 10 --
--------- --------- ------
671 946 1,291
Accumulated amortization................................... (87) (176) (248)
--------- --------- ------
$ 584 $ 770 $ 1,043
--------- --------- ------
--------- --------- ------
</TABLE>
F-16
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
6. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
<S> <C> <C> <C>
Accrued purchases.......................................... $ 282 $ 240 $ 453
Accrued payroll related.................................... 662 741 503
Accrued other.............................................. 186 353 163
--------- --------- ------
$ 1,130 $ 1,334 $ 1,119
--------- --------- ------
--------- --------- ------
</TABLE>
7. LICENSING AGREEMENTS
The Company manufactures and sells certain products under several licensing
agreements. The agreements require royalty payments based upon various
percentages of sales or profits from the products. Terms of the agreements range
from five to ten years and initial costs are amortized over their lives using
the straight-line method. Total royalties paid under the agreements were
approximately $242,000, $444,000, $815,000, and $730,000 for the years ended
December 31, 1995, 1996 and 1997 and the nine month period ended September 30,
1998, respectively.
Certain of the licensing agreements require guaranteed minimum annual
royalty payments, to maintain exclusively. Future minimum guaranteed royalties
at September 30, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------------
<S> <C>
October 1, through December 31, 1998................................................. $ 137
1999................................................................................. 862
2000................................................................................. 1,159
2001................................................................................. 1,486
2002................................................................................. 1,391
2003................................................................................. 1,520
---------
$ 6,555
---------
---------
</TABLE>
8. LINE OF CREDIT
As of September 30, 1998, the Company amended the line of credit to increase
the maximum available commitment to $10,000,000, which bears interest at the
bank's Libor rate (5.375% at September 30, 1998) plus 2% or the bank's prime
rate. The line of credit expires on September 30, 1999. The line of credit
agreement contains various normal and customary financial covenants, which the
Company was in compliance with for all periods presented.
F-17
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
9. INCOME TAXES
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1996 1997 1998
<S> <C> <C> <C>
Deferred tax assets:
Various accruals............................................. $ 197 $ 617 $ 576
Net operating loss carryforwards............................. 84 33 --
State taxes.................................................. -- 115 55
--------- --------- -----
Total deferred tax assets.................................... 281 765 631
Deferred tax liabilities:
Depreciation and amortization................................ (83) (25) (114)
--------- --------- -----
Net deferred tax assets........................................ $ 198 $ 740 $ 517
--------- --------- -----
--------- --------- -----
</TABLE>
Income before income taxes includes the following components:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------- SEPTEMBER 30,
1995 1996 1997 1998
<S> <C> <C> <C> <C>
United States.................................... $ 1,316 $ 1,212 $ 3,152 $ 2,875
Foreign.......................................... 46 1,471 954 703
--------- --------- --------- ------
$ 1,362 $ 2,683 $ 4,106 $ 3,578
--------- --------- --------- ------
--------- --------- --------- ------
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------- SEPTEMBER 30,
1995 1996 1997 1998
<S> <C> <C> <C> <C>
Current:
Federal......................................... $ 350 $ 510 $ 1,343 $ 578
State........................................... (9) 30 339 146
Foreign......................................... -- 462 334 293
--------- --------- --------- ------
Total current provision........................... 341 1,002 2,016 1,017
Deferred:
Federal......................................... (139) (27) (393) 230
State........................................... 4 (36) (150) 40
Foreign......................................... -- -- -- (47)
--------- --------- --------- ------
Total deferred provision.......................... (135) (63) (543) 223
--------- --------- --------- ------
Total provision................................... $ 206 $ 939 $ 1,473 $ 1,240
--------- --------- --------- ------
--------- --------- --------- ------
</TABLE>
The difference between the provision for income taxes and the amounts that
would be obtained by applying the Federal statutory rate to income before income
taxes relates primarily to the utilization of certain tax credit and net
operating loss carryforwards.
F-18
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
9. INCOME TAXES
The provision for income taxes differs from the amount computed by applying
the federal statutory rate to the Company's income before provision for income
taxes as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1995 1996 1997 1998
<S> <C> <C> <C> <C>
Federal tax provision at
statutory rate.............. 34.0% 34.0% 34.0% 34.0%
State tax, net of federal
benefit..................... 6.0% 4.0% 6.0% 6.0%
Foreign Sales Corporation
Benefit..................... -- -- (1.0)% (1.7)%
Research and development and
other credits............... -- -- (5.0)% (5.6)%
Other......................... -- (3.0)% 1.9% 1.9%
Decrease in valuation
allowance................... (24.9)% -- -- --
----- ---- ---- ---
Provision for income taxes.... 15.1% 35.0% 35.9% 34.6%
----- ---- ---- ---
----- ---- ---- ---
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain equipment under capital leases which are
personally guaranteed by the Company's principal stockholders are due in
aggregate monthly installments of $32,000 and mature at various dates through
November 2001. Property and equipment at December 31, 1996 and 1997, and
September 30, 1998, include approximately $1,603,000, $595,000 and $497,000,
respectively, of equipment under capital leases which have been capitalized.
Accumulated depreciation for such equipment was approximately $1,437,000,
$347,000 and $99,000 at December 31, 1996 and 1997, and September 30, 1998,
respectively.
F-19
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
10. COMMITMENTS AND CONTINGENCIES
Future minimum lease commitments at September 30, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASES LEASES
- --------------------------------------------------
<S> <C> <C>
October, 1, through December 31, 1998............. $ 111 $ 35
1999.............................................. 463 65
2000.............................................. 482 48
2001.............................................. 501 44
2002.............................................. 521 --
2003.............................................. 582 --
Thereafter........................................ 1,759 --
--------- --------
Total minimum lease payments...................... $4,419 192
---------
---------
Less amount representing interest................. 25
--------
$167
--------
--------
</TABLE>
The Company leases its office and manufacturing facility in Carlsbad,
California under an operating lease which expires February 2007. Rent expense
under all operating leases was approximately $258,000, $318,000, $480,000 and
$341,000 and $433,000 for the years ended December 31, 1995, 1996 and 1997 and
the nine months ended September 30, 1997 and 1998, respectively.
LITIGATION
The Company and its subsidiaries are subject to claims and from time to time
are named as defendants in legal proceedings. In the opinion of management, the
amount of ultimate liability, if any, with respect to those actions will not
materially affect the financial position or results of operations of the
Company.
11. REDEEMABLE SUBSIDIARY COMMON STOCK
Effective February 26, 1993, Invitrogen B.V. entered into a money loan
agreement with N.V. Noordelijke Ontwikkelingsmaatschappij, Investment and
Development Company for the Northern Netherlands ("NOM"). As of December 31,
1994, the Company had borrowed $618,000 under the agreement which had provisions
by which NOM could convert its loan balance to Invitrogen B.V. common stock. On
April 7, 1995, the Company, Invitrogen B.V. and NOM entered into a Shareholders'
Agreement. As a result, Invitrogen B.V. issued 18,000 shares of non-voting
subsidiary common stock to NOM in exchange for a NLG 600,000 cash payment by NOM
and retirement of a NLG 1,200,000 loan from NOM. NOM may require the Company
and/or its subsidiary to redeem these shares in the amount of NLG 3,150,000
(redemption amount) if certain events occur. The Company and/or its subsidiary
are required to redeem all the shares on April 7, 1999 for the redemption amount
of NLG 3,150,000 (USD $1,672,000 at September 30, 1998). At any time, the
Company and/or its subsidiary may redeem all of the subsidiary shares issued to
NOM for the redemption price.
F-20
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
10. COMMITMENTS AND CONTINGENCIES
The excess of the redemption value over the carrying value is being
accredited by periodic charges to retained earnings over the life of the issue
(through April 7, 1999) using the effective interest rate method.
12. PREFERRED STOCK
The Company has authorized 6,405,884 shares of preferred stock, designated
as follows:
<TABLE>
<CAPTION>
SHARES
<S> <C>
Series A convertible redeemable preferred stock.................................. 2,202,942
Redeemable preferred stock....................................................... 2,202,942
Undesignated preferred stock..................................................... 2,000,000
----------
Total preferred shares........................................................... 6,405,884
----------
----------
</TABLE>
On June 20, 1997, the Company entered into a stock purchase agreement with a
group of three investors (Investors). The Company sold 2,202,942 shares of
Series A Convertible Redeemable Preferred Stock ("Convertible Preferred Stock")
at $6.8091 per share to the Investors in exchange for $14,766,000, net of
issuance costs. Additionally, the Company repurchased and retired 1,101,471
shares of the Company's common stock at $6.8091 per share from certain
stockholders of the Company in exchange for $7.5 million. The Convertible
Preferred Stock accrues dividends at a rate of 6% per annum and has a
liquidation preference of $6.8091 per share plus accrued and unpaid dividends.
Additionally, the Convertible Preferred Stock entitles the holder thereof to one
vote per outstanding share in the election of one director of the Company,
voting together as one separate class. The Convertible Preferred Stock is
automatically converted into shares of common stock and redeemable preferred
stock ("Redeemable Preferred Stock") as of the filing of an initial public
offering or a qualified extraordinary item (including a sale, merger or purchase
of substantially all of the assets of the Company).
The Redeemable Preferred Stock accrues dividends at 3% per annum and
entitles the holder thereof to one vote per outstanding share in the election of
one director of the Company, voting together as a separate class. Upon
liquidation, the Redeemable Preferred Stock is entitled to be paid out of the
assets of the Company at the redeemable base liquidation amount (original issue
price plus accrued dividends) per share (determined at the measurement date).
There are no shares of Redeemable Preferred Stock outstanding at December 31,
1997.
13. COMMON STOCK
STOCK SPLIT
On June 20, 1997, the Company approved a recapitalization which authorized
20,000,000 shares of common stock and a stock split that converted each share of
Class A and Class B stock into seven shares of common stock of the Company. All
prior period share amounts have been restated to reflect the stock split.
F-21
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
13. COMMON STOCK
SERIES A
All outstanding shares of Series A common stock have been issued to
founders, directors, employees or consultants of the Company pursuant to
agreements which entitles the Company to repurchase the shares at the current
market value in the event of termination of employment.
SERIES B
All outstanding shares of Series B common stock have been issued to the
president and majority stockholder of the Company. The Series B common stock has
the same rights, preferences, privileges and restrictions of Series A common
stock except the Series B shares may not vote in the election of directors of
the Company. In 1997, the Company converted all the outstanding Series B common
stock to Series A common stock on a one to one basis.
14. EARNINGS PER SHARE
Earnings per share is calculated as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
Net income........................................ $2,338 7,426,377 $
Less: Preferred stock dividends................... (675) --
Accretion of redeemable subsidiary common
stock......................................... (151) --
----------- ------------- ---------
Basic EPS:
Income available to common stockholders........... 1,512 7,426,377 $0.20
---------
---------
Stock options..................................... -- 1,403,293
----------- -------------
Diluted EPS:
Income available to common stockholders plus
assumed conversions............................. $1,512 8,829,670 $0.17
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
F-22
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
14. EARNINGS PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
Net income........................................ $1,995 7,974,097 $
Less: Preferred stock dividends................... (250) --
Accretion of redeemable subsidiary common
stock......................................... (132) --
----------- ------------- ---------
Basic EPS: 1,613 7,974,097
Income available to common stockholders........... $0.20
---------
---------
Stock options..................................... -- 1,841,295
----------- -------------
Diluted EPS:
Income available to common stockholders plus
assumed conversions............................. $1,613 9,815,392 $0.16
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
Net income........................................ $2,633 7,837,248 $
Less: Preferred stock dividends................... (475) --
Accretion of redeemable subsidiary common
stock......................................... (175) --
----------- ------------- ---------
Basic EPS:
Income available to common stockholders........... 1,983 7,837,248 $0.25
---------
---------
Stock options..................................... -- 1,672,209
----------- -------------
Diluted EPS:
Income available to common stockholders plus
assumed conversions............................. $1,983 9,509,457 $0.21
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
F-23
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
14. EARNINGS PER SHARE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
Net income........................................ $1,744 8,356,270 $
Less: Accretion of redeemable subsidiary common
stock........................................... (171) --
----------- ------------- ---------
Basic EPS:
Income available to common stockholders........... 1,573 8,356,270 $0.19
----------- ------------- ---------
Stock options..................................... -- 1,723,485
----------- -------------
Diluted EPS:
Income available to common stockholders plus
assumed conversions............................. $1,573 10,079,755 $0.16
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
---------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
Net income........................................ $1,156 9,602,173 $
Less: Accretion of redeemable subsidiary common
stock........................................... (171) --
----------- ------------- ---------
Basic EPS:
Income available to common stockholders........... 985 9,602,173 $0.10
----------- ------------- ---------
---------
Stock options..................................... -- --
----------- -------------
Diluted EPS:
Income available to common stockholders plus
assumed conversions............................. $ 985 9,602,173 $0.10
----------- ------------- ---------
----------- ------------- ---------
</TABLE>
15. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan ("ESOP") covering all
employees who have completed one year of continuous service or have completed
1,000 hours of service in a twelve-month period prior to entry date.
Contributions to the ESOP are made at the discretion of the Board of Directors.
Contributions of approximately $199,000, $100,000, $100,000, $80,000 and $75,000
were designated for the ESOP for the years ended December 31, 1995, 1996 and
1997 and for the nine month periods ended September 30, 1997 and 1998,
respectively.
SECTION 401(k) PROFIT SHARING PLAN
The Company has a profit sharing plan which allows each eligible employee to
voluntarily make pre-tax deferred salary contributions. The Company may make
matching contributions in amounts as determined by the board of directors. The
Company made matching contributions of approximately
F-24
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
15. EMPLOYEE BENEFIT PLANS
$94,000, $111,000, $134,000, $109,000 and $167,000, for the years ended December
31, 1995, 1996 and 1997 and for the nine month periods ended September 30, 1997
and 1998, respectively.
16. STOCK OPTION PLANS
The Company has two stock option plans, the 1997 Invitrogen Corporation
Stock Option Plan and the 1995 Invitrogen Corporation Stock Option Plan. Under
both plans, incentive and nonqualified stock options are granted to eligible
employees to purchase shares of the Company's common stock at an exercise price
equal to no less than the estimated fair market value of such stock as
determined by the Board of Directors on the date of grant.
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
fixed stock option or stock purchase plans. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
SFAS 123, the Company's results of operations would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------
1995 1996 1997 1998
<S> <C> <C> <C> <C>
Net income:
As reported.................................... $ 1,156 $ 1,744 $ 2,633 $ 2,338
Pro forma...................................... 839 1,664 2,475 1,898
EPS:
As reported.................................... $ 0.10 $ 0.19 $ 0.25 $ 0.20
Pro forma...................................... 0.18 0.18 0.23 0.14
DEPS:
As reported.................................... $ 0.10 $ 0.16 $ 0.21 $ 0.17
Pro forma...................................... 0.18 0.15 0.19 0.12
</TABLE>
The Company may grant up to 3,570,037 options, of which 2,425,152 have been
granted at September 30, 1998, under these two Plans. Options vest immediately
or over a period of time ranging up to five years, are exercisable in whole or
in installments, and expire ten years from date of grant.
F-25
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 IS UNAUDITED)
16. STOCK OPTION PLANS
A summary of the status of the Company's stock option plans at December 31,
1996, December 31, 1997 and September 30, 1998 and changes during the periods
then ended is presented in the tables below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1995 1996 1997
WTD. AVG. WTD. AVG. WTD. AVG.
SHARES EX PRICE SHARES EX PRICE SHARES EX PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year.................... -- -- 2,956,107 $0.85 3,467,107 $0.91
Granted........................................... 2,956,107 $0.84 581,000 $1.21 222,000 $3.80
Exercised......................................... -- -- (70,000) $0.98 (178,955) $0.90
Forfeited/expired................................. -- -- -- -- (1,540,000) $0.84
--------- --------- --------- --------- ---------- ---------
Outstanding, end of year.......................... 2,956,107 $0.84 3,467,107 $0.91 1,970,152 $1.30
Exercisable, end of year.......................... 884,277 $0.84 1,331,686 $0.89 1,297,152 $1.09
Weighted average fair value of options granted.... $0.23 $0.35 $0.96
<CAPTION>
SEPTEMBER 30,
--------------------
1998
WTD. AVG.
SHARES EX PRICE
<S> <C> <C>
Outstanding, beginning of year.................... 1,970,152 $1.30
Granted........................................... 637,500 $5.75
Exercised......................................... (5,800) $0.84
Forfeited/expired................................. (6,200) $0.84
--------- ---------
Outstanding, end of year.......................... 2,595,652 $2.42
Exercisable, end of year.......................... 1,518,886 $1.37
Weighted average fair value of options granted.... $1.59
</TABLE>
At September 30, 1998:
<TABLE>
<CAPTION>
WTD. AVG.
REMAINING
OPTIONS OPTIONS EXERCISE CONTRACTUAL
OUTSTANDING EXERCISABLE PRICE LIFE IN YEARS
<S> <C> <C> <C>
1,101,152 882,752 $0.84 7.1
406,000 406,000 $0.85-$1.70 7.1
231,000 88,200 $1.70-$2.55 7.5
220,000 63,000 $3.40-$4.25 9.0
466,000 65,833 $5.10-$5.95 9.7
171,500 13,101 $6.00-$6.85 9.7
--
- ----------- ----------- -----------
2,595,652 1,518,886 $2.40 7.8
--
--
- ----------- ----------- -----------
- ----------- ----------- -----------
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the present value pricing method as described in SFAS No. 123. The underlying
assumptions used to estimate the fair values for the 1996, 1997 and 1998 grants
are weighted average risk-free interest rates of 6.02%, 5.81% and 5.40%,
respectively, with an expected life of 5 and 9.2 years in 1996, 1997 and 1998,
respectively. No dividend yield or stock price volatility was used in these
calculations.
F-26
<PAGE>
TRADEMARKS AND TRADENAMES
Discovery Line-TM-, Gene Pool-TM-, Hybrid Hunter-TM-, Micro-FastTrack-TM-,
Northern Territory-TM- and Zero Background-TM- are trademarks of the Company.
The Invitrogen logo, MaxBac-Registered Trademark- and TA
Cloning-Registered Trademark- are Company trademarks which have been registered
with the United States Patent and Trademark Office. FastTrack-TM-,
GeneStorm-TM-, Invitrogenomics-TM-, One Shot-TM-, TOPO-TM- and Zero Blunt-TM-
are trademarks of the Company for which registration applications have been
filed with the United States Patent and Trademark Office. Morphatides-TM- is a
trademark of MorphaGen-TM-, Inc., a wholly owned subsidiary of the Company. All
other trademarks or trade names referred to in this prospectus are the property
of their respective owners.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[LOGO]-Registered Trademark-
3,450,000 SHARES OF COMMON STOCK
-----------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
NATIONSBANC MONTGOMERY SECURITIES LLC
WARBURG DILLON READ LLC
------------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THE AFFAIRS OF THE COMPANY
HAVE NOT CHANGED SINCE THE DATE HEREOF.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE SHARES OF COMMON STOCK MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS AN UNDERWRITER AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market fee.
<TABLE>
<S> <C>
Registration fee.................................................. $ 14,387
NASD filing fee................................................... 5,675
Nasdaq National Market fee........................................ 84,875
Blue sky qualification fees and expenses.......................... 5,000
Printing and engraving expenses................................... 125,000
Legal fees and expenses........................................... 250,000
Accounting fees and expenses...................................... 150,000
Transfer agent and registrar fees................................. 20,000
Miscellaneous..................................................... 95,063
---------
Total......................................................... $ 750,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the DGCL permits indemnification of officers, directors, and
other corporate agents under certain circumstances and subject to certain
limitations. The Registrant's Certificate and Bylaws provide that the Registrant
shall indemnify its directors, officers, employees and agents to the full extent
permitted by the DGCL, including circumstances in which indemnification is
otherwise discretionary under Delaware law. In addition, the Registrant has
entered into separate indemnification agreements with its directors and
executive officers which require the Registrant, among other things, to
indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from acts or omissions not in
good faith or willful misconduct).
These indemnification provisions and the indemnification agreements entered
into between the Registrant and its executive officers and directors may be
sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since November 30, 1995, the Registrant has sold and issued the following
unregistered securities:
(a) Issuances of Shares of Common Stock.
In August 1996, the Registrant issued an aggregate of 15,936 shares (111,552
after the seven-for-one split discussed below) to the Registrant's ESOP as a
contribution. In May 1997, the Registrant issued an aggregate of 22,589 shares
to the Registrant's ESOP as a contribution. In July 1998, the Registrant issued
12,920 shares to the Registrant's ESOP as a contribution.
In June 1997, the Registrant reincorporated in Delaware and each outstanding
share of Common Stock of its California predecessor was converted into seven
shares of Common Stock of the Registrant.
II-1
<PAGE>
(b) Issuances of Shares of Preferred Stock.
On June 20, 1997, the Registrant issued a total of 2,202,942 shares of
Convertible Preferred Stock to three venture capital funds, each of which was an
accredited investor, for an aggregate offering price of $15 million.
(c) Option Issuances to, and Exercises by, Employees and Directors.
From December 31, 1995 to November 30, 1998, the Registrant issued options
to approximately 65 employees to purchase a total of 1,686,500 shares of Common
Stock at a weighted average exercise price of $7.02 per share. No consideration
was paid to the Registrant by any recipient of any of the foregoing options for
the grant of any such options. From December 31, 1995 through November 30, 1998,
6 employees had exercised options for an aggregate of 254,755 shares of Common
Stock. Certain of these shares were subsequently repurchased by the Company.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
The issuances described in Items 15(a) and 15(b) were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering. In
addition, the issuances described in Item 15(c) were deemed exempt from
registration under the Securities Act in reliance on Rule 701 promulgated
thereunder as transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other instruments
issued in such transactions. All recipients either received adequate information
about the Registrant or had access, through employment or other relationships,
to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company, as amended
3.2* Amended and Restated Certificate of Incorporation of the Company, to be in
effect following the Closing
3.3 By-laws, as amended
4.1* Specimen Common Stock Certificate
5.1* Opinion of Gray Cary Ware & Freidenrich LLP
10.1 Form of Indemnification Agreement for directors and executive officers
10.2 1995 Stock Option Plan and form of Agreement thereunder
10.3 1997 Stock Option Plan, as amended, and forms of Incentive Stock Option
Agreement and Nonstatutory Stock Option Agreement thereunder
10.4 1998 Employee Stock Purchase Plan and form of subscription agreement
thereunder
10.5 Patent License Agreement, effective as of July 1, 1998, among F.
Hoffmann-La Roche Ltd, Roche Molecular Systems, Inc. and Invitrogen
Corporation
10.6+ License Agreement, dated May 10, 1990, between Molecular Chimerics
Corporation and Invitrogen Corporation
10.7+ Purchase Agreement, effective July 1, 1994, between Cayla and Invitrogen,
as amended
10.8+ License Agreement, dated January 22, 1997, between Sloan-Kettering
Institute for Cancer Research and Invitrogen
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
10.9 Lease, dated November 1, 1995, between CRC and Invitrogen
10.10 Series A Preferred Stock Purchase Agreement dated June 20, 1997
10.11+ Stock Purchase Agreement dated November 3, 1998, between MorphaGen, Inc.,
Heidi Short and Invitrogen Corporation
21.1 List of Subsidiaries
23.1 Consent of Independent Public Accountants
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
+ The Registrant has applied for confidential treatment with respect to certain
portions of these documents.
(b) Financial Statement Schedules.
No schedules have been filed because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, employee or agent of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, employee or agent in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Carlsbad, County of San
Diego, State of California, on the 9th day of December, 1998.
<TABLE>
<S> <C> <C>
INVITROGEN CORPORATION
By: /s/ JAMES R. GLYNN
-----------------------------------------
James R. Glynn
Senior Vice President,
Chief Financial Officer and Director
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Lyle C. Turner, James Glynn, Warner
Broaddus, or any of them, as his attorney-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement, including post-effective amendments and any and
all new registration statements filed pursuant to Rule 462 under the Securities
Act in connection with or related to the offering contemplated by this
Registration Statement as amended, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorney-in-fact
or his substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
President, Chief Executive December 9, 1998
/s/ LYLE C. TURNER Officer and Chairman of
- ------------------------------ the Board
Lyle C. Turner (PRINCIPAL EXECUTIVE
OFFICER)
/s/ THEODORE J. DEFRANK
- ------------------------------ Chief Operations Officer December 9, 1998
Theodore J. DeFrank
/s/ JOSEPH M. FERNANDEZ Senior Vice President of December 9, 1998
- ------------------------------ Business Development,
Joseph M. Fernandez Secretary and Director
Senior Vice President, December 9, 1998
/s/ JAMES R. GLYNN Chief Financial Officer
- ------------------------------ and Director
James R. Glynn (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/s/ BRADLEY G. LORIMIER
- ------------------------------ Director December 9, 1998
Bradley G. Lorimier
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ DONALD W. GRIMM
- ------------------------------ Director December 9, 1998
Donald W. Grimm
/s/ KURT R. JAGGERS
- ------------------------------ Director December 9, 1998
Kurt R. Jaggers
/s/ JAY M. SHORT
- ------------------------------ Director December 9, 1998
Jay M. Short
/s/ LEWIS J. SHUSTER
- ------------------------------ Director December 9, 1998
Lewis J. Shuster
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company, as amended
3.2* Amended and Restated Certificate of Incorporation of the Company, to be in effect following the Closing
3.3 By-laws, as amended
4.1* Specimen Common Stock Certificate
5.1* Opinion of Gray Cary Ware & Freidenrich LLP
10.1 Form of Indemnification Agreement for directors and executive officers
10.2 1995 Stock Option Plan and form of Agreement thereunder
10.3 1997 Stock Option Plan, as amended, and forms of Incentive Stock Option Agreement and Nonstatutory Stock
Option Agreement thereunder
10.4 1998 Employee Stock Purchase Plan and form of subscription agreement thereunder
10.5 Patent License Agreement, effective as of July 1, 1998, among F. Hoffmann-La Roche Ltd, Roche Molecular
Systems, Inc. and Invitrogen Corporation
10.6+ License Agreement, dated May 10, 1990, between Molecular Chimerics Corporation and Invitrogen
Corporation
10.7+ Purchase Agreement, effective July 1, 1994, between Cayla and Invitrogen, as amended
10.8+ License Agreement, dated January 22, 1997, between Sloan-Kettering Institute for Cancer Research and
Invitrogen
10.9 Lease, dated November 1, 1995, as amended, between CRC and Invitrogen
10.10 Series A Preferred Stock Purchase Agreement dated June 20, 1997
10.11+ Stock Purchase Agreement dated November 3, 1998, between MorphaGen, Inc., Heidi Short and Invitrogen
Corporation
21.1 List of Subsidiaries
23.1 Consent of Independent Public Accountants
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
+ The Registrant has applied for confidential treatment with respect to
certain portions of these documents.
<PAGE>
__________ Shares
INVITROGEN CORPORATION
Common Stock
UNDERWRITING AGREEMENT
__________, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
WARBURG DILLON READ LLC
As representatives of the
several Underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Invitrogen Corporation, a Delaware corporation (the "COMPANY"), proposes to
issue and sell ____________ shares of its common stock, par value $0.01 per
share (the "FIRM SHARES"), to the several underwriters named in Schedule I
hereto (the "UNDERWRITERS"). The Company also proposes to issue and sell to
the several Underwriters not more than an additional _______ shares of its
common stock, par value $0.01 per share (the "ADDITIONAL SHARES"), if requested
by the Underwriters as provided in Section 2 hereof. The Firm Shares and the
Additional Shares are hereinafter referred to collectively as the "SHARES". The
shares of common stock of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "COMMON STOCK".
<PAGE>
SECTION 1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has
prepared and filed with the Securities and Exchange Commission (the
"COMMISSION") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "ACT"), a registration statement on Form S-1, including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "REGISTRATION STATEMENT";
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "PROSPECTUS". If the Company has filed or is
required pursuant to the terms hereof to file a registration statement pursuant
to Rule 462(b) under the Act registering additional shares of Common Stock (a
"RULE 462(b) REGISTRATION STATEMENT"), then, unless otherwise specified, any
reference herein to the term "Registration Statement" shall be deemed to include
such Rule 462(b) Registration Statement.
SECTION 2. AGREEMENTS TO SELL AND PURCHASE AND LOCK-UP AGREEMENTS. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $______ (the "PURCHASE PRICE") the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to _______ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for
the purpose of covering over-allotments made in connection with the offering of
the Firm Shares. The Underwriters may exercise their right to purchase
Additional Shares in whole or in part from time to time by giving written notice
thereof to the Company within 30 days after the date of this Agreement. You
shall give any such notice on behalf of the Underwriters and such notice shall
specify the aggregate number of Additional Shares to be purchased pursuant to
such exercise and the date for payment and delivery thereof, which date shall be
a business day (i) no earlier than two business days after such notice has been
given (and, in any event, no earlier than the Closing Date (as hereinafter
defined)) and (ii) no later than ten business days after such notice has been
given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased from the Company as the number of Firm Shares
set forth opposite the
-2-
<PAGE>
name of such Underwriter in Schedule I bears to the total number of Firm
Shares.
The Company hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option plan and (ii) the Company may
issue shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. The Company also
agrees not to file any registration statement with respect to any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock for a period of 180 days after the date of the Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation. The Company shall, prior to or concurrently with the execution of
this Agreement, deliver an agreement executed by (i) each of the directors and
officers of the Company and (ii) each stockholder listed on Annex I hereto to
the effect that such person will not, during the period commencing on the date
such person signs such agreement and ending 180 days after the date of the
Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette
Corporation, (A) engage in any of the transactions described in the first
sentence of this paragraph or (B) make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock.
SECTION 3. TERMS OF PUBLIC OFFERING. The Company is advised by you that
the Underwriters propose (i) to make a public offering of their respective
portions of the Shares as soon after the execution and delivery of this
Agreement as in your judgment is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
SECTION 4. DELIVERY AND PAYMENT. The Shares shall be represented by
definitive certificates and shall be issued in such authorized denominations
and registered in such names as Donaldson, Lufkin & Jenrette Securities
Corporation shall request no later than two business days prior to the
Closing Date or the applicable Option Closing Date (as defined below), as the
case may be. The Company shall deliver the Shares, with any transfer taxes
thereon duly paid by the
-3-
<PAGE>
respective Sellers, to Donaldson, Lufkin & Jenrette Securities Corporation
through the facilities of The Depository Trust Company ("DTC"), for the
respective accounts of the several Underwriters, against payment to the
Company of the Purchase Price therefore by wire transfer of Federal or other
funds immediately available in New York City. The certificates representing
the Shares shall be made available for inspection not later than 9:30 A.M.,
New York City time, on the business day prior to the Closing Date or the
applicable Option Closing Date, as the case may be, at the office of DTC or
its designated custodian (the "DESIGNATED OFFICE"). The time and date of
delivery and payment for the Firm Shares shall be 9:00 A.M., New York City
time, on ________, 1999 or such other time on the same or such other date as
Donaldson, Lufkin & Jenrette Securities Corporation and the Company shall
agree in writing. The time and date of delivery for the Firm Shares are
hereinafter referred to as the "CLOSING DATE". The time and date of delivery
and payment for any Additional Shares to be purchased by the Underwriters
shall be 9:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 or such other
time on the same or such other date as Donaldson, Lufkin & Jenrette
Securities Corporation and the Company shall agree in writing. The time and
date of delivery for any Additional Shares are hereinafter referred to as an
"OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
Date on behalf of the parties hereto pursuant to Section 8 of this Agreement
shall be delivered at the offices of Venture Law Group, a Professional
Corporation, 2800 Sand Hill Road, Menlo Park, California 94025, and the
Shares shall be delivered at the Designated Office, all on the Closing Date
or such Option Closing Date, as the case may be.
SECTION 5. AGREEMENTS OF THE COMPANY . The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such
advice in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for such purposes, (iii)
when any amendment to the Registration Statement becomes effective, (iv) if
the Company is required to file a Rule 462(b) Registration Statement after
the effectiveness of this Agreement, when the Rule 462(b) Registration
Statement has become effective and (v) of the happening of any event during
the period referred to in Section 5(d) below which makes any statement of a
material fact made in the Registration Statement or the Prospectus untrue or
which requires any additions to or changes in the
-4-
<PAGE>
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will use its best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.
(b) To furnish to you four signed copies of the Registration Statement
as first filed with the Commission and of each amendment to it, including all
exhibits, and to furnish to you and each Underwriter designated by you such
number of conformed copies of the Registration Statement as so filed and of
each amendment to it, without exhibits, as you may reasonably request.
(c) To prepare the Prospectus, the form and substance of which shall be
satisfactory to you, and to file the Prospectus in such form with the
Commission within the applicable period specified in Rule 424(b) under the
Act; during the period specified in Section 5(d) below, not to file any
further amendment to the Registration Statement and not to make any amendment
or supplement to the Prospectus of which you shall not previously have been
advised or to which you shall reasonably object after being so advised; and,
during such period, to prepare and file with the Commission, promptly upon
your reasonable request, any amendment to the Registration Statement or
amendment or supplement to the Prospectus which may be necessary or advisable
in connection with the distribution of the Shares by you, and to use its best
efforts to cause any such amendment to the Registration Statement to become
promptly effective.
(d) Prior to 10:00 A.M., New York City time, on the first business day
after the date of this Agreement and from time to time thereafter for such
period as in the opinion of counsel for the Underwriters a prospectus is
required by law to be delivered in connection with sales by an Underwriter or
a dealer, to furnish in New York City to each Underwriter and any dealer as
many copies of the Prospectus (and of any amendment or supplement to the
Prospectus) as such Underwriter or dealer may reasonably request.
(e) If during the period specified in Section 5(d), any event shall
occur or condition shall exist as a result of which, in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if, in the opinion of counsel for the Underwriters, it is
necessary to amend or supplement the Prospectus to comply with applicable
law, forthwith to prepare and file with the Commission an appropriate
amendment or supplement to the Prospectus so that the statements in the
Prospectus, as so amended or supplemented, will not in the light of the
circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with applicable law, and to furnish to each
Underwriter
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and to any dealer as many copies thereof as such Underwriter or dealer may
reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you
and counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters
and by dealers under the state securities or Blue Sky laws of such
jurisdictions as you may request, to continue such registration or
qualification in effect so long as required for distribution of the Shares
and to file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification; PROVIDED,
HOWEVER, that the Company shall not be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now
so qualified or to take any action that would subject it to general consent
to service of process or taxation other than as to matters and transactions
relating to the Prospectus, the Registration Statement, any preliminary
prospectus or the offering or sale of the Shares, in any jurisdiction in
which it is not now so subject.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
__________, 2000 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished
to or filed with the Commission or any national securities exchange on which
any class of securities of the Company is listed and such other publicly
available information concerning the Company and its subsidiaries as you may
reasonably request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of its obligations under this Agreement,
including: (i) the fees, disbursements and expenses of the Company's counsel
and the Company's accountants in connection with the registration and
delivery of the Shares under the Act and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to
any of the foregoing, including the mailing and delivering of copies thereof
to the Underwriters and dealers in the quantities specified herein, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii)
all costs of printing or producing this Agreement and any other agreements or
documents in connection with the offering, purchase,
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sale or delivery of the Shares, (iv) all expenses in connection with the
registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of the several states and all costs of printing
or producing any Preliminary and Supplemental Blue Sky Memoranda in
connection therewith (including the filing fees and fees and disbursements of
counsel for the Underwriters in connection with such registration or
qualification and memoranda relating thereto), (v) the filing fees and
disbursements of counsel for the Underwriters in connection with the review
and clearance of the offering of the Shares by the National Association of
Securities Dealers, Inc., (vi) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A relating to
the Common Stock and all costs and expenses incident to the listing of the
Shares on the Nasdaq National Market, (vii) the cost of printing certificates
representing the Shares, (viii) the costs and charges of any transfer agent,
registrar and/or depositary, and (ix) all other costs and expenses incident
to the performance of the obligations of the Company hereunder for which
provision is not otherwise made in this Section.
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market and to maintain the listing of the Shares on the
Nasdaq National Market for a period of three years after the date of this
Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior
to the Closing Date or any Option Closing Date, as the case may be, and to
satisfy all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of
this Agreement does not cover all of the Shares, to file a Rule 462(b)
Registration Statement with the Commission registering the Shares not so
covered in compliance with Rule 462(b) by 10:00 P.M., New York City time, on
the date of this Agreement and to pay to the Commission the filing fee for
such Rule 462(b) Registration Statement at the time of the filing thereof or
to give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the
effectiveness of this Agreement); any Rule 462(b) Registration Statement
filed after the effectiveness of this Agreement will become effective no
later than 10:00 P.M., New York City time, on the date of this Agreement; and
no stop order suspending the effectiveness of the Registration Statement is
in effect, and no proceedings for such purpose are pending before or
threatened by the Commission.
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(b) (i) The Registration Statement (other than any Rule 462(b)
Registration Statement to be filed by the Company after the effectiveness of
this Agreement), when it became effective, did not contain and, as amended,
if applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (ii) the Registration Statement
(other than any Rule 462(b) Registration Statement to be filed by the Company
after the effectiveness of this Agreement) and the Prospectus comply and, as
amended or supplemented, if applicable, will comply in all material respects
with the Act, (iii) if the Company is required to file a Rule 462(b)
Registration Statement after the effectiveness of this Agreement, such Rule
462(b) Registration Statement and any amendments thereto, when they become
effective (A) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (B) will comply in all
material respects with the Act and (iv) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph do not apply to statements or
omissions in any preliminary prospectus based upon information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through you expressly for use therein.
(d) Each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Prospectus and to own,
lease and operate its properties, and each is duly qualified and is in good
standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business,
prospects, financial condition or results of operations of the
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Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued
by the Company or any of its subsidiaries relating to or entitling any person
to purchase or otherwise to acquire any shares of the capital stock of the
Company or any of its subsidiaries, except as otherwise disclosed in the
Registration Statement.
(f) All the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights; and the Shares have been
duly authorized and, when issued and delivered to the Underwriters against
payment therefor as provided by this Agreement, will be validly issued, fully
paid and non-assessable, and the issuance of such Shares will not be subject
to any preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company, directly or
indirectly through one or more subsidiaries, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature.
(h) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material
to the Company and its subsidiaries, taken as a whole, to which the Company
or any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, the compliance by the Company with all the provisions hereof and the
consummation of the transactions contemplated hereby will not (i) require any
consent, approval, authorization or other order of, or qualification with,
any court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states), (ii) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of the Company or any of its
subsidiaries or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or
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their respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree of any
court or any governmental body or agency having jurisdiction over the
Company, any of its subsidiaries or their respective property or (iv) result
in the suspension, termination or revocation of any Authorization (as defined
below) of the Company or any of its subsidiaries or any other impairment of
the rights of the holder of any such Authorization.
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is or could be a
party or to which any of their respective property is or could be subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described; nor are there any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required.
(l) The Company and its subsidiaries have good and marketable title in
fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and
its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as
described in the Prospectus.
(m) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names ("INTELLECTUAL PROPERTY") currently
employed by them in connection with the business now operated by them except
where the failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a material
adverse effect on the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole; and neither
the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of such intellectual property which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a material
adverse effect on the business, prospects, financial condition or
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results of operations of the Company and its subsidiaries, taken as a whole.
(n) The Company and each of its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; and neither the Company nor any of its subsidiaries (i) has received
notice from any insurer or agent of such insurer that substantial capital
improvements or other material expenditures will have to be made in order to
continue such insurance or (ii) has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers at a cost that
would not have a material adverse effect on the business, prospects,
financial conditions or results of operations of the Company and its
subsidiaries, taken as a whole.
(o) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or any of its
subsidiaries on the other hand, which is required by the Act to be described
in the Registration Statement or the Prospectus which is not so described.
(p) The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(q) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been filed, other than
those filings being contested in good faith, and all material taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due pursuant to such returns or pursuant to any assessment
received by the Company or any of its subsidiaries have been paid, other than
those being contested in good faith and for which adequate reserves have been
provided.
(r) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection
of human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), any provisions
of the Employee Retirement Income Security Act of 1974, as amended, or any
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provisions of the Foreign Corrupt Practices Act, or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company and its
subsidiaries, taken as a whole.
(s) Each of the Company and its subsidiaries has such permits,
licenses, consents, exemptions, franchises, authorizations and other
approvals (each, an "AUTHORIZATION") of, and has made all filings with and
notices to, all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including, without
limitation, under any applicable Environmental Laws, as are necessary to own,
lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make
any such filing or notice would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
Each such Authorization is valid and in full force and effect and each of the
Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities and
governing bodies having jurisdiction with respect thereto; and no event has
occurred (including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of time
or both, would allow, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or both, would
result in any other impairment of the rights of the holder of any such
Authorization; and such Authorizations contain no restrictions that are
burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such restriction would
not, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole.
(t) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any Authorization, any related constraints on operating activities
and any potential liabilities to third parties) which would, singly or in the
aggregate, have a material adverse effect on the business, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole.
(u) This Agreement has been duly authorized, executed and delivered by the
Company.
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(v) Arthur Anderson L.L.P. are independent public accountants with
respect to the Company and its subsidiaries as required by the Act.
(w) The consolidated financial statements included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto),
together with related schedules and notes, present fairly the consolidated
financial position, results of operations and changes in financial position
of the Company and its subsidiaries on the basis stated therein at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; the supporting schedules,
if any, included in the Registration Statement present fairly in accordance
with generally accepted accounting principles the information required to be
stated therein; and the other financial and statistical information and data
set forth in the Registration Statement and the Prospectus (and any amendment
or supplement thereto) are, in all material respects, accurately presented
and prepared on a basis consistent with such financial statements and the
books and records of the Company.
(x) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(y) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company
to file a registration statement under the Act with respect to any securities
of the Company or to require the Company to include such securities with the
Shares registered pursuant to the Registration Statement.
(z) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there has not occurred any material adverse change or any development
involving a prospective material adverse change in the condition, financial
or otherwise, or the earnings, business, management or operations of the
Company and its subsidiaries, taken as a whole, (ii) there has not been any
material adverse change or any development involving a prospective material
adverse change in the capital stock or in the long-term debt of the Company
or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation, direct or
contingent.
(aa) Each certificate signed by any officer of the Company and delivered
to the Underwriters or counsel for the Underwriters shall be deemed to be a
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representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
SECTION 7. INDEMNIFICATION .
(a) The Company agrees to indemnify and hold harmless each Underwriter,
its directors, its officers and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement (or any amendment
thereto), the Prospectus (or any amendment or supplement thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or judgments are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished in writing to the Company
by such Underwriter through you expressly for use therein; PROVIDED, HOWEVER,
that the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter who failed to
deliver a Prospectus, as then amended or supplemented, (so long as the
Prospectus and any amendments or supplements thereto was provided by the
Company to the several Underwriters in the requisite quantity and on a timely
basis to permit proper delivery on or prior to the Closing Date) to the
person asserting any losses, claims, damages, liabilities or judgments caused
by any untrue statement or alleged untrue statement of a material fact
contained in such preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, if such
material misstatement or omission or alleged material misstatement or
omission was cured in the Prospectus, as so amended or supplemented, and such
Prospectus was required by law to be delivered at or prior to the written
confirmation of sale to such person.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to such
Underwriter but only with reference to information relating to such
Underwriter furnished in writing to the Company by such Underwriter through
you expressly for use in the Registration
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Statement (or any amendment thereto), the Prospectus (or any amendment or
supplement thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 7(a) or 7(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party shall assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnified party and the payment of all fees and expenses of such counsel,
as incurred (except that in the case of any action in respect of which
indemnity may be sought pursuant to both Sections 7(a) and 7(b), the
Underwriter shall not be required to assume the defense of such action
pursuant to this Section 7(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such
counsel, except as provided below, shall be at the expense of such
Underwriter). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
the indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall e reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation, in the case of parties indemnified
pursuant to Section 7(a), and by the Company, in the case of parties
indemnified pursuant to Section 7(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party
shall have failed
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to comply with such reimbursement request. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with
respect to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or contribution
may be or could have been sought hereunder by the indemnified party, unless
such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability on claims that are or
could have been the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause 7(d)(i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and
the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the
Underwriters on the other hand shall be deemed to be in the same proportion
as the total net proceeds from the offering (after deducting underwriting
discounts and commissions, but before deducting expenses) received by the
Company, and the total underwriting discounts and commissions received by the
Underwriters, bear to the total price to the public of the Shares, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault of the Company on the one hand and the Underwriters on the
other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount
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<PAGE>
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action,
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
to contribute pursuant to this Section 7(d) are several in proportion to the
respective number of Shares purchased by each of the Underwriters hereunder
and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
SECTION 8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS . The several
obligations of the Underwriters to purchase the Firm Shares under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration
Statement after the effectiveness of this Agreement, such Rule 462(b)
Registration Statement shall have become effective by 10:00 P.M., New York
City time, on the date of this Agreement; and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been commenced or shall be pending
before or contemplated by the Commission.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Lyle C. Turner and Jim Glynn, in their capacities as
the President and CFO of the Company, confirming the matters set forth in
Sections 6(t), 8(a) and 8(b) and that the Company has complied with all of
the agreements and satisfied all of the conditions herein contained and
required to be complied with or satisfied by the Company on or prior to the
Closing Date.
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<PAGE>
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement),
(i) there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken
as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt
of the Company or any of its subsidiaries and (iii) neither the Company nor
any of its subsidiaries shall have incurred any liability or obligation,
direct or contingent, the effect of which, in any such case described in
clause 8(d)(i), 8(d)(ii) or 8(d)(iii), in your judgment, is material and
adverse and, in your judgment, makes it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Gray Cary Ware & Freidenrich, LLP, counsel for the Company, to the
effect that:
(i) each of the Company and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has the corporate power
and authority to carry on its business as described in the Prospectus and
to own, lease and operate its properties;
(ii) each of the Company and its subsidiaries is duly qualified
and is in good standing as a foreign corporation authorized to do business
in each jurisdiction in which the nature of its business or its ownership
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
business, prospects, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole;
(iii) all the outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights;
(iv) the Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and the
issuance of such Shares will not be subject to any preemptive or similar
rights;
(v) all of the outstanding shares of capital stock of each of
the
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<PAGE>
Company's subsidiaries have been duly authorized and validly issued and
are fully paid and non-assessable, and are owned by the Company, directly
or indirectly through one or more subsidiaries, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(viii) the Registration Statement has become effective under the
Act, no stop order suspending its effectiveness has been issued and no
proceedings for that purpose are, to the best of such counsel's knowledge
after due inquiry, pending before or contemplated by the Commission;
(ix) the statements under the captions "Patents and Proprietary
Technologies," "Government Regulation," "Stock Option Plans," "Employee
Stock Ownership Plan," 1999 Employee Stock Purchase Plan," Section 401(k)
Plan, "Limitation of Liability and Indemnification Matters," "Shares
Eligible for Future Sale," "Description of Capital Stock" and
"Underwriting" in the Prospectus and Items 14 and 15 of Part II of the
Registration Statement, insofar as such statements constitute a summary of
the legal matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal matters,
documents and proceedings;
(x) neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws and, to the best of such
counsel's knowledge after due inquiry, neither the Company nor any of its
subsidiaries is in default in the performance of any obligation, agreement,
covenant or condition contained in any indenture, loan agreement, mortgage,
lease or other agreement or instrument that is material to the Company and
its subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
or their respective property is bound;
(xi) the execution, delivery and performance of this Agreement by
the Company, the compliance by the Company with all the provisions hereof
and the consummation of the transactions contemplated hereby will not (A)
require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
as may be required under the securities or Blue Sky laws of the
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<PAGE>
various states), (B) conflict with or constitute a breach of any of the
terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to the
Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, (C) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree
of any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property or (D)
result in the suspension, termination or revocation of any Authorization of
the Company or any of its subsidiaries or any other impairment of the
rights of the holder of any such Authorization;
(xii) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is or could be a party or to which any of their
respective property is or could be subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described, or of any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not so described or filed as required;
(xiii) neither the Company nor any of its subsidiaries has violated
any Environmental Law, any provisions of the Employee Retirement Income
Security Act of 1974, as amended, or any provisions of the Foreign Corrupt
Practices Act, or the rules and regulations promulgated thereunder, except
for such violations which, singly or in the aggregate, would not have a
material adverse effect on the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole;
(xiv) each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including, without limitation, under
any applicable Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its business, except
where the failure to have any such Authorization or to make any such filing
or notice would not, singly or in the aggregate, have a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole; each
such Authorization is valid and in full force and effect and each of the
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<PAGE>
Company and its subsidiaries is in compliance with all the terms and
conditions thereof and with the rules and regulations of the authorities
and governing bodies having jurisdiction with respect thereto; and no event
has occurred (including, without limitation, the receipt of any notice from
any authority or governing body) which allows or, after notice or lapse of
time or both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time or both,
would result in any other impairment of the rights of the holder of any
such Authorization; and such Authorizations contain no restrictions that
are burdensome to the Company or any of its subsidiaries; except where such
failure to be valid and in full force and effect or to be in compliance,
the occurrence of any such event or the presence of any such restriction
would not, singly or in the aggregate, have a material adverse effect on
the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole;
(xv) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended;
(xvi) to the best of such counsel's knowledge after due inquiry,
there are no contracts, agreements or understandings between the Company
and any person granting such person the right to require the Company to
file a registration statement under the Act with respect to any securities
of the Company or to require the Company to include such securities with
the Shares registered pursuant to the Registration Statement;
(xvii) the Company and its subsidiaries have good and
marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in each
case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries, in each case except as described in the Prospectus;
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<PAGE>
(xviii) the Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") currently employed by them in
connection with the business now operated by them except where the
failure to own or possess or otherwise be able to acquire such
intellectual property would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial
condition or results of operation of the Company and its subsidiaries,
taken as a whole; and, to the best of such counsel's knowledge after
due inquiry, neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted
rights of others with respect to any of such intellectual property
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on
the business, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole; and
(xix) (A) the Registration Statement and the Prospectus and any
supplement or amendment thereto (except for the financial statements and
other financial data included therein as to which no opinion need be
expressed) comply as to form with the Act, (B) such counsel has no reason
to believe that at the time the Registration Statement became effective or
on the date of this Agreement, the Registration Statement and the
prospectus included therein (except for the financial statements and other
financial data as to which such counsel need not express any belief)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (C) such counsel has no reason to
believe that the Prospectus, as amended or supplemented, if applicable
(except for the financial statements and other financial data, as
aforesaid) contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The opinion of Gray Cary Ware & Freidenrich, LLP described in Section 8(e)
above shall be rendered to you at the request of the Company and shall so state
therein.
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<PAGE>
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Venture Law Group, A Professional Corporation, counsel for the
Underwriters, as to the matters referred to in Sections 8(e)(iv), 8(e)(vi),
8(e)(ix) (but only with respect to the statements under the caption "Description
of Capital Stock" and "Underwriting") and 8(e)(xix).
In giving such opinions with respect to the matters covered by Section
8(e)(xvii) Gray Cary Ware & Freidenrich, LLP and Venture Law Group, A
Professional Corporation, may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification
except as specified.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be, in
form and substance satisfactory to you, from Arthur Anderson L.L.P., independent
public accountants, containing the information and statements of the type
ordinarily included in accountants' "comfort letters" to Underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(i) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(j) The Company shall not have failed on or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company on or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
SECTION 9. EFFECTIVENESS OF AGREEMENT AND TERMINATION . This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
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<PAGE>
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in your judgment, is
material and adverse and, in your judgment, makes it impracticable to market the
Shares on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities or other instruments
on the New York Stock Exchange, the American Stock Exchange, the Chicago Board
of Options Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade
or the Nasdaq National Market or limitation on prices for securities or other
instruments on any such exchange or the Nasdaq National Market, (iii) the
suspension of trading of any securities of the Company on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it has or they have
agreed to purchase hereunder on such date and the aggregate number of Firm
Shares or Additional Shares, as the case may be, which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not
more than one-tenth of the total number of Firm Shares or Additional Shares,
as the case may be, to be purchased on such date by all Underwriters, each
non-defaulting Underwriter shall be obligated severally, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I
bears to the total number of Firm Shares which all the non-defaulting
Underwriters have agreed to purchase, or in such other proportion as you may
specify, to purchase the Firm Shares or Additional Shares, as the case may
be, which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; PROVIDED that in no event shall the number
of Firm Shares or Additional Shares, as the case may be, which any
Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such number
of Firm Shares or Additional Shares, as the case may be, without the written
consent of such Underwriter. If on the Closing Date any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the
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<PAGE>
aggregate number of Firm Shares to be purchased by all Underwriters and
arrangements satisfactory to you and the Company for purchase of such Firm
Shares are not made within 48 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter and
the Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. If, on an Option Closing
Date, any Underwriter or Underwriters shall fail or refuse to purchase
Additional Shares and the aggregate number of Additional Shares with respect
to which such default occurs is more than one-tenth of the aggregate number
of Additional Shares to be purchased on such date, the non-defaulting
Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase such Additional Shares or (ii) purchase not less than
the number of Additional Shares that such non-defaulting Underwriters would
have been obligated to purchase on such date in the absence of such default.
Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of any such Underwriter
under this Agreement.
SECTION 10. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company, to
Invitrogen Corporation, 1600 Faraday Avenue, Carlsbad, CA 92008, and (ii) if
to any Underwriter or to you, to you c/o Donaldson, Lufkin & Jenrette
Securities Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, or in any case to such other address as the person to
be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters
set forth in or made pursuant to this Agreement shall remain operative and in
full force and effect, and will survive delivery of and payment for the
Shares, regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of any Underwriter, the officers or directors
of any Underwriter, any person controlling any Underwriter, the Company, the
officers or directors of the Company or any person controlling the Company,
(ii) acceptance of the Shares and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) incurred by them. Notwithstanding any termination
of this Agreement, the Company shall be liable for all expenses which it has
agreed to pay pursuant
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<PAGE>
to Section 5(i) hereof. The Company also agrees to reimburse the several
Underwriters, their directors and officers and any persons controlling any of
the Underwriters for any and all fees and expenses (including, without
limitation, the fees disbursements of counsel) incurred by them in connection
with enforcing their rights hereunder (including, without limitation,
pursuant to Section 7 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters,
the Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include a purchaser of any of the Shares
from any of the several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
INVITROGEN CORPORATION
By:
--------------------------------
[Name/Title]
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC
WARBURG DILLON READ LLC
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:
-------------------------------------
[Name/Title]
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<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriters to be Purchased
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation
NationsBanc Montgomery Securities LLC
Warburg Dillon Read LLC
[Names of other Underwriters]
Total
</TABLE>
<PAGE>
Annex I
[INSERT NAMES OF STOCKHOLDERS OF THE COMPANY WHO WILL BE REQUIRED TO SIGN
LOCK-UPS]
<PAGE>
[ILLEGIBLE]
Exhibit 3.1
PAGE 1
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"INVITROGEN CORPORATION", FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF
SEPTEMBER, A.D. 1997, AT 11 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:00 AM 09/16/1997
971308206 - 2753431
RESTATED CERTIFICATE OF INCORPORATION
OF
INVITROGEN CORPORATION
a Delaware Corporation
INVITROGEN CORPORATION, a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), hereby certifies as follows:
ONE: The name of this Corporation is INVITROGEN CORPORATION. Invitrogen
Corporation was originally incorporated under the name Invitrogen Inc., and the
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of Delaware on May 21, 1997. The Certificate of Incorporation
was later amended and restated pursuant to the terms of an Agreement and Plan of
Merger filed with the Delaware Secretary of State on June 12, 1997.
TWO: Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this Corporation as set forth in the Agreement and Plan of Merger.
THREE: The text of the Certificate of Incorporation as heretofore in effect
is hereby restated and further amended to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Invitrogen Corporation.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is 26,405,884, of which (a) 6,405,884 shares shall be
preferred stock, par
<PAGE>
value $.01 per share ("Preferred Stock"), and (b) 20,000,000 shares shall be
common stock, par value $.01 per share.
Except as otherwise restricted by this Certificate of Incorporation, the
Corporation is authorized to issue, from time to time, all or any portion of the
capital stock of the Corporation which may have been authorized but not issued,
to such person or persons and for such lawful consideration as it may deem
appropriate, and generally in its absolute discretion to determine the terms and
manner of any disposition of such authorized but unissued capital stock.
In addition, the Preferred Stock authorized by this Certificate of
Incorporation may be issued from time to time in one or more series. The Board
of Directors is hereby authorized to fix or alter the dividend rights, dividend
rate, conversion rights, voting rights, rights and terms of redemption,
including sinking fund provisions, the redemption price or prices, the
liquidation preferences and the other preferences, powers, rights,
qualifications, limitations and restrictions of any wholly unissued class or
series of Preferred Stock, not including any Convertible Preferred Stock nor
Redeemable Preferred Stock, as defined in Article IV. A. and B. below, and the
number of shares constituting any such series and the designation thereof, or
any of them.
Any and all such shares issued for which the full consideration has been
paid or delivered shall be deemed fully paid shares of capital stock, and the
holder of such shares shall not be liable for any further call or assessment or
any other payment thereon.
The voting powers, designations, preferences, privileges and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of each class of capital stock of the Corporation,
shall be as provided in this Article IV.
A. CONVERTIBLE PREFERRED STOCK
1. DESIGNATION. A total of 2,202,942 shares of the Corporation's
Preferred Stock shall be designated as Series A Convertible Redeemable Preferred
Stock, $.01 par value per share (the "Convertible Preferred Stock").
2. ELECTION OF DIRECTORS; VOTING.
(a) ELECTION OF DIRECTORS. The holders of outstanding shares of
Convertible Preferred Stock shall, voting together as a separate class, be
entitled to elect one (1) Director of the Corporation. Such Director shall be
the candidate receiving the highest number of affirmative votes (with each
holder of Convertible Preferred Stock entitled to cast one vote for or against
each candidate with respect to each share of Convertible Preferred Stock held by
such holder) of the outstanding shares of Convertible Preferred Stock (the
"Convertible Preferred Stock Director Designee"), with votes cast against such
candidate and votes withheld having no legal effect. The election of the
Convertible Preferred Stock Director Designee by the holders of the Convertible
2
<PAGE>
Preferred Stock shall occur (i) at the annual meeting of holders of capital
stock, (ii) at any special meeting of holders of capital stock, (iii) at any
special meeting of holders of Convertible Preferred Stock called by holders of a
majority of the outstanding shares of Convertible Preferred Stock or (iv) by the
unanimous written consent of holders of the outstanding shares of Convertible
Preferred Stock. If at any time when any share of Convertible Preferred Stock is
outstanding the Convertible Preferred Stock Director Designee should cease to be
a Director for any reason, the vacancy shall only be filled by the vote or
written consent of the holders of the outstanding shares of Convertible
Preferred Stock, voting together as a separate class, in the manner and on the
basis specified above. The holders of outstanding shares of Convertible
Preferred Stock shall also be entitled to vote for all other Directors of the
Corporation together with holders of all other shares of the Corporation's
outstanding capital stock entitled to vote thereon, voting as a single class,
with each outstanding share entitled to the same number of votes specified in
Section A.2(b).
(b) VOTING GENERALLY. The holder of each share of Convertible
Preferred Stock shall be entitled to the number of votes equal to the largest
number of full shares of Common Stock (as defined in Section C of this
Article IV) into which each share of Convertible Preferred Stock could be
converted pursuant to Section A.6 hereof (other than by means of Section
A.6(b)) on the record date for the vote or for written consent of
stockholders, if applicable, multiplied by the number of shares of
Convertible Preferred Stock held of record on such date. The holder of each
share of Convertible Preferred Stock shall be entitled to notice of any
stockholders' meeting in accordance with the by-laws of the Corporation and
shall vote with holders of the Common Stock, voting together as single class,
upon all matters submitted to a vote of stockholders excluding those matters
required to be submitted to a class or series vote pursuant to the terms
hereof (including without limitation Section A.8) or by law. Fractional votes
shall not, however, be permitted and any fractional voting rights resulting
from the above formula (after aggregating all shares of Common Stock into
which shares of Convertible Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half
rounded upward to one).
3. DIVIDENDS. The holders of Convertible Preferred Stock shall be entitled
to receive, out of funds legally available therefor, cumulative
(non-compounding) dividends on the Convertible Preferred Stock in cash, at the
rate per annum of six percent (6%) of the Convertible Base Liquidation Amount
(as defined in Section A.4 below), or $.4085 per share of Convertible Preferred
Stock as of the date this Certificate of Incorporation is first filed with the
Delaware Secretary of State (the "Convertible Cumulative Dividend"). Such
dividends will accumulate commencing as of the date of issuance of the
Convertible Preferred Stock and shall be cumulative, to the extent unpaid,
whether or not they have been declared and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends. Convertible Cumulative Dividends shall become due and payable with
respect to any share of Convertible Preferred Stock as provided in Sections A.4,
A.5, A.6, B.4 and B.5. So long as any shares of Convertible Preferred Stock are
oubstanding and the Convertible Cumulative Dividends have not been paid in full
in cash: (a) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any capital stock of the
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Corporation ranking junior to the Convertible Preferred Stock; and, (b) except,
as permitted by Sections A.8(c)(ii) and (iii), no shares of capital stock of the
Corporation ranking junior to the Convertible Preferred Stock shall be
purchased, redeemed or acquired by the Corporation and no monies shall be paid
into or set aside or made available for a sinking fund for the purchase,
redemption or acquisition thereof. All numbers relating to the calculation of
dividends pursuant to this Section A.3 shall be subject to equitable adjustment
in the event of any stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the Convertible
Preferred Stock.
4. LIQUIDATION.
(a) LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or
winding up of the Corporation and its subsidiaries, whether voluntary or
involuntary (a "Liquidation Event"), each holder of outstanding shares of
Convertible Preferred Stock shall be entitled to be paid out of the assets of
the Corporation available for distribution to stockholders, whether such assets
are capital, surplus or earnings, and before any amount shall be paid or
distributed to the holders of Common Stock or of any other stock ranking on
liquidation junior to the Convertible Preferred Stock, an amount in cash equal
to (i) $6.8091 per share of Convertible Preferred Stock held by such holder
(adjusted appropriately for stock splits, stock dividends, recapitalizations and
the like with respect to the Convertible Preferred Stock) (the "Convertible Base
Liquidation Preference Amount") plus (ii) any accumulated but unpaid dividends
to which such holder of outstanding shares of Convertible Preferred Stock is
then entitled pursuant to Sections A.3 and A.5(d) hereof, plus (iii) any
interest accrued pursuant to Section A.5(c) to which such holder of Convertible
Preferred Stock is entitled (the "Convertible Preferred Liquidation Preference
Amount"); PROVIDED, HOWEVER, that if, upon any Liquidation Event, the amounts
payable with respect to the Convertible Preferred Stock are not paid in full,
the holders of the Convertible Preferred Stock shall share ratably in any
distribution of assets in proportion to the full respective preferential amounts
to which they are entitled. The provisions of this Section A.4 shall not in any
way limit the right of the holders of Convertible Preferred Stock to elect to
convert their shares of Convertible Preferred Stock into Redeemable Preferred
Stock and Common Stock pursuant to Section A.6 prior to or in connection with
any Liquidation Event.
(b) NOTICE. Prior to the occurrence of any Liquidation Event, the
Corporation will furnish each holder of Convertible Preferred Stock notice in
accordance with Section A.9 hereof, together with a certificate prepared by the
chief financial officer of the Corporation describing in detail the facts of
such Liquidation Event, stating in detail the amount(s) per share of Convertible
Preferred Stock each holder of Convertible Preferred Stock would receive
pursuant to the provisions of Section A.4(a) hereof and stating in detail the
facts upon which such amount was determined.
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5. REDEMPTION.
(a) REDEMPTION EVENTS.
(i) The holder or holders of not less than sixty-six and
two-thirds percent in voting power of the outstanding Convertible Preferred
Stock may require the Corporation to redeem on or after June 18, 2003, 50% of
the outstanding shares of Convertible Preferred Stock; PROVIDED, HOWEVER, that
such holder or holders may not require the Corporation to redeem less than 50%
of the outstanding shares of Convertible Preferred Stock.
(ii) The holder or holders of not less than sixty-six and
two-thirds percent in voting power of the outstanding Convertible Preferred
Stock may require the Corporation to redeem on or after June 18, 2004 all of the
outstanding shares of Convertible Preferred Stock; PROVIDED, HOWEVER, that such
holder or holders may not require the Corporation to redeem less than the number
of outstanding shares of Convertible Preferred Stock.
(iii) NOTICE. An election pursuant to subparagraphs (i) or (ii)
of this Section A.5(a) shall be made by such holders giving the Corporation and
each other holder of Convertible Preferred Stock not less that fifteen (15) days
prior written notice, which notice shall set forth the date for such redemption.
(b) REDEMPTION DATE; REDEMPTION PRICE. Upon the election of the
holders of not less than sixty-six and two-thirds of the voting power of the
outstanding Convertible Preferred Stock to cause the Corporation to redeem
the Convertible Preferred Stock pursuant to Section A.5(a)(i) or (ii), all
holders of Convertible Preferred Stock shall be deemed to have elected to
cause the Convertible Preferred Stock to be so redeemed. Any date upon which
a redemption shall occur in accordance with Section A.5(a) shall be referred
to as a "Convertible Preferred Redemption Date." The redemption price for
each share of Convertible Preferred Stock redeemed pursuant to Section A.5
shall be an amount in cash equal to (i) the Convertible Base Liquidation
Preference Amount plus (ii) any accumulated but unpaid dividends on such
share of Convertible Preferred Stock pursuant to Sections A.3 and A.5(d)
hereof, plus (iii) any interest accrued with respect to such share of
Convertible Preferred Stock pursuant to Section A.5(c) (collectively, the
"Convertible Preferred Redemption Price"). The Convertible Preferred
Redemption Price shall be payable in cash in immediately available funds, to
the respective holders of the Convertible Preferred Stock on the Convertible
Preferred Redemption Date and subject to Section A.5(c). Until the full
Convertible Preferred Redemption Price has been paid to such holders for all
shares of Convertible Preferred Stock being redeemed: (A) no dividend
whatsoever shall be paid or declared, and no distribution shall be made, on
any capital stock of the Corporation; and (B) no shares of capital stock
(other than shares of capital stock the repurchase of which is required
pursuant to the provisions of ERISA or any like statutory requirement) of the
Corporation (other than the Convertible Preferred Stock in accordance with
this Section A.5) shall be purchased, redeemed or acquired by the Corporation
and no
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monies shall be paid into or set aside or made available for a sinking fund for
the purchase, redemption or acquisition thereof.
(c) REDEMPTION PROHIBITED. If, at a Convertible Preferred
Redemption Date, the Corporation is prohibited under the General Corporation
Law of the State of Delaware from redeeming all shares of Convertible
Preferred Stock for which redemption is required hereunder, then it shall
redeem such shares on a pro-rata basis among the holders of Convertible
Preferred Stock in proportion to the full respective redemption amounts to
which they are entitled hereunder to the extent possible and shall redeem the
remaining shares to be redeemed as soon as the Corporation is not prohibited
from redeeming some or all of such shares under the General Corporation Law
of the State of Delaware, subject to the last paragraph of Section A.8. The
shares of Convertible Preferred Stock not redeemed shall remain outstanding
and entitled to all of the rights and preferences provided in this Article
IV. In the event that the Corporation fails to redeem shares for which
redemption is required pursuant to this Section A.5, then during the period
from the applicable Convertible Preferred Redemption Date through the date on
which such shares are redeemed, the applicable Convertible Preferred
Redemption Price of such shares shall bear interest at the per annum rate of
the greater of (i) 12% or (ii) 5% over the Citibank prime rate published in
the Wall Street Journal on such Convertible Preferred Redemption Date,
compounded annually; PROVIDED, HOWEVER, that in no event shall such interest
exceed the maximum permitted rate of interest under applicable law (the
"Maximum Permitted Rate"). In the event that fulfillment of any provision
hereof results in such rate of interest being in excess of the Maximum
Permitted Rate, the obligation to be fulfilled shall automatically be reduced
to eliminate such excess; PROVIDED, HOWEVER, that any subsequent increase in
the Maximum Permitted Rate shall be retroactively effective to the applicable
Convertible Preferred Redemption Date.
(d) DIVIDEND AFTER CONVERTIBLE PREFERRED REDEMPTION DATE. From and
after a Convertible Preferred Redemption Date, no shares of Convertible
Preferred Stock subject to redemption shall be entitled to dividends, if any, as
contemplated by Section A.3; PROVIDED, HOWEVER, that in the event that shares of
Convertible Preferred Stock are unable to be redeemed and continue to be
outstanding in accordance with Section A.5(c), such shares shall continue to be
entitled to dividends and interest thereon as provided in Sections A.3 and
A.5(c) until the date on which such shares are actually redeemed by the
Corporation.
(e) SURRENDER OF CERTIFICATES. Upon receipt of the applicable
Convertible Preferred Redemption Price by certified check or wire transfer, each
holder of shares of Convertible Preferred Stock to be redeemed shall surrender
the certificate or certificates representing such shares to the Corporation,
duly assigned or endorsed for transfer (or accompanied by duly executed stock
powers relating thereto), or, in the event the certificate or certificates are
lost, stolen or missing, shall deliver an affidavit or agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith (an "Affidavit of Loss") with respect to such certificates
at the principal executive office of the Corporation or the office of the
transfer agent for the Convertible Preferred Stock or such office or offices in
the continental
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United States of an agent for redemption as may from time to time be designated
by notice to the holders of Convertible Preferred Stock, and each surrendered
certificate shall be canceled and retired; PROVIDED, HOWEVER, that if the holder
has exercised its redemption right pursuant to Section A.5(a)(i) or the
Corporation is prohibited from redeeming all shares of Convertible Preferred
Stock as provided in Section A.5(c), the holder shall not be required to
surrender said certificate(s) to the Corporation until said holder has received
a new stock certificate for those shares of Convertible Preferred Stock not so
redeemed.
6. CONVERSION. The holders of the Convertible Preferred Stock shall have
the following conversion rights:
(a) VOLUNTARY CONVERSION. The holders of shares of Convertible
Preferred Stock shall be entitled at any time, upon the written election of the
holder or holders of not less than sixty-six and two-thirds percent in voting
power of the outstanding shares of Convertible Preferred Stock, without the
payment of any additional consideration, to cause each (but not less than all)
of the outstanding shares of Convertible Preferred Stock to be converted into
(i) the number of fully paid and nonassessable shares of Common Stock (as
hereinafter defined) which results from dividing the Conversion Price (as
defined in this Section A.6(a)) per share in effect for the Convertible
Preferred Stock at the time of conversion into the per share Conversion Value
(as defined in this Section A.6(a)) of the Convertible Preferred Stock and (ii)
one (1) fully paid and non-assessable share of Redeemable Preferred Stock per
share of Convertible Preferred Stock. Upon the election to so convert in the
manner and on the basis specified in the preceding sentence, all holders of the
Convertible Preferred Stock shall be deemed to have elected to voluntarily
convert all outstanding shares of Convertible Preferred Stock pursuant to this
Section A.6. Upon the filing of this Certificate of Incorporation with the
Delaware Secretary of State, the "Conversion Price" per share of Convertible
Preferred Stock shall be $6.8091, and the per share "Conversion Value" per share
of Convertible Preferred Stock shall be $6.8091. The Conversion Price per share
of Convertible Preferred Stock shall be subject to adjustment from time to time
as provided in Section A.7 hereof. The Conversion Value per share of Convertible
Preferred Stock shall also be subject to adjustment in connection with certain
Qualified Public Offerings (as defined in Section A.6(b) below) as provided in
Section A.7 hereof. The number of shares of Common Stock into which a share of
Convertible Preferred Stock is convertible is hereinafter referred to as the
"Common Stock Conversion Rate." The number of shares of Redeemable Preferred
Stock into which a share of Convertible Preferred Stock is convertible is
hereinafter referred to as the "Redeemable Conversion Rate." If the holders of
shares of Convertible Preferred Stock elect to convert the outstanding shares of
Convertible Preferred Stock at a time when there are any accumulated but unpaid
dividends or other amounts due on or in respect of such shares, such dividends
and other amounts shall be paid in full upon a Liquidation Event (as set forth
in Section B.4) or redemption of the Redeemable Preferred Stock (as set forth in
Section B.5).
(b) AUTOMATIC CONVERSION UPON QPO OR QET. Each share of Convertible
Preferred Stock shall automatically be converted, without the payment of
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any additional consideration, into shares of Common Stock and Redeemable
Preferred Stock as of, and in all cases subject to, the closing of the
Corporation's first QPO or QET (each as defined below in Section A.6(b));
PROVIDED that if a closing of a QPO or QET occurs, all outstanding shares of
Convertible Preferred Stock shall be deemed to have been converted into
shares of Common Stock and Redeemable Preferred Stock as provided herein
immediately prior to such closing. Any such conversion shall be at the Common
Stock Conversion Rate and Redeemable Conversion Rate in effect upon (and
giving effect to) the closing of the QPO or QET, as provided in Section
A.6(a). "QPO" and "Qualified Public Offering" mean a firm commitment public
offering pursuant to an effective registration statement under Securities Act
of 1933, as amended, PROVIDED that (i) such registration statement covers the
offer and sale of Common Stock of which the aggregate net proceeds
attributable to sales for the account of the Corporation exceed $20,000,000
at a per share price to public (as set forth in the final prospectus in
connection with such public offering) (the "Price to Public") equal to at
least 1.25 times the Conversion Price, and (ii) either all shares of
Redeemable Preferred Stock which are outstanding or issuable upon such
automatic conversion are redeemed immediately upon and as of the closing of
such offering or contemporaneously with such offering cash, or, as provided
in Section B.5(b), cash and a promissory note in the form attached hereto, in
an amount sufficient to redeem all such shares of Redeemable Preferred Stock
is segregated and irrevocably held by the Corporation for payment to holders
of Redeemable Preferred Stock in connection with the redemption thereof
pursuant to Section B.5(a)(i). "QET" and "Qualified Extraordinary
Transaction" mean any of the transactions set forth in subparagraphs (A)
through (D) below, PROVIDED that (i) at the closing of such transaction the
holders of Common Stock that held Convertible Preferred Stock prior to such
automatic conversion upon such QET (the "Conversion Holders") receive per
share consideration with a value (as determined in Section A.6(c) below with
respect to securities, and excluding any amount (exceeding five percent (5%)
of the total consideration paid or payable to the Corporation's stockholders)
held in escrow or otherwise not actually received as of such closing date)
that equals or exceeds three (3) times the Conversion Price should such
transaction close prior to or on December 18, 1998, with such amount
increasing in a linear fashion to four (4) times the Conversion Price should
such transaction close on or after June 18, 2000, (for example, one of the
transactions set forth in subparagraphs (A) through (D) would be a QET if
such per share consideration was three and one-half (3.5) times the
Conversion Price and the transaction closed on September 18, 1999, and (ii)
such consideration is in the form of cash and/or unrestricted equity
securities of a corporation and such securities have an average monthly
trading volume over the four (4) full trading months prior to the closing
date of the transaction equal to two (2) times the aggregate number of such
securities to be issued to the Conversion Holders in connection with such
closing and such securities trade on either the New York Stock Exchange, the
Nasdaq National Market or the American Stock Exchange. The following
transactions (each an "Extraordinary Transaction") shall be deemed a QET if
the conditions set forth in clauses (i) and (ii) of the immediately preceding
sentence are satisfied:
(A) the sale, lease or other disposition of (whether in one transaction
or a series of related transactions) all or substantially all of the assets
or business of the Corporation and its subsidiaries;
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(B) a merger or consolidation of the Corporation with or into another
entity or any other transaction or series of related transactions, in any such
case in connection with or as a result of which the Corporation is not the
surviving entity or the owners of the Corporation's outstanding equity
securities prior to the transaction or series of related transactions do not own
at least a majority of the outstanding equity securities of the surviving,
resulting or consolidated entity;
(C) any purchase by any party of shares of capital stock of the Corporation
(either through a negotiated stock purchase or a tender for such shares), the
effect of which is that such party that did not beneficially own a majority of
the voting power of the outstanding shares of capital stock of the Corporation
immediately prior to such purchase beneficially owns at least a majority of such
voting power immediately after such purchase; or
(D) the redemption or repurchase of shares representing a majority of the
voting power of the outstanding shares of capital stock of the Corporation.
If the holders of shares of Convertible Preferred Stock are required to convert
the outstanding shares of Convertible Preferred Stock pursuant to this Section
A.6(b) at a time when there are any accumulated but unpaid dividends or other
amounts due on or in respect of such shares, such dividends and other amounts
shall be paid in full in cash by the Corporation in connection with such
conversion.
(c) VALUATION OF DISTRIBUTION SECURITIES. In determining whether an
Extraordinary Transaction constitutes a QET, the value of any securities to be
delivered to the holders of the Common Stock shall be deemed to be the average
of the closing prices or last sales prices, as applicable, of the securities on
such exchange or system over the 30-day period ending three (3) business days
prior to the closing.
(d) PROCEDURE FOR VOLUNTARY CONVERSION; EFFECTIVE DATE. Upon election
to convert pursuant to Section A.6(a), each holder of Convertible Preferred
Stock (i) shall provide written notice of conversion (the "Voluntary Conversion
Notice") to the Corporation and (ii) shall surrender the certificate or
certificates representing its Convertible Preferred Stock, duly assigned or
endorsed for transfer to the Corporation (or accompanied by duly executed stock
powers relating thereto), at the principal executive office of the Corporation
or the offices of the transfer agent for the Convertible Preferred Stock or such
office or offices in the continental United States of an agent for conversion as
may from time to time be designated by notice to the holders of the Convertible
Preferred Stock by the Corporation, or shall deliver an Affidavit of Loss with
respect to such certificates. The Voluntary Conversion Notice shall specify (i)
the number of shares of Convertible Preferred Stock held by such holder, (ii)
the name or names in which such holder wishes the certificate or certificates
for Common Stock and Redeemable Preferred Stock to be issued upon such
conversion and (iii) the address to which such holder wishes delivery to be made
of such new certificates to be issued upon such conversion. The issuance by
the Corporation of shares of Common Stock and Redeemable Preferred Stock upon a
conversion of Convertible Preferred Stock pursuant to Section A.6(a) hereof
shall be effective as of the surrender of the certificate or
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certificates for the Convertible Preferred Stock to be converted, duly assigned
or endorsed for transfer to the Corporation (or accompanied by duly executed
stock powers relating thereto), or as of the delivery of an Affidavit of Loss.
Upon surrender of a certificate representing Convertible Preferred Stock for
conversion, or delivery of an Affidavit of Loss, the Corporation shall issue and
send by hand delivery, by courier or by first class mail (postage prepaid) to
the holder thereof or to such holder's designee, at the address designated by
such holder, certificates for the number of shares of Common Stock and
Redeemable Preferred Stock to which such holder shall be entitled upon
conversion. The issuance of certificates for Common Stock and Redeemable
Preferred Stock upon conversion of Convertible Preferred Stock will be made
without charge to the holders of such shares for any issuance tax in respect
thereof or other costs incurred by the Corporation in connection with such
conversion and the related issuance of such stock. Notwithstanding anything to
the contrary set forth in this Section A.6(d), in the event that the holders of
shares of Convertible Preferred Stock elect to convert such shares pursuant to
Section A.6(a) in connection with any Liquidation Event, Extraordinary
Transaction not constituting a QET or initial public offering not constituting a
QPO, (i) the Voluntary Conversion Notice shall be delivered to the Corporation
prior to the effective date of or record date for (as applicable) such
Liquidation Event, Extraordinary Transaction or initial public offering and such
Voluntary Conversion Notice shall be effective as of, and shall in all cases be
subject to, the occurrence of such Liquidation Event or closing of such
Extraordinary Transaction or initial public offering and (ii) if such
Liquidation Event, Extraordinary Transaction or initial public offering occurs,
all outstanding shares of Convertible Preferred Stock shall be deemed to have
been converted into shares of Common Stock and Redeemable Preferred Stock
immediately prior thereto, provided that the Corporation shall make appropriate
provisions (x) for the Common Stock issued upon such conversion to be treated on
the same basis as all other Common Stock in such Liquidation Event,
Extraordinary Transaction or initial public offering provided that the foregoing
shall not be construed to provide or require the registration of any shares of
Common Stock for sale and (y) for the payment of the Redeemable Liquidation
Preference Amount (as defined in Section B.4) in connection with any Liquidation
Event or the redemption of the Redeemable Preferred Stock (issued upon such
conversion) upon election of such redemption in connection with any
Extraordinary Transaction or initial public offering, if applicable, as provided
herein. In the event of any public offering constituting a QPO or an
Extraordinary Transaction constituting a QET, the provisions of Section A.5(e)
shall apply.
(e) PROCEDURE FOR AUTOMATIC CONVERSION. As of, and in all cases
subject to, the closing of a QPO or QET (the "Automatic Conversion Date"), all
outstanding shares of Convertible Preferred Stock shall be converted
automatically into shares of Common Stock and Redeemable Preferred Stock at the
applicable conversion rates specified in Section A.6(a) and without any further
action by the holders of such shares and whether or not the certificates
representing such shares of Convertible Preferred Stock are surrendered to the
Corporation or its, transfer agent; PROVIDED, HOWEVER, that all holders of
Convertible Preferred Stock shall be given prior written notice of the
occurrence of a QPO or QET in accordance with Section A.9 hereof. The
Corporation shall not be obligated to issue certificates evidencing the shares
of Redeemable Preferred
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Stock or Common Stock issuable on the Automatic Conversion Date (or the payment
for the shares of Redeemable Preferred Stock which are redeemed immediately
after such automatic conversion as provided below and in Section B.5(a)(i))
unless certificates evidencing such shares of the Convertible Preferred Stock
being converted, or an Affidavit or Affidavits of Loss with respect to such
certificates, are delivered to the Corporation or its transfer agent. On the
Automatic Conversion Date, all rights with respect to the Convertible Preferred
Stock so converted shall terminate, except any of the rights of the holders
thereof upon surrender of their certificate or certificates therefor or delivery
of an Affidavit of Loss thereof to receive certificates for the number of shares
of Common Stock and Redeemable Preferred Stock into which such Convertible
Preferred Stock has been converted (or the payment to which such holder is
entitled as provided below and in Section B.5(a)(i)). 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.
Upon surrender of such certificates or Affidavit of Loss the Corporation shall
issue and deliver to such holder, promptly (and in any event in such time as is
sufficient to enable such holder to participate in such QPO or QET) at such
office and in its name as shown on such surrendered certificate or certificates,
a certificate or certificates for the number of shares of Common Stock and
number of shares of Redeemable Preferred Stock into which the shares of the
Convertible Preferred Stock surrendered were convertible on the Automatic
Conversion Date. Notwithstanding anything to the contrary set forth in this
Section A.6(e), the Corporation may deliver, in lieu of certificates for
Redeemable Preferred Stock, a payment in an amount and form determined pursuant
to Section B.5(b) hereof on account of the redemption of such Redeemable
Preferred Stock, and upon such payment the Redeemable Preferred Stock into which
such Convertible Preferred Stock would have been converted shall be deemed to
have been issued and redeemed by the Corporation.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock and Redeemable Preferred Stock solely for the purpose of
effecting the conversion of the shares of Convertible Preferred Stock such
number of its shares of Common Stock and Redeemable Preferred Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock and Redeemable Preferred Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of Convertible Preferred Stock, the Corporation will take such corporate action
as may be necessary to increase its authorized but unissued shares of Common
Stock and Redeemable Preferred Stock to such number of shares as shall be
sufficient for such purpose.
(g) NO CLOSING OF TRANSFER BOOKS. The Corporation shall not close its
books against the transfer of shares of Convertible Preferred Stock in any
manner which would interfere with the timely conversion of any shares of
Convertible Preferred Stock.
7. ADJUSTMENTS. The Conversion Price and Conversion Value in effect
from time to time shall be subject to adjustment from and after June 18,
1997, and regardless
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of whether any shares of Convertible Preferred Stock are then issued and
outstanding as follows:
(a) ADJUSTMENTS TO CONVERSION PRICE.
(i) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. Upon the
issuance of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, the subdivision of outstanding shares
of Common Stock into a greater number of shares of Common Stock, or the
combination of outstanding shares of Common Stock into a smaller number of
shares of the Common Stock, the Conversion Price shall, simultaneously with the
happening of such dividend, subdivision or split be adjusted by multiplying the
then effective Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such event
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event. An adjustment made pursuant to this
Section A.7(a)(i) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of stockholders
entitled to receive such dividend or distribution (on a retroactive basis) and
in the case of a subdivision or combination shall become effective immediately
as of the effective date thereof.
(ii) SALE OF COMMON STOCK. In the event the Corporation
shall at any time, or from time to time, issue, sell or exchange any shares
of Common Stock including shares held in the Corporation's treasury but
excluding up to an aggregate 3,735,479 shares of Common Stock (as
appropriately adjusted for stock splits, stock dividends and the like) issued
to officers, Directors, employees of, or consultants, advisors, independent
contractors to the Corporation or the Corporation's Employee Stock Ownership
Plan (the "ESOP") (collectively, "Eligible Employees") pursuant to the
Corporation's 1995 Stock Option Plan, 1997 Stock Option Plan or ESOP
(collectively, the "Plans") or upon the exercise of options or other rights
issued to such Eligible Employees pursuant to the Plans (collectively, the
"Excluded Shares"), for a consideration per share less than the Conversion
Price in effect immediately prior to the issuance, sale or exchange of such
shares, then, and thereafter successively upon each such issuance, sale or
exchange, the Conversion Price in effect immediately prior to the issuance,
sale or exchange of such shares shall forthwith be reduced to an amount
determined by multiplying such Conversion Price by a fraction:
(A) the numerator of which shall be (X) the number of shares of
Common Stock of all classes outstanding immediately prior to
the issuance of such additional shares of Common Stock
(excluding treasury shares but including all shares of
Common Stock issuable upon conversion or exercise of any
outstanding Convertible Preferred Stock, options, warrants,
rights or convertible securities), plus (Y) the number of
shares of Common Stock which the net aggregate consideration
received by the Corporation for the total number of such
additional shares of Common Stock so issued
12
<PAGE>
would purchase at the Conversion Price (prior to
adjustment), and
(B) the denominator of which shall be (X) the number of
shares of Common Stock of all classes outstanding
immediately prior to the issuance of such additional
shares of Common Stock (excluding treasury shares but
including all shares of Common Stock issuable upon
conversion or exercise of any outstanding Convertible
Preferred Stock, options, warrants, rights or
convertible securities), plus (Y) the number of such
additional shares of Common Stock so issued.
(iii) SALE OF OPTIONS, RIGHTS OR CONVERTIBLE SECURITIES. In the
event the Corporation shall at any time or from time to time, issue options,
warrants or rights to subscribe for shares of Common Stock, or issue any
securities convertible into or exchangeable for shares of Common Stock (other
than any options or warrants for Excluded Shares), for a consideration per share
(determined by dividing the Net Aggregate Consideration (as determined below) by
the aggregate number of shares of Common Stock that would be issued if all such
options, warrants, rights or convertible securities were exercised or converted
to the fullest extent permitted by their terms) less than the Conversion Price
in effect immediately prior to the issuance of such options or rights or
convertible or exchangeable securities, the Conversion Price in effect
immediately prior to the issuance of such options, warrants or rights or
securities shall be reduced to an amount determined by multiplying such
Conversion Price by a fraction:
(A) the numerator of which shall be (X) the number of
shares of Common Stock of all classes outstanding
immediately prior to the issuance of such options,
rights or convertible securities (excluding treasury
shares but including all shares of Common Stock
issuable upon conversion or exercise of any outstanding
Convertible Preferred Stock, options, warrants, rights
or convertible securities), plus (Y) the number of
shares of Common Stock which the total amount of
consideration received by the Corporation for the
issuance of such options, warrants, rights or
convertible securities plus the minimum amount set
forth in the terms of such security as payable to the
Corporation upon the exercise or conversion thereof
(the "Net Aggregate Consideration") would purchase at
the Conversion Price prior to adjustment, and
(B) the denominator of which shall be (X) the number of
shares of Common Stock of all classes outstanding
immediately prior to the issuance of such options,
warrants, rights or convertible securities (excluding
treasury shares but including all shares of Common
Stock issuable upon
13
<PAGE>
conversion or exercise of any outstanding Convertible
Preferred Stock, options, warrants, rights or convertible
securities), plus (Y) the aggregate number of shares of
Common Stock that would be issued if all such options,
warrants, rights or convertible securities were exercised or
converted.
(iv) EXPIRATION OR CHANGE IN PRICE. If the consideration per share
provided for in any options or rights to subscribe for shares of Common Stock or
any securities exchangeable for or convertible into shares of Common Stock
changes at any time, the Conversion Price in effect at the time of such change
shall be readjusted to the Conversion Price which would have been in effect at
such time had such options or convertible securities provided for such changed
consideration per share (determined as provided in Section A.7(a)(iii) hereof),
at the time initially granted, issued or sold; PROVIDED, that such adjustment of
the Conversion Price will be made only as and to the extent that the Conversion
Price effective upon such adjustment remains less than or equal to the
Conversion Price that would be in effect if such options, rights or securities
had not been issued. No adjustment of the Conversion Price shall be made under
this Section A.7(a) upon the issuance of any additional shares of Common Stock
which are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any convertible securities if an adjustment shall previously
have been made upon the issuance of such warrants, options or other rights. Any
adjustment of the Conversion Price shall be disregarded if, as, and when the
rights to acquire shares of Common Stock upon exercise or conversion of the
warrants, options, rights or convertible securities which gave rise to such
adjustment expire or are canceled without having been exercised, so that the
Conversion Price effective immediately upon such cancellation or expiration
shall be equal to the Conversion Price in effect at the time of the issuance of
the expired or canceled warrants, options, rights or convertible securities,
with such additional adjustments as would have been made to that Conversion
Price had the expired or canceled warrants, options, rights or convertible
securities not been issued.
(b) ADJUSTMENT TO CONVERSION VALUE UPON CERTAIN OPOS. As set forth
below, upon a QPO in which the Price to Public (as defined in Section A.6(b)) is
1.25 times or greater but less than two (2) times the Conversion Price, for the
purpose of determining the number of shares of Common Stock to be issued upon
conversion of the Convertible Preferred Stock in connection therewith, the
Conversion Value shall be adjusted prior to the closing and conversion by
multiplying the Conversion Value then in effect by the applicable Conversion
Value Multiplier set forth below. The Conversion Value Multiplier is determined
according to (i) the closing date of such offering and (ii) the Price to Public
expressed as a multiple of the Conversion Price. The Conversion Value Multiplier
with respect to any multiple of the Conversion Price between any of the data
points in any column below shall be determined by linear interpolation (for
example, given a QPO on July 1, 1997 with a Price to Public equal to 1.625 times
the Conversion Price, the Conversion Value Multiplier would be 1.0355).
14
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Price to Public Per Share Expressed as
Multiple of Conversion Price Conversion Value Multiplier
- --------------------------------------------------------------------------------
On or Before After On or Before After
June 18, 1998 June 18, 1998 June 18, 1999 June 18, 1999
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1.75X 2.0X 1.0 1.0
- --------------------------------------------------------------------------------
1.5X 1.75X 1.071 1.086
- --------------------------------------------------------------------------------
1.25X 1.5X 1.167 1.20
- --------------------------------------------------------------------------------
1.25X 1.30 1.36
- --------------------------------------------------------------------------------
</TABLE>
(c) OTHER ADJUSTMENTS. In the event the Corporation 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
lawful and adequate provision shall be made so that the holders of Convertible
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the number of securities of the
Corporation which they would have received had their Convertible Preferred Stock
been converted into Common Stock and Redeemable Preferred Stock on the date of
such event and had they thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by them as aforesaid during such period, giving application to all
adjustments called for during such period under this Section A.7 as applied to
such distributed securities.
If the Common Stock issuable upon the conversion of the Convertible
Preferred Stock shall be changed into the same or different number of shares of
any class or classes of stock, whether by 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 elsewhere in this Section A.7), then and in each such event the holder of
each share of Convertible Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock 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 Convertible Preferred Stock might have been converted immediately
prior to such reorganization, reclassification or change, all subject to
further adjustment as provided herein.
(d) MERGERS AND OTHER REORGANIZATIONS. Unless such transaction is a
QET (in which case Section A.6(b) shall apply and this subsection shall not
apply), if at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section
A.7) or a merger or consolidation of the Corporation with or into another
Corporation or the sale of all or substantially all of the Corporation's
properties and assets to any other person, then, as a part of and as a
condition to the effectiveness of such reorganization, merger, consolidation
or sale, lawful and adequate provision shall be made so that the holders of
the Convertible
15
<PAGE>
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Convertible Preferred Stock the number of shares of stock or other securities or
property of the Corporation or of the successor Corporation resulting from such
merger or consolidation or sale, to which a holder of Common Stock deliverable
upon conversion would have been entitled on such capital reorganization, merger,
consolidation, or sale. In any such case, appropriate provisions shall be made
with respect to the rights of the holders of the Convertible Preferred Stock
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Section A.7 (including without limitation provisions for
adjustment of the Conversion Price and the number of shares purchasable upon
conversion of the Convertible Preferred Stock) shall thereafter be applicable,
as nearly as may be, with respect to any shares of stock, securities or assets
to be deliverable thereafter upon the conversion of the Convertible Preferred
Stock.
(e) All calculations under this Section A.7 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the case may
be.
(f) Upon the occurrence of each adjustment or readjustment pursuant
to this Section A.7, the Corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Convertible 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 written
request at any time of any holder of Convertible Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Prices before and after such
adjustment or readjustment, and (iii) the number of shares of Common Stock and
Redeemable Preferred Stock and the amount, if any, of other property which at
the time would be received upon the conversion of such holder's shares of
Convertible Preferred Stock.
8. COVENANT. So long as any shares of Convertible Preferred Stock (or
Redeemable Preferred Stock, as applicable) shall be outstanding, the Corporation
shall not, without first having provided the written notice of such proposed
action to each holder of outstanding shares of Convertible Preferred Stock (or
Redeemable Preferred Stock, as applicable) and having obtained the affirmative
vote or written consent of the holders of not less than sixty-six and two-thirds
percent in voting power of the outstanding shares of Convertible Preferred Stock
(or Redeemable Preferred Stock, as applicable), voting as a single class, with
each share of Convertible Preferred Stock (or Redeemable Preferred Stock, as
applicable) entitling the holder thereof to one vote per share of Convertible
Preferred Stock held by such holder:
(a) unless such transaction is a QET, effect (I) any Extraordinary
Transaction or other sale or transfer of all or substantially all of the
properties and assets of any subsidiary of the Corporation, (II) any
recapitalization of the Corporation or (III) any other transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is transferred;
(b) dissolve, liquidate or wind up its operations;
16
<PAGE>
(c) directly or indirectly redeem, purchase, or otherwise acquire for
consideration any shares of its Common Stock or any other class of its capital
stock except for (i) redemption of Convertible Preferred Stock or Redeemable
Preferred Stock pursuant to and as provided in this Certificate of
Incorporation, (ii) repurchase of up to 1,101,471 shares of Common Stock from
the stockholders of the Company pursuant to a Repurchase Agreement dated June
18, 1997, or (iii) redemption or repurchase of Common Stock issued pursuant to
the Plans from Eligible Employees (as defined in Section A.7(a)(ii)) pursuant to
an agreement containing vesting and/or repurchase provisions approved by the
Board of Directors of the Corporation or a committee thereof;
(d) propose or adopt any amendment to this Article IV, or any other
amendment to this Certificate of Incorporation or the Corporation's By-Laws that
eliminates, amends or restricts or otherwise adversely affects the rights and
preferences of the Convertible Preferred Stock or the Redeemable Preferred
Stock, or increase the authorized shares of Convertible Preferred Stock or
Redeemable Preferred Stock;
(e) declare or make dividend payments on any shares of Common Stock
or any other class of the Corporation's capital stock;
(f) create, or obligate itself to create, any class or series of
shares having preference over or being on a parity with the Convertible
Preferred Stock or the Redeemable Preferred Stock;
(g) increase the size of the Board of Directors to more than seven
(7) members; or
(h) except as provided in the Corporation's 1997 Management Bonus
Plan, pay any bonuses to the Corporation's executive officers unless any such
bonus shall have been unanimously approved by the compensation committee of the
Board of Directors.
Further, the Corporation and each subsidiary of the Corporation shall not,
by amendment of this Certificate of Incorporation or through any Extraordinary
Transaction or other 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 and each subsidiary of the Corporation
but shall at all times in good faith assist in the carrying out of all the
provisions of this Article IV and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holders of the
Convertible Preferred Stock and the Redeemable Preferred Stock set forth in this
Certificate against impairment. Any successor to the Corporation or any
subsidiary of the Corporation shall agree, as a condition to such succession, to
carry out and observe the obligations of the Corporation hereunder with respect
to the Convertible Preferred Stock and the Redeemable Preferred Stock.
17
<PAGE>
9. NOTICE
(a) LIQUIDATION EVENTS, EXTRAORDINARY TRANSACTIONS, ETC. In the event
(i) the Corporation establishes a record date to determine the holders of any
class of securities who are entitled to receive any dividend or other
distribution or who are entitled to vote at a meeting (or by written consent) in
connection with any of the transactions identified in clause (ii) hereof, or
(ii) any Liquidation Event (as defined in Section A.4), any Extraordinary
Transaction, QET or QPO (each as defined in Section A.6) or any other public
offering becomes reasonably likely to occur, the Corporation shall mail or cause
to be mailed by first class mail (postage prepaid) to each holder of Convertible
Preferred Stock (or each holder of Redeemable Preferred Stock, as applicable) at
least twenty (20) business days prior to such record date specified therein or
the expected effective date of any such transaction, whichever is earlier, a
notice specifying (A) the date of such record date for the purpose of such
dividend or distribution or meeting or consent and a description of such
dividend or distribution or the action to be taken at such meeting or by such
consent, (B) the date on which any such Liquidation Event, Extraordinary
Transaction, QET, QPO or other public offering is expected to become effective,
and (C) the date on which the books of the Corporation shall close or a record
shall be taken with respect to any such event.
(b) WAIVER OF NOTICE. The holder or holders of not less than
sixty-six and two-thirds percent in voting power of the outstanding shares of
Convertible Preferred Stock (or Redeemable Preferred Stock, as applicable) may,
at any time upon written notice to the Corporation, waive any notice provisions
specified herein for the benefit of such holders, and any such waiver shall be
binding upon the holders of all such securities.
(c) GENERAL. In the event that the Corporation provides any notice,
report or statement to any holder of Common Stock, the Corporation shall at the
same time provide a copy of any such notice, report or statement to each holder
of outstanding shares of Convertible Preferred Stock (or Redeemable Preferred
Stock, as applicable).
10. NO REISSUANCE OF CONVERTIBLE PREFERRED STOCK. No share or shares of
Convertible Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
B. REDEEMABLE PREFERRED STOCK
1. DESIGNATION; RANKING. A total of 2,202,942 shares of the Corporation's
Preferred Stock shall be designated as Redeemable Preferred Stock, $.01 par
value per share (the "Redeemable Preferred Stock").
18
<PAGE>
2. ELECTION OF DIRECTORS; VOTING.
(a) ELECTION OF DIRECTORS. The holders of outstanding shares of
Redeemable Preferred Stock shall, voting together as a separate class, be
entitled to elect one (1) Director. Such Director shall be the candidate
receiving the highest number of affirmative votes (with each holder of
Redeemable Preferred Stock entitled to cast one vote for or against each
candidate with respect to each share of Redeemable Preferred Stock held by such
holder) of the outstanding shares of Redeemable Preferred Stock (the "Redeemable
Preferred Stock Director Designee"), with votes cast against such candidate and
votes withheld having no legal effect. The election of the Redeemable Preferred
Stock Director Designee by the holders of the Redeemable Preferred Stock shall
occur (i) at the annual meeting of holders of capital stock, (ii) at any special
meeting of holders of capital stock, (iii) at any special meeting of holders of
Redeemable Preferred Stock called by holders of a majority of the outstanding
shares of Redeemable Preferred Stock or (iv) by the unanimous written consent of
holders of the outstanding shares of Redeemable Preferred Stock. Upon conversion
of the Convertible Preferred Stock, the Convertible Preferred Stock Director
Designee then serving on the Corporation's board of directors shall continue in
such capacity as the Redeemable Preferred Stock Designee. If at any time when
any share of Redeemable Preferred Stock is outstanding the Redeemable Preferred
Stock Director Designee should cease to be a Director for any reason, the
vacancy shall only be filled by the vote or written consent of holders of the
outstanding shares of Redeemable Preferred Stock, voting together as a separate
class, in the manner and on the basis specified above.
(b) VOTING GENERALLY. Except as set forth above with respect to the
election of the Redeemable Preferred Stock Director Designee, the holders of
Redeemable Preferred Stock shall not be entitled to vote on any matters except
to the extent otherwise required under the General Corporation Law of the State
of Delaware.
3. DIVIDENDS. The holders of outstanding shares of Redeemable Preferred
Stock shall be entitled to receive, out of any funds legally available therefor,
cumulative (non-compounding) dividends on the Redeemable Preferred Stock in
cash, at the rate per annum of three percent (3%) of $6.8091 per share (adjusted
appropriately for stock splits, stock dividends, recapitalization and the like
with respect to the Redeemable Preferred Stock), or $.2043 per share of
Redeemable Preferred Stock as of the date this Certificate of Incorporation is
first filed with the Delaware Secretary of State (a "Redeemable Cumulative
Dividend"). Such dividends will accrue commencing as of the date of issuance of
the Redeemable Preferred Stock and be cumulative, to the extent unpaid, whether
or not they have been declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends.
Redeemable Cumulative Dividends shall become due and payable with respect to any
share of Redeemable Preferred Stock as provided in Section B.4 and Section B.5.
So long as any shares of Redeemable Preferred Stock are outstanding and the
Redeemable Cumulative Dividends have not been paid in full in cash: (A) no
dividend whatsoever shall be paid or declared, and no distribution shall be
made, on any capital stock of the Corporation ranking junior to the Redeemable
Preferred Stock; and (B) no shares of capital stock of the Corporation ranking
junior to the Redeemable Preferred Stock shall
19
<PAGE>
be purchased, redeemed or acquired by the Corporation and no monies shall be
paid into or set aside or made available for a sinking fund for the purchase,
redemption or acquisition thereof. All numbers relating to the calculation of
dividends pursuant to this Section B.3 shall be subject to equitable adjustment
in the event of any stock split, combination, reorganization, recapitalization,
reclassification or other similar event involving a change in the Redeemable
Preferred Stock.
4. LIQUIDATION.
(a) Upon any Liquidation Event, each holder of outstanding shares
of Redeemable Preferred Stock shall be entitled to be paid out of the assets
of the Corporation available for distribution to stockholders, whether such
assets are capital, surplus, or earnings as follows, and before any amount
shall be paid or distributed to the holders of Common Stock or of any other
stock ranking on liquidation junior to the Redeemable Preferred Stock, an
amount in cash equal to the sum of (i) the Redeemable Base Liquidation Amount
(as determined in Section B.4(b) below) multiplied by the number of shares of
Redeemable Preferred Stock held by such holder, plus (ii) any accumulated but
unpaid dividends to which such holder of outstanding shares of Redeemable
Preferred Stock is entitled pursuant to Section B.3 and B.5(d) hereof, plus
(iii) any interest accrued pursuant to Section B.5(c) to which such holder of
outstanding shares of Redeemable Preferred Stock is entitled, plus (iv) any
accumulated but unpaid dividends or other amounts due on or in respect of the
shares of Convertible Preferred Stock held by such holder prior to the
conversion of such Convertible Preferred Stock (the "Redeemable Liquidation
Preference Amount"); PROVIDED, HOWEVER that if, upon any Liquidation Event,
the amounts payable with respect to the Redeemable Preferred Stock are not
paid in full, the holders of the Redeemable Preferred Stock shall share
ratably in any distribution of assets in proportion to the full respective
preferential amounts to which they are entitled.
(b) The per share "Redeemable Base Liquidation Amount" shall be
determined according to (i) the closing date of the Liquidation Event, QPO, QET,
Extraordinary Transaction or public offering (each a "Measurement Event") and
(ii) (A) in connection with a QPO or public offering, the Price to Public (as
defined in Section A.6(b)) expressed as a multiple of the Conversion Price or,
(B) in connection with a Liquidation Event, QET, or Extraordinary Transaction,
the value (as determined in Section B.4(c) below, and excluding any amount held
in escrow or otherwise not actually received as of such closing date), expressed
as a multiple of the Conversion Price, of the cash, securities or other
consideration distributed, paid or delivered at closing with respect to each
share of Common Stock. The following schedule sets forth the Redeemable Base
Liquidation Amount at various data points. Between data points, the Redeemable
Base Liquidation Amount reduces in a linear fashion corresponding to linear
increases in either time (with a day being the smallest unit of measurement),
multiple or both. For example, if on June 18, 1999 the Price to Public or per
share value of such consideration were 2.5 times the Conversion Price, the
Redeemable Base Liquidation Amount per share would be $5.6743. By way of further
example, if on December 18, 1998 the Price to Public or per share value of such
consideration were 3.5 times the Conversion Price, the Redeemable Base
Liquidation Amount per share would
20
<PAGE>
be $0.00, and each holder would be entitled to receive the amounts due under
clauses (ii) through (iv) of Section B.4(a) above.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Price to Public or Closing Date of Measurement Event
Value of ---------------------------------
Consideration On or prior to September 18, 1999 On or after
Expressed as December 18, 1998 June 18, 2000
Multiple of
Conversion Price
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
2.0X $6.8091 $6.8091 $6.8091
- ---------------------------------------------------------------------------------
2.5X $3.4046 $6.8091 $6.8091
- ---------------------------------------------------------------------------------
3.0X $ 0.00 $3.4046 $6.8091
- ---------------------------------------------------------------------------------
3.5X $ 0.00 $ 0.00 $3.4046
- ---------------------------------------------------------------------------------
4.0X $ 0.00 $ 0.00 $ 0.00
- ---------------------------------------------------------------------------------
</TABLE>
(c) VALUATION OF DISTRIBUTION SECURITIES. For purposes of determining
the Redeemable Base Liquidation Amount, any securities or other consideration to
be delivered to the holders of the Common Stock upon completion of any
Measurement Event shall be valued as follows:
(i) If traded on a nationally recognized securities exchange
or interdealer quotation system, the value shall be deemed to be the average of
the closing prices of the securities on such exchange or system over the 30-day
period ending three (3) business days prior to the closing;
(ii) If traded over-the-counter, the value shall be deemed to
be the average of the closing bid prices over the 30-day period ending three (3)
business days prior to the closing; and
(iii) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the Corporation and the
holders of not less than sixty-six and two-thirds percent in voting power of the
outstanding shares of Convertible Preferred Stock, provided that if the
Corporation and the holders of sixty-six and two-thirds percent in voting power
of the outstanding shares of Convertible Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the Corporation, but reasonably acceptable to the holders of sixty-six and
two-thirds percent in voting power of the outstanding shares of Convertible
Preferred Stock.
5. REDEMPTION.
(a) REDEMPTION EVENTS.
(i) AUTOMATIC. Immediately upon and as of, and in all cases
subject to, the closing of a QPO or QET, the Corporation shall redeem all (and
not less than all) of the outstanding shares of Redeemable Preferred Stock at
the
21
<PAGE>
Redemption Price specified in Section B.5(b); provided that if the Corporation
shall receive the proceeds from such QPO or QET in next-day available funds,
such redemption shall occur on the first business day following such closing.
(ii) OPTIONAL.
(A) UPON CERTAIN TRANSACTIONS. Upon the election of the
holder or holders of not less than sixty-six and
two-thirds percent in voting power of the outstanding
Redeemable Preferred Stock (or Convertible Preferred
Stock, as applicable, proposing to convert the same in
order to effect a redemption of the Redeemable
Preferred Stock received upon such conversion
hereunder), the Corporation shall redeem all (and not
less than all, other than pursuant to Section B.5(c)
below) of the outstanding shares of Redeemable
Preferred Stock upon the occurrence of an Extraordinary
Transaction (as defined in Section A.6) not
constituting a QET or, other than a public offering
initiated by the holders of Convertible Preferred Stock
or Redeemable Preferred stock, a public offering not
constituting a QPO.
(B) NOTICE. An election pursuant to subparagraph (A) of
this Section B.5(a)(ii) shall be made by such holders
giving the Corporation and each other holder of
Redeemable Preferred Stock (or Convertible Preferred
Stock, as applicable) not less that five (5) days prior
written notice, which notice shall set forth the date
for such redemption.
(b) REDEMPTION DATE; REDEMPTION PRICE. Upon the election of the
holders of not less than sixty-six and two-thirds percent in voting power of the
outstanding Redeemable Preferred Stock to cause the Corporation to redeem the
Redeemable Preferred Stock pursuant to Section B.5(a)(ii), all holders of
Redeemable Preferred Stock shall be deemed to have elected to cause the
Redeemable Preferred Stock to be so redeemed. Any date upon which a redemption
shall occur in accordance with Section B.5(a) shall be referred to as a
"Redemption Date." The redemption price for each share of Redeemable Preferred
Stock redeemed pursuant to this Section B.5 shall be the sum of (i) the
Redeemable Base Liquidation Amount (as set forth in Section B.4(b) above), plus
(ii) any accumulated but unpaid dividends on such share of Redeemable Preferred
Stock pursuant to Section B.3 and Section B.5(d) hereof, plus (iii) any interest
accrued with respect to such share of Convertible Preferred Stock pursuant to
Section B.5(c), plus (iv) any accumulated but unpaid dividends or other amounts
due on or in respect of the share of Convertible Preferred Stock from which such
share of Redeemable Preferred Stock was converted
22
<PAGE>
(the "Redemption Price"). Except as holders of sixty-six and two-thirds percent
of the Redeemable Preferred Stock shall otherwise agree, the Redemption Price
shall be payable in cash in immediately available funds to the respective
holders of the Redeemable Preferred Stock on the Redemption Date; PROVIDED,
HOWEVER, that upon a QPO in which the Price to Public (as defined in Section
A.6(b)) is 1.25 times or greater but less than two (2) times the Conversion
Price, the portion of the Redemption Price representing the Redeemable Base
Liquidation Amount shall be payable in a combination of cash and promissory
notes, which promissory notes will have a maturity date equal to one year after
the Redemption Date, shall bear interest at the per annum rate equal to the
greater of (x) 12% or (y) 5% over the Citibank prime rate published in the Wall
Street Journal on the Redemption Date and shall contain other customary terms
and provisions ("Promissory Notes"), as set forth below, and the remaining
portions of the Redemption Price set forth in clause (ii) through (iv) of this
Section B.5(b) shall be paid in cash. The per share amount of cash and amount of
Promissory Notes is determined according to (i) the closing date of such
offering and (ii) the Price to Public expressed as a multiple of the Conversion
Price. The per share amount of cash and amount of Promissory Notes with respect
to any multiple of the Conversion Price between any of the data points in any
column below shall be determined by linear interpolation (for example, given a
QPO on July 1, 1997 with a Price to Public equal to 1.625 times the Conversion
Price, the Redemption Price shall be payable $6.2417 in cash and $.5674 in
Promissory Notes).
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Price to Public as Multiple of Combination of Cash
Conversion Price and Promissory Notes
- -----------------------------------------------------------------------------------
On or Before After Cash Payment Promissory Note
June 18, 1998 June 18, 1998 Amount Per Share Amount Per Share
- -----------------------------------------------------------------------------------
<C> <C> <C> <C>
1.75X 2.0X $6.8091 $ 0.00
- -----------------------------------------------------------------------------------
1.5X 1.75X $5.6743 $1.1348
- -----------------------------------------------------------------------------------
1.25X 1.5X $4.5394 $2.2697
- -----------------------------------------------------------------------------------
1.25X $4.5394 $2.2697
- -----------------------------------------------------------------------------------
</TABLE>
Until the full Redemption Price, including any interest thereon, has been
paid to such holders in cash (or cash and Promissory Notes, as provided above)
for all shares of Redeemable Preferred Stock redeemed as of the applicable
Redemption Date: (A) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any capital stock of the Corporation; and (B) no
shares of capital stock of the Corporation (other than the Redeemable Preferred
Stock in accordance with this Section B.5 or shares of capital stock the
repurchase of which is required pursuant to the provisions of ERISA or any like
statutory requirement) shall be purchased, redeemed or acquired by the
Corporation and no monies shall be paid into or set aside or made available for
a sinking fund for the purchase, redemption or acquisition thereof.
(c) REDEMPTION PROHIBITED. If, at a Redemption Date, the
Corporation is prohibited under the General Corporation Law of the State of
Delaware from redeeming all shares of Redeemable Preferred Stock for which
23
<PAGE>
redemption is required hereunder, then it shall redeem such shares on a
pro-rata basis among the holders of Redeemable Preferred Stock in proportion
to the full respective redemption amounts to which they are entitled
hereunder to the extent possible and shall redeem the remaining shares to be
redeemed as soon as the Corporation is not prohibited from redeeming some or
all of such shares under the General Corporation Law of the State of
Delaware, subject to the last paragraph of Section A.8. The shares of
Redeemable Preferred Stock not redeemed shall remain outstanding and entitled
to all of the rights and preferences provided in this Article IV. In the
event that the Corporation fails to redeem shares for which redemption is
required pursuant to Section B.5, then during the period from the applicable
Redemption Date through the date on which such shares are redeemed, the
applicable Redemption Price of such shares plus additional dividends that
accumulate in respect of such shares under Section B.5(d) shall bear interest
at the per annum rate of the greater of (i) 12% or (ii) 5% over the Citibank
prime rate published in the Wall Street Journal on such Convertible Preferred
Redemption Date, compounded annually; PROVIDED, HOWEVER, that in no event
shall such interest exceed the maximum permitted rate of interest under
applicable law (the "Maximum Permitted Rate"). In the event that fulfillment
of any provision hereof results in such rate of interest being in excess of
the Maximum Permitted Rate, the obligation to be fulfilled shall
automatically be reduced to eliminate such excess; PROVIDED, HOWEVER, that
any subsequent increase in the Maximum Permitted Rate shall be retroactively
effective to the applicable Preferred Redemption Date.
(d) DIVIDEND AFTER REDEMPTION DATE. From and after a Redemption
Date, no shares of Redeemable Preferred Stock subject to redemption shall be
entitled to any further dividends pursuant to Section B.3 hereof; PROVIDED,
HOWEVER, that in the event that shares of Redeemable Preferred Stock are
unable to be redeemed and continue to be outstanding in accordance with
Section B.5(c), such shares shall continue to be entitled to dividends and
interest thereon as provided in Sections B.3 and B.5(c) until the date on
which such shares are actually redeemed by the Corporation.
(e) SURRENDER OF CERTIFICATES. Upon receipt of the applicable
Redemption Price by certified check or wire transfer, each holder of shares
of Redeemable Preferred Stock to be redeemed shall surrender the certificate
or certificates representing such shares to the Corporation, duly assigned or
endorsed for transfer (or accompanied by duly executed stock powers relating
thereto), or shall deliver an Affidavit of Loss with respect to such
certificates at the principal executive office of the Corporation or the
office of the transfer agent for the Redeemable Preferred Stock or such
office or offices in the continental United States of an agent for redemption
as may from time to time be designated by notice to the holders of Redeemable
Preferred Stock (or the holders of Convertible Preferred Stock, as
applicable), and each surrendered certificate shall be canceled and retired;
PROVIDED, HOWEVER, that if the holder has exercised its redemption right
pursuant to Section B.5(a)(ii)(A), the holder shall not be required to
surrender said certificate(s) to the Corporation until said holder has
received a new stock certificate for those shares of Redeemable Preferred
Stock not so redeemed.
24
<PAGE>
6. NOTICE. In the event that the Corporation provides or is required to
provide notice to any holder of Convertible Preferred Stock or any holder of
Common Stock in accordance with the provisions of this Certificate of
Incorporation (including the provisions of Section A.9) and/or the Corporation's
by-laws, the Corporation shall at the same time provide a copy of any such
notice to each holder of outstanding shares of Redeemable Preferred Stock.
7. NO REISSUANCE OF REDEEMABLE PREFERRED STOCK. No share or shares of
Redeemable Preferred Stock acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued, and all such shares shall
be canceled, retired and eliminated from the shares which the Corporation shall
be authorized to issue.
8. COVENANTS. So long as any shares of Redeemable Preferred Stock
shall be outstanding the provisions of Section A.8 shall apply to all shares
of Redeemable Preferred Stock as if such shares were shares of Convertible
Preferred Stock.
C. COMMON STOCK
1. DESIGNATION; RANKING. A total of 20,000,000 shares of the
Corporation's common stock shall be designated as Common Stock, $.01 par value
per share (the "Common Stock").
2. VOTING.
(a) ELECTION OF DIRECTORS. The holders of Common Stock voting
together with the holders of outstanding Convertible Preferred Stock as a
single class, shall be entitled to elect all of the Directors of the
Corporation, other than the Directors who are subject to election by the
holders of Convertible Preferred Stock or Redeemable Preferred Stock as a
separate class for so long as any shares of Convertible Preferred Stock or
Redeemable Preferred Stock remain outstanding, and thereafter shall be
entitled to elect all of the Directors of the Corporation. Such Directors
shall be the candidates receiving the highest number of affirmative votes
entitled to be cast (with each holder entitled to cast one vote for or
against each candidate with respect to each share held by such holder), with
votes cast against such candidates and votes withheld having no legal effect.
The election of such Directors shall occur at the annual meeting of holders
of capital stock or at any special meeting called and held in accordance with
the by-laws of the Corporation. If a person elected in accordance with the
foregoing provisions should cease to be a Director for any reason, the
vacancy shall only be filled by the vote or written consent of holders of the
outstanding shares entitled to vote for such Directors, in the manner and on
the basis specified above.
(b) OTHER VOTING. The holder of each share of Common Stock shall be
entitled to one vote for each such share as determined on the record date for
the vote or consent of stockholders and shall vote together with the holders of
the
25
<PAGE>
Convertible Preferred Stock as a single class upon any items submitted to a vote
of stockholders, except as otherwise provided herein.
3. DIVIDENDS. Subject to the payment in full of all preferential
dividends to which the holders of the Convertible Preferred Stock and the
Redeemable Preferred Stock are entitled hereunder, the holders of Common Stock
shall be entitled to receive dividends out of funds legally available therefor
at such times and in such amounts as the Board of Directors may determine in its
sole discretion. The Board of Directors shall give the holders of Convertible
Preferred Stock twenty (20) days prior written notice of the declaration of any
such dividends, and the record date for such dividends shall not precede the
expiration of such twenty (20) day period.
4. LIQUIDATION. Upon any Liquidation Event, after the payment or
provision for payment of all debts and liabilities of the Corporation and all
preferential amounts to which the holders of Convertible Preferred Stock or
Redeemable Preferred Stock, as applicable, are entitled with respect to the
distribution of assets in liquidation, the holders of Common Stock (and, to the
extent applicable under Section A.4(a), Convertible Preferred Stock) shall be
entitled to share ratably in the remaining assets of the Corporation available
for distribution.
5. FRACTIONAL SHARES; UNCERTIFICATED SHARES. The Corporation may issue
fractional shares (up to five decimal places) of Common Stock. Fractional shares
shall be entitled to dividends (on a pro rata basis), and the holders of
fractional shares shall be entitled to all rights as stockholders of the
Corporation to the extent provided herein and under applicable law in respect of
such fractional shares. Shares of Common Stock, or fractions thereof, may, but
need not be represented by share certificates. Such shares, or fractions
thereof, not represented by share certificates ("Uncertificated Common Shares")
shall be registered in the stock records book of the Corporation. The
Corporation at any time at its sole option may deliver to any registered holder
of such shares share certificates to represent Uncertificated Common Shares
previously issued (or deemed issued) to such holder.
ARTICLE V
In furtherance of and not in limitation of powers conferred by statute, it
is further provided:
1. Election of Directors need not be by written ballot unless the by-laws
of the Corporation so provide.
2. Except as set forth in Section A.8(c), the Board of Directors is
expressly authorized to adopt, amend or repeal the by-laws of the Corporation to
the extent specified therein.
26
<PAGE>
ARTICLE VI
Meetings of stockholders may be held within or without the State of
Delaware, as the by-laws may provide. Any action taken by the written consent of
the stockholders of the Corporation must include the consent of the holder or
holders of not less than a majority in voting power of the outstanding shares of
Convertible Preferred Stock (or Redeemable Preferred Stock, as applicable).
ARTICLE VII
To the extent permitted by law, the books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated in
the by-laws of the Corporation or from time to time by its Board of Directors.
ARTICLE VIII
No person shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of his or her fiduciary duty as a Director of
the Corporation, except for liability (a) for any breach of the Director's duty
of loyalty to the Corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the General Corporation Law of the State of
Delaware, or (d) for any transaction from which the Director derived an improper
personal benefit. If the General Corporation Law of the State of Delaware is
amended after the effective date of this Amended and Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of each past or present
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of this Article VIII by (a) the stockholders
of the Corporation or (b) an amendment to the General Corporation Law of the
State of Delaware (unless such statutory amendment specifically provides to
the contrary) shall not adversely affect any right or protection existing at
the time of such repeal or modification with respect to any acts or omissions
occurring either before or after such repeal or modification, of a person
serving as a Director prior to or at the time of such repeal or modification.
27
<PAGE>
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed by the undersigned duly authorized officer of the Corporation on
this 29 day of August, 1997.
INVITROGEN CORPORATION
By: /s/ Lyle C. Turner
-------------------------
Lyle C. Turner, President
28
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INVITROGEN CORPORATION
Invitrogen Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does
hereby certify:
FIRST: That at a meeting of the Board of Directors, resolutions were
duly adopted setting forth proposed amendments to the Certificate of
Incorporation of said corporation, declaring said amendments to be advisable
and calling for a written consent of the stockholders of said corporation for
consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that conditioned on the receipt of requisite stockholder
approval, the first paragraph of Article IV of the Corporation's Certificate
of Incorporation be amended and restated in its entirety to read as follows:
"The total number of shares of capital stock which the corporation
shall have authority to issue is 56,405,884, of which (a) 6,405,884 shares
shall be preferred stock, par value $0.01 per share ("Preferred Stock"),
and (b) 50,000,000 shares shall be common stock, par value $0.01 per
share."
RESOLVED, that conditioned on the receipt of requisite stockholder
approval, Section 1 of Article V of the Certificate of Incorporation be
amended and restated in its entirety to read as follows:
"1. BOARD OF DIRECTORS.
(a) Election of Directors need not be by written ballot
unless the by-laws of the Corporation so provide.
(b) Subject to Section A.8(g) hereof, the number of directors
shall be fixed from time to time exclusively by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board for adoption). Following the corporation's first QPO, the directors
shall be divided into three classes with the term of office of the first
class to expire at the annual meeting of the stockholders held in 2000; the
term of office of the second class to expire at the meeting of the
stockholders held in 2001; the term of office of the third class to expire at
the annual meeting of the stockholders held in 2002; and thereafter for each
such term to expire at each third succeeding annual meeting of stockholders
after such election. Subject to the rights of the holders of any series of
Preferred
29
<PAGE>
Stock then outstanding, a vacancy resulting from the removal of a director by
the stockholders as providing in Article V, Section 3 below may be filled at
a special meeting of the stockholders held for that purpose."
RESOLVED, that conditioned on the receipt of requisite stockholder
approval, a new Section 3 shall be added to Article V of the Certificate of
Incorporation to read in its entirety as follows:
"3. Following the corporation's first QPO any director or the entire
Board of Directors may be removed from office before the expiration of the
applicable term of office only with cause."
SECOND: That thereafter, pursuant to resolution of its Board of Directors, a
written consent of the stockholders of said corporation was duly solicited
and executed, pursuant to which the necessary number of shares as required by
statute and by said corporation's Certificate of Incorporation, as amended,
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said corporation has caused this certificate to be
signed and attested by its duly authorized officer this 20th day of November,
1998.
By: /s/ JOSEPH FERNANDEZ
------------------------------
Joseph Fernandez, Secretary
30
<PAGE>
BY-LAWS
OF
INVITROGEN INC., A DELAWARE CORPORATION
<PAGE>
<TABLE>
<CAPTION>
INDEX Page
<S> <C> <C>
ARTICLE I STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. Notice of Stockholder Business . . . . . . . . . . . . . . . . . . . . 2
1.8. Proxies and Voting . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9. Stock List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10. Stockholder Action by Written Consent. . . . . . . . . . . . . . . . . 3
ARTICLE II BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1. Number and Term of Office. . . . . . . . . . . . . . . . . . . . . . . 4
2.2. Vacancies and Newly Created Directorships . . . . . . . . . . . . . . 4
2.3. Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7. Participation in Meetings by Conference Telephone . . . . . . . . . . 5
2.8. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10. Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . . 6
2.11. Nomination of Director Candidates. . . . . . . . . . . . . . . . . . . 6
ARTICLE III COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1. Committees of the Board of Directors . . . . . . . . . . . . . . . . . 6
3.2. Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1. Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.2. Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3. President. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4. Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5. Chief Financial Officer. . . . . . . . . . . . . . . . . . . . . . . . 7
4.6. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.7. Delegation of Authority. . . . . . . . . . . . . . . . . . . . . . . . 8
4.8. Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9. Action With Respect to Securities of Other Corporations. . . . . . . . 8
ARTICLE V STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1. Certificates of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2. Transfers of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 8
-i-
<PAGE>
5.3. Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4. Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . 9
5.5. Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VI NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.1. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VII MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3. Reliance Upon Books, Reports and Records . . . . . . . . . . . . . . . 10
7.4. Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5. Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . 10
8.1. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . 10
8.2. Right of Indemnitee to Bring Suit. . . . . . . . . . . . . . . . . . . 11
8.3. Indemnification of Employees and Agents. . . . . . . . . . . . . . . . 12
8.4. Non-Exclusivity of Rights. . . . . . . . . . . . . . . . . . . . . . . 12
8.5. Indemnification Contracts. . . . . . . . . . . . . . . . . . . . . . . 12
8.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.7. Advance Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . 12
8.8. Effect of Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.9. Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
-ii-
<PAGE>
INVITROGEN INC., A DELAWARE CORPORATION
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1.1. ANNUAL MEETING. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen months after
the organization of the corporation or after its last annual meeting of
stockholders.
Section 1.2. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes prescribed in the notice of the meeting, may be called
by (1) the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any such resolution
is presented to the Board for adoption), (2) the Chairman of the Board, (3) the
President, or (4) the holders of shares entitled to cast not less than ten
percent (10%) of the votes at the meeting, and shall be held at such place, on
such date, and at such time as they shall fix. Business transacted at special
meetings shall be confined to the purpose or purposes stated in the notice.
Section 1.3. NOTICE OF MEETINGS. Written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date, and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.4. QUORUM. At any meeting of the stockholders, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law or by the Certificate of Incorporation or By-Laws of this
corporation.
1
<PAGE>
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
If a notice of any adjourned special meeting of stockholders is sent to all
stockholders entitled to vote thereat, stating that it will be held with those
present constituting a quorum, then except as otherwise required by law, those
present at such adjourned meeting shall constitute a quorum, and all matters
shall be determined by a majority of the votes cast at such meeting.
Section 1.5. ORGANIZATION. Such person as the Board of Directors may have
designated or, in the absence of such a person, the Chairman, if there is such
an officer, or if not, the President or the Corporation, or in his absence the
Vice President designated by the President, or in the absence of such
designation any Vice President, or in the absence of all of the above, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
Section 1.6. CONDUCT OF BUSINESS. The chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him in order.
Section 1.7. NOTICE OF STOCKHOLDER BUSINESS. At an annual or special
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) properly brought before an annual meeting by a stockholder and
if, and only if, the notice of a special meeting provides for business to be
brought before the meeting by stockholders, properly brought before the special
meeting by a stockholder. For business to be properly brought before a meeting
by a stockholder, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal offices of
the Corporation no later than the date on which stockholder proposals to be
included in the stockholder proxy must be received by the Corporation under the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder. A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the annual or special
meeting (a) a brief description of the business desired to be brought before the
annual or special meeting and the reasons for conducting such business at the
annual or special meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no business shall be
conducted at an annual or special meeting except in accordance with the
procedures set forth in this Section 1.7. The chairman of an annual
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or special meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 1.7, and if he should so
determine, he shall so declare to the meeting and any such business not
properly brought before the meeting shall not be transacted.
Section 1.8. PROXIES AND VOTING. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one vote for every share of stock entitled to
vote which is registered in his name on the record date for the meeting, except
as otherwise provided herein or required by law.
All voting, except where otherwise required by law, may be by a voice vote;
provided, however, that upon demand therefor by a stockholder entitled to vote
or by his proxy, a stock vote shall be taken. Every stock vote shall be taken by
ballots, each of which shall state the name of the stockholder or proxy voting
and such other information as may be required under the procedure established
for the meeting. Every vote taken by ballots shall be counted by an inspector or
inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of this Corporation or
these By-Laws, all other matters shall be determined by a majority of the votes
cast.
Section 1.9. STOCK LIST. A complete list of stockholders entitled to
vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the
number of shares registered in his name, shall be open to the examination of
any such stockholder, for any purpose germane to the meeting, during
ordinary business hours for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 1.10. STOCKHOLDER ACTION BY WRITTEN CONSENT. Prior to the closing
of the first sale of the Corporation's common stock pursuant to a firmly
underwritten registered public offering (the "IPO"), any action which may
otherwise be taken at any meeting of the stockholders may be taken without a
meeting and without prior notice, if a written consent describing such actions
is signed by the holders of outstanding shares having not less than the minimum
number of votes which would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
After the closing
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of the corporation's IPO, the shareholders may no longer take action by written
consent and may act only at an annual or special meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. NUMBER AND TERM OF OFFICE. The number of directors shall
initially be five (5), and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). Upon the closing of the
Corporation's IPO, the directors shall be divided into three classes, with the
term of office of the first class, which class shall initially consist of two
directors, to expire at the first annual meeting of stockholders held after the
IPO; the term of office of the second class, which class shall initially
consist of one director, to expire at the second annual meeting of stockholders
held after the IPO; the term of office of the third class, which class shall
initially consist of one director, to expire at the third annual meeting of
stockholders held after the IPO; and thereafter for each such term to expire at
each third succeeding annual meeting of stockholders after such election. All
directors shall hold office until the expiration of the term for which elected
and until their respective successors are elected, except in the case of death,
resignation or removal of any director.
Section 2.2. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the rights Of
the holders of any series of Preferred Stock then outstanding, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, or other cause (other then removal from office by
a vote of the stockholders) may be filled only by a majority vote of the
directors then in office, though less than a quorum, and directors so chosen
shall hold office for a term expiring at the next annual meeting of
stockholders. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Section 2.3. REMOVAL. Subject to the limitations stated in the Certificate
of Incorporation, any director, or the entire Board of Directors, may be removed
from office at any time, with or without cause, but only by the affirmative vote
of the holders of at least a majority of the voting power of its then
outstanding shares of stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class. Vacancies in the Board
of Directors resulting from such removal may be filled by (i) a majority of the
directors then in office, though less than a quorum, or (ii) the stockholders at
a special meeting of the stockholders properly called for that purpose, by the
vote of the holders of a majority of the shares entitled to vote at such special
meeting. Directors so chosen shall hold office until the next annual meeting of
stockholders.
Section 2.4. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have
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been established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 2.5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by one-third of the directors then in office (rounded up to the
nearest whole number), by the chairman of the board or by the chief executive
officer and shall be held at such place, on such date, and at such time as they
or he shall fix. Notice of the place, date, and time of each such special
meeting shall be given each director by whom it is not waived by mailing written
notice not less than five (5) days before the meeting (one (1) day before the
meeting if delivered by an overnight courier service and two (2) days before the
meeting if by overseas courier service) or by telephoning, telecopying,
telegraphing or personally delivering the same not less than twelve (12) hours
before the meeting. Unless otherwise indicated in the notice thereof, any and
all business may be transacted at a special meeting.
Section 2.6. QUORUM. At any meeting of the Board of Directors, a majority
of the total number of authorized directors shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 2.7. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members of
the Board of Directors, or of any committee of the Board of Directors, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 2.8. CONDUCT OF BUSINESS. AT any meeting of the Board of Directors,
business shall be transacted in such order and manner as the Board may from time
to time determine, and all matters shall be determined by the vote of a majority
of the directors present, except as otherwise provided herein or required by
law. Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors.
Section 2.9. POWERS. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such
form as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and
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(4) To remove any officer of the Corporation with or without
cause, and from time to time to pass on the powers and duties of any officer
upon any other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent
with these By-Laws, for the management of the Corporation's business and
affairs.
Section 2.10. COMPENSATION OF DIRECTORS. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 2.11. NOMINATION OF DIRECTOR CANDIDATES. Subject to the rights of
holders of any class or series of preferred stock then outstanding, nominations
for the election of Directors may be made by the Board of Directors or a proxy
committee appointed by the Board of Directors or by any stockholder entitled to
vote in the election of Directors.
ARTICLE III
COMMITTEES
Section 3.1. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors,
by a vote of a majority of the whole Board, may from time to time designate
committees of the Board, with such lawfully delegable powers and duties as it
thereby confers, to serve at the pleasure of the Board and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desires, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. Any committee so designated may exercise the power and
authority of the Board of Directors to declare a dividend, to authorize the
issuance of stock or to adopt an agreement of merger or consolidation if the
resolution which designates the committee or a supplemental resolution of the
Board of Directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may by unanimous vote
appoint another member of the Board of Directors to act at the meeting in the
place of the absent or disqualified member.
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Section 3.2. CONDUCT OF BUSINESS. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third of the authorized members shall constitute a quorum unless the
committee shall consist of one or two members, in which event one member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of the proceedings of such committee.
ARTICLE IV
OFFICERS
Section 4.1. GENERALLY. The officers of the Corporation shall consist of a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, one
or more Vice Presidents, and such other officers as may from time to time be
appointed by the Board of Directors. Officers shall be elected by the Board of
Directors, which shall consider that subject at its first meeting after every
annual meeting of stockholders. Each officer shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
Any number of offices may be held by the same person.
Section 4.2. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or as provided by
these By-Laws.
Section 4.3. 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 be
such an officer, the President shall be the general manager and 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
officers of the corporation. He shall preside at all meetings of the
shareholders. He shall be ex officio a member of all the standing committees,
including the executive committee, if any, and 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 by these By-Laws.
Section 4.4. VICE PRESIDENT. In the absence or disability of the President,
the Vice Presidents in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the Board of Directors, shall
perform the duties of the President, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall 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
or these By-Laws.
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Section 4.5. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain or cause to be kept and maintained, adequate and correct books
and records of account in written form or any other form capable of being
converted into written form.
The Chief Financial Officer shall deposit all monies and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the Board of Directors. He shall disburse all 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 Chief Financial Officer 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 by these By-Laws.
Section 4.6. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes in written form of the proceedings of the Board of Directors,
committees of the Board, and shareholders. Such minutes shall include all
waivers of notice, consents to the holding of meetings, or approvals of the
minutes of meetings executed pursuant to these By-Laws or the General Delaware
Corporation Law. The Secretary shall keep, or cause to be kept at the
principal executive office or at the office of the corporation's transfer agent
or registrar, a record of its shareholders, giving the names and addresses of
all shareholders and the number and class of shares held by each.
The Secretary shall give or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required by these By-Laws or by
law to be given, and shall keep the seal of the corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the Board of Directors or these By-Laws.
Section 4.7. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
Section 4.8. REMOVAL. Any officer of the Corporation may be removed at any
time, with or without cause, by the Board of Directors.
Section 4.9. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
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ARTICLE V
STOCK
Section 5.1. CERTIFICATES OF STOCK. Each stockholder shall be entitled to
a certificate signed by, or in the name of the Corporation by, the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the Chief
Financial Officer, certifying the number of shares owned by him or her. Any or
all of the signatures on the certificate may be facsimile.
Section 5.2. TRANSFERS OF STOCK. Transfers of stock shall be made only upon
the transfer books of the Corporation kept at an office of the Corporation or by
transfer agents designated to transfer shares of the stock of the Corporation.
Except where a certificate is issued in accordance with Section 5.4 of these
By-Laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
Section 5.3. RECORD DATE. The Board of Directors may fix a record date,
which shall not be more than sixty (60) nor fewer than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for the other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to vote at any
meeting of stockholders or any adjournment thereof; to receive payment of any
dividend or other distribution or allotment of any rights; or to exercise any
rights with respect to any change, conversion or exchange of stock or with
respect to any other lawful action.
Section 5.4. LOST, STOLEN OR DESTROYED CERTIFICATES. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued
in its place pursuant to such regulations as the Board of Directors may
establish concerning proof of such loss, theft or destruction and concerning
the giving of a satisfactory bond or bonds of indemnity.
Section 5.5. REGULATIONS. The issue, transfer, conversion and registration
of certificates of stock shall be governed by such other regulations as the
Board of Directors may establish.
ARTICLE VI
NOTICES
Section 6.1. NOTICES. Except as otherwise specifically provided
herein or required by law, all notices required to be given to any
stockholder, director, officer, employee or agent shall be in writing and may
in every instance be effectively given by hand delivery to the recipient
thereof, by depositing such notice in the mails, postage paid, or by sending
such notice by prepaid telegram, mailgram or commercial courier service. Any
such notice shall be addressed to such stockholder, director, officer,
employee or agent at his last known address as the same appears on the books
of the Corporation. The time when such notice is received by such
stockholder, director, officer, employee or agent, or by any person accepting
such notice on behalf of such person, if hand delivered, or dispatched, if
delivered
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through the mails or by telegram, courier or mailgram, shall be the time of the
giving of the notice.
Section 6.2. WAIVERS. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after
the time of the event for which notice is to be given, shall be deemed
equivalent to the notice required to be given to such stockholder, director,
officer, employee or agent. Neither the business nor the purpose of any
meeting need be specified in such a waiver. Attendance of a person at a
meeting shall constitute a waiver of notice for 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.
ARTICLE VII
MISCELLANEOUS
Section 7.1. FACSIMILE SIGNATURES. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these By-Laws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 7.2. CORPORATE SEAL. The Board of Directors may provide a suitable
seal, containing the name of the Corporation, which seal shall be in the charge
of the Secretary. If and when so directed by the Board of Directors or a
committee thereof, duplicates of the seal may be kept and used by the Chief
Financial Officer or by an Assistant Secretary or other officer designated by
the Board of Directors.
Section 7.3. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his duties, be fully protected
in relying in good faith upon the books of account or other records of the
Corporation, including reports made to the Corporation by any of its officers,
by an independent certified public accountant, or by an appraiser.
Section 7.4. FISCAL YEAR. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 7.5. TIME PERIODS. In applying any provision of these By-Laws which
require that an act be done or not done a specified number of days prior to an
event or that an act be done during a period of a specified number of days prior
to an event, calendar days shall be used, the day of the doing of the act shall
be excluded, and the day of the event shall be included.
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ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative,
or appellate ("Proceeding"), by reason of the fact that he or a person of
whom he is the legal representative, is or was a director or officer,
employee or agent of the Corporation or is or was serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis
of such Proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended, (but, in the
case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorney's fees, judgment, fines,
ERISA excise taxes or penalties, amounts paid or to be paid in settlement and
amounts expended in seeking indemnification granted to such person under
applicable law, this By-Law or any agreement with the Corporation) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his
heirs, executors and administrators; PROVIDED, HOWEVER, that, except as
provided in Section 8.2, the Corporation shall indemnify any such person
seeking indemnity in connection with an action, suit or proceeding (or part
thereof) initiated by such person only if such action, suit or proceeding (or
part thereof) was authorized by the Board of Directors of the Corporation;
PROVIDED, HOWEVER, that, if the Delaware General Corporation Law then so
requires, the payment of such expenses incurred by a director or officer of
the Corporation in his capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of such proceeding, shall
be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
should be determined ultimately that such director or officer is not entitled
to be indemnified under this Section or otherwise.
Section 8.2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section
8.1 is not paid in full by the corporation within sixty (60) days after a
written claim has been received by the corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period shall
be twenty (20) days, the indemnitee may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim. If successful
in whole or in part in any such suit, or in a suit brought by the corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a
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defense that, and (ii) in any suit by the corporation to recover an advancement
of expenses pursuant to the terms of an undertaking the corporation shall be
entitled to recover such expenses upon a final adjudication that, the indemnitee
has not met the applicable standard of conduct set forth under the General
Corporation Law of Delaware. Neither the failure of the corporation (including
its board of directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the indemnitee is proper in the circumstances because he or
she has met the applicable standard of conduct set forth in the General
Corporation law of Delaware, nor an actual determination by the corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct or, in the case of a suit brought by the indemnitee, be a defense to
such a suit. In a suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Article or otherwise
shall be on the corporation.
Section 8.3. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The corporation may,
to the extent authorized from time to time by the Board of Directors, grant
rights to indemnification, and to the advancement of expenses to any employee or
agent of the corporation to the fullest extent of the provisions of this Article
with respect to the indemnification of and advancement of expenses to directors
and officers of the corporation.
Section 8.4. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by Sections 8.1 and 8.2 shall not be exclusive of any other right which such
persons may have or hereafter acquired under any statute, provisions of the
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 8.5. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director or his affiliates,
officer, employee or agent of the Corporation, or any person serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
employee benefit plans, providing for indemnification rights equivalent to those
provided for in this Article VIII.
Section 8.6. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any such director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expenses,
liability or loss under Delaware General Corporation Law.
Section 8.7. ADVANCE PAYMENT OF EXPENSES. Unless otherwise determined by
(i) the Board of Directors, (ii) if more than half of the Directors are
involved in a Proceeding by a majority vote of a committee of one or more
distinguished Director(s) or (iii) if directed by the Board of Directors, by
independent legal counsel in a written opinion, any indemnification extended
to an officer or key employee pursuant to this Article VIII shall include
payment by
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the Corporation or a subsidiary of the Corporation of expenses as the same are
incurred in defending a Proceeding in advance of the final disposition of such
Proceeding upon receipt of an undertaking by such officer or key employee
seeking indemnification to repay such payment if such officer or key employee
shall be adjudicated or determined not to be entitled to indemnification under
this Article.
Section 8.8. EFFECT OF AMENDMENT. Any amendment, repeal or modification of
any provision of this Article VIII by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.
Section 8.9. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, officer, employee and
agent of the Corporation as to costs, charges and expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to the
full extent permitted by any applicable portion of this Article that shall not
have been invalidated and to the full extent permitted by applicable law
ARTICLE IX
AMENDMENTS
The Corporation reserves the right to amend or repeal any provision
contained in this Certificate of Incorporation in the manner prescribed by the
laws of the State of Delaware and all rights conferred upon stockholders are
granted subject to this reservation; PROVIDED, HOWEVER, that, notwithstanding
any other provision of this Certificate of Incorporation or any provision of law
which might otherwise permit a lesser vote or no vote, but in addition to any
vote of the holders of any class or series of the stock of this Corporation
required by law or by this Certificate of Incorporation, the affirmative vote of
the holders of at least 66-2/3% of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend or repeal this Article IX, Article V, Article VI, Article
VII, or Article VIII.
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Secretary's Certificate Of Adoption Of
By-Laws Of Invitrogen Inc.
I hereby certify:
That I am the duly elected Secretary of Invitrogen Inc., Delaware
corporation;
That the foregoing By-Laws comprising thirteen (13) pages, constitute the
original By-laws of said corporation as duly adopted by the sole incorporator of
the corporation by written consent.
IN WITNESS WHEREOF, I have hereunder subscribed my name this 22nd day
of May, 1997.
/s/ Joseph M. Fernandez
------------------------------
Joseph M. Fernandez, Secretary
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CERTIFICATE OF
AMENDMENT TO THE BYLAWS OF
INVITROGEN CORPORATION,
I, Joseph M. Fernandez, hereby certify that:
1. I am the Secretary of Invitrogen Corporation, a Delaware
corporation (the "Corporation").
2. Section 2.1 of the current Bylaws of the Corporation is hereby
amended to read in its entirety as follows:
"Section 2.1. Number and Term of Office. The number of directors
shall be set within a range of from and including five (5) to and including
nine (9), with the number initially set at eight (8), and thereafter shall be
fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exists any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board for
adoption. The eight (8) directors shall be elected at the annual meeting of
the stockholders, who shall vote for such directors as provided in the
Certificate of Incorporation. Upon the closing of the IPO, the directors
shall be divided into three (3) classes, with the term of office of the first
class, which class shall initially consist of two (2) directors, to expire at
the first annual meeting of stockholders held after the IPO; the term of
office of the second class, which class shall initially consist of three (3)
directors, to expire at the second annual meeting of stockholders held after
the IPO; the term of office of the third class, which class shall initially
consist of three (3) directors, to expire at the third annual meeting of
stockholders held after the IPO; and thereafter for each such term to expire
at each third succeeding annual meeting of stockholders after such election.
All directors shall hold office until the expiration of the term for which
elected and until their respective successors are elected, except in the case
of the death, resignation or removal of any director. Directors need not be
stockholders.
3. Section 2.11 of the current Bylaws of the Corporation is
hereby amended to read in its entirety as follows.
"Section 2.11. Nomination of Director Candidates. Subject to the
rights of holders of any class or series of Preferred Stock then outstanding,
nominations for the election of Directors may be made by the Board of
Directors or a proxy committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of Directors generally.
However, any stockholder entitled to vote in the election of Directors
generally may nominate one or more persons for election as Directors at a
meeting only if timely notice of such stockholder's intent to make such
nomination or nominations has been given in writing to the Secretary of the
Corporation. To be timely, a stockholder nomination for a director to be
elected at an annual meeting shall be received at the Corporation's principal
executive offices not less
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than 120 calendar days in advance of the date that the Corporation's proxy
statement was released to stockholders in connection with the previous year's
annual meeting of stockholders, except that if no annual meeting was held in
the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous
year's proxy statement, or in the event of a nomination for director to be
elected at a special meeting, notice by the stockholders to be timely must
be received not later than the close of business on the tenth day following
the day on which such notice of the date of the special meeting was mailed or
such public disclosure was made. Each such notice shall set forth: (a) the
name and address of the stockholder who intends to make the nomination and of
the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to
vote for the election of Directors on the date of such notice and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nomine and any other person
or persons (naming such person or persons) pursuant to which the nomination
or nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of
each nominee to serve as a director of the Corporation if so elected.
In the event that a person is validly designated as a nominee in
accordance with this Section 2.11 and shall thereafter become unable or
unwilling to stand for election to the Board of Directors, the Board of
Directors or the stockholder who proposed such nominee, as the case may be,
may designate a substitute nominee upon delivery, not fewer than five days
prior to the date of the meeting for the election of such nominee, of a
written notice to the Secretary setting forth such information regarding such
substitute nominee as would have been required to be delivered to the
Secretary pursuant to this Section 2.11 had such substitute nominee been
initially proposed as a nominee. Such notice shall include a signed consent
to serve as a director of the Corporation, if elected, of each such
substitute nominee.
If the chairman of the meeting for the election of Directors determines
that a nomination of any candidate for election as a Director at such meeting
was not made in accordance with the applicable provisions of this Section
2.11, such nomination shall be void; provided, however, that nothing in this
Section 2.11 shall be deemed to limit any voting rights upon the occurrence
of dividend arrearages provided to holders of Preferred Stock pursuant to the
Preferred Stock designation for any series of Preferred Stock."
4. The foregoing Amendment of the Bylaws of the Corporation
has been duly approved by the stockholders and the Board of Directors as of
November 20, 1998.
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I hereby declare that the matters set forth in this
Certificate are true and correct of my own knowledge.
/s/ JOSEPH M. FERNANDEZ
- -----------------------------------
Joseph M. Fernandez, Secretary
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Ex. 10.1
INDEMNIFICATION AGREEMENT
This Indemnification Agreement made and entered into this ___ day of ___,
1998 ("Agreement"), by and between Invitrogen Corporation, a Delaware
corporation (together with any successor or successors and predecessor or
predecessors thereto, the "Company") and [NAME] ("Indemnitee").
WHEREAS, it is essential to the Company that it be able to retain and
attract as directors, officers, employees and agents the most capable persons
available;
WHEREAS, increased corporate litigation has subjected directors, officers,
employees and agents of corporations to litigation risks and expenses and the
limitations on the availability of directors and officers liability insurance
have made it increasingly difficult for the Company to attract and retain such
persons;
WHEREAS, its by-laws permit the Company to enter into indemnification
arrangements and agreements;
WHEREAS, the Company desires to provide Indemnitee with specific
contractual assurance of Indemnitee's rights to full indemnification against
litigation risks and expenses (regardless, among other things, of any amendment
to or revocation of the Company's by-laws or any change in the ownership of the
Company or the composition of its Board of Directors), which indemnification is
intended to be greater than that which is afforded by the Company's certificate
of incorporation, by-laws and, to the extent insurance is available, the
coverage of Indemnitee under the Company' directors and officers liability
insurance policies; and
WHEREAS, Indemnitee is relying upon the rights afforded under this
Agreement in continuing in Indemnitee's position as an agent of the Company.
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
(a) "agent" of the Company means any person who is or was a director,
officer, employee or other agent of the Company or a subsidiary of the
Company; or is or was serving at the request of, for the convenience
of, or to represent the interests of the Company or a subsidiary of
the Company as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation of
the Company or a subsidiary of the Company, or was a director,
officer, employee or agent of another enterprise at the request of,
for the convenience of, or to represent the interests of such
predecessor corporation.
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(b) "Corporate Status" describes the status of a person who is
serving or has served (i) as an agent of the Company, (ii) in any
capacity with respect to any employee benefit plan of the Company, or
(iii) as a director, partner, trustee, officer, employee, or agent of
any other Entity as defined below at the request of the Company.
(c) "Entity" shall mean any corporation, partnership, joint venture,
trust, foundation, association, organization or other legal entity and
any group or division of the Company or any of its subsidiaries.
(d) "Expenses" shall mean all reasonable fee, costs and expenses
incurred in connection with any Proceeding (as defined below),
including, without limitation, attorney's fees, disbursements and
retainers (including, without limitation, any such fees, disbursements
and retainers incurred by Indemnitee pursuant to Section 10 of this
Agreement), fees and disbursements of expert witnesses, private
investigators and professional advisors (including, without
limitation, accountants and investment bankers), court costs,
transcript costs, fees of experts, travel expenses, duplicating,
printing and binding costs, telephone and fax transmission charges,
postage, delivery services, secretarial services, and other
disbursements and expenses.
(e) "Indemnifiable Expenses," "Indemnifiable Liabilities" and
"Indemnifiable Amounts" shall have the meanings ascribed to those
terms in Section 3(a) below.
(f) "Liabilities" shall mean judgments, damages, liabilities, losses,
penalties, excise taxes, fines and amounts paid in settlement.
(g) "Proceeding" shall mean any threatened, pending or completed
claim, action, suit, arbitration, alternate dispute resolution
process, investigation, administrative hearing, appeal, or any other
proceeding, whether civil, criminal, administrative or investigative,
whether formal or informal, including a proceeding initiated by
Indemnitee pursuant to Section 10 of this Agreement to enforce
Indemnitee's rights hereunder.
2. SERVICES OF INDEMNITEE. In consideration of the Company's covenants
and commitments hereunder, Indemnitee agrees to serve or continue to serve as an
agent of the Company. However, this Agreement shall not impose any obligation on
Indemnitee or the Company to continue Indemnitee's service to the Company beyond
any period otherwise required by law or by other agreements or commitments of
the parties, if any.
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<PAGE>
3. AGREEMENT TO INDEMNIFY. The Company agrees to indemnify Indemnitee as
follows:
(a) Subject to the exceptions contained in Section 4(a) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding (other than an action by or in the right of the
Company) by reason of Indemnitee's Corporate Status, Indemnitee shall
be indemnified by the Company against all Expenses and Liabilities
incurred or paid by Indemnitee in connection with such Proceeding
(referred to herein as "Indemnifiable Expenses" and "Indemnifiable
Liabilities," respectively, and collectively as "Indemnifiable
Amounts").
(b) Subject to the exceptions contained in Section 4(b) below, if
Indemnitee was or is a party or is threatened to be made a party to
any Proceeding by or in the right of the Company to procure a judgment
in its favor by reason of Indemnitee's Corporate Status, Indemnitee
shall be indemnified by the Company against all Indemnifiable
Expenses.
4. EXCEPTIONS TO INDEMNIFICATION. Indemnitee shall be entitled to
indemnification under Section 3(a) and 3(b) above in all circumstances other
than the following:
(a) If indemnification is requested under Section 3(a) and it has
been adjudicated finally by a court of competent jurisdiction that, in
connection with the subject of the Proceeding out of which the claim
for indemnification has arisen, Indemnitee failed to act in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company or, with respect to any criminal
action or proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful, Indemnitee shall not be entitled to
payment of Indemnifiable Amounts hereunder.
(b) If indemnification is requested under Section 3(b) and
(i) It has been adjudicated finally by a court of competent
jurisdiction that, in connection with the subject of the
Proceeding out of which the claim for indemnification has arisen,
Indemnitee failed to act in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests
of the Company, Indemnitee shall not be entitled to payment of
Indemnifiable Expenses hereunder;
or
(ii) It has been adjudicated finally by a court of competent
jurisdiction that Indemnitee is liable to the Company with
respect to any claim, issue or matter involved in the Proceeding
out of which the claim for indemnification has arisen, including,
without limitation, a
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<PAGE>
claim that Indemnitee received an improper personal benefit, no
Indemnifiable Expenses shall be paid with respect to such claim,
issue or matter unless the Court of Chancery or another court in
which such Proceeding was brought shall determine upon
application that, despite the adjudication of liability, but in
view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnity for such Indemnifiable
Expenses which such court shall deem proper.
(c) The Company shall not be obligated to indemnify the Indemnitee
for expenses or liabilities of any type whatsoever (including, but not
limited to, judgments, fines ERISA excise taxes and penalties, and
amounts paid in settlement) for which payment is actually made to or
on behalf of Indemnitee under a valid and collectible insurance policy
of D&O Insurance, or under a valid and enforceable indemnity clause,
by-law or agreement.
5. PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. Indemnitee shall
submit to the Company a written request specifying the Indemnifiable Amounts for
which Indemnitee seeks payment under Section 3 of this Agreement and the basis
for the claim. The Company shall pay such Indemnifiable Amounts to Indemnitee
within twenty (20) calendar days of receipt of the request. At the request of
the Company, Indemnitee shall furnish such documentation and information as are
reasonably available to Indemnitee and necessary to establish that Indemnitee is
entitled to indemnification hereunder.
6. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, Indemnitee shall be indemnified against all
Expenses reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with each successfully resolved claim, issue
or matter. For purposes of this Agreement, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
7. EFFECT OF CERTAIN RESOLUTIONS. Neither the settlement or termination
of any Proceeding nor the failure of the Company to award indemnification or to
determine that indemnification is payable shall create an adverse presumption
that Indemnitee is not entitled to indemnification hereunder. In addition, the
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not create a presumption
that Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
or, with
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<PAGE>
respect to any criminal action or proceeding, had reasonable cause to believe
that Indemnitee's action was unlawful.
8. AGREEMENT TO ADVANCE INTERIM EXPENSES; CONDITIONS. The Company shall
pay to Indemnitee all Indemnifiable Expenses incurred by Indemnitee in
connection with any Proceeding, including a Proceeding by or in the right of the
Company, in advance of the final disposition of such Proceeding, if Indemnitee
furnishes the Company with a written undertaking to repay the amount of such
Indemnifiable Expenses advanced to Indemnitee if it is finally determined by a
court of competent jurisdiction that Indemnitee is not entitled under this
Agreement to indemnification with respect to such Expenses. Such undertaking
shall be an unlimited general obligation of Indemnitee, shall be accepted by the
Company without regard to the financial ability of Indemnitee to make repayment,
and in no event shall be required to be secured.
9. PROCEDURE FOR PAYMENT OF INTERIM EXPENSES. Indemnitee shall submit to
the Company a written request specifying the Indemnifiable Expenses for which
Indemnitee seeks an advancement under Section 8 of this Agreement, together with
documentation evidencing that Indemnitee has incurred such Indemnifiable
Expenses. Payment of Indemnifiable Expenses under Section 8 shall be made no
later than twenty (20) calendar days after the Company's receipt of such request
and the undertaking required by Section 8.
10. REMEDIES OF INDEMNITEE.
(a) RIGHT TO PETITION COURT. In the event that Indemnitee makes a
request for payment of Indemnifiable Amounts under Section 3 and 5
above or a request for an advancement of Indemnifiable Expenses under
Sections 8 and 9 above and the Company fails to make such payment or
advancement in a timely manner pursuant to the terms of this
Agreement, Indemnitee may petition the appropriate judicial authority
to enforce the Company's obligations under this Agreement.
(b) BURDEN OF PROOF. In any judicial proceeding brought under Section
10(a) above, the Company shall have the burden of proving that
Indemnitee is not entitled to payment of Indemnifiable Amounts
hereunder.
(c) EXPENSES. The Company agrees to reimburse Indemnitee in full for
any Expenses incurred by Indemnitee in connection with investigating,
preparing for, litigating, defending or settling any action brought by
Indemnitee under Section 10(a) above, or in connection with any claim
or counterclaim brought by the Company in connection therewith.
(d) VALIDITY OF AGREEMENT. The Company shall be precluded from
asserting in any Proceeding, including, without limitation, an action
under Section 10(a) above, that the provisions of this Agreement are
not valid,
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binding and enforceable or that there is insufficient consideration
for this Agreement and shall stipulate in court that the Company is
bound by all the provisions of this Agreement.
(e) FAILURE TO ACT NOT A DEFENSE. The failure of the Company
(including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination
concerning the permissibility of the payment of Indemnifiable Amounts
or the advancement of Indemnifiable Expenses under this Agreement
shall not be a defense in any action brought under Section 10(a)
above, and shall not create a presumption that such payment or
advancement is not permissible.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Indemnitee as follows:
(a) AUTHORITY. The Company has all necessary power and authority to
enter into, and be bound by the terms of, this Agreement, and the
execution, delivery and performance of the undertakings contemplated
by this Agreement have been duly authorized by the Company.
(b) ENFORCEABILITY. This Agreement, when executed and delivered by
the Company in accordance with the provisions hereof, shall be a
legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally.
12. INSURANCE. The Company hereby covenants and agrees that, so long as
Indemnitee shall continue to serve as an agent of the Company and thereafter so
long as the Indemnitee shall be subject to any possible proceeding by reason of
the fact that the Indemnitee was an agent of the Company, the Company will use
its commercially reasonable efforts to obtain and maintain a policy or policies
of insurance with reputable insurance companies providing the Indemnitee with
coverage for losses from wrongful acts, and to ensure the Company's performance
of its indemnification obligations under this Agreement. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee at least 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 the
Indemnitee is not a director of the Company but is an officer; or of the
Company's key employees, if the Indemnitee is not a director or officer but is a
key employee. Notwithstanding the foregoing, if the Company, after employing
commercially reasonable efforts as provided in this section, 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, or if
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit the Company shall use its commercially
reasonable efforts to obtain and
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maintain a policy or policies of insurance with coverage having features as
similar as practicable to those described above.
13. CONTRACT RIGHTS NOT EXCLUSIVE. The rights to payment of Indemnifiable
Amounts and advancement of Indemnifiable Expenses provided by this Agreement
shall be in addition to, but not exclusive of, any other rights which Indemnitee
may have at any time under applicable law, the Company's by-laws or certificate
of incorporation, or any other agreement, vote of stockholders or directors, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in any other capacity as a result of Indemnitee's serving as a director, officer
or agent of the Company.
14. SUCCESSORS. This Agreement shall be (a) binding upon all successors
and assigns of the Company (including any transferee of all or a substantial
portion of the business, stock and/or assets of the Company and any direct or
indirect successor by merger or consolidation or otherwise by operation of law)
and (b) binding on and shall inure to the benefit of the heirs, personal
representatives, executors and administrators of Indemnitee. This Agreement
shall continue for the benefit of Indemnitee and such heirs, personal
representatives, executors and administrators after Indemnitee has ceased to
have Corporate Status.
15. SUBROGATION. In the event of any payment of Indemnifiable Amounts
under this Agreement, the Company shall be subrogated to the extent of such
payment to all of the rights of contribution or recovery of Indemnitee against
other persons, and Indemnitee shall take, at the request of the Company, all
reasonable action necessary to secure such rights, including the execution of
such documents as are necessary to enable the Company to bring suit to enforce
such rights.
16. CHANGE IN LAW. To the extent that a change in applicable law (whether
by statute or judicial decision) shall permit broader indemnification than is
provided under the terms of the by-laws of the Company and this Agreement,
Indemnitee shall be entitled to such broader indemnification and this Agreement
shall be deemed to be amended to such extent.
17. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement, or any clause thereof,
shall be determined by a court of competent jurisdiction to be illegal, invalid
or unenforceable, in whole or in part, such provision or clause shall be limited
or modified in its application to the minimum extent necessary to make such
provision or clause valid, legal and enforceable, and the remaining provisions
and clauses of this agreement shall remain fully enforceable and binding on the
parties.
18. INDEMNITEE AS PLAINTIFF. Except as provided in Section 10(c) of this
Agreement and in this Section 18, Indemnitee shall not be entitled to payment of
Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to
any Proceeding brought by Indemnitee against the Company, any Entity which it
controls, any director, officer or agent thereof, or any third party. This
Section shall not apply (i) to counterclaims or affirmative defenses asserted by
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Indemnitee in an action brought against Indemnitee, (ii) if the Company has
consented to the initiation of such Proceeding, (iii) if such indemnification is
expressly regarded to be made by law or (iv) if such indemnification is provided
by the Company, in its sole discretion, pursuant to the powers vested in the
Company under the General Corporation Laws of Delaware. In addition to the
foregoing, the Company shall not be obligated pursuant to the terms of this
Agreement to indemnify the Indemnitee (i) for any expenses incurred by the
Indemnitee with respect to any proceeding instituted by the Indemnitee to
enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in such
proceeding was not made by good faith or was frivolous; or (ii) under this
Agreement for any amounts paid in settlement of a proceeding unless the Company
consents to such settlement, which consent shall not be unreasonably withheld.
19. MODIFICATIONS AND WAIVER. Except as provided in Section 16 above with
respect to changes in applicable law which broaden the right of Indemnitee to be
indemnified by the Company, no supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by each of the parties
hereto. No waiver or any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement (whether or
not similar), nor shall such waiver constitute a continuing waiver.
20. GENERAL NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (a) when delivered by hand, (b) when transmitted by facsimile and
receipt is acknowledged, or (c) if mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed.
(i) If to Indemnitee, to:
[name]
Address:
--------------------------------
--------------------------------
If to the Company, to:
Warner Broaddus
Invitrogen Corporation
1600 Faraday
Carlsbad, CA 92008
or to such other address as may have been furnished in the same manner by any
party to the others.
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21. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced under the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
22. CONSENT TO JURISDICTION. The Company hereby irrevocably and
unconditionally consents to the jurisdiction of the courts of Delaware and the
United States District Court in Delaware. The Company hereby irrevocably and
unconditionally waives any objection to the laying of venue of any Proceeding
arising out of or relating to this Agreement in the courts of Delaware or the
United States District Court in Delaware, and hereby irrevocably and
unconditionally waives and agrees not to plead or claim that any such Proceeding
brought in any such court has been brought in an inconvenient forum.
23. AGREEMENT GOVERNS. This Agreement is to be deemed consistent
wherever possible with relevant provisions of the Company's by-laws and
certificate of incorporation; however, in the event of a conflict between
this Agreement and such provisions, the provisions of this Agreement shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
INVITROGEN CORPORATION
By: ------------------------------------
Lyle C. Turner, Chairman, President
& CEO
INDEMNITEE
----------------------------------------
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EXHIBIT 10.2
INVITROGEN CORPORATION
1995 STOCK OPTION PLAN
1. PURPOSE
This Invitrogen Corporation 1995 Stock Option Plan (the "Plan") is
established to enhance the ability of Invitrogen Corporation, a California
corporation (the "Company") to attract and retain persons of training,
experience and ability. This Plan is intended to encourage stock ownership in
Invitrogen Corporation by the officers, directors, employees and consultants of
the Company and its Affiliates in order to promote their interest in the success
of the Company and to encourage their continued affiliation. All options granted
under this 1995 Stock Option Plan are intended to be either (a) Incentive Stock
Options or (b) Non-Qualified Stock Options.
2. DEFINITIONS
As used herein the following definitions shall apply:
"Act" shall mean the Securities Exchange Act of 1934, as amended from time
to time.
"Affiliate" shall mean any corporation defined as a "parent corporation"
or a "subsidiary corporation" by Code Section 424(e) and (f), respectively.
"Agreement" shall mean an Incentive Stock Option Agreement or a
Non-Qualified Stock Option Agreement embodying the terms of the agreement
between the Company and an Optionee with respect to the Optionee's Option.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Invitrogen Corporation, a California corporation.
"Consultant" shall mean any person or entity who provides services to the
Company pursuant to a written agreement other than as an employee, officer or
director.
"Disability" or "Disabled" shall mean the condition of being "disabled"
within the meaning of Section 422(c)(6) of the Code or any successor provision.
"Director" shall mean an individual member of the Board.
<PAGE>
"Employee" shall mean any salaried employee of the Company or its
Affiliates, including those employees who are officers of the Company or its
Affiliates.
"ERISA" shall mean the Employee Retirement Income Security Act or the
rules thereunder, as amended from time to time.
"Fair Market Value" of Stock on a given date shall mean an amount per share
as determined by the Board by applying any reasonable valuation method
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse. Notwithstanding the preceding, if the Stock is
traded upon an established stock exchange or exchanges or quoted on the
over-the-counter market as reported by The NASDAQ Stock Market ("NASDAQ"), then
the "Fair Market Value" of Stock per share on a given date shall be deemed to be
the average of the highest and lowest selling price per share of the Stock on
the principal stock exchange on which the Stock is then trading or on the
over-the-counter market as reported by NASDAQ on such date, or, if there was no
trading of the Stock on that day, on the next preceding day on which there was
such a trade; if the Stock is not traded upon an established stock exchange or
quoted on the over-the-counter market as reported by NASDAQ but is quoted on the
NASDAQ or a successor quotation system, the "Fair Market Value" of Stock on a
given date shall be deemed to be the mean between the closing representative
"bid" and "ask" prices per share of the Stock on such date as reported by the
NASDAQ or such quotation system, or, if there shall have been no trading of the
Stock on that day, on the next preceding day on which there was such trading.
"Incentive Stock Option" shall mean an option granted pursuant to the Plan
which is designated by the Board as an "Incentive Stock Option" and which
qualifies as an incentive stock option under Section 422 of the Code or any
successor provision.
"Non-Qualified Stock Option" shall mean a stock option granted pursuant to
the Plan which is not an Incentive Stock Option.
"Option" shall refer to either or both an Incentive Stock Option or
Non-Qualified Stock option as the context shall indicate.
"Optionee" shall mean the recipient of an Incentive Stock Option or a
Non-Qualified Stock Option.
"Option Price" shall mean the price per share of Stock to be paid by the
Optionee upon exercise of the Option.
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"Option Stock" shall mean the total number of shares of Stock the Optionee
shall be entitled to purchase pursuant to the Agreement.
"Plan" shall mean this Invitrogen Corporation 1995 Stock Option Plan, as
amended from time to time.
"Publicly Traded" shall mean that the Company is subject to the reporting
requirements pursuant to Section 13(a) or Section 15(d) of the Act. The Stock
shall be deemed to be "Publicly Traded" as of the date a registration statement
subjecting the Company to the reporting requirements of the Act is declared
effective under the Securities Act of 1933, as amended.
"Purchase Agreement" shall mean a Purchase Agreement between the Company
and an Optionee pursuant to the Invitrogen Corporation Stock Purchase Plan
adopted on October 1, 1989.
"Reporting Person" shall mean an Optionee who is required to file
statements relating to his or her beneficial ownership of Stock with the SEC
pursuant to Section 16(a) of the Act.
"Rule 16b-3" shall mean Rule 16b-3 (as amended from time to time)
promulgated by the SEC under the Act, and any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
"Stock" shall mean the common stock of the Company.
"Stockholder Agreement" shall mean the Invitrogen Corporation Buy/Sell
Agreement among the Company and certain of its shareholders governing certain
purchase rights between the parties, a true and correct copy of which is
attached hereto as Exhibit A, as may he amended from time to time.
"Ten Percent Owner" shall mean a person who owns more than ten percent
(10%) of the total combined voting power of all classes of capital stock of the
Company at the time an Option is granted to such person. In determining
ownership of capital stock by an Optionee, the attribution standards set forth
in Code Section 424(d) shall be applicable.
3. ADMINISTRATION
The Plan shall be administered by the Board or by the committee of the
Board consisting of not less than two persons; provided, however, that from and
after the date on which the Company first registers a class of its equity
securities under Section 12 of the Act, the Plan shall be administered by the
Board, all of whom shall be "disinterested persons" within the meaning of Rule
16b-3 or by a committee consisting solely of not
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fewer than two members of the Board who are such "disinterested persons." A
"disinterested person" for these purposes is a director who is not, during the
one year prior to service as an administrator of the Plan, or during such
service, granted or awarded equity securities pursuant to the Plan or any other
plan of the Company, except as otherwise provided in Rule 16b-3. As used in
this Plan, the term "Board" will refer to the Board or to such a committee, if
established. To the extent consistent with the applicable corporate law, the
Board may delegate administrative acts to any officers of the Company pursuant
to such conditions or limitations as the Board may establish; provided, however,
that only the Board may exercise such duties, power and authority with respect
to Reporting Persons if necessary to satisfy the requirements for the exemptions
provided by Rule 16b-3. The Board may adopt, amend and rescind such rules and
regulations for carrying out the Plan and implementing agreements and take such
acts as it deems proper. The interpretation, construction and application of the
Plan or any of the provisions of the Plan or any Option granted thereunder shall
be final and binding on the Company, all Optionees, their legal representatives,
and any person who may acquire an Option directly from an Optionee by permitted
transfer, bequest or inheritance. Whether or not the Board has delegated
administrative authority, the Board has the final power to determine all
questions of policy or expediency that may arise in administration of the Plan.
4. ELIGIBILITY
Only Employees are eligible to receive Incentive Stock Options under the
Plan. Employees, officers, Directors and Consultants of the Company or its
Affiliates are eligible to receive Non-Qualified Stock Options under the Plan.
Despite the foregoing, a Director who is not also an Employee, officer or
Consultant to the Company shall not be eligible to receive Options under the
Plan unless the Board expressly declares the Director eligible for participation
in the Plan. A member of the Board may elect to irrevocably decline to
participate in the Plan or in any other stock option plan of the Company for a
period of time in order to permit the Director to comply with the requirements
of Rule 16b-3 to be a "disinterested person".
No person shall he eligible to receive an Option for a larger number of
shares than is recommended by the Board. An Optionee may hold more than one
Option (whether Incentive Stock Options, Non-Qualified Stock Options, or
both), but only on the terms and conditions and subject to the restrictions
set forth herein.
5. STOCK SUBJECT TO PLAN
Options granted under the Plan shall be for shares of the Company's
authorized but unissued Stock. The aggregate number of
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shares of Stock which may be subject to Options pursuant to the Plan shall not
exceed 500,000 shares. The number of shares available shall be adjusted as
provided in Paragraph 6(i). Despite any other provision of the Plan to the
contrary, no Employee may be granted, during the term of the Plan, any options
under the Plan relating to more than an aggregate of 500,000 shares (subject to
adjustment as provided in Paragraph 6(i). Stock issued under other stock option
plans or stock option agreements of the Company shall not be counted against the
maximum number of shares that can be issued under the Plan. In the event any
outstanding Option expires or is terminated for any reason, the shares of Stock
allocable to the unexercised portion of such Option may again be subject to an
Option under the Plan.
Stock issued on the exercise of an Option which is forfeited by the
Optionee after issuance in accordance with conditions contained in the grant
shall be deemed to have never been issued under the Plan, and accordingly, shall
not be counted against the maximum number of shares that can be issued under the
Plan. Notwithstanding the terms of the previous sentence, the maximum number of
shares for which Incentive Stock Options may be issued under the Plan shall be
500,000 shares, subject to adjustment as provided under Paragraph 6(i).
6. TERMS AND CONDITIONS OF OPTIONS
The Board shall authorize the granting of all Options under the Plan with
such Options to be evidenced by Incentive Stock Option Agreements or
Non-Qualified Stock Option Agreements as the case may be. Each Agreement shall
be in such form as the Board may approve from time to time. Each Agreement shall
comply with and be subject to the following terms and conditions:
(a) TYPE OF OPTION; NUMBER OF SHARES. Each particular Option Agreement
shall state the type of Options to be granted (whether Incentive Stock
Options or Non-Qualified Stock Options) and the number of shares to which
the Options pertain. Under no circumstances shall the aggregate Fair Market
Value (determined as of the time the Options are granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the first time
by an Optionee during any calendar year (under this Plan and any other
incentive stock option plans of the Company or any Affiliate) exceed
$100,000 (or such other amount as may be prescribed by the Code from time
to time).
(b) OPTION PRICE. Each particular Option Agreement shall state the Option
Price. The Option Price for each share of Stock subject to an Incentive
Stock Option issued to an Employee other than a Ten Percent Owner shall not
be less than 100% of the Fair Market Value per share of Stock on the date
of the grant of the Incentive Stock Option. The Option
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Price for shares of Stock subject to a Non-Qualified Stock Option other
than to a Ten Percent Owner shall not be less than eighty-five (85%)
percent of the Fair Market Value of the shares of Stock on the date of
grant. The Option Price for each share of Stock subject to an Incentive
Stock Option or Non-Qualified Stock Option issued to a Ten Percent Owner
shall not he less than one hundred ten (110%) percent of the Fair Market
Value per share of Stock on the date of the granting of the respective
Option.
(c) MEDIUM AND TIME OF PAYMENT. The aggregate Option Price shall be
payable upon the exercise of the Option and shall be paid in any
combination of (a) United States cash currency; (b) a cashier's or
certified check to the order of the Company; (c) a personal check
acceptable to the Company; (d) to the extent permitted by the Board,
shares of Stock of the Company (including previously owned Stock or
Stock issuable in connection with the Option exercise), properly
endorsed to the Company, whose Fair Market Value on the date of
exercise equals the aggregate Option Price of the Option being
exercised; and (e) to the extent agreed to by the Board, the Optionee's
entering into an agreement with the Company whereby a portion of the
Optionee's options are terminated and where the Built in Gain on any
Options which are terminated as part of the agreement equals the aggregate
Option Price of the Option being exercised. "Built in Gain" means the
excess of the aggregate Fair Market Value of any Stock otherwise issuable
on exercise of a terminated Option over the aggregate Option Price
otherwise due the Company on such exercise.
The Board may permit deemed or constructive transfer of shares in lieu of
actual transfer and physical delivery of certificates. Except to the extent
prohibited by applicable law, the Board may take any necessary or
appropriate steps in order to facilitate the payment of any such Option
Price. Without limiting the foregoing, the Board may cause the Company to
loan the Option Price to the Optionee or to guarantee that any Stock to be
issued will be delivered to a broker or lender in order to allow the
Optionee to borrow the Option Price. The Board, in its sole and exclusive
discretion, may require satisfaction of any rules or conditions in
connection with paying the Option Price at any particular time, in any
particular form, or with the Company's assistance.
If Stock used to pay any Option Price is subject to any prior restrictions
imposed in connection with any stock option or stock purchase plan or
agreement of the Company (including this Plan, the Purchase Agreement and
the Stockholder Agreement), an equal number of the shares of Stock acquired
on exercise shall be made subject to such prior restrictions
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in addition to any further restrictions imposed on such Stock by the terms
of the Optionee's Agreement or by the Plan.
(d) DURATION OF OPTIONS. Each particular Option Agreement shall state the
term of the Option; provided, however, that all Incentive Stock Options
granted under this Plan shall expire and not be exercisable after the
expiration of ten (10) years from the date granted; provided, however, that
any Incentive Stock Option granted to a Ten Percent Owner shall expire and
not be exercisable after the expiration of five (5) years from the date
granted. Non-Qualified Stock Options shall expire and not be exercisable
after the date set by the Board in the particular Option Agreement or on
any later date subsequently approved by the Board.
(e) EXERCISE OF OPTIONS.
(i) Each particular Option Agreement shall state when the
Optionee's right to purchase Stock pursuant to the terms of an Option
are exercisable in whole or in part. Subject to the earlier
termination of the right to exercise the Options as provided under
this Plan, Options shall be exercisable in whole or in part as the
Board in its sole and exclusive discretion may provide in the
particular Option Agreement. Notwithstanding the foregoing, an
Optionee shall have the right to exercise his or her Options at the
race of at least twenty percent (20%) per year for a five year period
from the date the Option is granted. The Board may at any time
increase the percentage an Option is otherwise exercisable under the
terms of a particular Option Agreement.
(ii) If the Optionee does not exercise in any one (1) year period
the full number of shares to which he is then entitled to exercise, he
may exercise those shares in any subsequent year during the term of
the Option.
(iii) Notwithstanding the foregoing, none of the Options granted
hereunder to a Reporting Person shall vest before six (6) months from
the date of grant of the Option.
(f) TRANSFER OF OPTION. To the extent required by Code Section 422 and
Rule 16b-3, Options, or the rights of Optionees pursuant to the Options,
shall not be transferable in any manner, whether voluntary or involuntary,
except by will or the law of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of
ERISA; provided, however, that a Non-Qualified Stock Option may be
transferred to a trust for the benefit of the Optionee or members of his
immediate family provided such
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transfer does not violate the requirements of Rule 16b-3. An attempted
non-permitted transfer shall be void and shall immediately terminate the
Option.
(g) DEATH OF OPTIONEE. If the Optionee who is an Employee, officer,
Director, or Consultant of the Company or its Affiliates dies while in the
employ or service of the Company or its Affiliates or within a period of
three (3) months after termination of such employment or service as a
corporate officer or consultant, and before he or she has fully exercised
an Option, the Option may be exercised, to the extent that the Option was
exercisable on the date of death and had not previously been exercised, for
one (1) year after the date of the Optionee's death; provided, however,
that an Option may not be exercised after the expiration date set forth in
a particular Option Agreement. Such exercise may be made by a personal
representative of the Optionee or by any person or persons who shall have
acquired the Option directly from the Optionee by bequest or inheritance.
Notwithstanding the foregoing, an Incentive Stock Option may not be
exercise after ten (10) years following the date of grant.
(h) TERMINATION OF EMPLOYMENT OR SERVICE OTHER THAN DEATH. Subject to the
provisions of Paragraph 6(g) above, in the event that an Optionee who is an
Employee, officer, Director or Consultant of the Company or its Affiliates
shall cease to be employed by or performing service for the Company or its
Affiliates prior to the Option's expiration date, the exercise of Options
held by such Optionee shall be subject to such limitations on the periods
of time during which such Options may be exercised as may be specified in
the particular Option Agreement between the Optionee and the Company.
Notwithstanding the foregoing (and subject to the provisions of Paragraph 6
(g) above), an Optionee who is Disabled on the date of termination of
employment or service as a corporate officer or Consultant may exercise his
Option to the extent that the Option was exercisable on the date of such
termination and had not previously been exercised, for one (1) year from
the date of such termination. Whether authorized leave of absence or
absence for military or governmental service shall constitute termination
of employment for purposes of the Plan, shall be determined by the Board in
its sole and exclusive discretion. No provision of the Plan shall be
construed so as to grant any individual the right to remain in the employ
or service of the Company for any period of specific duration. In the event
an Optionee shall cease to be employed by or performing service for the
Company or its Affiliates during the term of the Option for reasons other
than death or Disability, the Option may be exercised, to the extent the
Optionee's right to exercise such Option had accrued at the time of
termination
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of employment or service and had not previously been exercised. Unless such
termination is for cause as determined in the particular Option Agreement,
such exercise may be made at any time within thirty (30) days after the
date of Optionee's termination of employment or service. Notwithstanding
any other provision of this paragraph 6(h), no Option may be exercised
after the expiration date of such Option as set forth in the particular
Option Agreement.
(i) ADJUSTMENTS UPON CHANGES IN STOCK AND OTHER EVENTS
(1) The number of shares issuable under the Plan and the number and
amount of the Option Stock and Option Price of outstanding Options
shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Stock resulting from a subdivision or
consolidation of shares or for the payment of a stock dividend or any
other increase or decrease in the number of such shares effected
without receipt of consideration by the Company in order to preclude
the dilution or enlargement of benefits under the Plan.
(2) The Board, in its sole and exclusive discretion, may make such
equitable adjustments to the Plan and outstanding Options as it deems
appropriate in order to preclude the dilution or enlargement of
benefits under the Plan upon exchange of all of the outstanding Stock
of the Company for a different class or series of capital stock or the
separation of assets of the Company, including a spin-off or other
distribution of stock or property by the Company.
(3) All adjustments required by the preceding paragraphs shall be
made by the Board, whose determination in that respect shall be final,
binding and conclusive; provided, that adjustments shall not be made
in a manner that causes an Incentive Stock Option to fail to continue
to qualify as an "incentive stock option" within the meaning of Code
Section 422.
(4) Except as expressly provided in this Paragraph 6(i), an Optionee
shall have no rights by reason of any subdivision or consolidation of
shares of Stock of any class or the payment of any stock dividend or
any other increase in the number of shares of Stock of any class by
reason of any dissolution, liquidation, merger, consolidation,
reorganization, or separation of assets, and any issue by the Company
of shares of stock of any class, or securities convertible into shares
of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the
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number or amount of the Option Stock or Option Price of outstanding
Options.
(5) The grant or existence of an Option shall not affect in any way
the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate, or
sell or transfer all or any part of its business or assets.
(6) In the event of: (a) a merger or consolidation in which the
Company is not the surviving corporation or (b) a reverse merger in
which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger
are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise, then to the extent
permitted by applicable law: (xx) any surviving corporation shall
assume any Options outstanding under the Plan or shall substitute
similar options for those outstanding under the Plan, or (yy) such
Options shall continue in full force and effect. In the event any
surviving corporation refuses to assume or continue such Options, or
to substitute similar options for those outstanding under the Plan,
then, with respect to options held by persons then performing services
as Employees, officers, Consultants or Directors for the Company, the
time at which such Options may first be exercised shall be accelerated
so that they may be exercised immediately before such merger or
consolidation and the Options terminated if not exercised prior to
such event. In the event of a dissolution or liquidation of the
Company, any Options outstanding under the Plan shall terminate if not
exercised prior to such event.
(j) RIGHTS AS A SHAREHOLDER. An Optionee shall not have rights as a
shareholder with respect to any shares until the date of the issuance of a
stock certificate to him for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is
prior to the date of issuance of such stock certificate, except as provided
in Paragraph 6(i) above.
(k) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions of the Plan, the Board may modify (including lowering the
Option Price or changing Incentive Stock Options into Non-Qualified Stock
Options), extend or renew outstanding Options granted under the Plan, or
accept the surrender of outstanding stock options under this Plan and/or
other stock option plans of the Company (to
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the extent not previously exercised) and authorize the granting of new
Options in substitution therefor. Notwithstanding the foregoing, no
modification of an Option shall, without the consent of the Optionee, alter
or impair any rights or obligations under any Option previously granted
under the Plan.
(1) SECURITIES LAW AND OTHER RESTRICTIONS. Notwithstanding any other
provisions of the Plan or any Agreement thereunder, the Company will not be
required to issue any Option Stock, and an Optionee may not sell, assign,
transfer or otherwise dispose of Option Stock, unless (a) there is in
effect with respect to such shares a registration statement under the
Securities Act of 1933, as amended, and any applicable state securities
laws or an exemption from such registration, and (b) there has been
obtained any other consent, approval or permit from any securities exchange
or other regulatory body which the Board, in its sole discretion, deems
necessary or advisable. The Company may condition such issuance, sale or
transfer upon the receipt of any representations or agreements from the
parties involved, and the placement of any legends on certificates
representing shares of Common Stock, as may be deemed necessary or
advisable by the Company in order to comply with such securities law or
other restrictions; or upon receipt of an acceptable opinion of counsel of
the Optionee or transferee.
(m) TRANSFER AND EXERCISE OF OPTION. To the extent required by Code
Section 422, each Incentive Stock Option shall state it is not transferable
or assignable by Optionee otherwise than by will or the laws of descent and
distribution, and that during an Optionee's lifetime, such Incentive Stock
Option shall be exercisable only by the Optionee. Options held by Reporting
Persons shall be nontransferable otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of ERISA to the extent required by
Rule 16b-3.
(n) STOCKHOLDER AGREEMENT. All Options granted under this Plan and all
Option Stock acquired pursuant thereto shall be subject to the terms and
conditions of the Stockholder Agreement between the Company and the
Optionee. Accordingly, the grant of Options and the issuance of Option
Stock upon the exercise of Options shall be conditioned upon, and shall be
null and void until the Optionee's delivery to the Company of an executed
counterpart of the Stockholder Agreement as to the initial exercise of an
Option, and an instrument confirming that such Options and Option Stock
shall be subject to the Stockholder Agreement as to any subsequent
exercise. The provisions of this Plan and any Agreements thereunder shall
be interpreted so as to be consistent with
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the Stockholder Agreement, and any ambiguities in the Plan or in the
Agreements shall be interpreted by reference to the Stockholder Agreement.
In the event that any provisions of the Plan or such Agreements are
inconsistent with the terms of the Stockholder Agreement, the terms of the
Stockholder Agreement shall prevail. The Agreements shall provide that the
Optionee, by execution thereof, acknowledges having received a copy of the
Stockholder Agreement. The provisions of this paragraph shall terminate at
such time as the Company becomes Publicly Traded.
(o) OTHER PROVISIONS. Each Agreement may contain such other provisions,
including without limitation, restrictions upon the exercise or
transferability of the Option, and repurchase of the Stock acquired upon
exercise of an Option by the Company as the Board may deem advisable. Any
Incentive Stock Option Agreement shall contain such limitations and
restrictions upon the exercise of the Incentive Stock Option as shall be
necessary in order that such Incentive Stock Option will be an "incentive
stock option" as defined in Code Section 422 or to conform to any change in
the law.
(p) WITHHOLDING TAXES. When the Company becomes required to collect
federal and state income and employment taxes in connection with the
exercise of an Option ("withholding taxes"), the Optionee shall promptly
pay to the Company the amount of such taxes in cash, unless the Board
permits or requires payment in another form. If an Optionee is a Reporting
Person at the time of exercise and is given an election to pay any
withholding taxes with Stock, the Board shall have sole discretion to
approve or disapprove such election.
7. TERM OF PLAN
Options may be granted pursuant to the Plan from time to time within a
period of ten (10) years from the date the Plan is adopted by the Board, or the
date the Plan is approved by the shareholders of the Company, whichever is
earlier.
8. AMENDMENT OF THE PLAN
The Board may, insofar as permitted by law, from time to time, with respect
to any shares at the time not subject to Options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever except that, without
approval of the shareholders, no such revision or amendment shall materially
increase the number of shares for which Options may be granted under the Plan,
materially modify the designation of the class of persons eligible to receive
Options, materially increase the benefits accruing to Optionees under the Plan,
or decrease the
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price at which Incentive Stock Options may be granted. Furthermore, the Plan may
not, without the approval of the shareholders, be amended in any manner that
will cause Incentive Stock Options issued under it to fail to meet the
requirements of "incentive stock options" as defined in Code Section 422. The
Board may amend the Plan from time to time to the extent necessary to comply
with Rule 16b-3 or any successor rule or other regulatory requirement.
9. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Stock pursuant to the
exercise of an Option will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
11. INDEMNIFICATION
In addition to such other rights of indemnification as they may have as
Directors, Employees or agents of the Company, to the maximum extent permitted
by applicable law, the Directors or any committee to whom the Board of Directors
has delegated administrative authority shall be indemnified by the Company
against: (i) the reasonable expenses, including attorneys' fees actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder; and (ii) against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company or by a court of competent
jurisdiction) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in actions to matters as to which it shall be
adjudicated in such action, suit or proceeding that such Director or individual
is liable for negligence or misconduct in the performance of his duties; this
indemnification is expressly conditioned upon the indemnified party within
ninety (90) days after institution of any such action, suit or proceeding
offering the Company in writing the opportunity, at its own expense, to handle
and defend the same.
12. APPROVAL OF SHAREHOLDERS
The portions of the Plan dealing with Incentive Stock Options shall not
take effect unless approved by the shareholders of the Company, which approval
must occur within a period commencing twelve (12) months before and ending
twelve (12) months after the
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date the Plan is adopted by the Board. Nothing in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including the right of the Company to grant options for proper corporate
purposes otherwise than under the Plan to any person or entity.
Adopted this 3 day of November, 1995.
INVITROGEN CORPORATION
By: /s/ Lyle Turner
------------------------
Lyle Turner, President
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INVITROGEN CORPORATION
(A CALIFORNIA CORPORATION)
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE: ((name)) NO. OF SHARES OF STOCK: ((shares))
DATE OF GRANT: ((date_issued)) OPTION PRICE: $
TERM OF OPTION: Ten (10) Years From Date of Grant
(Expires 12:00 p.m. on ((date_plus_ten)) "Expiration Date")
This Option Agreement is entered into between Invitrogen Corporation, a
California corporation (the "Company") and the above-named Optionee
("Optionee").
1. RECITALS
1.1 The Board of Directors of the Company authorized the granting of
this Option to Optionee who is an Employee of the Company or its Affiliates
pursuant to the Invitrogen Corporation 1995 Stock Option Plan.
1.2 This option agreement is intended to constitute an "incentive
stock option" within the meaning of Section 422 of Internal Revenue Code of
1986, as amended.
2. DEFINITIONS
In addition to those words and phrases defined above and unless otherwise
required by the context in which they appear, words and phrases having their
initial letters capitalized shall have the following meanings:
"Act" shall mean the Securities Exchange Act of 1934, as amended from
time to time.
"Affiliate" shall mean any corporation defined as a "parent
corporation" or a "subsidiary corporation" within the meaning of Code Section
424(e) and (f) respectively.
"Agreement" shall mean this 1995 Incentive Stock Option Agreement
(including any schedules, attachments, documents incorporated by reference or
modifications agreed to in writing by the Company and Optionee) which sets forth
the Optionee's and Company's rights and obligations with respect to the option
granted Optionee by the Board.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Invitrogen Corporation, a California Corporation and
any successors or assigns.
"Date of Grant" shall mean the Date of Grant set forth above at the
beginning of this Agreement.
"Disability" or "Disabled" shall mean the condition of being disabled
within the meaning of Code Section 422(c)(6).
"Employee" shall mean any salaried employee of the Company, or its
Affiliates, including those employees who are officers of the Company or its
Affiliates.
Invitrogen Incentive Stock Option Agreement Page 1 of 8
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"ERISA" shall mean the Employee Retirement Income Security Act or the
rules thereunder, as amended from time to time.
"Fair Market Value" of Stock on a given date shall mean an amount per
share as determined by the Board by applying any reasonable valuation method
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse. Notwithstanding the preceding, if the Stock is
traded upon an established stock exchange or exchanges or quoted on the
over-the-counter market as reported by The NASDAQ Stock Market ("NASDAQ"), then
the "Fair Market Value" of Stock on a given date per share shall be deemed to be
the average of the highest and lowest selling price per share of the Stock on
the principal stock exchange on which the Stock is then trading or on the
over-the-counter market as reported by NASDAQ on such date, or, if there was no
trading of the Stock on that day, on the next preceding day on which there was
such a trade; if the Stock is not traded upon an established stock exchange or
quoted on the over-the-counter market as reported by NASDAQ but is quoted on the
NASDAQ or a successor quotation system, the "Fair Market Value" of Stock on a
given date shall be deemed to be the mean between the closing representative
"bid" and "ask" prices per share of the Stock on such date as reported by the
NASDAQ or such quotation system, or, if there shall have been no trading of the
Stock on that day, on the next preceding day on which there was such trading.
"Option" shall mean the right of Optionee to purchase the number of
shares of Stock set forth above at the beginning of this Agreement in accordance
with the terms and conditions of this Agreement.
"Optionee" shall mean the person whose name is set forth above at the
beginning of this Agreement.
"Option Price" shall mean the price per share of Stock to be paid by the
Optionee upon exercise of the Option which amount is set forth above at the
beginning of this Agreement.
"Option Stock" shall mean the total number of shares of Stock the
Optionee shall be entitled to purchase pursuant to this Agreement as set
forth above at the beginning of this Agreement.
"Plan" shall mean the 1995 Invitrogen Corporation Stock Option Plan, as
amended from time to time.
"Publicly Traded" shall mean that the Company is subject to the reporting
requirements pursuant to Section 13(a) or Section 15(d) of the Act. The Stock
shall be deemed to be "Publicly Traded" as of the date a registration statement
subjecting the Company to the reporting requirements of the Act is declared
effective under the Securities Act of 1933, as amended.
"Purchase Agreement" shall mean a Purchase Agreement between the Company
and an Optionee entered into pursuant to the Invitrogen Corporation Stock
Purchase Plan adopted on October 1, 1989.
"Reporting Person" shall mean an Optionee who is required to file
statements relating to his or her beneficial ownership of Stock with the SEC
pursuant to Section 16(a) of the Act.
"Rule 16b-3" shall mean Rule 16b-3 (as amended from time to time)
promulgated by the SEC under the Act, and any successor thereto.
"SEC" shall mean the Securities and Exchange Commission.
Invitrogen Incentive Stock Option Agreement Page 2 of 8
<PAGE>
"Stock" shall mean the no par common stock of the Company.
"Stockholder Agreement" shall mean the Buy/Sell Agreement governing
certain purchase rights between the parties, a true and correct copy of which is
attached hereto as Exhibit A, as may be amended from time to time.
3. OPTION
3.1 GRANT. The Company hereby grants to Optionee an Option to purchase
all or any part of the Option Stock on the terms and conditions set forth in
this Agreement. The Date of Grant shall be the Date of Grant set forth above at
the beginning of this Agreement.
3.2 PURCHASE PRICE. The purchase price per share of Stock to be paid
upon the exercise of this Option shall be the Option Price which is set forth
above at the beginning of this Agreement. This Option Price is deemed by the
Board to be not less than the Fair Market Value of the Stock on the Date of
Grant.
3.3 RESTRICTIONS ON TRANSFER. This Option shall not be transferable by
Optionee other than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined in the Code or Title I of
ERISA, as amended from time to time and may be exercised during Optionee's
lifetime only by Optionee; provided, however, that this Option may be
transferred to a trust for the benefit of the Optionee or members of his
immediate family provided that such transfer does not violate the requirements
of Rule 16b-3 and Code Section 422. Upon any attempt to sell, assign, encumber
or otherwise transfer this Option in violation of this Agreement, or upon the
levy of any attachment or similar process upon this Option, this Option shall
immediately become null and void.
3.4 MODIFICATIONS OF RIGHTS. As set forth in Paragraph 6(k) of the
Plan, the Board may modify (including lowering the Option Price or converting
this Option which is an incentive stock option into a non-statutory stock
option), extend or renew this Option (to the extent not previously exercised),
or to accept the surrender of this Option (to the extent not previously
exercised) and authorize the granting of new stock options in substitution
therefor; provided, however, that no modification of this Option shall, without
the consent of the Optionee, alter or impair any rights or obligations under
this Agreement.
3.5 CHANGES IN COMPANY'S EQUITY STRUCTURE; RECAPITALIZATION OF COMPANY
Upon the occurrence of the capital and/or recapitalization transactions
described in Paragraph 6(i) of the Plan this Option (to the extent not
previously exercised) shall be adjusted or modified as provided in Paragraph
6(i) of the Plan.
Notwithstanding any provision of this Agreement, the Company reserves the
right to:
(a) Make or enter into any adjustments, reclassifications,
reorganizations or changes of its capital or business structure;
(b) Merge or consolidate with other entities; or
(c) Dissolve, liquidate or sell or transfer any or all of its
business or assets.
3.6 STOCKHOLDER'S RIGHTS. Optionee shall have no rights as a
stockholder with respect to any shares of Stock Optionee is entitled to purchase
under this Option until the date of the issuance of a certificate for such
shares of Stock. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other
Invitrogen Incentive Stock Option Agreement Page 3 of 8
<PAGE>
rights for which the record date is prior to the date such certificate is
issued, except as provided in this Agreement or in the Plan.
4. EMPLOYMENT CONDITIONS
4.1 EMPLOYMENT STATUS. Optionee shall be considered to be in the
employment of the Company as long as Optionee remains an Employee of the Company
or its Affiliates. The Board exclusively shall determine whether or when there
has been a termination of Optionee's employment, if there has been a failure to
comply with Optionee's covenant not to compete obligations and the cause of such
termination, which determination shall be final.
4.2 COVENANT NOT TO COMPETE. Unless otherwise permitted in writing,
Optionee shall devote his entire time, energy and skill to the service of the
Company or its Affiliates, subject to vacations, sick leave and other approved
absences. Failure of Optionee to comply with his covenant not to compete
obligations stated above within thirty (30) days of written notice of such
failure shall cause the cancellation on the thirtieth (30th) day after such
written notice of Optionee's right to purchase Option Stock (to the extent not
previously exercised) without further action by the Company.
4.3 TERMINATION FOR CAUSE. Unless otherwise agreed to by the Board if
Optionee's employment is terminated for cause, the right of Optionee to purchase
Option Stock shall only be exercisable by Optionee for a period of thirty (30)
days after the date of such termination, but only to the extent exercisable on
the date of termination.
4.4 STOCKHOLDER AGREEMENT. All Options granted under this Agreement
and all Option Stock acquired hereunder shall be subject to the terms and
conditions of the Stockholder Agreement and by execution hereof, Optionee
confirms having received a copy of the Stockholder Agreement. Accordingly, the
grant of Options and the issuance of Option Stock upon the exercise of Options
shall be conditioned upon, and shall be null and void until the Optionee's
delivery to the Company of an executed counterpart of the Stockholder Agreement
on the initial exercise of an Option, and an instrument confirming that such
Options and Option Stock shall be subject to the Stockholder Agreement as to any
subsequent exercise. The provisions of this Agreement shall be interpreted so as
to be consistent with the Stockholder Agreement, and any ambiguities in the Plan
or in this Agreement shall be interpreted by reference to the Stockholder
Agreement. In the event that any provisions of the Plan or this Agreement are
inconsistent with the terms of the Stockholder Agreement, the terms of the
Stockholder Agreement shall prevail. The provisions of this Paragraph shall
terminate at such time as the Company becomes Publicly Traded.
5. EXERCISE
5.1 EXERCISE PERCENTAGES. Subject to the earlier termination of the
right to exercise this Option as provided under this Agreement, including
Paragraphs 4.2 and 4.3 herein, the Optionee shall be entitled to exercise the
following cumulative percentages of his Option Stock in whole or in part as
follows:
<TABLE>
<CAPTION>
PERIOD (IN YEARS) FROM DATE OF GRANT CUMULATIVE % OF OPTION
After But on or Before Stock Available for Exercise
----- ---------------- ----------------------------
<S> <C> <C>
Date of Grant 1 year 0%
1 year 2 years 20%
2 years 3 years 40%
3 years 4 years 60%
4 years 5 years 80%
5 years Expiration Date 100%
</TABLE>
Invitrogen Incentive Stock Option Agreement Page 4 of 8
<PAGE>
5.2 ADDITIONAL ADJUSTMENTS. Notwithstanding the terms of Paragraph 5.1
of this Agreement, the Board in its sole and exclusive discretion may provide
for conditions upon the exercise of this Option and/or the exercise of either an
increased or lesser percentage of shares of Stock per year or as to all
remaining shares of Stock; provided however the Board may only provide for
conditions upon the exercise of this Option and/or the exercise of a lesser
percentage of shares of Stock per year when this Option is granted. Provided
further, to the extent that a six (6) month non-exercise period is required by
Rule 16b-3 at the time and under the circumstances of the exercise and Optionee
is a Reporting Person, then this Option shall not be exercisable for six (6)
months after Date of Grant, unless the death or Disability of the Optionee
occurs before the expiration of such six (6) month period.
5.3 CUMULATIVE EXERCISE RIGHTS. If the Optionee does not exercise
options in any one (1) year period to acquire the full number of shares of Stock
to which he is then entitled upon to exercise, he may exercise options to
acquire those shares of Stock in any subsequent year during the term of the
Option as set forth above at the beginning of this Agreement or such later date
subsequently approved by the Board.
5.4 EXPIRATION OF EXERCISE RIGHTS. In no event shall this Option be
exercisable after the Expiration Date or such later date subsequently approved
by the Board; provided, however, that this Option shall expire and not be
exercisable after the expiration of ten (10) years from the Date of Grant.
5.5 FRACTIONAL SHARES. This Option shall not be exercisable with
respect to any fractional shares of the Stock.
5.6 EXERCISE PROCEDURE. The Option shall be exercised by the giving of
written notice of exercise to the Company specifying the number of shares of
Stock to be purchased, accompanied by the payment (in accordance with the terms
of Paragraph 6(d) of the Plan) of the aggregate Option Price for the shares of
Stock being purchased, such payment to be made in any combination of:
(a) United States cash currency;
(b) a cashier's or certified check to the order of the Company;
(c) a personal check acceptable to the Company;
(d) to the extent permitted by the Board, shares of Stock (including
previously owned Stock or Stock issuable in connection with the Option
exercise), properly endorsed to the Company; or
(e) to the extent agreed to by the Board, the Optionee's entering into an
agreement with the Company whereby a portion of the Optionee's Options are
terminated;
provided, however, that the form of payment which Optionee selects shall be
permissible under Code Section 422.
The Board (in accordance with the terms of Paragraph 6(d) of the Plan)
may provide such assistance to the Optionee to facilitate the exercise of the
Option as it deems appropriate. Provided, however, that the Board, as a
prerequisite to providing such assistance, may require satisfaction of any rules
or conditions it deems appropriate. Shares of Stock used to pay the Option Price
shall be valued at their Fair Market Value on the date of exercise. The
Optionee's notice of exercise shall also be accompanied by payment (in
accordance with the terms of Paragraph 6(p) of the Plan) of the amount of
federal, state and local income, employment and
Invitrogen Incentive Stock Option Agreement Page 5 of 8
<PAGE>
other taxes the Company is required to collect from Optionee because of the
exercise of the Option.
If Stock used to pay the Option Price is subject to any prior
restrictions imposed in connection with any stock option or stock purchase plan
or agreement of the Company (including the Plan, the Purchase Agreement and the
Stockholder Agreement), an equal number of the shares of Stock acquired on
exercise shall be made subject to such prior restrictions in addition to any
further restrictions imposed on such Stock by the terms of the Optionee's
Agreement or by the Plan.
5.7 EXERCISE DURING LIFE. Subject to the provisions of Paragraphs 4.2,
4.3, 5.4 and 5.9, during Optionee's lifetime, this Option shall be exercisable
only by Optionee either:
(a) While Optionee is employed by the Company or its
Affiliates;
(b) Within three (3) months after the date on which Optionee's
employment terminates for reasons other than "termination for
cause" as provided in Paragraph 4.3 of this Agreement; or
(c) Within one (1) year after the date on which the Optionee's
employment terminates due to a Disability;
provided, however, that in no event shall the period of exercise be extended
beyond the Expiration Date or such later dates subsequently approved by the
Board. Unless the Board otherwise agrees, if Optionee is entitled to purchase
shares of Stock after the termination of Optionee's employment the number of
shares of Stock Optionee may so purchase shall be limited to the number of
shares of Stock Optionee was entitled to purchase as of such date of such
termination.
5.8 EXERCISE AFTER DEATH. Subject to the provisions of Paragraph 5.4,
if Optionee dies while employed by the Company or its Affiliates or within a
period of three (3) months after the date such employment terminates, but prior
to the complete exercise of this Option, the Option may be exercised within one
(1) year from the date of Optionee's death, but:
(a) Only by the personal representative of Optionee's estate or
by such person or persons who acquire the Option pursuant to
Optionee's will, testamentary substitute, or the laws of descent
and distribution; and
(b) Only as to the number of shares of Stock that Optionee was
entitled to purchase under this Option on the date of Optionee's
death.
5.9 CONSULTANCY TO THE COMPANY AFTER TERMINATION OF "EMPLOYMENT OR
CORPORATE OFFICE. If Optionee acts as a consultant for the Company or its
Affiliates after the termination of his employment, then Optionee shall not be
deemed to have terminated his employment for the Company or its Affiliates for
purposes of Paragraph 5.7 of this Agreement until he ceases to be a consultant
for the Company or its Affiliates, provided he does not violate any covenant not
to compete obligations contained in his consulting agreement with the Company or
its Affiliates. Notwithstanding Optionees not being deemed to have terminated
his employment for the Company or its Affiliates pursuant to the terms of the
preceding sentence, this Option which is an incentive stock option shall
automatically convert into a non-qualified stock option three (3) months after
the date which Optionee actually terminates his employment with the Company or
its Affiliates (one (1) year if the Optionee is Disabled on the date of
termination).
Invitrogen Incentive Stock Option Agreement Page 6 of 8
<PAGE>
5.10 NON-SEQUENTIAL EXERCISE PERMITTED. Subject to the exercise
limitations set forth herein, this Option shall be exercisable notwithstanding
the fact that there is outstanding any incentive stock option or non-statutory
stock option for the purchase of Stock of the Company which was granted before
this Option was granted, and no subsequently granted incentive stock option
shall fail to be exercisable solely because this Option remains outstanding.
5.11 LEGENDS. Certificates representing Stock acquired upon exercise of
this Option may contain such legends and transfer restrictions as the Company
shall deem necessary or desirable to assure the satisfaction of any liability
that the Company may or will have incurred for any withholding of federal, state
or local income, employment or other taxes, to facilitate compliance by the
Company with any federal or state laws or regulations, including, without
limitation, legends restricting transfer of the Stock until there has been
compliance with federal and state securities laws or pursuant to the Stockholder
Agreement or such other restrictions as may be imposed on the Stock under the
terms of this Agreement.
6. CONFLICT BETWEEN PLAN AND AGREEMENT
This Agreement, including the Option and Optionee's rights hereunder, is
subject to and governed by the Plan. Any conflict between the terms and
provisions of this Agreement and the terms and provisions of the Plan shall be
governed by the terms and provisions of the Plan.
7. INVESTMENT INTENT
This Option is granted on the condition that, if requested by the
Company, Optionee's purchases of shares of Stock shall be for investment
purposes and not with a view to resale or distribution. The Company shall not,
upon the exercise of this Option, be required to issue or deliver shares of
Stock, or certificates therefor, if in the opinion of counsel for the Company
such issuance or delivery would be in violation of, or would not comply with,
any applicable state or federal securities law, regulation or rule.
8. NOTICES
8.1 IN WRITING. All notices, demands, requests, declarations, service
of process or other communications permitted or required under this Agreement or
applicable law shall be in writing.
8.2 DELIVERY. All such communications may be served personally or may
be sent by registered or certified mail, return receipt requested, postage
prepaid and addressed to either Optionee or the Company at the addresses
appearing beneath the respective party's signature to this Agreement, or at such
other address as either party shall have communicated to the other pursuant to
this Paragraph. All such communications shall be deemed effectively delivered
upon personal service or three (3) days after deposit in the United States Mail.
9. MISCELLANEOUS
9.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall inure to the benefit of only the Company, Optionee and their
respective successors or assigns.
9.2 STATUS. Nothing contained in this Agreement shall be construed as
giving Optionee any right to be retained as an Employee of the Company.
Invitrogen Incentive Stock Option Agreement Page 7 of 8
<PAGE>
9.3 SEVERABILITY. If any provision or provisions of this Agreement are
adjudged to be for any reason unenforceable, illegal or void, the remainder of
its provisions shall remain in full force and effect.
9.4 INTEGRATION. This Agreement constitutes the entire understanding
of the parties concerning the Option granted hereby. Except as otherwise
provided, any changes, modifications, variations, or subordinations pertaining
to this Agreement or the Option are invalid unless stated in writing and
executed by the Company and Optionee.
9.5 GOVERNING LAW. This Agreement and the Option granted hereby shall
be governed by the laws of the State of California.
9.6 ATTORNEY'S FEES. If either party brings an action or seeks to
enforce or interpret any of the terms or provisions of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorney's fees and
costs in addition to any other remedy it may be awarded.
9.7 COUNTERPARTS. This Agreement may be executed in counterparts and
the counterparts shall constitute the whole instrument.
9.8 TITLES FOR CONVENIENCE; GENDER AND PLURALS. Titles of articles and
paragraph headings are for convenience only and shall not affect the
construction or interpretation of this Incentive Stock Option Agreement, or any
portion thereof. Whenever required by the context hereof, the singular shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter, and vice versa.
Executed to be effective as of the Date of Grant set forth above at the
beginning of this Agreement.
OPTIONEE:
--------------------------------------------------
Signature
--------------------------------------------------
Address
--------------------------------------------------
City State Zip Code
INVITROGEN CORPORATION
By:
----------------------------------------------
3985 B Sorrento Valley Blvd., San Diego, CA 92121
Invitrogen Incentive Stock Option Agreement Page 8 of 8
<PAGE>
INVITROGEN CORPORATION
1997 STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Invitrogen Corporation 1997 Stock Option Plan
(the "PLAN") is hereby established effective as of May 28, 1997 (the "EFFECTIVE
DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(d) "COMPANY" means Invitrogen Corporation, a California
corporation, or any successor corporation thereto.
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<PAGE>
(e) "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.
(f) "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company, and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:
(i) If, on such date, there is a public market for the
Stock, the Fair Market Value of a share of Stock shall be the closing sale price
of a share of Stock (or the mean of the closing bid and asked prices of a share
of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National
Market, the Nasdaq Small-Cap Market or such other national or regional
securities exchange or market system constituting the primary market for the
Stock, as reported in the WALL STREET JOURNAL or such other source as the
Company deems reliable. If the relevant date does not fall on a day on which
the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Board, in its sole discretion.
(ii) If, on such date, there is no public market for the
Stock, the Fair Market Value of a share of Stock shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.
(j) "INCENTIVE STOCK OPTION" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(k) "INSIDER" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(l) "NONSTATUTORY STOCK OPTION" means an Option not intended to
be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.
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<PAGE>
(m) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan. An Option may be either an Incentive Stock Option or a
Nonstatutory Stock Option.
(n) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions
of the Option granted to the Optionee and any shares acquired upon the
exercise thereof.
(o) "OPTIONEE" means a person who has been granted one or
more Options.
(p) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(q) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(r) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.
(s) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.
(t) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(u) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(v) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at
the time an Option is granted to the Optionee, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context
clearly requires otherwise.
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<PAGE>
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan or of any Option shall
be determined by the Board, and such determinations shall be final and binding
upon all persons having an interest in the Plan or such Option. Any officer of
a Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
3.3 POWERS OF THE BOARD. In addition to any other powers set forth
in the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of employment or service
with the Participating Company Group on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
4
<PAGE>
(f) to amend, modify, extend, cancel, renew, or grant a new
Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise
thereof;
(g) to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
employment or service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be the sum of (a) six hundred nine thousand
six hundred eighty five (609,685) shares, and (b) the number of shares of Stock,
as of the Effective Date, subject to outstanding options or reserved and
available for grant pursuant to the Company's 1995 Stock Option Plan (the "1995
PLAN OPTIONS") resulting in an aggregate total of three million seven hundred
thirty five thousand four hundred seventy nine (3,735,479) shares (the "SHARE
RESERVE") and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. Notwithstanding the foregoing, the Share
Reserve, determined at any time, shall be reduced by (a) the number shares
remaining subject to outstanding 1995 Plan Options, and (b) the number shares
issued upon the exercise of 1995 Plan Options. If an outstanding Option for any
reason expires or is terminated or canceled, or if shares of Stock acquired,
subject to repurchase, upon the exercise of an Option are repurchased by the
Company, the shares of Stock allocable to the unexercised portion of such Option
or such repurchased shares of Stock shall again be available for issuance under
the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options and in the exercise price per
share of any outstanding Options. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or
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otherwise become (whether or not pursuant to an Ownership Change Event, as
defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Options to provide that such
Options are exercisable for New Shares. In the event of any such amendment, the
number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
5. ELIGIBILITY AND OPTION LIMITATIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants," and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of employment or other service relationship with
the Participating Company Group. Eligible persons may be granted more than one
(1) Option.
5.2 OPTION GRANT RESTRICTIONS. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted only
a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service as an Employee with
a Participating Company, with an exercise price determined as of such date in
accordance with Section 6.1.
5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having an
aggregate Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3,
options designated as Incentive Stock Options shall be taken into account in the
order in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an
Incentive Stock Option in part and as a Nonstatutory Stock Option in part by
reason of the limitation set forth in this Section 5.3, the Optionee may
designate which portion of such Option the Optionee is exercising. In the
absence of such designation, the Optionee shall be deemed to have exercised the
Incentive Stock Option portion
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of the Option first. Separate certificates representing each such portion shall
be issued upon the exercise of the Option.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. No Option or purported
Option shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Option Agreement. Option Agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.
6.2 EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option,
and (c) no Option granted to a prospective Employee, prospective Consultant or
prospective Director may become exercisable prior to the date on which such
person commences service with a Participating Company.
6.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for the
Company) not less than the exercise price, (iii) by the assignment of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal
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Reserve System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's promissory note
in a form approved by the Company, (v) by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable
law, or (vi) by any combination thereof. The Board may at any time or from time
to time, by adoption of or by amendment to the standard forms of Option
Agreement described in Section 7, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.
(b) TENDER OF STOCK. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been owned by
the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine at the time the Option is granted. The Board shall
have the authority to permit or require the Optionee to secure any promissory
note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.
6.4 TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof.
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The Company shall have no obligation to deliver shares of Stock or to release
shares of Stock from an escrow established pursuant to the Option Agreement
until the Participating Company Group's tax withholding obligations have been
satisfied by the Optionee.
7. STANDARD FORMS OF OPTION AGREEMENT.
7.1 INCENTIVE STOCK OPTIONS. Unless otherwise provided by the Board
at the time the Option is granted, an Option designated as an "Incentive Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the form of Incentive Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.2 NONSTATUTORY STOCK OPTIONS. Unless otherwise provided by the
Board at the time the Option is granted, an Option designated as a "Nonstatutory
Stock Option" shall comply with and be subject to the terms and conditions set
forth in the form of Nonstatutory Stock Option Agreement adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.
7.3 STANDARD TERM OF OPTIONS. Except as otherwise provided in
Section 6.2 or by the Board in the grant of an Option, any Option granted
hereunder shall have a term of ten (10) years from the effective date of grant
of the Option.
7.4 AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
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(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
Section 8.2, an Option shall be deemed assumed if, following the Transfer of
Control, the Option confers the right to purchase in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Transfer of Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Transfer of Control was entitled. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Transfer of Control nor exercised as of the date of the Transfer of Control
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Option prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of
which is subject to the outstanding Options immediately prior to an Ownership
Change Event described in Section 8.1(a)(i) constituting a Transfer of Control
is the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of
its voting stock is held by another corporation or by other corporations that
are members of an affiliated group within the meaning of Section 1504(a) of the
Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options shall not terminate unless the Board otherwise provides in
its sole discretion.
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9. PROVISION OF INFORMATION. At least annually, copies of the Company's
balance sheet and income statement for the just completed fiscal year shall be
made available to each Optionee and purchaser of shares of Stock upon the
exercise of an Option. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
11. INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.
12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in applicable law,
regulations or rules that would permit otherwise, without the approval of the
Company's shareholders there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by operation
of the provisions of Section 4.2), (b) no change in the class of persons
eligible to receive Incentive Stock Options, and (c) no other amendment of the
Plan that would require approval of the Company's shareholders under any
applicable law, regulation or rule. In any event, no termination or amendment
of the Plan may adversely affect any then outstanding Option or any unexercised
portion thereof, without the consent of the Optionee, unless such termination or
amendment is required to enable an Option designated as an Incentive Stock
Option to qualify as an Incentive Stock Option or is necessary to comply with
any applicable law, regulation or rule.
13. SHAREHOLDER APPROVAL. The Plan or any increase in the maximum number
of shares of Stock issuable thereunder as provided in Section 4.1 (the "MAXIMUM
SHARES") shall be approved by the shareholders of the Company within twelve (12)
months of the date of adoption thereof by the Board. Options granted prior to
shareholder approval of the Plan or in excess of
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the Maximum Shares previously approved by the shareholders shall become
exercisable no earlier than the date of shareholder approval of the Plan or such
increase in the Maximum Shares, as the case may be.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Invitrogen Corporation 1997 Stock Option Plan was duly adopted by
the Board on May 28, 1997. Additionally, the Secretary notes that the share
reserve set forth in section 4.1 of the Plan reflects the seven (7) for one (1)
stock split which became effective upon the Company's reincorporation into
Delaware on June 17, 1997.
/s/ JOSEPH FERNANDEZ
----------------------------
Joseph Fernandez, Secretary
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FIRST AMENDMENT TO THE
INVITROGEN CORPORATION
1997 STOCK OPTION PLAN
This First Amendment to Invitrogen Corporation 1997 Stock Option Plan
(the "Plan") is made pursuant to Section 12 of the Plan. Capitalized terms
not defined in this First Amendment shall have the meanings provided in the
Plan.
WHEREAS, it has been determined to be in the best interests of the
Company that the aggregate number of shares of Stock that may be issued under
the Plan be increased by seven hundred fifty thousand (750,000);
WHEREAS, the Company wishes to provide options to acquire Stock to its
Nonemployee Directors to strengthen the incentives of such directors to act
in the best interests of the Company;
WHEREAS, the Company has determined to provide Optionees with
additional rights in the event of a Transfer in Control.
Now therefore, the Plan is hereby amended as follows:
1. Section 4.1 shall be amended to state in its entirety as follows:
"4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be the sum of (a) one million eight hundred
fifty-nine thousand six hundred eighty-five (1,859,685) shares, and (b) the
number of shares of Stock, as of the date of this Amendment, subject to
outstanding options or reserved and available for grant pursuant to the
Company's 1995 Stock Option Plan (the "1995 PLAN OPTIONS") resulting in an
aggregate total of four million four hundred eighty five thousand four
hundred seventy nine (4,485,479) shares (the "SHARE RESERVE") and shall
consist of authorized and unissued or reacquired shares of Stock or any
combination thereof. Notwithstanding the foregoing, the Share Reserve,
determined at any time, shall be reduced by (a) the number of shares
remaining subject to outstanding 1995 Plan Options, and (b) the number of
shares issued upon the exercise of 1995 Plan Options. If an outstanding
option for any reason expires or is terminated or canceled, or if the shares
of Stock acquired, subject to repurchase, upon the exercise of an Option are
repurchased by the Company, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan."
2. A new Section 6.5 shall be added to the Plan which shall state in
its entirety as follows:
"6.5 NONEMPLOYEE DIRECTOR OPTIONS
(a) AUTOMATIC GRANT. Subject to the execution by a Nonemployee Director
of an appropriate Option Agreement, Nonemployee Director Options shall be
granted automatically and without further action of the Board, as follows:
(i) INITIAL OPTION. Each person who first becomes a Nonemployee
Director on or after the date of this Amendment shall be granted on the date
such person first becomes a Nonemployee Director a Nonemployee Director
Option to purchase ten thousand (10,000) shares of Stock (an "INITIAL
OPTION"); provided, however, that an Initial Option shall not be granted to a
Director who previously did not qualify as a Nonemployee Director but
subsequently becomes a Nonemployee Director as a result of the termination of
his or her status as an Employee.
<PAGE>
(ii) ANNUAL OPTION. Each Nonemployee Director (including any
Director who previously did not qualify as a Nonemployee Director but who
subsequently becomes a Nonemployee Director) shall be granted on the date
immediately following each annual meeting of the stockholders of the Company
which occurs on or after the date of this Amendment (an "ANNUAL MEETING") a
Nonemployee Director Option to purchase ten thousand (10,000) shares of Stock
(an "ANNUAL OPTION"); provided, however, that a Nonemployee Director granted
an Initial Option less than six months prior to date of an Annual Meeting
shall not be granted an Annual Option pursuant to this Section on the date
immediately following the same Annual Meeting.
(iii) RIGHT TO DECLINE NONEMPLOYEE DIRECTOR OPTION.
Notwithstanding the foregoing, any person may elect not to receive a Nonemployee
Director Option by delivering written notice of such election to the Board no
later than the day prior to the date such Nonemployee Director Option would
otherwise be granted. A person so declining a Nonemployee Director Option shall
receive no payment or other consideration in lieu of such declined Nonemployee
Director Option. A person who has declined a Nonemployee Director Option may
revoke such election by delivering written notice of such revocation to the
Board no later than the day prior to the date such Nonemployee Director Option
would be granted pursuant to Section 6.5(a)(i) or 6.5(a)(ii), as the case may
be.
(b) EXERCISE PRICE. The exercise price per share of Stock subject to a
Nonemployee Director Option shall be the Fair Market Value of a share of Stock
on the date the Nonemployee Director Option is granted.
(c) EXERCISE PERIOD. Each Nonemployee Director Option shall terminate
and cease to be exercisable on the date ten (10) years after the date of grant
of the Nonemployee Director Option unless earlier terminated pursuant to the
terms of the Plan or the Option Agreement.
(d) RIGHT TO EXERCISE NONEMPLOYEE DIRECTOR OPTIONS.
(i) INITIAL OPTIONS. Except as otherwise provided in the Option
Agreement, each Initial Option shall become vested and exercisable cumulatively
for 1/3 of the shares of Stock initially subject to the Option on each of the
first three (3) anniversaries of the date on which the Initial Option was
granted, provided that the Optionee's Service has not terminated prior to the
relevant date.
(ii) ANNUAL OPTIONS. Except as otherwise provided in the Option
Agreement, each Annual Option shall become fully vested and exercisable on the
first anniversary of the date of grant, provided the Optionee's Service has not
terminated prior to such date.
(e) EFFECT OF TERMINATION OF SERVICE ON NONEMPLOYEE DIRECTOR OPTIONS.
(i) OPTION EXERCISABILITY. Subject to earlier termination of the
Nonemployee Director Option as otherwise provided herein, a Nonemployee Director
Option shall be exercisable after an Optionee's termination of Service as
follows:
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(A) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Nonemployee Director Option, to the extent unexercised and
exercisable on the date on which the Optionee's Service terminated, may be
exercised by the Optionee (or the Optionee's guardian or legal representative)
at any time prior to the expiration of twelve (12) months after the date on
which the Optionee's Service terminated, but in any event no later than the date
of expiration of the Option Expiration Date.
(B) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Nonemployee Director Option, to the extent unexercised and exercisable on
the date on which the Optionee's Service terminated, may be exercised by the
Optionee's legal representative or other person who acquired the right to
exercise the Nonemployee Director Option by reason of the Optionee's death at
any time prior to the expiration of twelve (12) months after the date on which
the Optionee's Service terminated, but in any event no later than the Option
Expiration Date. The Optionee's Service shall be deemed to have terminated on
account of death if the Optionee dies within six (6) months after the Optionee's
termination of Service.
(C) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Nonemployee Director Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within six (6) months after the
date on which the Optionee's Service terminated, but in any event no later than
the Option Expiration Date.
(ii) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.5(e)(i) of shares acquired upon the exercise of the
Nonemployee Director Option would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Nonemployee Director Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be
subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee's termination of Service, and (iii) the Option Expiration Date.
3. Section 8.2 shall be amended to state in its entirety as follows:
"8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of a
Transfer of Control, the percentage of the Option that has vested shall be
adjusted to 100% (if not already at that percentage) on the date that the
Company mails the Optionee notice of the Transfer of Control at the last
address shown on the records of the Company for such Optionee (the
"NOTICE"), unless the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), either assumes the Company's rights and obligations under
outstanding Options or substitutes for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. Any Options which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date fifteen
days after the Notice of the Transfer of Control shall terminate and cease to
be outstanding effective upon the later of (i) the date of the Transfer of
Control or (ii) fifteen days after mailing of the Notice. For purposes of
this Section 8.2, an Option shall be deemed assumed if, following the
Transfer of Control, the Option confers the right to purchase in accordance
with its terms and conditions, for each share of Stock subject to the Option
immediately prior to the Transfer of Control, the consideration (whether
stock, cash or other securities or property) to which a holder of a share of
Stock on the effective date of the Transfer of Control was entitled.
Notwithstanding the foregoing, shares acquired upon exercise of an Option
prior to the Transfer of Control and any consideration received pursuant to
the Transfer of Control with respect to such shares shall continue to be
subject to all applicable provisions of the Option Agreement evidencing such
Option except as otherwise provided in such Option Agreement. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is
subject to the outstanding Options immediately prior to an Ownership Change
Event described in Section 8.1(a)(i) constituting a Transfer of Control is
the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power
of its voting stock is held by another corporation or by other corporations
that are members of an affiliated group within the meaning of Section 1504(a)
of the Code without regard to the provisions of Section 1504(b) of the Code,
the outstanding Options shall not terminate unless the Board otherwise
provides in its sole discretion."
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4. All other terms of the Plan shall remain the same.
IN WITNESS WHEREOF, the undersigned Secretary of Invitrogen Corporation
certifies that the foregoing amendment to the 1997 Stock Option Plan was duly
adopted by the Board of Directors on November 20, 1998.
Dated: November 20, 1998
INVITROGEN CORPORATION
By: /s/ JOSEPH FERNANDEZ
-----------------------
Joseph Fernandez
Its: Secretary
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THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
INVITROGEN CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
THIS INCENTIVE STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is made and
entered into as of ___________199_, by and between Invitrogen Corporation and
______________________(the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Invitrogen
Corporation 1997 Stock Option Plan an option to purchase certain shares of
Stock, upon the terms and conditions set forth in this Option Agreement (the
"OPTION"). The Option shall in all respects be subject to the terms and
conditions of the Plan, the provisions of which are incorporated herein by
reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized terms
shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means __________________ 199_.
(b) "NUMBER OF OPTION SHARES" means ______________ shares of
Stock, as adjusted from time to time pursuant to Section 9.
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(c) "EXERCISE PRICE" means $ _____________ per share of Stock,
as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial Vesting Date.
(e) "INITIAL VESTING DATE" means the date occurring one (1)
year after (check one):
__ the Date of Option Grant.
__ __________________, 199_, the date the Optionee's
Service commenced.
(f) "VESTED PERCENTAGE" means, on any relevant date, the
percentage determined as follows:
<TABLE>
<CAPTION>
Vested Percentage
-----------------
<S> <C>
Prior to Initial Vesting Date 0%
On Initial Vesting Date, 20%
provided the Optionee's Service
has not terminated prior to such
date
PLUS
For each full year of the 20%
Optionee's continuous Service
from the Initial Vesting Date
until the Vested Percentage
equals 100%, an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten (10) years after
the Date of Option Grant.
(h) "COMPANY" means Invitrogen Corporation, a California
corporation, or any successor corporation thereto.
(i) "DISABILITY" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.
(j) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(k) "SERVICE" means the Optionee's employment or service with
the Participating Company Group as an Employee, a Director or a Consultant,
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whichever such capacity the Optionee held on the Date of Option Grant or, if
later, the date on which the Optionee commenced Service. The Optionee's Service
shall be deemed to have terminated if the Optionee ceases to render Service to
the Participating Company Group in such initial capacity. However, the
Optionee's Service shall not be deemed to have terminated merely because of a
change in the Participating Company for which the Optionee renders Service in
such initial capacity, provided that there is no interruption or termination of
the Optionee's Service. Furthermore, the Optionee's Service with the
Participating Company Group shall not be deemed to have terminated if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining the Optionee's Vested Percentage. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be an Incentive
Stock Option within the meaning of Section 422(b) of the Code, but the Company
does not represent or warrant that this Option qualifies as such. The Optionee
should consult with the Optionee's own tax advisor regarding the tax effects of
this Option and the requirements necessary to obtain favorable income tax
treatment under Section 422 of the Code, including, but not limited to, holding
period requirements. (NOTE: If the aggregate Exercise Price of the Option (that
is, the Exercise Price multiplied by the Number of Option Shares) plus the
aggregate exercise price of any other Incentive Stock Options held by the
Optionee (whether granted pursuant to the Plan or any other stock option plan of
the Participating Company Group) is greater than One Hundred Thousand Dollars
($100,000), the Optionee should contact the Chief Financial Officer of the
Company to ascertain whether the entire Option qualifies as an Incentive Stock
Option.)
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a
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<PAGE>
substantial risk of forfeiture, the Optionee understands that the Optionee
should consult with the Optionee's tax advisor regarding the advisability of
filing with the Internal Revenue Service an election under Section 83(b) of the
Code, which must be filed no later than thirty (30) days after the date on which
the Optionee exercises the Option. Shares acquired upon exercise of the Option
are nontransferable and subject to a substantial risk of forfeiture if, for
example, (a) they are unvested and are subject to a right of the Company to
repurchase such shares at the Optionee's original purchase price if the
Optionee's Service terminates, (b) the Optionee is an Insider and, under certain
circumstances, exercises the Option within six (6) months of the Date of Option
Grant (if a class of equity security of the Company is registered under Section
12 of the Exchange Act), or (c) the Optionee is subject to a restriction on
transfer to comply with "Pooling-of-Interests Accounting" rules. Failure to file
an election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Optionee. The Optionee acknowledges that the Optionee has
been advised to consult with a tax advisor prior to the exercise of the Option
regarding the tax consequences to the Optionee of the exercise of the Option. AN
ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON
WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE
OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE
OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares multiplied by the Vested Percentage less the
number of shares previously acquired upon exercise of the Option. In no event
shall the Option be exercisable for more shares than the Number of Option
Shares.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by
4
<PAGE>
confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in whole or
in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon
5
<PAGE>
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired upon exercise of the Option. The Optionee is
cautioned that the Option is not exercisable unless the tax withholding
obligations of the Participating Company Group are satisfied. Accordingly, the
Optionee may not be able to exercise the Option when desired even though the
Option is vested, and the Company shall have no obligation to issue a
certificate for such shares or release such shares from any escrow provided for
herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise Price
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should
be directed to the Chief Financial Officer of the Company. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company's legal counsel to be necessary to the lawful
issuance and sale of any shares subject to the Option 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. As a condition to
the exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
4.8 BUY/SELL AGREEMENT. As a condition of any exercise of the Option,
the Optionee and the spouse of the Optionee, if any, contemporaneously with the
exercise of the Option and prior to the issuance of any certificate representing
the
6
<PAGE>
shares purchased upon exercise of the Option, shall execute the Invitrogen
Corporation Buy/Sell Agreement by and among the Company and the Company's
shareholders, including any and all amendments to such agreement in effect at
the time of such exercise.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or a Transfer of Control to the extent
provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the Participating
Company Group is terminated because of the Disability of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee (or the
Optionee's guardian or legal representative) at any time prior to the expiration
of twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service other than upon a termination for
"Cause".
(c) OTHER TERMINATION OF SERVICE. If the Optionee's Service with
the Participating Company Group terminates for any reason, except Disability or
death, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee's Service terminated, may be exercised by the
Optionee within three (3) months (or such other longer period of time as
determined by the
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<PAGE>
Board, in Its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date. The Company makes no representation as to
the tax consequences of any such delayed exercise. The Optionee should consult
with the Optionee's own tax advisor as to the tax consequences to the Optionee
of any such delayed exercise.
7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in Section
7.1 of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
7.4 TERMINATION FOR CAUSE. Notwithstanding any other provision of
this Option Agreement, if the Optionee's Service with the Participating Company
Group is terminated for Cause (as defined below), the Option shall terminate and
cease to be exercisable on the effective date of such termination of Service.
For purposes of this Option Agreement, "CAUSE" shall mean any of the following:
(i) the Optionee's theft, dishonesty, or falsification of any Participating
Company documents or records; (ii) the Optionee's improper use or disclosure of
a Participating Company's confidential or proprietary information; (iii) any
action by the Optionee which has a detrimental effect on a Participating
Company's reputation or business; (iv) the Optionee's failure or inability to
perform any reasonable assigned duties after written notice from the
Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction (including any plea of guilty or nolo contendere) of any criminal act
which impairs the Optionee's ability to perform his or her duties with the
Participating Company Group.
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<PAGE>
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. For purposes of this Section 8.2, the Option
shall be deemed assumed if, following the Transfer of Control, the Option
confers the right to purchase in accordance with its terms and conditions, for
each share of Stock subject to the Option immediately prior to the Transfer of
Control, the consideration (whether stock, cash or other securities or property)
to which a holder of a share of Stock on the effective date of the Transfer of
Control was entitled. The Option shall terminate and cease to be
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<PAGE>
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company, appropriate adjustments shall be made in the number, Exercise
Price and class of shares of stock subject to the Option. If a majority of
the shares which are of the same class as the shares that are subject to the
Option are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event) shares of another corporation (the
"New Shares"), the Board may unilaterally amend the Option to provide that
the Option is exercisable for New Shares. In the event of any such amendment,
the Number of Option Shares and the Exercise Price shall be adjusted in a
fair and equitable manner, as determined by the Board, in its sole discretion
Notwithstanding the foregoing, any fractional share resulting from an
adjustment pursuant to this Section 9 shall be rounded up or down to the
nearest whole number, as determined by the Board, and in no event may the
Exercise Price be decreased to an amount less than the par value, if any, of
the stock subject to the Option. The adjustments determined by the Board
pursuant to this Section 9 shall be final, binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. If the Optionee is an Employee, the Optionee understands
and acknowledges that, except as otherwise provided in a separate, written
employment agreement between a Participating Company and the Optionee, the
Optionee's employment is "at will" and is for no specified term. Nothing in this
Option Agreement shall confer upon the Optionee, whether an Employee or
Consultant, any right to continue in the Service of a
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Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee's Service as an Employee
or Consultant, as the case may be, at any time.
11. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year after the date the Optionee exercises all or part of the Option or within
two (2) years after the Date of Option Grant and shall provide the Company with
a description of the terms and circumstances of such disposition. Until such
time as the Optionee disposes of such shares in a manner consistent with the
provisions of this Option Agreement, unless otherwise expressly authorized by
the Company, the Optionee shall hold all shares acquired pursuant to the Option
in the Optionee's name (and not in the name of any nominee) for the one-year
period immediately after the exercise of the Option and the two-year period
immediately after Date of Option Grant. At any time during the one-year or
two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence.
12. LEGENDS. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions, as well as any
restrictions on transfer set forth in the Buy/Sell Agreement, on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
12.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
12.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
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12.3 "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION
AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE
SHARES SHOULD NOT BE TRANSFERRED PRIOR TO _________. SHOULD THE REGISTERED
HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX
TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION
IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF
ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE."
13. PUBLIC OFFERING . The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The Optionee shall be subject to this Section provided and only
if the officers and directors of the Company are also subject to similar
arrangements.
14. RESTRICTIONS ON TRANSFER OF SHARES. No shares acquired upon exercise
of the Option may be sold, exchanged, transferred (including, without
limitation, any transfer to a nominee or agent of the Optionee), assigned,
pledged, hypothecated or otherwise disposed of, inducting by operation of law,
in any manner which violates any of the provisions of this Option Agreement, and
any such attempted disposition shall be void. The Company shall not be required
(a) to transfer on its books any shares which will have been transferred in
violation of any of the provisions set forth in this Option Agreement or (b) to
treat as owner of such shares or to accord the right to vote as such owner or to
pay dividends to any transferee to whom such shares will have been so
transferred.
15. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
16. TERMINATION OR AMENDMENT. The Board may terminate or amend the
Plan or the Option at any time; provided, however, that except as provided in
Section 8.2 in connection with a Transfer of Control, no such termination or
amendment may
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<PAGE>
adversely affect the Option or any portion hereof without the consent of the
Optionee unless such termination or amendment is necessary to Comply with any
applicable law or government regulation or is required to enable the Option to
qualify as an Incentive Stock Option. No amendment or addition to this Option
Agreement shall be effective unless in writing.
17. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature or at such other
address as such party may designate in writing from time to time to the other
party.
18. INTEGRATED AGREEMENT. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein or therein,
and there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Participating Company Group with respect
to such subject matter other than those as set forth or provided for herein or
therein To the extent contemplated herein or therein, the provisions of this
Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.
19. APPLICABLE LAW. This Option Agreement shall be governed by the laws of
the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
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INVITROGEN CORPORATION
By:
--------------------------
Title:
----------------------
Address:
1600 Faraday
Carlsbad, CA 92008
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Plan.
OPTIONEE
Date:
------------------------------ -----------------------------
Optionee Address:
-----------------------------
-----------------------------
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THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
INVITROGEN CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
THIS NONSTATUTORY STOCK OPTION AGREEMENT (the "OPTION AGREEMENT") is made
and entered into as of ___________, 199_, by and between Invitrogen Corporation
and ___________________________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Invitrogen
Corporation 1997 Stock Option Plan an option to purchase certain shares of
Stock, upon the terms and conditions set forth in this Option Agreement (the
"OPTION"). The Option shall in all respects be subject to the terms and
conditions of the Plan, the provisions of which are incorporated herein by
reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized terms
shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means ______________________,
199_.
(b) "NUMBER OF OPTION SHARES" means ________________ shares
of Stock, as adjusted from time to time pursuant to Section 9.
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(c) "EXERCISE PRICE" means $__________ per share of Stock, as
adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial Vesting Date.
(e) "INITIAL VESTING DATE" means the date occurring one (1) year
after (check one):
__ the Date of Option Grant.
__ __________________ , 199_, the date the Optionee's
Service commenced.
(f) "VESTED PERCENTAGE" means, on any relevant date, the
percentage determined as follows:
<TABLE>
<CAPTION>
Vested Percentage
-----------------
<S> <C>
Prior to Initial Vesting Date 0%
On Initial Vesting Date, provided the 20%
Optionee's Service has not terminated
prior to such date
PLUS
For each full year of the Optionee's 20%
continuous Service from the Initial Vesting
Date until the Vested Percentage equals 100%,
an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten (10) years after
the Date of Option Grant.
(h) "COMPANY" means Invitrogen Corporation, a California
corporation, or any successor corporation thereto.
(i) "DISABILITY" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.
(j) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(k) "SERVICE" means the Optionee's employment or service with
the Participating Company Group as an Employee, a Director or a Consultant,
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<PAGE>
whichever such capacity the Optionee held on the Date of Option Grant or, if
later, the date on which the Optionee commenced Service. The Optionee's Service
shall be deemed to have terminated if the Optionee ceases to render Service to
the Participating Company Group in such initial capacity. However, the
Optionee's Service shall not be deemed to have terminated merely because of a
change in the Participating Company for which the Optionee renders Service in
such initial capacity, provided that there is no interruption or termination of
the Optionee's Service. Furthermore, the Optionee's Service with the
Participating Company Group shall not be deemed to have terminated if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining the Optionee's Vested Percentage. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option
within the meaning of Section 422(b) of the Code.
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both nontransferable
and subject to a substantial risk of forfeiture, the Optionee understands that
the Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, (b) the Optionee is an Insider and, under
certain circumstances, exercises the Option within six (6) months of the Date of
Option Grant (if a class of equity security of the Company is registered under
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<PAGE>
Section 12 of the Exchange Act), or (c) the Optionee is subject to a restriction
on transfer to comply with "Pooling-of-Interests Accounting" rules. Failure to
file an election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Optionee. The Optionee acknowledges that the Optionee has
been advised to consult with a tax advisor prior to the exercise of the Option
regarding the tax consequences to the Optionee of the exercise of the Option.
AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON
WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE EXTENDED. THE
OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS THE
OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of a Participating Company shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation, or
election which is the responsibility of or which is allocated to the Company
herein, provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein, the
Option shall be exercisable on and after the Initial Exercise Date and prior to
the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares multiplied by the Vested Percentage less the
number of shares previously acquired upon exercise of the Option. In no event
shall the Option be exercisable for more shares than the Number of Option
Shares.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased. The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.
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<PAGE>
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(c), or (iv) by any
combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, if any, which arise in
connection with the Option, including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares acquired upon exercise of the Option, (iii) the
operation of any law or regulation providing for the imputation of interest, or
(iv) the lapsing of any restriction with respect to any shares acquired upon
exercise of the Option. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
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<PAGE>
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise Price
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. Questions concerning this restriction should
be directed to the Chief Financial Officer of the Company. The inability of the
Company to obtain from any regulatory body having jurisdiction the authority, if
any, deemed by the Company's legal counsel to be necessary to the lawful
issuance and sale of any shares subject to the Option 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. As a condition to
the exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
4.8 BUY/SELL AGREEMENT. As a condition of any exercise of the
Option, the Optionee and the spouse of the Optionee, if any, contemporaneously
with the exercise of the Option and prior to the issuance of any certificate
representing the shares purchased upon exercise of the Option, shall execute the
Invitrogen Corporation Buy/Sell Agreement by and among the Company and the
Company's shareholders, including any and all amendments to such agreement in
effect at the time of such exercise.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the
6
<PAGE>
Option, to the extent provided in Section 7, may be exercised by the Optionee's
legal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date,
(b) the last date for exercising the Option following termination of the
Optionee's Service as described in Section 7, or (c) a Transfer of Control to
the extent provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service other than upon a termination for
"Cause".
(c) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within three (3) months (or such other longer period
of time as determined by the Board, in its sole discretion) after the date on
which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
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<PAGE>
7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in Section
7.1 of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
7.4 TERMINATION FOR CAUSE. Notwithstanding any other provision of
this Option Agreement, if the Optionee's Service with the Participating Company
Group is terminated for Cause (as defined below), the Option shall terminate and
cease to be exercisable on the effective date of such termination of Service.
For purposes of this Option Agreement, "CAUSE" shall mean any of the following:
(i) the Optionee's theft, dishonesty, or falsification of any Participating
Company documents or records; (ii) the Optionee's improper use or disclosure of
a Participating Company's confidential or proprietary information; (iii) any
action by the Optionee which has a detrimental effect on a Participating
Company's reputation or business; (iv) the Optionee's failure or inability to
perform any reasonable assigned duties after written notice from the
Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction (including any plea of guilty or nolo contendere) of any criminal act
which impairs the Optionee's ability to perform his or her duties with the
Participating Company Group.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
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<PAGE>
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under the
Option or substitute for the Option a substantially equivalent option for the
Acquiring Corporation's stock. For purposes of this Section 8.2, the Option
shall be deemed assumed if, following the Transfer of Control, the Option
confers the right to purchase in accordance with its terms and conditions, for
each share of Stock subject to the Option immediately prior to the Transfer of
Control, the consideration (whether stock, cash or other securities or property)
to which a holder of a share of Stock on the effective date of the Transfer of
Control was entitled. The Option shall terminate and cease to be outstanding
effective as of the date of the Transfer of Control to the extent that the
Option is neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date of the
Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of the Option prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of this Option Agreement
except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification,
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or similar change in the capital structure of the Company, appropriate
adjustments shall be made in the number, Exercise Price and class of shares of
stock subject to the Option. If a majority of the shares which are of the same
class as the shares that are subject to the Option are exchanged for, converted
into, or otherwise become (whether or not pursuant to an Ownership Change Event)
shares of another corporation (the "NEW SHARES"), the Board may unilaterally
amend the Option to provide that the Option is exercisable for New Shares. In
the event of any such amendment, the Number of Option Shares and the Exercise
Price shall be adjusted in a fair and equitable manner, as determined by the
Board, in its sole discretion. Notwithstanding the foregoing, any fractional
share resulting from an adjustment pursuant to this Section 9 shall be rounded
up or down to the nearest whole number, as determined by the Board, and in no
event may the Exercise Price be decreased to an amount less than the par value,
if any, of the stock subject to the Option. The adjustments determined by the
Board pursuant to this Section 9 shall be final, binding and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the Option
until the date of the issuance of a certificate for the shares for which the
Option has been exercised (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 9. If the Optionee is an Employee, the Optionee understands
and acknowledges that, except as otherwise provided in a separate, written
employment agreement between a Participating Company and the Optionee, the
Optionee's employment is "at will" and is for no specified term. Nothing in
this Option Agreement shall confer upon the Optionee, whether an Employee or
Consultant, any right to continue in the Service of a Participating Company or
interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.
11. LEGENDS. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions, as well as any
restrictions on transfer set forth in the Buy/Sell Agreement, on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section. Unless otherwise specified by the Company,
legends placed on such certificates may include, but shall not be limited to,
the following:
11.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE
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WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
11.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
12. PUBLIC OFFERING. The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including an initial public offering of
stock, made by the Company pursuant to an effective registration statement filed
under the Securities Act, the Optionee shall not offer, sell, contract to sell,
pledge, hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The Optionee shall be subject to this Section provided and only
if the officers and directors of the Company are also subject to similar
arrangements.
13. RESTRICTIONS ON TRANSFER OF SHARES. No shares acquired upon exercise
of the Option may be sold, exchanged, transferred (including, without
limitation, any transfer to a nominee or agent of the Optionee), assigned,
pledged, hypothecated or otherwise disposed of, including by operation of law,
in any manner which violates any of the provisions of this Option Agreement, and
any such attempted disposition shall be void. The Company shall not be required
(a) to transfer on its books any shares which will have been transferred in
violation of any of the provisions set forth in this Option Agreement or (b) to
treat as owner of such shares or to accord the right to vote as such owner or to
pay dividends to any transferee to whom such shares will have been so
transferred.
14. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
15. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in Section
8.2 in connection with a Transfer of Control, no such termination or amendment
may adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.
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16. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature or at such other
address as such party may designate in writing from time to time to the other
party.
17. INTEGRATED AGREEMENT. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein or therein,
and there are no agreements, understandings, restrictions, representations, or
warranties among the Optionee and the Participating Company Group with respect
to such subject matter other than those as set forth or provided for herein or
therein. To the extent contemplated herein or therein, the provisions of this
Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.
18. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
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INVITROGEN CORPORATION
By:
---------------------------
Title:
------------------------
Address:
1600 Faraday
Carlsbad, CA 92008
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Plan.
OPTIONEE
Date:
---------------------------------------- ------------------------------
Optionee Address:
------------------------------
------------------------------
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INVITROGEN CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. Invitrogen Corporation hereby establishes the
1998 Employee Stock Purchase Plan (the "PLAN"), effective as of the effective
date of the initial registration by the Company of its Stock under Section 12 of
the Securities Exchange Act of 1934, as amended (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Company and its stockholders by providing an incentive to attract, retain
and reward Eligible Employees of the Participating Company Group and by
motivating such persons to contribute to the growth and profitability of the
Participating Company Group. The Plan provides such Eligible Employees with an
opportunity to acquire a proprietary interest in the Company through the
purchase of Stock. The Company intends that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code (including any amendments or
replacements of such section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan but
defined for purposes of Section 423 of the Code shall have the same definition
herein. Whenever used herein, the following terms shall have their respective
meanings set forth below:
(a) "BOARD" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means the Compensation Committee, or another
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
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(d) "COMPANY" means Invitrogen Corporation., a Delaware
corporation, or any successor corporation thereto.
(e) "COMPENSATION" means, with respect to any Offering Period,
base wages or salary, commissions, overtime, bonuses, annual awards, other
incentive payments, shift premiums, and all other compensation paid in cash
during such Offering Period before deduction for any contributions to any plan
maintained by a Participating Company and described in Section 401(k) or Section
125 of the Code. Compensation shall not include reimbursements of expenses,
allowances, long-term disability, workers' compensation or any amount deemed
received without the actual transfer of cash or any amounts directly or
indirectly paid pursuant to the Plan or any other stock purchase or stock option
plan, or any compensation other than base wages or salary.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets the
requirements set forth in Section 5 for eligibility to participate in the Plan.
(g) "EMPLOYEE" means a person treated as an employee of a
Participating Company for purposes of Section 423 of the Code. A Participant
shall be deemed to have ceased to be an Employee either upon an actual
termination of employment or upon the corporation employing the Participant
ceasing to be a Participating Company. For purposes of the Plan, an individual
shall not be deemed to have ceased to be an Employee while such individual is on
any military leave, sick leave, or other bona fide leave of absence approved by
the Company of ninety (90) days or less. In the event an individual's leave of
absence exceeds ninety (90) days, the individual shall be deemed to have ceased
to be an Employee on the ninety-first (91st) day of such leave unless the
individual's right to reemployment with the Participating Company Group is
guaranteed either by statute or by contract. The Company shall determine in
good faith and in the exercise of its discretion whether an individual has
become or has ceased to be an Employee and the effective date of such
individual's employment or termination of employment, as the case may be. For
purposes of an individual's participation in or other rights, if any, under the
Plan as of the time of the Company's determination, all such determinations by
the Company shall be final, binding and conclusive, notwithstanding that the
Company or any governmental agency subsequently makes a contrary determination.
(h) "FAIR MARKET VALUE" means, as of any date, if there is then
a public market for the Stock, the closing price of a share of Stock (or the
mean of the closing bid and asked prices if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, the Nasdaq Small-Cap Market or such other
national or regional securities exchange or market system constituting the
primary market for the Stock, as reported in THE WALL STREET JOURNAL or such
other source as the Company deems reliable. If the relevant date does not fall
on a day on which the Stock has traded on such securities exchange or market
system, the date on which the Fair Market Value shall be established shall be
the last day on which the Stock was so traded prior to the relevant date, or
such other appropriate day as shall be determined by the Board, in its sole
discretion. If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board. Notwithstanding
the foregoing, the Fair Market Value per share of Stock on the Effective Date
shall be deemed to be the public offering
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price set forth in the final prospectus filed with the Securities and Exchange
Commission in connection with the public offering of the Stock on the Effective
Date.
(i) "OFFERING" means an offering of Stock as provided in
Section 6.
(j) "OFFERING DATE" means, for any Offering, the first day of
the Offering Period with respect to such Offering.
(k) "OFFERING PERIOD" means a period established in accordance
with Section 6.1.
(l) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPANT" means an Eligible Employee who has become a
participant in an Offering Period in accordance with Section 7 and remains a
participant in accordance with the Plan.
(n) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation designated by the Board as a corporation
the Employees of which may, if Eligible Employees, participate in the Plan. The
Board shall have the sole and absolute discretion to determine from time to time
which Parent Corporations or Subsidiary Corporations shall be Participating
Companies. Invitrogen BV, the Company's Netherlands subsidiary shall be a
Participating Company unless and until the Board decides otherwise.
(o) "PARTICIPATING COMPANY GROUP" means, at any point in time,
the Company and all other corporations collectively which are then Participating
Companies.
(p) "PURCHASE DATE" means, for any Purchase Period, the last
day of such period.
(q) "PURCHASE PERIOD" means a period, if any, established in
accordance with Section 6.2.
(r) "PURCHASE PRICE" means the price at which a share of Stock
may be purchased under the Plan, as determined in accordance with Section 9.
(s) "PURCHASE RIGHT" means an option granted to a Participant
pursuant to the Plan to purchase such shares of Stock as provided in Section 8,
which the Participant may or may not exercise during the Offering Period in
which such option is outstanding. Such option arises from the right of a
Participant to withdraw any accumulated payroll deductions of the Participant
not previously applied to the purchase of Stock under the Plan and to terminate
participation in the Plan at any time during an Offering Period.
(t) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.
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(u) "SUBSCRIPTION AGREEMENT" means a written agreement in such
form as specified by the Company, stating an Employee's election to participate
in the Plan and authorizing payroll deductions under the Plan from the
Employee's Compensation.
(v) "SUBSCRIPTION DATE" means the last business day prior to
the Offering Date of an Offering Period or such earlier date as the Company
shall establish.
(w) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular.
Use of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan, of any form of
agreement or other document employed by the Company in the administration of the
Plan, or of any Purchase Right shall be determined by the Board and shall be
final and binding upon all persons having an interest in the Plan or the
Purchase Right. Subject to the provisions of the Plan, the Board shall
determine all of the relevant terms and conditions of Purchase Rights granted
pursuant to the Plan; provided, however, that all Participants granted Purchase
Rights pursuant to the Plan shall have the same rights and privileges within the
meaning of Section 423(b)(5) of the Code. All expenses incurred in connection
with the administration of the Plan shall be paid by the Company.
3.2 AUTHORITY OF OFFICERS. Any officer of the Company shall have
the authority to act on behalf of the Company with respect to any matter, right,
obligation, determination or election that is the responsibility of or that is
allocated to the Company herein, provided that the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
3.3 POLICIES AND PROCEDURES ESTABLISHED BY THE COMPANY. The Company
may, from time to time, consistent with the Plan and the requirements of Section
423 of the Code, establish, change or terminate such rules, guidelines,
policies, procedures, limitations, or adjustments as deemed advisable by the
Company, in its sole discretion, for the proper administration of the Plan,
including, without limitation, (a) a minimum payroll deduction amount required
for participation in an Offering, (b) a limitation on the frequency or number of
changes permitted in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, (d) a payroll deduction greater than or less than the amount
designated by a Participant in order to adjust for the Company's delay or
mistake in processing a Subscription Agreement or in otherwise effecting a
Participant's election under the Plan or as advisable to comply with the
requirements
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of Section 423 of the Code, and (e) determination of the date and manner by
which the Fair Market Value of a share of Stock is determined for purposes of
administration of the Plan.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two hundred fifty thousand (250,000) and
shall consist of authorized but unissued or reacquired shares of Stock, or any
combination thereof. If an outstanding Purchase Right for any reason expires or
is terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan and each Purchase
Right and in the Purchase Price. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Purchase Rights are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event) shares of another corporation (the "NEW SHARES"), the
Board may unilaterally amend the outstanding Purchase Rights to provide that
such Purchase Rights are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the Purchase Price of, the
outstanding Purchase Rights shall be adjusted in a fair and equitable manner, as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded down to the nearest whole number, and in no event may the
Purchase Price be decreased to an amount less than the par value, if any, of the
stock subject to the Purchase Right. The adjustments determined by the Board
pursuant to this Section 4.2 shall be final, binding and conclusive.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Each Employee of a
Participating Company is eligible to participate in the Plan and shall be deemed
an Eligible Employee except for any Employee who has not completed six months of
continuous employment with a Participating Company as of the commencement of an
Offering Period.
5.2 EXCLUSION OF CERTAIN STOCKHOLDERS. Notwithstanding any
provision of the Plan to the contrary, no Employee shall be granted a Purchase
Right under the Plan if, immediately after such grant, such Employee would own
or hold options to purchase stock of the Company or of any Parent Corporation or
Subsidiary Corporation possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of such corporation, as
determined in accordance with Section 423(b)(3) of the Code. For purposes of
this Section 5.2, the attribution rules of Section 424(d) of the Code shall
apply in determining the stock ownership of such Employee.
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6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below, the Plan
shall be implemented by sequential Offerings of approximately twenty-four (24)
months duration (an "OFFERING PERIOD"). The first Offering Period shall
commence on the Effective Date and end on January 31, 2001. Subsequent Offering
Periods shall commence on the first day of February, May, August, and November
of each year and end on the last day of the 24th month of such Offering Period.
Notwithstanding the foregoing, the Board may establish a different duration for
one or more future Offering Periods or different commencing or ending dates for
such Offering Periods; provided, however, that no Offering Period may have a
duration exceeding twenty-seven (27) months. If the first or last day of an
Offering Period is not a day on which the national or regional securities
exchange or market system constituting the primary market for the Stock is open
for trading, the Company shall specify the trading day that will be deemed the
first or last day, as the case may be, of the Offering Period.
6.2 PURCHASE PERIODS. Generally, each Offering Period will consist
of eight (8) quarterly Purchase Periods which begin on the first day of
February, May, August and November of each year and end on the last day of the
third month of each such Purchase Period (i.e. the following April, July,
October and January). The Purchase Period commencing on the Effective Date
shall end on the last day of April, 1999. The Board may establish different
Purchase Periods which may consist of two (2) or more consecutive Purchase
Periods having such duration as the Board shall specify. The last day of each
Purchase Period shall be a Purchase Date. If the first or last day of a
Purchase Period is not a day on which the national or regional securities
exchange or market system constituting the primary market for the Stock is open
for trading, the Company shall specify the trading day that will be deemed the
first or last day, as the case may be, of the Purchase Period.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee may become a
Participant in an Offering Period by delivering a properly completed
Subscription Agreement to the office designated by the Company not later than
the close of business for such office on the Subscription Date established by
the Company for such Offering Period. An Eligible Employee who does not deliver
a properly completed Subscription Agreement to the Company's designated office
on or before the Subscription Date for an Offering Period shall not participate
in the Plan for that Offering Period or for any subsequent Offering Period
unless such Eligible Employee subsequently delivers a properly completed
Subscription Agreement to the appropriate office of the Company on or before the
Subscription Date for such subsequent Offering Period. An Employee who becomes
an Eligible Employee after the Offering Date of an Offering Period shall not be
eligible to participate in such Offering Period but may participate in any
subsequent Offering Period provided such Employee is still an Eligible Employee
as of the Offering Date of such subsequent Offering Period.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the next Offering Period commencing immediately after the final
Purchase Date of each Offering
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Period in which the Participant participates provided that such Participant
remains an Eligible Employee on the Offering Date of the new Offering Period and
has not either (a) withdrawn from the Plan pursuant to Section 12.1 or
(b) terminated employment as provided in Section 13. A Participant who may
automatically participate in a subsequent Offering Period, as provided in this
Section, is not required to deliver any additional Subscription Agreement for
the subsequent Offering Period in order to continue participation in the Plan.
However, a Participant may deliver a new Subscription Agreement for a subsequent
Offering Period in accordance with the procedures set forth in Section 7.1 if
the Participant desires to change any of the elections contained in the
Participant's then effective Subscription Agreement.
7.3 ONE OFFERING PERIOD PER PARTICIPANT. A Participant may
participate in only one Offering Period at any given time. A Participant's
delivery to the Company of a Subscription Agreement for any given Offering
Period shall constitute Participant's withdrawal from any concurrent Offering
Period and termination of any Purchase Right granted pursuant thereto.
8. RIGHT TO PURCHASE SHARES.
8.1 GRANT OF PURCHASE RIGHT. Except as set forth below, on the
Offering Date of each Offering Period, each Participant in such Offering Period
shall be granted automatically a Purchase Right consisting of an option to
purchase the lesser of (a) that number of whole shares of Stock determined by
dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value of a share of
Stock on such Offering Date, reduced by the aggregate purchase price of any
Stock purchased during any concurrent Offering Period(s) or (b) five thousand
(5,000) shares of Stock, reduced by the number of shares of Stock purchased
during any concurrent Offering Period(s). No Purchase Right shall be granted on
an Offering Date to any person who is not, on such Offering Date, an Eligible
Employee.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
provisions of Section 8.1, if the Board establishes an Offering Period of any
duration other than twenty four months, then (a) the dollar amount in
Section 8.1 shall be determined by multiplying $2,083.33 by the number of months
(rounded to the nearest whole month) in the Offering Period and rounding to the
nearest whole dollar, and (b) the share amount in Section 8.1 shall be
determined by multiplying 208.33 shares by the number of months (rounded to the
nearest whole month) in the Offering Period and rounding to the nearest whole
share.
8.3 CALENDAR YEAR PURCHASE LIMITATION. Notwithstanding any
provision of the Plan to the contrary, no Participant shall be granted a
Purchase Right which permits his or her right to purchase shares of Stock under
the Plan to accrue at a rate which, when aggregated with such Participant's
rights to purchase shares under all other employee stock purchase plans of a
Participating Company intended to meet the requirements of Section 423 of the
Code, exceeds Twenty-Five Thousand Dollars ($25,000) in Fair Market Value (or
such other limit, if any, as may be imposed by the Code) for each calendar year
in which such Purchase Right is outstanding at any time. For purposes of the
preceding sentence, the Fair Market Value of shares purchased during a given
Offering Period shall be determined as of the Offering Date for such Offering
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Period. The limitation described in this Section 8.3 shall be applied in
conformance with applicable regulations under Section 423(b)(8) of the Code.
9. PURCHASE PRICE.
The Purchase Price at which each share of Stock may be acquired in an
Offering Period upon the exercise of all or any portion of a Purchase Right
shall be established by the Board; provided, however, that the Purchase Price
shall not be less than eighty-five percent (85%) of the lesser of (a) the Fair
Market Value of a share of Stock on the Offering Date of the Offering Period or
(b) the Fair Market Value of a share of Stock on the Purchase Date. Unless
otherwise provided by the Board prior to the commencement of an Offering Period,
the Purchase Price for that Offering Period shall be eighty-five percent (85%)
of the lesser of (a) the Fair Market Value of a share of Stock on the Offering
Date of the Offering Period, or (b) the Fair Market Value of a share of Stock on
the Purchase Date.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION.
Shares of Stock acquired pursuant to the exercise of all or any
portion of a Purchase Right may be paid for only by means of payroll deductions
from the Participant's Compensation accumulated during the Offering Period for
which such Purchase Right was granted, subject to the following:
10.1 AMOUNT OF PAYROLL DEDUCTIONS. Except as otherwise provided
herein, the amount to be deducted under the Plan from a Participant's
Compensation on each payday during an Offering Period shall be determined by the
Participant's Subscription Agreement. The Subscription Agreement shall set
forth the percentage of the Participant's Compensation to be deducted on each
payday during an Offering Period in whole percentages of not less than one
percent (1%) (except as a result of an election pursuant to Section 10.3 to stop
payroll deductions made effective following the first payday during an Offering)
or more than ten percent (10%). Notwithstanding the foregoing, the Board may
change the limits on payroll deductions effective as of any future Offering
Date.
10.2 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions shall
commence on the first payday following the Offering Date and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
herein.
10.3 ELECTION TO CHANGE OR STOP PAYROLL DEDUCTIONS. During an
Offering Period, a Participant may elect to increase or decrease the rate of or
to stop deductions from his or her Compensation by delivering to the Company's
designated office an amended Subscription Agreement authorizing such change on
or before the "Change Notice Date." The "CHANGE NOTICE DATE" shall be a date
prior to the beginning of the first pay period for which such election is to be
effective as established by the Company from time to time and announced to the
Participants. A Participant who elects to decrease the rate of his or her
payroll deductions to zero percent (0%) shall nevertheless remain a Participant
in the current Offering Period unless such Participant withdraws from the Plan
as provided in Section 12.1.
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10.4 ADMINISTRATIVE SUSPENSION OF PAYROLL DEDUCTIONS. The Company
may, in its sole discretion, suspend a Participant's payroll deductions under
the Plan as the Company deems advisable to avoid accumulating payroll deductions
in excess of the amount that could reasonably be anticipated to purchase the
maximum number of shares of Stock permitted during a calendar year under the
limit set forth in Section 8.3. Payroll deductions shall be resumed at the rate
specified in the Participant's then effective Subscription Agreement at the
beginning of the next Purchase Period the Purchase Date of which falls in the
following calendar year.
10.5 PARTICIPANT ACCOUNTS. Individual bookkeeping accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such Participant's Plan account and shall be
deposited with the general funds of the Company. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose.
10.6 NO INTEREST PAID. Interest shall not be paid on sums deducted
from a Participant's Compensation pursuant to the Plan.
10.7 VOLUNTARY WITHDRAWAL FROM PLAN ACCOUNT. A Participant may
withdraw all or any portion of the payroll deductions credited to his or her
Plan account and not previously applied toward the purchase of Stock by
delivering to the Company's designated office a written notice on a form
provided by the Company for such purpose. A Participant who withdraws the
entire remaining balance credited to his or her Plan account shall be deemed to
have withdrawn from the Plan in accordance with Section 12.1. Amounts withdrawn
shall be returned to the Participant as soon as practicable after the withdrawal
and may not be applied to the purchase of shares in any Offering under the Plan.
The Company may from time to time establish or change limitations on the
frequency of withdrawals permitted under this Section, establish a minimum
dollar amount that must be retained in the Participant's Plan account, or
terminate the withdrawal right provided by this Section.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Plan and whose
participation in the Offering has not terminated before such Purchase Date shall
automatically acquire pursuant to the exercise of the Participant's Purchase
Right the number of whole shares of Stock determined by dividing (a) the total
amount of the Participant's payroll deductions accumulated in the Participant's
Plan account during the Offering Period and not previously applied toward the
purchase of Stock by (b) the Purchase Price. However, in no event shall the
number of shares purchased by the Participant during an Offering Period exceed
the number of shares subject to the Participant's Purchase Right. No shares of
Stock shall be purchased on a Purchase Date on behalf of a Participant whose
participation in the Offering or the Plan has terminated before such Purchase
Date.
11.2 PRO RATA ALLOCATION OF SHARES. In the event that the number of
shares of Stock which might be purchased by all Participants in the Plan on a
Purchase Date exceeds the number of shares of Stock available in the Plan as
provided in Section 4.1, the Company shall
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make a pro rata allocation of the remaining shares in as uniform a manner as
shall be practicable and as the Company shall determine to be equitable. Any
fractional share resulting from such pro rata allocation to any Participant
shall be disregarded.
11.3 DELIVERY OF CERTIFICATES. As soon as practicable after each
Purchase Date, the Company shall arrange the delivery to each Participant, as
appropriate, of a certificate representing the shares acquired by the
Participant on such Purchase Date; provided that the Company may deliver such
shares to a broker that holds such shares in street name for the benefit of the
Participant. Shares to be delivered to a Participant under the Plan shall be
registered in the name of the Participant, or, if requested by the Participant,
in the name of the Participant and his or her spouse, or, if applicable, in the
names of the heirs of the Participant.
11.4 RETURN OF CASH BALANCE. Any cash balance remaining in a
Participant's Plan account following any Purchase Date shall be refunded to the
Participant as soon as practicable after such Purchase Date. However, if the
cash to be returned to a Participant pursuant to the preceding sentence is an
amount less than the amount that would have been necessary to purchase an
additional whole share of Stock on such Purchase Date, the Company may retain
such amount in the Participant's Plan account to be applied toward the purchase
of shares of Stock in the subsequent Purchase Period or Offering Period, as the
case may be.
11.5 TAX WITHHOLDING. At the time a Participant's Purchase Right is
exercised, in whole or in part, or at the time a Participant disposes of some or
all of the shares of Stock he or she acquires under the Plan, the Participant
shall make adequate provision for the foreign, federal, state and local tax
withholding obligations of the Participating Company Group, if any, which arise
upon exercise of the Purchase Right or upon such disposition of shares,
respectively. The Participating Company Group may, but shall not be obligated
to, withhold from the Participant's compensation the amount necessary to meet
such withholding obligations.
11.6 EXPIRATION OF PURCHASE RIGHT. Any portion of a Participant's
Purchase Right remaining unexercised after the end of the Offering Period to
which the Purchase Right relates shall expire immediately upon the end of the
Offering Period.
11.7 REPORTS TO PARTICIPANTS. Each Participant who has exercised all
or part of his or her Purchase Right shall receive, as soon as practicable after
the Purchase Date, a report of such Participant's Plan account setting forth the
total payroll deductions accumulated prior to such exercise, the number of
shares of Stock purchased, the Purchase Price for such shares, the date of
purchase and the cash balance, if any, remaining immediately after such purchase
that is to be refunded or retained in the Participant's Plan account pursuant to
Section 11.4. The report required by this Section may be delivered in such form
and by such means, including by electronic transmission, as the Company may
determine.
12. WITHDRAWAL FROM THE PLAN.
12.1 VOLUNTARY WITHDRAWAL FROM THE PLAN. A Participant may withdraw
from the Plan by signing and delivering to the Company's designated office a
written notice of withdrawal on a form provided by the Company for such purpose.
Such withdrawal may be
10
<PAGE>
elected at any time prior to the end of an Offering Period. A Participant who
voluntarily withdraws from the Plan is prohibited from resuming participation in
the Plan in the same Offering from which he or she withdrew, but may participate
in any subsequent Offering by again satisfying the requirements of Sections 5
and 7.1. The Company may impose, from time to time, a requirement that the
notice of withdrawal from the Plan be on file with the Company's designated
office for a reasonable period prior to the effectiveness of the Participant's
withdrawal.
12.2 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's voluntary
withdrawal from the Plan pursuant to Sections 12.1 or 10.7 or an automatic
withdrawal pursuant to Section 12.3, the Participant's accumulated payroll
deductions which have not been applied toward the purchase of shares of Stock
shall be refunded to the Participant as soon as practicable after the
withdrawal, without the payment of any interest, and the Participant's interest
in the Plan shall terminate. Such accumulated payroll deductions to be refunded
in accordance with this Section may not be applied to any other Offering under
the Plan.
12.3 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market Value
of a share of Stock on a Purchase Date (other than the final Purchase Date of an
Offering Period) is less that the Fair Market Value of a share of Stock on the
Offering Date for such Offering Period, then every Participant shall
automatically be (a) withdrawn from such Offering Period after the acquisition
of shares of Stock on the Purchase Date and (b) enrolled in the new Offering
Period effective on its Offering Date. A Participant may elect not to be
automatically withdrawn from an Offering Period pursuant to this Section 12.2 by
delivering to the Company's designated office not later than the close of
business on the Offering Date of the new Offering Period a written notice
indicating such decision.
13. TERMINATION OF EMPLOYMENT OR ELIGIBILITY.
Upon a Participant's ceasing, prior to a Purchase Date, to be an
Employee of the Participating Company Group for any reason, including
retirement, disability or death, or the failure of a Participant to remain an
Eligible Employee, the Participant's participation in the Plan shall terminate
immediately. In such event, the payroll deductions credited to the
Participant's Plan account since the last Purchase Date shall, as soon as
practicable, be returned to the Participant or, in the case of the Participant's
death, to the Participant's legal representative, and all of the Participant's
rights under the Plan shall terminate. Interest shall not be paid on sums
returned pursuant to this Section 13. A Participant whose participation has
been so terminated may again become eligible to participate in the Plan by again
satisfying the requirements of Sections 5 and 7.1.
14. CHANGE IN CONTROL.
14.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more
11
<PAGE>
than fifty percent (50%) of the voting stock of the Company; (ii) a merger or
consolidation in which the Company is a party; (iii) the sale, exchange, or
transfer of all or substantially all of the assets of the Company; or (iv) a
liquidation or dissolution of the Company.
(b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
14.2 EFFECT OF CHANGE IN CONTROL ON PURCHASE RIGHTS. In the event of
a Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may assume the Company's rights and obligations under the Plan.
If the Acquiring Corporation elects not to assume the Company's rights and
obligations under outstanding Purchase Rights, the Purchase Date of the then
current Offering Period (or Purchase Period) shall be accelerated to a date
before the date of the Change in Control specified by the Board, but the number
of shares of Stock subject to outstanding Purchase Rights shall not be adjusted.
All Purchase Rights which are neither assumed by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control shall terminate and cease to be outstanding effective as of the date
of the Change in Control.
15. NONTRANSFERABILITY OF PURCHASE RIGHTS.
A Purchase Right may not be transferred in any manner otherwise than
by will or the laws of descent and distribution and shall be exercisable during
the lifetime of the Participant only by the Participant.
16. COMPLIANCE WITH SECURITIES LAW.
The issuance of shares under the Plan shall be subject to compliance
with all applicable requirements of federal, state and foreign law with respect
to such securities. A Purchase Right may not be exercised if the issuance of
shares upon such exercise would constitute a violation of any applicable
federal, state or foreign securities laws or other law or regulations or the
requirements of any securities exchange or market system upon which the Stock
may then be listed. In addition, no Purchase Right may be exercised unless
(a) a
12
<PAGE>
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan 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. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
17. RIGHTS AS A STOCKHOLDER AND EMPLOYEE.
A Participant shall have no rights as a stockholder by virtue of the
Participant's participation in the Plan until the date of the issuance of a
certificate for the shares purchased pursuant to the exercise of the
Participant's Purchase Right (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company). No
adjustment shall be made for dividends, distributions or other rights for which
the record date is prior to the date such certificate is issued, except as
provided in Section 4.2. Nothing herein shall confer upon a Participant any
right to continue in the employ of the Participating Company Group or interfere
in any way with any right of the Participating Company Group to terminate the
Participant's employment at any time.
18. LEGENDS.
The Company may at any time place legends or other identifying symbols
referencing any applicable federal, state or foreign securities law restrictions
or any provision convenient in the administration of the Plan on some or all of
the certificates representing shares of Stock issued under the Plan. The
Participant shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to a
Purchase Right in the possession of the Participant in order to carry out the
provisions of this Section.
19. NOTIFICATION OF SALE OF SHARES.
The Company may require the Participant to give the Company prompt
notice of any disposition of shares acquired by exercise of a Purchase Right
within two years from the date of granting such Purchase Right or one year from
the date of exercise of such Purchase Right. The Company may require that until
such time as a Participant disposes of shares acquired upon exercise of a
Purchase Right, the Participant shall hold all such shares in the Participant's
name (or, if elected by the Participant, in the name of the Participant and his
or her spouse but not in the name of any nominee) until the lapse of the time
periods with respect to such Purchase Right referred to in the preceding
sentence. The Company may direct that the certificates evidencing
13
<PAGE>
shares acquired by exercise of a Purchase Right refer to such requirement to
give prompt notice of disposition.
20. NOTICES.
All notices or other communications by a Participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.
21. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have
as members of the Board or officers or employees of the Participating Company
Group, members of the Board and any officers or employees of the Participating
Company Group to whom authority to act for the Board or the Company is delegated
shall be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.
22. AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time amend or terminate the Plan, except that
(a) such termination shall not affect Purchase Rights previously granted under
the Plan, except as permitted under the Plan, provided however that the Board
may terminate the Plan (and any Offerings and future Purchase Rights) on any
Purchase Date if the Board determines that such termination is in the best
interests of the Company and its stockholders; and (b) no amendment may
adversely affect a Purchase Right previously granted under the Plan (except to
the extent permitted by the Plan or as may be necessary to qualify the Plan as
an employee stock purchase plan pursuant to Section 423 of the Code or to obtain
qualification or registration of the shares of Stock under applicable federal,
state or foreign securities laws). In addition, an amendment to the Plan must
be approved by the stockholders of the Company within twelve (12) months of the
adoption of such amendment if such amendment would authorize the sale of more
shares than are authorized for issuance under the Plan or would change the
definition of the corporations that may be designated by the Board as
Participating Companies. In the event that the Board approves an amendment to
increase the number of shares authorized for issuance under the Plan (the
"ADDITIONAL SHARES"), the Board, in its sole discretion, may specify that such
Additional Shares may only be issued pursuant to Purchase Rights granted after
the date on which the
14
<PAGE>
stockholders of the Company approve such amendment, and such designation by the
Board shall not be deemed to have adversely affected any Purchase Right granted
prior to the date on which the stockholders approve the amendment.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing Invitrogen Corporation 1998 Employee Stock Purchase Plan was duly
adopted by the Board of Directors of the Company on _____________, 1998.
/s/ Joseph M. Fernandez
----------------------------------
Joseph M. Fernandez
15
<PAGE>
PLAN HISTORY
__________, 1998 Board adopts the Plan, with an initial reserve of _________
shares.
__________, 1998 Stockholders approve Plan, with an initial reserve of
________ shares.
<PAGE>
INVITROGEN CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
NAME (Please print): __________________________________________________
(Last) (First) (Middle)
/ / Original Application for the Offering Period beginning ___________, 199__.
/ / Change in Payroll Deduction rate effective with the pay period ending
_________, 199__.
I hereby elect to participate in the 1998 Employee Stock Purchase Plan
(the "PLAN") of Invitrogen Corporation (the "COMPANY") and subscribe to
purchase shares of the Company's Stock in accordance with this Subscription
Agreement and the Plan.
I hereby authorize payroll deductions in the amount of ________ percent
(in whole percentages not less than 1% (unless an election to stop deductions
is being made) or more than 10%) of my "COMPENSATION" on each payday
throughout the "OFFERING PERIOD" in accordance with the Plan. I understand
that these payroll deductions will be accumulated for the purchase of shares
of Stock at the applicable purchase price determined in accordance with the
Plan. I understand that, except as otherwise provided by the Plan, I will
automatically purchase shares on each Purchase Date under the Plan unless I
withdraw from the Plan by giving written notice on a form provided by the
Company or unless my employment terminates.
I understand that I will automatically participate in each subsequent
Offering that commences immediately after the last day of an Offering in
which I am participating until I withdraw from the Plan by giving written
notice on a form provided by the Company or I cease to be eligible to
participate in the Plan.
Shares I purchase under the Plan should be issued in the name(s) set
forth below. (Shares may be issued in the participant's name alone or
together with the participant's spouse as community property or in joint
tenancy.)
NAME(S): _______________________________________________________________
ADDRESS: _______________________________________________________________
MY SOCIAL SECURITY NUMBER: _____________________________________________
I agree to make adequate provision for the federal, state, local and
foreign tax withholding obligations, if any, which may arise upon my purchase
of shares under the Plan and/or my disposition of such shares. The Company
may, but will not be obligated to, withhold from my compensation the amount
necessary to meet such withholding obligations.
I agree that while I hold shares acquired under the Plan, unless
otherwise permitted by the Company, I will hold such shares in the name(s)
entered above (and not in the name of any nominee) for at least two years
from the first day of the Offering Period in which, and at least one year
from the Purchase Date on which, I acquired such shares (this restriction
only applies to the name(s) in which shares are held and does not affect the
ability to dispose of Plan shares).
I AGREE THAT I WILL NOTIFY THE CHIEF FINANCIAL OFFICER OF THE COMPANY IN
WRITING WITHIN 30 DAYS AFTER ANY SALE, GIFT, TRANSFER OR OTHER DISPOSITION OF
ANY KIND PRIOR TO THE END OF THE PERIODS REFERRED TO IN THE PRECEDING
PARAGRAPH (A "DISQUALIFYING DISPOSITION") OF ANY SHARES I PURCHASED UNDER THE
PLAN. I FURTHER AGREE THAT IF I DO NOT RESPOND WITHIN 30 DAYS OF THE DATE OF
A DISQUALIFYING DISPOSITION SURVEY DELIVERED TO ME, THE COMPANY MAY TREAT MY
NONRESPONSE AS MY NOTICE TO THE COMPANY OF A DISQUALIFYING DISPOSITION AND
MAY COMPUTE AND REPORT TO THE INTERNAL REVENUE SERVICE THE ORDINARY INCOME I
MUST RECOGNIZE UPON SUCH DISQUALIFYING DISPOSITION.
I am familiar with the provisions of the Plan and agree to participate
in the Plan subject to all of its provisions. I understand that the Board of
Directors of the Company reserves the right to terminate the Plan or to amend
the Plan and my right to purchase stock under the Plan to the extent provided
by the Plan. I understand that the effectiveness of this Subscription
Agreement is dependent upon my eligibility to participate in the Plan.
Date: _________________ Signature:___________________________________
17
<PAGE>
INVITROGEN CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
NAME (Please print): _____________________________________________________
(Last) (First) (Middle)
I hereby elect to withdraw from the Offering under Invitrogen
Corporation 1998 Employee Stock Purchase Plan (the "PLAN") which began on
______________, 19____ and in which I am currently participating (the
"CURRENT OFFERING").
ELECT EITHER A OR B BELOW:
/ / A. I elect to terminate immediately my participation in the Current
Offering and in the Plan.
I request that the Company cease all further payroll deductions from
my Compensation under the Plan (provided that I have given sufficient
notice prior to the next payday). I request that all payroll
deductions credited to my account under the Plan (if any) not
previously used to purchase shares under the Plan shall not be used to
purchase shares on the next Purchase Date of the Current Offering.
Instead, I request that all such amounts be paid to me as soon as
practicable. I understand that this election immediately terminates my
interest in the Current Offering and in the Plan.
/ / B. I elect to terminate my participation in the Current Offering and in
the Plan following my purchase of shares on the next Purchase Date of
the Current Offering.
I request that the Company cease all further payroll deductions from
my Compensation under the Plan (provided that I have given sufficient
notice prior to the next payday). I request that all payroll
deductions credited to my account under the Plan (if any) not
previously used to purchase shares under the Plan shall be used to
purchase shares on the next Purchase Date of the Current Offering to
the extent permitted by the Plan. I understand that this election will
terminate my interest in the Current Offering and in the Plan
immediately following such purchase. I request that any cash balance
remaining in my account under the Plan after my purchase of shares be
paid to me as soon as practicable.
I understand that by making this election I am terminating my interest
in the Plan and that no further payroll deductions will be made (provided
that I have given sufficient notice prior to the next payday) unless I elect
in accordance with the Plan to become a participant in another Offering under
the Plan by filing a new Subscription Agreement with the Company.
Date:______________________ Signature:_________________________________
18
<PAGE>
PATENT LICENSE AGREEMENT
This is a patent license agreement ("Agreement"), and effective as of July 1,
1998.
by and among
F. Hoffmann-La Roche Ltd, a Swiss corporation with offices at Grenzacherstrasse
124, CH-4070 Basel, Switzerland
and
Roche Molecular Systems, Inc., a Delaware corporation having an office at 1080
U.S. Highway 202, Branchburg Township, Somerville, New Jersey 08876-1760
(BOTH OF WHICH ARE REFERRED TO HEREIN AS "ROCHE"),
and
Invitrogen Corporation, a Delaware corporation with offices at 1600 Faraday
Avenue, Carlsbad, California 92008
(HEREINAFTER REFERRED TO AS "INVITROGEN")
***********************
BACKGROUND
A. ROCHE owns United States Patents Nos. 4,683,195, 4,683,202 and 4,965,188 and
the corresponding foreign counterpart patents and patent applications,
describing and claiming nucleic acid amplification processes including,
INTER ALIA, a process known as the polymerase chain reaction ("PCR")
process.
B. ROCHE also owns certain patents and patent applications, filed worldwide,
relating to purified natural, as well as recombinant, thermostable DNA
polymerases, as well as compositions including said polymerases, including
for example, DNA polymerases isolated from Thermus species and fragments and
mutants thereof.
C. ROCHE also owns United States Patent No. 5,075,216 and the corresponding
foreign counterpart patents and patent applications relating to sequencing
with Taq DNA polymerase.
D. ROCHE also owns United States Patent Nos. 5,407,800, 5,322,770 and 5,310,652
and the corresponding foreign counterpart patents and patent applications
relating, inter alia, to reverse transcription using a thermostable
polymerase.
E. The Perkin-Elmer Corporation ("P-E") has exclusive rights in certain fields,
including the field of research, pursuant to an agreement dated December 11,
1991 with ROCHE and has
Enzyme/PCR Research Products 1 v.2061097
<PAGE>
certain rights to grant sublicenses in said fields. Under separate
agreements between ROCHE and P-E and in consideration of a share of
royalties due hereunder, P-E has released ROCHE from so much of P-E's rights
in the aforementioned fields as is necessary for ROCHE to convey to
INVITROGEN the rights specified in this Agreement.
F. INVITROGEN wishes to obtain the right to make, use and sell to the research
and to other markets products covered by AMPLIFICATION PATENT RIGHTS,
POLYMERASE PATENT RIGHTS, RT AND RT-PCR PATENT RIGHTS and/or SEQUENCING
PATENT RIGHTS, as hereinafter defined.
G. In structuring the present Agreement, the Parties have considered the
possibility that novel polymerases may be developed by INVITROGEN (and
others) that are useful in, and that without a license from ROCHE,
INVITROGEN may not pass on to its customers the right to use said
polymerases in the PCR PROCESS, or in process covered by RT or RT-PCR PATENT
RIGHTS. It is INVITROGEN's desire to promote and sell such internally
developed, or licensed or purchased polymerases for use in the PCR PROCESS,
or in processes covered by RT and/or RT-PCR PATENT RIGHTS and to pass on to
the purchaser such a license and ROCHE is willing to permit INVITROGEN to do
so.
H. In addition, the parties take note that INVITROGEN may market the products
licensed hereunder in conjunction with other products, components or
materials, both separately or together, and in various package arrangements,
which may be useful in the PCR PROCESS, and/or processes covered by RT AND
RT-PCR PATENT RIGHTS. Taking this into consideration, for the mutual
convenience of the parties, the products on which INVITROGEN will pay a
royalty, that is the royalty base, will include those products on which
INVITROGEN will pay a royalty, that is the royalty base, will include those
products as specifically described below that are adapted for, promoted or
supported for use with the patent rights licensed herein. Futhermore, in an
effort to minimize customer confusion as to which INVITROGEN products in
fact permit the customer to practice the PCR PROCESS, and/or processes
covered by RT AND RT-PCR PATENT RIGHTS without additional licenses,
INVITROGEN agrees, as is further described below, to give special
consideration to the manner in which it promotes and sells its other
products which may be useful in the PCR PROCESS and/or processes covered by
RT AND RT-PCR PATENT RIGHTS but which are not specifically licensed by ROCHE
for that purpose.
NOW THEREFORE, for and in consideration of the mutual covenants contained
herein, ROCHE and INVITROGEN ("the Parties") agree as follows:
1. DEFINITIONS
For the purpose of this Agreement, and solely for that purpose, the terms set
forth hereinafter shall be defined as follows:
1.1 The term "AFFILIATE" of a designated party to this Agreement shall mean:
a) and organization of which fifty percent (50%) or more of the
voting stock is controlled or owned directly or indirectly by
either party to this Agreement;
Enzyme/PCR Research Products 2 v.2061097
<PAGE>
b) an organization which directly or indirectly owns or controls
fifty percent (50%) or more of the voting stock of either party to
this Agreement;
c) an organization, the majority ownership of which is directly or
indirectly common to the majority ownership of either party to
this Agreement; and
d) an organization under a), b), or c) above in which the amount of
said ownership is less than fifty percent (50%) and that amount is
the maximum amount permitted pursuant to the law governing the
ownership of said organization.
It is understood and agreed, however, that the term "AFFILIATE" shall not
include Genentech Inc., a Delaware corporation.
1.2 "AMPLIFICATION PATENT RIGHTS" shall mean the nucleic acid amplification
processes covered by United States Patent Nos. 4,683,195, 4,683,202 and
4,965,188, and those claims in foreign patents and patent applications
which correspond to issued claims in the above patents and which foreign
patents and patent applications claim priority from patent applications
on which the above patents are based, and access to which patents and
patent applications are necessary for INVITROGEN to manufacture, use and
sell products which include a label license under AMPLIFICATION PATENT
RIGHTS, in accordance with the rights granted in Sections 2.2 - 2.3
hereto.
1.3 "APPLICATION FIELDS" shall mean those fields listed in Appendix A.
1.4 "APPLICATIONS KIT" shall mean a LICENSED PRODUCT in combination with all
such other reagents, enzymes or other materials as are necessary to
perform a PCR-based assay or nucleic acid sequencing in the APPLICATION
FIELD for which it is sold.
1.5 "AUTHORIZED THERMAL CYCLER" shall mean a thermal cycler or temperature
cycling instrument whose use in automated performance of the PCR PROCESS
in the RESEARCH FIELD and APPLICATION FIELDS is covered by the up-front
fee component of a PCR PROCESS license. The up-front component of that
license may be purchased from P-E. Alternatively, the up-front component
of that license may be obtained through the purchase of thermal cycler(s)
or temperature cycling instrument(s) bearing a valid label conveying the
up-front PCR PROCESS license component.
1.6 "INVITROGEN ENZYME" shall mean any thermostable polymerase that is not a
ROCHE PATENTED ENZYME, is not within POLYMERASE PATENT RIGHTS, and is
developed by INVITROGEN or is purchased or licensed by INVITROGEN from a
third party, which enzyme may be used in or with the PCR PROCESS and/or
processes covered by RT AND RT-PCR PATENT RIGHTS. An enzyme shall not be
included in this definition if INVITROGEN demonstrates to ROCHE'S
satisfaction that said enzyme is in fact used predominantly for other
than the PCR PROCESS and/or processes covered by RT AND RT-PCR PATENT
RIGHTS. Unless excluded as provided herein, all sales of said INVITROGEN
ENZYMES are assumed to be for use in the PCR Process and/or processes
covered by RT AND RT-PCR PATENT RIGHTS.
Enzyme/PCR Research Products 3 v.2061097
<PAGE>
1.7 "LICENSED APPLICATION PRODUCT" shall mean a) an APPLICATIONS KIT for a
LICENSED APPLICATION FIELD or b) reagents, components or other materials
which are sold in connection with the sale of an APPLICATIONS KIT for a
LICENSED APPLICATION FIELD by INVITROGEN and which are adapted for or
promoted or supported for use by customers in PCR TESTING or nucleic acid
sequencing, or RT AND RT-PCR in APPLICATION FIELDS. As used herein, "PCR
testing" shall include all steps in the analysis of a sample for the
presence or absence of amplifiable nucleic acid from preparation of the
sample to detection and/or analysis of any amplified product.
1.8 "LICENSED FIELDS" shall mean the RESEARCH FIELD and those APPLICATION
FIELDS that are elected or added pursuant to Section 5 of this Agreement
("LICENSED APPLICATION FIELDS").
1.9 "LICENSED PRODUCT" shall mean:
a) a ROCHE PATENTED ENZYME or a INVITROGEN ENZYME used or sold in a
country where the use or sale of such ROCHE PATENTED ENZYME or
INVITROGEN ENZYME would infringe at least one VALID CLAIM of a
patent or patent application within AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS or RT AND RT-PCR PATENT RIGHTS; and/or
b) a ROCHE PATENTED ENZYME made, used or sold in a country where the
manufacture, use or sale thereof would infringe a VALID CLAIM of a
patent or patent application within POLYMERASE PATENT RIGHTS.
1.10 "LICENSED RESEARCH PRODUCTS" shall mean any product, including but not
limited to kits, which products consist of or contain a LICENSED PRODUCT
and may include all or some of the following components: buffers,
nucleotides, enzymes, or other reagents or materials. Notwithstanding
the foregoing, it is understood and agreed that such LICENSED RESEARCH
PRODUCT shall not contain, without ROCHE's specific approval, which
approval shall be strictly discretionary with ROCHE, nucleic acid
sequences homologous to the nucleic acid sequences of any human
infectious agent or pathogen.
1.11 "NET SALES" shall mean gross invoice amount less
a) discounts allowed and taken, in amounts customary in the trade,
and
b) sales and/or use taxes and/or duties for particular sales.
No allowance or deduction shall be made for commissions or fees
for collection, by whatever name known.
NET SALES shall be calculated on the basis of sales or transfers
to end users by INVITROGEN or an AFFILIATE or distributor. In the
event INVITROGEN is unable to account for sales to third-party end
users by its distributors, the NET SALES shall be calculated as
the sales price to such distributors multiplied by 1.67, which
factor
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represents a 40% margin allowed to the distributor. Sales to a
third party controlling, controlled by, or under common control
with INVITROGEN, or enjoying a special course of dealing with
INVITROGEN, shall be determined by reference to the listed or
published price for the product sold or transferred which would be
applicable in an arm's length transaction, with an unrelated third
party. In Japan, if INVITROGEN does not use a distributor, but
instead, sales are made to end users through a WHOLESALER, and
INVITROGEN is unable to account for sales to third-party end users
by said WHOLESALER in Japan, the Net Sales shall be calculated as
the sale price to such WHOLESALER multiplied by 1.20, which factor
represents a 17% margin allowed to the WHOLESALER in Japan.
INVITROGEN and ROCHE agree that ROCHE may amend this factor in the
event that market conditions change such that the prevailing
margin to WHOLESALERS differs from 17% by 2% or more.
1.12 "PCR PROCESS" shall mean the polymerase chain reaction (PCR)
process, which is one of the amplification processes covered by
AMPLIFICATION PATENT RIGHTS.
1.13 "POLYMERASE PATENT RIGHTS" shall mean
a) TAQ PATENT RIGHTS; and
b) those claims of those United States patents and patent
applications listed in Schedule 1 hereto, and those claims
in non-US patents and patent applications which claim
priority from the patents and patent applications on which
the patents and patent applications in Schedule 1 are
based, and access to which patents and patent applications
are necessary for INVITROGEN to manufacture, use and sell
ROCHE PATENTED ENZYMES, other than A TAQ REAGENT, in
accordance with the rights granted in Section 2.2. hereto.
1.14 "RESEARCH FIELD" shall mean the internal use by an end user of a
product solely in applications of the end user (or in applications
of the end user's customer, if the end user is performing contract
research) in scientific research and development; and by way of
example but not by way of limitation, expressly excludes:
a) reportable results generated from clinical applications in
humans or animals such as the detection or measurement,
treatment, prevention or mitigation of disease or other
health-related condition; the detection of pathogens,
detection of genetic disease or genetic predisposition to
disease; tissue transplantation typing; and parentage
determination;
b) the use of PCR to manufacture any products for sale;
c) the commercial application of Taggants, which shall be
defined herein to be the application of the PCR PROCESS to
identify any synthetic nucleotide sequence which has been
inserted, dispersed or applied into a product, substance or
organism in order to identify such product, substance or
organism or to convey other specific information;
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d) quality assurance and quality control, including without
limitation, conformance with specifications, purity, batch
to batch consistency whether performed internally or for
third parties on a commercial basis; and
e) Forensic and Human Identity Applications (as defined in
Appendix A);
f) Environmental Testing Applications (as defined in Appendix
A);
g) Agricultural Plant Applications (as defined in Appendix A);
h) Animal Identity Testing and Positive Trait Breeding
Applications (as defined in Appendix A);
i) Food Testing Applications (as defined in Appendix A).
1.15 "ROCHE PATENTED ENZYME" shall mean
a) a TAQ REAGENT; or
b) an enzyme the manufacture, use or sale of which would be
covered by at least one VALID CLAIM within paragraph (b) of
POLYMERASE PATENT RIGHTS and which ROCHE has agreed to
include in Schedule 2 hereto. Notwithstanding the
foregoing, the Parties understand and agree that ROCHE
shall not be obligated in any way to include any additional
patent rights to those currently listed in Schedule 1.
1.16 "ROYALTY UNIT" shall mean:
a) for a TAQ REAGENT, the equivalence to a unit of AmpliTaq
-Registered Trademark- DNA polymerase as described in
Appendix B, Section I;
b) for a ROCHE PATENTED ENZYME other than a TAQ REAGENT, and
for an INVITROGEN ENZYME, a unit of enzyme (as unit is
defined in INVITROGEN's product specification) multiplied
by the PCR EFFECTIVENESS RATIO as provided in Appendix B,
Section II.
1.17 "RT" shall mean reverse transcription.
1.18 "RT AND RT-PCR PATENT RIGHTS" shall mean those claims of United
States Patent Nos. 5,407,800, 5,322,770, and 5,310,652 and any
reissues thereof and those claims in foreign patents and patent
applications which correspond to issued claims in the above
patents and which foreign patents and patent applications claim
priority from the patent application(s) on which the '800, '770
and '652 patents are based, and access to which patents and patent
applications are necessary for INVITROGEN to manufacture, use and
sell ROCHE PATENTED ENZYMES and INVITROGEN ENZYMES in accordance
with the rights granted in Section 2.5 hereto.
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<PAGE>
1.19 "SEQUENCING PATENT RIGHTS" shall mean the claims of United States Patent
No. 5,075,216 and any reissue thereof and those claims in foreign patents
and patent applications which correspond to issued claims in the above
patent and which foreign patents and patent applications claim priority
from the patent application(s) on which the '216 patent is based, and
access to which patents and patent applications are necessary for
INVITROGEN to manufacture, use and sell products pursuant to section 2.4
hereto.
1.20 "TAQ PATENT RIGHTS" shall mean those claims of United States Patent Nos.
4,889,818 and 5,079,352 and any reissues and continuations thereof, but
not continuations in part of the above patents and patent applications,
and those claims in foreign patents and patent applications claiming
priority from a patent application which is a basis for any of the above
US patents or patent applications, which include within their scope a
polymerase encoded by THERMUS AQUATICUS DNA, but only to the extent that
such claims are necessary for INVITROGEN to manufacture, use and sell a
polymerase encoded by THERMUS AQUATICUS pursuant to Section 2.1 hereto,
except that these rights specifically exclude the "Stoffel Fragment"
(Lawyer, et. al. (1993) PCR Methods and Applications 2: 275-287) and the
"Abramson Mutant" (described in and additionally covered by US Patent No.
5,466,591).
1.21 "TAQ REAGENT" shall mean an enzyme the manufacture, use or sale of which
is covered by at least one VALID CLAIM within TAQ PATENT RIGHTS.
1.22 "TERRITORY" shall mean worldwide.
1.23 "VALID CLAIM" shall mean the claim of a patent or pending patent
application which has not been held invalid or otherwise unenforceable by
a court from which no appeal has or can be taken, or has not otherwise
finally been held unpatentable by the appropriate administrative agency.
1.24 "WHOLESALER" shall mean an agent who takes orders from end-user customers
for INVITROGEN products, purchases said products from INVITROGEN,
delivers the products to said customers and collects payment from the
end-user customers. The WHOLESALER does not perform other functions of a
distributor, such as, by way of example but not by way of exclusion,
marketing activities such as participating in trade shows, creating
product advertising, and presenting technical seminars, or pre- and
post-sale technical support of the products. ROCHE and INVITROGEN agree
that this definition is applicable only to the Japanese market.
2. GRANT TO INVITROGEN
2.1 LICENSES UNDER POLYMERASE PATENT RIGHTS
Upon the terms and subject to the conditions of this Agreement, ROCHE
hereby grants to INVITROGEN and INVITROGEN hereby accepts from ROCHE a
royalty bearing
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nonexclusive license in the TERRITORY, without the right to sublicense
except to its current AFFILIATES as specifically provided in Section 2.6,
as follows:
a) under TAQ PATENT RIGHTS, to manufacture, but not to have
manufactured, to use and to sell, strictly under INVITROGEN's or
its Affiliates' own Trademarks, Tradenames and/or label(s), TAQ
REAGENTS; and
b) under POLYMERASE PATENT RIGHTS, to manufacture, but not to have
manufactured, to use and to sell, strictly under INVITROGEN's or
its Affiliates' own Trademarks, Tradenames and/or label(s), ROCHE
PATENTED ENZYMES other than TAQ REAGENTS.
No rights are granted expressly, by implication or by estoppel under
AMPLIFICATION PATENT RIGHTS, SEQUENCING PATENT RIGHTS, RT- and RT-PCR
PATENT RIGHTS or any other ROCHE patent rights by the grant of this
Section.
2.2 LICENSE IN THE RESEARCH FIELD TO CONVEY A LABEL LICENSE AND TO PROMOTE
FOR USE IN PCR
A license under the AMPLIFICATION PATENT RIGHTS for automated performance
of the PCR PROCESS in the RESEARCH FIELD has an up-front fee component
based on the capacity of thermal cyclers used, and a running-royalty
component for each use of the process. In consideration of INVITROGEN's
payment of the license issuance fee and of royalties on sales of LICENSED
RESEARCH PRODUCTS, ROCHE hereby grants to INVITROGEN and INVITROGEN
accepts from ROCHE, in the TERRITORY, limited, nonexclusive rights,
without the right to sublicense except to its current AFFILIATES as
specifically provided in Section 2.6, as follows:
a) INVITROGEN is hereby authorized to sell, strictly under
INVITROGEN's or it Affiliates' own Trademarks, Tradenames and/or
label(s), LICENSED RESEARCH PRODUCTS with a label conveying to
end-user purchasers the running-royalty component of a license
under the AMPLIFICATION PATENT RIGHTS to use such LICENSED
RESEARCH PRODUCTS in or with the PCR PROCESS strictly for such
purchasers' own internal use in the RESEARCH FIELD in conjunction
with a thermal cycler whose use is covered by the up-front fee
component, either by payment to P-E or as purchased, and
b) INVITROGEN may promote LICENSED RESEARCH PRODUCTS for such use in
or with the PCR PROCESS in the RESEARCH FIELD. The up-front
component of the PCR license for research must be obtained by the
end user in order to have a complete license for the automated
performance of the PCR PROCESS. The up-front component may be
purchased from P-E. Alternatively, it may be obtained through the
purchase of thermal cycler(s) or temperature cycling instrument(s)
bearing a valid label conveying to purchasers the up-front
component of the license, that is, an "AUTHORIZED THERMAL CYCLER."
Enzyme/PCR Research Products 8 v.2061097
<PAGE>
INVITROGEN may use LICENSED RESEARCH PRODUCTS, on which it pays royalties
hereunder, in accordance with the terms of the label authorized in part a)
above.
2.3 LICENSE IN APPLICATION FIELDS TO CONVEY A LABEL LICENSE AND TO PROMOTE FOR
PCR
A license under the AMPLIFICATION PATENT RIGHTS for automated performance
of the PCR PROCESS in all or some of the APPLICATION FIELDS includes an
up-front fee component as described in Section 2.2 and a running royalty
component. In further consideration of INVITROGEN's payment of license
issuance fees and royalties on sales of LICENSED APPLICATION PRODUCTS,
ROCHE hereby grants to INVITROGEN and INVITROGEN accepts from ROCHE in the
TERRITORY, limited, nonexclusive rights, without the right to sublicense
except to its current AFFILIATES as specifically provided in Section 2.6 as
follows:
a) INVITROGEN is hereby authorized to sell, strictly under INVITROGEN's
or its Affiliates' own Trademarks, Tradenames and/or label(s),
APPLICATION KITS with a label conveying to end-user purchasers the
running-royalty component of a license under the AMPLIFICATION PATENT
RIGHTS to use such APPLICATION KITS in or with the PCR PROCESS
strictly for such purchasers' own internal use in the LICENSED
APPLICATION FIELDS in conjunction with a thermal cycler whose use is
covered by the up-front fee component, either by payment to P-E or as
purchased; and
b) INVITROGEN may promote LICENSED APPLICATION PRODUCTS for such use in
or with the PCR PROCESS in the LICENSED APPLICATION FIELDS. The
up-front component of the PCR license for APPLICATION FIELDS must be
obtained by the end user in order to have a complete license for the
automated performance of the PCR PROCESS. The up-front component may
be purchased from P-E. Alternatively, it may be obtained through the
purchase of thermal cycler(s) or temperature cycling instrument(s)
bearing a valid label conveying to purchasers the up-front component
of the license, that is, an "AUTHORIZED THERMAL CYCLER."
INVITROGEN may use APPLICATION KITS, on which it pays royalties hereunder,
in accordance with the terms of the label authorized in part a) above.
24. LICENSE IN THE RESEARCH FIELD AND LICENSED APPLICATION FIELDS TO CONVEY A
LABEL LICENSE AND TO PROMOTE FOR USE IN SEQUENCING.
In further consideration of INVITROGEN's payment of license issuance fees
and royalties on sales of LICENSED RESEARCH PRODUCTS and LICENSED
APPLICATION PRODUCTS, ROCHE hereby grants to INVITROGEN and INVITROGEN
accepts from ROCHE in the TERRITORY, limited nonexclusive rights, without
the right to sublicense except to its current AFFILIATES as specifically
provided in Section 2.6, as follows:
a) INVITROGEN is authorized to sell, strictly under INVITROGEN's or its
Affiliates' own Trademarks, Tradenames and/or labels(s)., LICENSED
RESEARCH PRODUCTS in the RESEARCH FIELD and APPLICATIONS KITS in the
LICENSED
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<PAGE>
APPLICATION FIELDS with a label conveying to end-user purchasers a
license under the SEQUENCING PATENT RIGHTS to use such LICENSED
RESEARCH PRODUCTS and APPLICATIONS KITS for such purchasers' own
internal use in sequencing without any rights under the AMPLIFICATION
PATENT RIGHTS in the RESEARCH FIELD or the LICENSED APPLICATION FIELDS
for which the APPLICATIONS KITS are sold; and
b) INVITROGEN may promote LICENSED RESEARCH PRODUCTS for use in the
RESEARCH FIELD and APPLICATIONS KITS for use in the LICENSED
APPLICATION FIELDS for which the APPLICATIONS KITS are sold in
processes within the SEQUENCING PATENT RIGHTS.
INVITROGEN may use LICENSED RESEARCH PRODUCTS and APPLICATIONS KITS, on
which it pays royalties hereunder, in accordance with the terms of the
label authorized in part a) above.
25. LICENSE IN THE RESEARCH FIELD AND LICENSED APPLICATION FIELDS TO CONVEY
RIGHTS TO PERFORM AND PROMOTE FOR USE IN RT AND RT-PCR
In further consideration of INVITROGEN's payment of license issuance fees
and royalties on sales of LICENSED RESEARCH PRODUCTS and LICENSED
APPLICATION PRODUCTS, ROCHE hereby grants to INVITROGEN and INVITROGEN
accepts from ROCHE in the TERRITORY, limited nonexclusive rights, without
the right to sublicense except to its current AFFILIATES as specifically
provided in Section 2.6, as follows:
a) INVITROGEN is authorized to sell, strictly under INVITROGEN's or its
Affiliates' own Trademarks, Tradenames and/or labels(s), LICENSED
RESEARCH PRODUCTS in the RESEARCH FIELD and APPLICATIONS KITS in the
LICENSED APPLICATION FIELDS which convey to the end-user purchasers a
license under RT AND RT-PCR PATENT RIGHTS to use such LICENSED
RESEARCH PRODUCTS and APPLICATIONS KITS for such purchasers' own
internal use in reverse transcription and reverse transcription
coupled with PCR amplification; and
b) INVITROGEN may promote LICENSED RESEARCH PRODUCTS for use in the
RESEARCH FIELD and APPLICATIONS KITS for use in the LICENSED
APPLICATION FIELDS in processes within RT AND RT-PCR PATENT RIGHTS.
INVITROGEN may use LICENSED RESEARCH PRODUCTS and APPLICATIONS KITS on
which it pays royalties hereunder, in accordance with the terms defined in
part a) above.
2.6 LIMITED RIGHT TO GRANT SUBLICENSES
a) INVITROGEN expressly acknowledges and agrees that the license pursuant
to this Agreement is personal to INVITROGEN alone, and INVITROGEN
shall have no right to sublicense, assign or otherwise transfer or
share its right, under this license. Notwithstanding the foregoing,
ROCHE hereby grants to INVITROGEN the right to sublicense current
INVITROGEN AFFILIATES, that is AFFILIATES of INVITROGEN
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<PAGE>
on the Effective Date of this Agreement. INVITROGEN hereby
accepts that right, and grants to all of its current
AFFILIATES, and on their behalf accepts, sublicenses as
provided herein. INVITROGEN's AFFILIATES shall not have the
right to grant further sublicenses to any other AFFILIATE or
third party.
b) INVITROGEN shall provide prior written notice to ROCHE of
AFFILIATES operating under its sublicense. Sublicenses to
AFFILIATES of INVITROGEN shall accord with all requirements of
this Agreement and shall include the following terms and
conditions:
i) That the sublicense is co-terminus with this Agreement
as to term and TERRITORY, except as provided below;
ii) To provide INVITROGEN with such complete and accurate
information as is necessary to calculate the NET SALES
of each sublicensed product sold or otherwise
transferred by such AFFILIATE;
iii) To grant to ROCHE the right to inspect under the terms
and conditions in Section 4.4; and
iv) To be bound by all terms and conditions of this
Agreement, including without limitation, the indemnity
provisions of Section 11.
Notwithstanding the foregoing, INVITROGEN shall remain
primarily responsible both for its and its sublicensed
AFFILIATES' performance under this Agreement.
c) Unless terminated sooner pursuant to Section 6 herein, any
sublicense to an AFFILIATE shall terminate immediately without
any notice or action on the part of INVITROGEN if:
i) Such sublicense no longer meets the definition of an
AFFILIATE set forth in Section 1.1 hereof; or
ii) INVITROGEN sells its business in LICENSED PRODUCTS to
another person.
In the event of termination on either of the bases set forth in
Section 2.6 c i) or ii) above, then all rights granted to and
obligations undertaken by the sublicensee and INVITROGEN under
such sublicense shall terminate immediately without any action
on the part of INVITROGEN, the AFFILIATE or ROCHE, except for
the rights and obligations surviving termination set forth in
Sections 6.7 and 6.8 herein, and INVITROGEN shall provide
written notice to ROCHE of such termination.
d) No sublicensed AFFILIATE shall have the right to assign or
otherwise transfer its sublicense in whole or in part to any
other AFFILIATE or third party, whether by written instrument
or by operation of law. An assignment of a sublicense in
Enzyme/PCR Research Products 11 v.2061097
<PAGE>
violation of the foregoing sentence shall include, but is not
limited to, either of the following occurrences:
i) The sale, directly or indirectly, to any third party of
a beneficial interest in fifty percent (50%) or more of
the outstanding voting securities of such AFFILIATE; or
ii) The issuance or sale to any third party of a class of
securities of INVITROGEN, the interest dividend or other
distribution on which is measured in substantial part by
the performance of such AFFILIATE such that such third
party, acting alone or in concert with other third
parties, become the beneficial owner of fifty percent
(50%) or more of such class of INVITROGEN securities.
e) Nothing herein shall prohibit INVITROGEN from distributing
LICENSED PRODUCTS on behalf of any sublicensed AFFILIATE.
2.7 Except as is specifically provided herein, this Agreement shall not
limit the rights of ROCHE in any way. It is specifically understood
that as between the Parties to this Agreement, ROCHE reserves the
right itself or through its AFFILIATES to practice under POLYMERASE
PATENT RIGHTS, SEQUENCING PATENT RIGHTS, RT AND RT-PCR PATENT RIGHTS
and AMPLIFICATION PATENT RIGHTS, including the PCR PROCESS itself, and
to sublicense, assign or otherwise transfer such rights to others for
any purpose whatsoever.
2.8 INVITROGEN shall affix to each particular LICENSED RESEARCH PRODUCT or
LICENSED APPLICATIONS PRODUCT licensed hereunder, either on a product
insert accompanying the product or on the product itself, one of the
labels described in Appendix C, as ROCHE shall direct, or such other
label as ROCHE may direct from time to time. Such changes in labeling
shall be subject to the approval of INVITROGEN, which shall not be
unreasonably withheld. As to the labels set forth in Appendix C,
INVITROGEN understands and agrees that the notices numbered 1 through
5 reflect ROCHE's present label licensing policy and shall be used on
the labels for INVITROGEN products as appropriate. In regard to any
changes in labels directed by ROCHE, INVITROGEN shall have a
reasonable time period over which to change its labels.
2.9 a) INVITROGEN hereby covenants that it shall sell, market and
otherwise promote products licensed hereunder in accordance
with the terms of this Agreement and it shall use its best
efforts, as described herein, and shall contractually require
all of its distributors to also use their best efforts, as
described herein, to ensure that these products are sold in
compliance with the letter and intent of this Agreement. To
that end, INVITROGEN and its distributors shall prominently
display in catalogues and brochures describing LICENSED
RESEARCH PRODUCTS and/or LICENSED APPLICATION PRODUCTS, the
label license statements as described in Section 2.8 and
Appendix C. Furthermore, in advertisements or any other
materials intended for distribution to third parties and
referring in any way to
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products licensed hereunder and the use of said products in the PCR PROCESS,
but in which it is not practical to include the complete label license
statements, INVITROGEN will include a comparable restriction on use as
follows:
"Purchase of this product [or product name] is accompanied by a limited
license to use it in the Polymerase Chain Reaction (PCR) process
[and RT or other as appropriate] for ["field"] in conjunction with a thermal
cycler whose use in the automated performance of the PCR process is covered
by the up-front license fee, either by payment to Perkin-Elmer or as
purchased, i.e., an authorized thermal cycler."
or other statement approved in writing by ROCHE.
b) INVITROGEN agrees that once it is notified by ROCHE or once it
independently becomes aware that a particular purchaser is using or
intends to use any product licensed herein in violation of AMPLIFICATION
PATENT RIGHTS, SEQUENCING PATENT RIGHTS, or RT AND RT-PCR PATENT RIGHTS,
INVITROGEN shall immediately notify said purchaser in writing that such
use is unlicensed and that a license for said use must be obtained from
ROCHE or P-E. INVITROGEN shall also require sublicensed AFFILIATES and
distributors to report to INVITROGEN any unlicensed activities of which
they become aware. INVITROGEN further agrees that continued or resumed
sales by INVITROGEN, a sublicensed AFFILIATE or a distributor, to a
particular purchaser of which INVITROGEN was previously notified or is
otherwise aware is distributing/using any licensed product in violation of
AMPLIFICATION PATENT RIGHTS, RT AND RT-PCR PATENT RIGHTS or SEQUENCING
PATENT RIGHTS, shall constitute a breach of this Agreement under Section 6.5
of the Agreement. A written certification by a distributor or purchaser which
is executed by an officer of said distributor or purchaser which officer may
legally bind the company, that it has ceased infringing the AMPLIFICATION
PATENT RIGHTS, RT AND RT-PCR PATENT RIGHTS and/or SEQUENCING PATENT RIGHTS
or, alternatively, that it does not infringe said patent rights, or a
written certification by INVITROGEN which is executed by an officer of
INVITROGEN which officer may legally bind INVITROGEN that sales to such
distributor or purchaser have ceased, shall be a cure under Section 6.5.
c) Pursuant to the foregoing general requirements, INVITROGEN shall, when it
receives an order for a LICENSED RESEARCH PRODUCT from any customer, which
INVITROGEN recognizes as significantly exceeding that customer's typical
usage requirements, contact the customer and specifically inform the
customer that the AMPLIFICATION PATENT RIGHTS, RT AND RT-PCR PATENT RIGHTS
and/or SEQUENCING PATENT RIGHTS conveyed to customer with the sale of such
LICENSED RESEARCH PRODUCT are limited for use by the customer for internal
research only and that no other rights under the AMPLIFICATION PATENT RIGHTS,
RT AND RT-PCR PATENT RIGHTS and/or SEQUENCING PATENT RIGHTS outside the
LICENSED FIELD are conveyed. Said customers shall be required to furnish a
written certification that customer intends to use said LICENSED RESEARCH
PRODUCT without violating the
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<PAGE>
AMPLIFICATION PATENT RIGHTS, RT AND RT-PCR PATENT RIGHTS or the SEQUENCING
PATENT RIGHTS.
d) INVITROGEN agrees that it shall provide to ROCHE a copy of each of its
notices to purchasers/distributors (as well as a copy of each
purchaser/distributor's certification of compliance) pursuant to this
Section 2.9.
e) The Parties understand and hereby agree that INVITROGEN shall have no
obligation to monitor or police its customers' payment of the up-front fee
component of a PCR license for research or the thermal cycler
"authorization" fee described in Section 1.5. INVITROGEN's obligations
hereinunder in regard to AUTHORIZED THERMAL CYCLERS shall be limited to
providing the label license as specified in Section 2.8 and Appendix C.
However, INVITROGEN agrees not to knowingly promote, directly or through
its distributors, the unlicensed use of PCR with the ROCHE PATENTED
ENZYMES or INVITROGEN ENZYMES in the RESEARCH FIELD or APPLICATION FIELDS
in thermal cyclers for which the up-front license fee has not been paid
(not authorized).
INVITROGEN and ROCHE agree that ROCHE will enforce its rights and will use
its best efforts to cause P-E to enforce its rights with regard to
customers of INVITROGEN using thermal cyclers that are not "authorized" in
the same manner ROCHE and P-E treat their own customers in the same
circumstances.
2.10 Roche hereby grants to INVITROGEN the right and INVITROGEN accepts and
agrees to credit ROCHE as the source of patent rights in INVITROGEN's
promotional materials, including for example advertisements, product
inserts and data sheets, intended for distribution to third parties as
follows:
"This product is sold under licensing arrangements with F. Hoffmann-La
Roche Ltd, Roche Molecular Systems, Inc. and The Perkin-Elmer
Corporation."
Such reference will be reasonably prominent and in materials (for example
catalogues) containing multiple product descriptions, will be directly
associated with information on each specific product covered by this
Agreement.
2.11 In accordance with Section 2.6 b iv), sublicenses granted by INVITROGEN
shall specifically require the sublicensee to comply with INVITROGEN's
obligations under Sections 2.7-2.10.
3. GRANT TO ROCHE
3.1 If INVITROGEN elects to market a INVITROGEN ENZYME or elects to license
third parties to make, use or sell a INVITROGEN ENZYME, ROCHE shall have
an option to negotiate a nonexclusive license to manufacture and sell
directly or through disributors such INVITROGEN ENZYME. INVITROGEN shall
notify ROCHE of its election to market or to license third parties to
market INVITROGEN Enzymes within thirty (30)
Enzyme/PCR Research Products 14 v.2061097
<PAGE>
days of INVITROGEN making such an election. ROCHE may exercise the
said option within three (3) years after the receipt of INVITROGEN's
notice. The terms of said licenses shall be negotiated in good faith
by the parties, taking into consideration the relevant market factors
typically considered in such agreements, but any negotiated royalty
shall not exceed 10% of the Net Selling Price of ROCHE to its
customers or distributors. The duration of said license shall be
commensurate with the term of the last to expire of any patent
covering ROCHE's customers' use of such enzyme without further payment
of any kind from end user customers to INVITROGEN or its licensor, if
there is one. If ROCHE does not exercise the option hereunder, ROCHE
shall nonetheless be entitled to a license to make, use or sell said
INVITROGEN ENZYME under the same terms and conditions as the most
favorable nonexclusive license granted by INVITROGEN.
3.2 Sublicenses granted by INVITROGEN are conditioned on the sublicensee's
making a grant equivalent to Section 3.1 to ROCHE.
4. ROYALTIES, RECORDS AND REPORTS
4.1 LICENSE ISSUANCE FEE
For the rights and privileges granted hereunder, INVITROGEN will pay to
P-E a nonrefundable, noncreditable License Issuance fee of *
upon execution of the Agreement.
4.2 ROYALTIES
For the rights and privileges granted under this Agreement, INVITROGEN
shall pay royalties on products licensed hereunder used by INVITROGEN or
its sublicensed AFFILIATES of sold, distributed, or otherwise transferred
by INVITROGEN or its sublicensed AFFILIATES (with or without payment), as
follows below, except as otherwise specifically modified by Section 5.2
and Appendix A:
a) for a ROCHE PATENTED ENZYME or an INVITROGEN ENZYME, *
for each such enzyme;
b) for LICENSED RESEARCH PRODUCTS and LICENSED APPLICATION PRODUCTS
that include ROCHE PATENTED ENZYMES and/or INVITROGEN ENZYME, *
c) for LICENSED RESEARCH PRODUCTS which contain neither ROCHE
PATENTED ENZYMES nor INVITROGEN ENZYMES *
Furthermore, the Parties further understand and agree that the royalty
rates provided in subsections a) though c) above shall apply *
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 15 v.2061097
<PAGE>
4.3 Royalties for sales prior to the signature of the Agreement as from the
first commercial sale of products licensed hereunder shall be reported
together with the first report due hereunder in accordance with Section
4.5.
4.4 INVITROGEN shall keep full, true and accurate books of account containing
all particulars which may be necessary for the purpose of showing the
amount payable by way of royalty or by way of any other provision under
this Agreement for itself and its sublicensed AFFILIATES. Such books and
the supporting data shall be open at all reasonable times, for three (3)
years following the end of the calendar year to which they pertain (and
access shall not be denied thereafter, if reasonably available), to the
inspection of an independent certified public accountant retained by
ROCHE for the purpose of verifying INVITROGEN's royalty statements or
INVITROGEN's compliance in other respects with this Agreement. If in
dispute, such records shall be kept until the dispute is settled. The
inspection of records shall be at ROCHE's sole cost unless the inspector
concludes that royalties reported by INVITROGEN for the period being
audited are understated by five percent (5%) or more from actual
royalties, in which case the costs and expenses of such inspection
shall be paid by INVITROGEN.
4.5 INVITROGEN shall within thirty (30) days after the first day of January,
April, July and October of each year deliver to the addresses provided
below a true and accurate royalty report. This report shall be in
accordance with the royalty report form attached hereto as Appendix D.
This report shall be on U.S./ex-U.S. basis and shall give such
particulars of the business conducted by INVITROGEN in the United States
and in territories other than the United States during the preceding
three (3) calendar months as are pertinent to an accounting for royalty
under this Agreement and shall include at least the following:
a) separately itemized quantities of products licensed hereunder that
are used, sold or otherwise transferred by INVITROGEN during those
three (3) months;
b) the ROYALTY UNITS of ROCHE PATENTED ENZYME(S) AND/OR INVITROGEN
ENZYME(S) in each product licensed hereunder and, for each
product, the calculation of ROYALTY UNITS if different from
"activity units" for said enzyme as advertised, marketed or sold
by INVITROGEN;
c) the NET SALES of each LICENSED RESEARCH PRODUCT and LICENSED
APPLICATION PRODUCT;
d) the calculation of net royalties based on a royalty rate as
defined in Section 4.2;
e) the net royalties due. If no royalties are due, it shall be so
reported.
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 16 v.2061097
<PAGE>
The correctness and completeness of each such report shall be attested to
in writing by the responsible financial officer of INVITROGEN's
organization or by INVITROGEN's external auditor or by the chairman or
other head of INVITROGEN's internal audit committee. With respect to
royalties due from sublicenses, attestation by INVITROGEN may be that it
has obtained from sublicensed AFFILIATES attestations complying with the
preceding sentence.
Simultaneously with the delivery of each such royalty report, INVITROGEN
shall pay to P-E the royalty and any other payments due under this
Agreement for the period covered by such report. All amounts payable
hereunder by INVITROGEN shall be payable in United States currency and
sent by the due date, together with the royalty report, to the following
address:
Applied Biosystems Division
The Perkin-Elmer Corporation
850 Lincoln Centre Drive
Foster City, California 94404, U.S.A.
Attn: Licensing Manager
or to such other address as P-E may designate. A copy of the royalty
report shall also be sent to:
Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501, U.S.A.
Attn: Licensing Manager
or to such other address as ROCHE may designate.
4.6 Royalties accruing on account of sales in countries other than the United
States shall be payable in United States dollars in amounts based on the
New York rate of exchange as quoted in The Wall Street Journal (WSJ) for
the last business day of each quarter. If the WSJ does not publish any
such rate, a comparable publication shall be agreed upon from time to
time by the parties, and with respect to each country for which such rate
is not published in the WSJ or in a comparable publication, the parties
shall use the applicable rate for such date by the appropriate
governmental agency in such country.
4.7 a) *
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 17 v.2061097
<PAGE>
b) *
4.8 Withholding tax, if any, levied on any royalty and/or on any other
payments to be paid hereunder, will be paid by INVITROGEN to the proper
taxing authority and proof of payment will be sent to P-E. Any such
withholding tax paid by INVITROGEN, will be fully credited against the
royalty due to P-E.
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 18 v.2061097
<PAGE>
4.9 Any amount not being paid by INVITROGEN when due will bear interest
of one and a half percent (1.5%) per month from the due date until
paid.
5. LICENSE IN ADDITIONAL FIELDS
5.1 INVITROGEN may elect at the time of execution of this Agreement, or
shall maintain an option, exercisable for five years from the
signature date of this Agreement, to add APPLICATION FIELDS to the
LICENSED FIELDS.
5.2 Appendix A specifies for each field to which this election and option
applies a license issuance fee, where applicable, and the applicable
royalty rate if such rate is different from that specified in Section
4.2, for each such field. Roche shall have the right to change said
license issuance fees and royalty rate after two years from the
signature of this Agreement for any field which has not become a
LICENSED FIELD pursuant to Section 5.3.
5.3 Each individual field in addition to RESEARCH FIELD will become a
LICENSED FIELD when the respective election and option has been
exercised and the specified license issuance fee for that field has
been paid.
6. TERM AND TERMINATION
6.1 This license is granted retroactively to INVITROGEN as from the date
of first commercial sale of LICENSED PRODUCTS, LICENSED RESEARCH
PRODUCTS and/or LICENSED APPLICATION PRODUCTS and will expire on the
expiration of the last to expire of the patents within AMPLIFICATION
PATENT RIGHTS, SEQUENCING PATENT RIGHTS, POLYMERASE PATENT RIGHTS, RT
AND RT-PCR PATENT RIGHTS to the extent a license of rights under any
of the foregoing surviving Patent Rights is being exercised pursuant
to Sections 2.1 - 2.5 hereto.
6.2 Notwithstanding any other Section of this Agreement, INVITROGEN may
terminate this Agreement for any reason on ninety (90) days' written
notice to ROCHE. If INVITROGEN elects to terminate this Agreement
pursuant to this section, it shall within thirty (30) days of said
notice to ROCHE, also notify each of its customers that INVITROGEN is
no longer licensed under AMPLIFICATION PATENT RIGHTS, POLYMERASE
PATENT RIGHTS, SEQUENCING PATENT RIGHTS or RT AND RT-PCR PATENT RIGHTS.
6.3 Notwithstanding any other section of this Agreement, ROCHE may
terminate this Agreement, effective immediately upon notice of
termination to INVITROGEN, in the event that a third party which is
licensed by ROCHE to manufacture products for use in PCR-based human
diagnostic testing acquires any interest, including but not limited to
an ownership interest, directly or indirectly, in INVITROGEN of 50% or
more.
6.4 The license granted hereunder to INVITROGEN and all sublicenses
granted by INVITROGEN to its AFFILIATES shall automatically terminate
upon i) an adjudication of INVITROGEN as bankrupt or insolvent, or
INVITROGEN's admission in writing of its
Enzyme/PCR Research Products 19 v.2061097
<PAGE>
inability to pay its obligations as they mature; or ii) an assignment
by INVITROGEN for the benefit of creditors; or iii) INVITROGEN's
applying for or consenting to the appointment of a receiver, trustee
or similar officer for any substantial part of its property or such
receiver, trustee or similar officer's appointment without the
application or consent of INVITROGEN, if such appointment shall
continue undischarged for a period of ninety (90) days; or iv)
INVITROGEN's instituting (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency arrangement, or similar
proceeding relating to INVITROGEN under the laws of any jurisdiction;
or v) the institution of any such proceeding (by petition, application
or otherwise) against INVITROGEN, if such proceeding shall remain
undismissed for a period of ninety (90) days or the issuance or levy
of any judgment, writ, warrant of attachment or execution or similar
process against a substantial part of the property of INVITROGEN, if
such judgment, writ, or similar process shall not be released, vacated
or fully bonded within ninety (90) days after its issue or levy.
6.5 Upon any breach or default of a material term under this Agreement by
INVITROGEN or an AFFILIATE sublicensed by INVITROGEN, this Agreement
may be terminated upon ninety (90) days, written notice to INVITROGEN.
Said notice shall become effective at the end of the ninety-day
period, unless during said period INVITROGEN fully cures such breach
or default and notifies ROCHE of such cure. Such 90-day cure period
shall not apply to any uncontested royalty payments due, which
uncontested payments must be made in accordance with the terms of this
Agreement.
6.6 Upon termination of this Agreement as provided herein, INVITROGEN
shall immediately stop selling products licensed hereunder and all
rights and licenses granted to INVITROGEN by ROCHE hereunder and all
sublicenses granted by INVITROGEN shall automatically revert to or be
retained by ROCHE.
6.7 INVITROGEN's obligations to report to ROCHE and to pay royalties as to
the sale of products licensed and sublicensed hereunder pursuant to
the Agreement prior to termination or expiration of the Agreement
shall survive such termination or expiration.
6.8 Upon termination of this Agreement for any reason, INVITROGEN shall
destroy its inventory of all products licensed hereunder and confirm
such destruction in writing within ten days of the termination of the
Agreement.
7. ENFORCEMENT OF PATENTS
7.1 INVITROGEN shall advise ROCHE promptly, and shall furnish documentary
proof which is reasonably acceptable to ROCHE, upon its becoming aware
of substantial infringement by a third party or parties of an
enforceable patent right (1) within POLYMERASE PATENT RIGHTS by the
sale of "Significant Quantities" of unlicensed stand-alone enzymes in
any country in the TERRITORY, or (2) within AMPLIFICATION PATENT
RIGHTS by the sale of "Significant Quantities" of enzymes not within
POLYMERASE PATENT RIGHTS but which enzymes are actively promoted by
said third party or parties or their AFFILIATES or distributors for
use in AMPLIFICATION PATENT RIGHTS in any country in
Enzyme/PCR Research Products 20 v.2061097
<PAGE>
the TERRITORY. Upon receipt of said written information, ROCHE agrees it
shall, within its reasonable business judgment, take such action as is
required to restrain such infringement.
ROCHE shall be in full compliance with its obligations under this Section
7.1 if, within six (6) months of ROCHE having received said written
information from INVITROGEN about any one infringing party in a
particular country, (1) ROCHE notifies each third party identified by
such acceptable documentary proof of ROCHE's enforceable proprietary
position in the country where infringement is occurring and receives from
such third parties written assurances, which shall be executed by an
officer of each said third party capable of legally binding that party,
that it is not infringing ROCHE's rights, or (2) said infringement has
stopped, or (3) ROCHE has entered into good faith license negotiations
with such third parties, or (4) ROCHE has instituted or is prosecuting an
action for patent infringement against at least one infringing third
party seller which is active in said country. The above six-month period
may be extended with the consent of INVITROGEN.
It is agreed and understood that nothing in this Section 7.1 or this
Agreement shall require ROCHE to sue more than one party at a time or to
sue in more than one country at any one time.
For the purposes of the foregoing clauses, "Significant Quantities" of
unlicensed stand-alone enzymes shall mean (1) in the case of a single
third-party infringer in a particular country, at least 20%, or (2) in
the case of more than one third party seller in a particular country, at
least 40%, of total ROYALTY UNIT turnover, respectively, of all
stand-alone enzyme(s) within POLYMERASE PATENT RIGHTS or thermostable
enzymes not within POLYMERASE PATENT RIGHTS but which are "Actively
Promoted" for use in AMPLIFICATION PATENT RIGHTS, in each country. For
purposes of this Section 7.1, both Parties must agree as to the accuracy
of said 20% or 40% figures before ROCHE is obligated under this Section
7.1 to pursue any remedial course of action vis a vis any third party
with respect to sales of unlicensed stand-alone enzymes. Also, for
purposes of this particular paragraph, "Actively Promoted" shall mean
advertised or technically supported for use in AMPLIFICATION PATENT
RIGHTS.
If ROCHE is provided with the documentary proof of ongoing infringing
sales as above described and ROCHE does not within the six-month period
pursue one of the above options, INVITROGEN shall have the right at the
expiration of the six-month period, or such other period as the parties
have agreed, to reduce its royalty rate for royalties owed on stand-alone
ROCHE PATENTED ENZYMES and/or stand-alone INVITROGEN ENZYMES in said
country by 20%. It is understood and agreed that any royalty reduction
afforded INVITROGEN pursuant to this Section 7 applies only to sold as
stand-alone enzymes and not to kits containing said enzymes.
INVITROGEN's right to reduce its royalties shall terminate and INVITROGEN
shall resume paying full royalties in each country, as of the time (1)
all such parties in such country have either delivered the written
assurances described above or engaged in good
Enzyme/PCR Research Products 21 v.2061097
<PAGE>
faith license negotiations with ROCHE, provided that if said negotiations
do not conclude within one year, INVITROGEN may again abate its royalty
by 20% in the manner described above until the conclusion of a license
with said third party, or (2) the filing or prosecution of an
infringement suit against at least one such party in said country, or (3)
as a result of the written assurances received in accordance with the
foregoing or the conclusion of any licenses or litigations or otherwise,
infringement in fact ceases or is reduced to below "Significant
Quantities".
Notwithstanding the provisions of this Section 7.1, ROCHE and INVITROGEN
understand and specifically agree that nothing in this Section shall
reduce INVITROGEN's royalty *
7.2 Section 7.1 shall apply to sublicensed AFFILIATES and to INVITROGEN's
royalty obligations for sales of sublicensed AFFILIATES as if the
sublicensed AFFILIATES were INVITROGEN.
8. CONFIDENTIALITY-PUBLICITY
8.1 To the extent that, in literature for distribution to third parties,
INVITROGEN refers to ROCHE, P-E or the terms of this Agreement, solely by
specific inclusion of the clause provided in Section 2.10, ROCHE hereby
approves of such usage and no further ROCHE review or approval shall be
required for distribution of said literature. If INVITROGEN varies from
the agreed-to clause in Section 2.10, then INVITROGEN agrees to obtain
ROCHE's written approval prior to distributing any written information
including said modified reference to ROCHE, P-E or the terms of this
Agreement. ROCHE's approval shall not be unreasonably withheld or
delayed and, in any event, its decision shall be rendered within three
(3) weeks of receipt of the written information. Once approved, such
materials, or abstracts of such materials, which do not materially alter
the context of the material originally approved may be reprinted during
the term of the Agreement without further approval by ROCHE unless ROCHE
has notified INVITROGEN in writing of its decision to withdraw permission
for such use. Sublicenses are conditioned on the sublicensed AFFILIATES'
specific agreement to be bound by INVITROGEN's obligations under this
Section.
8.2 Each party agrees that any financial, legal or business information or
any technical information disclosed to it (the "Receiving Party") by the
other (the "Disclosing Party") and identified in writing as confidential
in connection with this Agreement shall be considered confidential and
proprietary and the Receiving Party shall not disclose same to any third
party and shall hold it in confidence for a period of five (5) years
following termination of this Agreement and will not use it other than as
permitted under this Agreement provided, however, that any information,
know-how or data which is orally disclosed to the Receiving Party shall
not be considered confidential and proprietary unless such oral
disclosure is reduced to writing and marked confidential and given to the
Receiving Party in written form within thirty (30) days after oral
disclosure thereof. Such confidential and proprietary information shall
include, without limitation, marketing and sales information,
commercialization plans and strategies, research and
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 22 v.2061097
<PAGE>
development work plans, and technical information such as patent
applications, inventions, trade secrets, systems, methods,
apparatus, designs, tangible material, organisms and products and
derivatives thereof. Notwithstanding the above, ROCHE shall have
the right to share royalty reports with P-E.
8.3 The above obligations of confidentiality shall not be applicable
to the extent that:
a) such information is general public knowledge or, after
disclosure hereunder, becomes general or public knowledge
through no fault of the Receiving Party; or
b) such information can be shown by the Receiving Party by its
written records to have been in its possession prior to
receipt thereof hereunder; or
c) such information is received by the Receiving Party from
any third party for use or disclosure by the Receiving
Party without any obligation to the Disclosing Party
provided, however, that information received by the
Receiving Party from any third party funded by the
Disclosing Party (e.g. consultants, subcontractors, etc.)
shall not be released from confidentiality under this
exception; or
d) the disclosure of such information is required or desirable
to comply with or fulfill governmental requirements,
submissions to governmental bodies, or the securing of
regulatory approvals.
8.4 Each party shall, to the extent reasonably practicable, maintain
the confidentiality of the provisions of this Agreement and shall
refrain from making any public announcement or disclosure of this
Agreement or its terms without the prior consent of the other
party, which consent shall not be unreasonably withheld, except to
the extent a party concludes in good faith that such disclosure is
required under applicable law or regulations, in which case the
other party shall be notified in advance.
9. ASSIGNMENT/TRANSFERABILITY
9.1 The rights and licenses granted by ROCHE to INVITROGEN in this
Agreement are personal to INVITROGEN and may not be assigned or
otherwise transferred, including without limitation any purported
assignment or transfer that would arise from a sale or transfer of
INVITROGEN's business (or any portion of said business). Any
attempted assignment or transfer shall be void and shall
automatically terminate all rights of INVITROGEN under this
Agreement.
9.2 ROCHE may assign all or any part of its rights and obligations
under this Agreement at any time without the consent of
INVITROGEN. INVITROGEN agrees to execute such further
acknowledgments or other instruments as ROCHE may reasonably
request in connection with such assignment.
Enzyme/PCR Research Products 23 v.2061097
<PAGE>
10. NEGATION OF WARRANTIES AND INDEMNITY
10.1 Nothing in this Agreement shall be construed as:
a) a warranty or representation by ROCHE as to the validity or
scope of any patent included within POLYMERASE PATENT
RIGHTS, AMPLIFICATION PATENT RIGHTS, SEQUENCING PATENT
RIGHTS or RT AND RT-PCR PATENT RIGHTS;
b) a warranty or representation that the practice of
POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS or RT AND RT-PCR PATENT RIGHTS is
or will be free from infringement of patents of third
parties;
c) an obligation to bring or prosecute actions or suits
against third parties for infringement, provided, however,
that this clause shall not alter INVITROGEN's rights and
ROCHE's obligations under Section 7.1;
d) except as expressly set forth herein, conferring the right
to use in advertising, publicity or otherwise any
trademark, trade name, or names, or any contraction,
abbreviation, simulation or adaptation thereof, of ROCHE or
P-E;
e) conferring by implication, estoppel or otherwise any
licenses, immunities or rights under any patents or patent
applications of ROCHE other than those specified in
POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS or RT AND RT-PCR PATENT RIGHTS,
regardless of whether such other patents or patent
applications are dominant or subordinate to those in
POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS or RT AND RT-PCR PATENT RIGHTS, or
under any thermal cycler or other instrument patent, or to
perform PCR in the thermal cycler that is not an AUTHORIZED
THERMAL CYCLER, or to make or sell any thermal cycler or
other instrument for the automated performance of the PCR
PROCESS;
f) an obligation to furnish any know-how not provided in
POLYMERASE PATENT RIGHTS, AMPLIFICATION PATENT RIGHTS,
SEQUENCING PATENT RIGHTS and RT AND RT-PCR PATENT RIGHTS;
or
g) creating any agency, partnership, joint venture or similar
relationship between ROCHE and/or P-E on the one hand, and
INVITROGEN on the other hand.
10.2 ROCHE MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
10.3 Notwithstanding the foregoing, ROCHE warrants and represents that
it has the right to grant the licenses provided in Sections 2 and
5.
10.4 The provisions of Section 10.1 and 10.2 regarding warranties and
representations by ROCHE shall be specifically included in any
sublicense granted by INVITROGEN.
Enzyme/PCR Research Products 24 v.2061097
<PAGE>
11. INDEMNITY
INVITROGEN shall assume full responsibility for its use of POLYMERASE
PATENT RIGHTS and for its sale of ROCHE PATENTED ENZYMES and
INVITROGEN ENZYMES and shall defend, indemnify and hold ROCHE and P-E
and their respective officers, directors, agents, employees and
stockholders, harmless from and against all liability, demands,
damages, expenses (including attorneys' and expert witness fees and
expenses) and losses for death, personal injury, illness or property
damage, or any other injury or damage arising out of the use by
INVITROGEN of the POLYMERASE PATENT RIGHTS or the preparation, use or
sale of LICENSED PRODUCTS, including but not limited to, use or
reliance upon such LICENSED PRODUCTS by customers of INVITROGEN.
12. *
13. GENERAL
13.1 This Agreement constitutes the entire agreement between INVITROGEN and
ROCHE as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into,
extinguished by and completely expressed by it. This Agreement may be
modified or amended only by a writing executed by authorized officers
of each of The Parties.
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 25 v.2061097
<PAGE>
Any notice required or permitted to be given by this Agreement shall
be given by postpaid, first class, registered or certified mail, or by
courier, properly addressed to the other party or parties at the
respective address as shown below.
If to ROCHE: F. Hoffmann-La Roche Ltd
Grenzacherstrasse 124
4070 Basel
Switzerland
Attn: Corporate Law Department
with a copy to: Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501
U.S.A.
Attn: Licensing Manager
If to INVITROGEN: Invitrogen Corporation
1600 Faraday Avenue
Carlsbad, California 92008
U.S.A.
Attn: Law Department
Either party may change its address by providing notice to the other
party. Unless otherwise specified herein, any notice given in
accordance with the foregoing shall be deemed given within four (4)
full business days after the day of mailing, or one full day after the
date of delivery to the courier, as the case will be.
13.2 GOVERNING LAW
This Agreement and its effect are subject to and shall be construed
and enforced in accordance with the laws of Switzerland
13.3 ARBITRATION
The Parties agree that all disputes arising from or in connection with
this Agreement, including disputes on its conclusion, binding effect,
amendment and termination, the exclusive jurisdiction and venue for
any such dispute or controversy shall be resolved, to the exclusion of
the ordinary courts, by an Arbitral Tribunal in accordance with the
International Arbitration Rules of the Zurich Chamber of Commerce.
13.4 Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any
conflict between any provision of this Agreement or concerning the
legal right of the parties to enter into this Agreement and any
statute, law, ordinance or treaty, the latter shall prevail, but in
such event the affected provisions of the Agreement shall be curtailed
and limited only to the extent necessary to bring it within the
applicable legal requirements.
Enzyme/PCR Research Products 26 v.2061097
<PAGE>
13.5 If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event,
all other provisions of this Agreement shall be deemed valid and
enforceable to the full extent possible.
IN WITNESS WHEREOF, The Parties hereto have set their hands and seals and
duly executed this Agreement on the date(s) indicated below.
Basel, F. HOFFMANN-LA ROCHE LTD
By: /s/ [ILLEGIBLE]
--------------------------------
Title: PCR Licensing Manager Signatory
----------------------------
Date: September 19, 1998
------------------------------
Branchburg, ROCHE MOLECULAR SYSTEMS, INC.
Apprv'd As To Form By: /s/ Kathy Ordonez
LAW DEPT. ---------------------------------------
Kathy Ordonez
By: [ILLEGIBLE]
---- Title: President
Date: July 27, 1998
-------------------------------------
INVITROGEN CORPORATION
By: /s/ Joseph M. Fernandez
---------------------------------------
Joseph M. Fernandez
Title: Vice President, Business Development
Date: 9/1/98
-------------------------------------
Enzyme/PCR Research Products 27 v.2061097
<PAGE>
S C H E D U L E 1
POLYMERASE PATENT RIGHTS(1)
4,889,818
5,079,352
5,352,600
USSN 07/873,897
USSN 08/384,490
- ----------------
(1) And those Ex-US patents and patent applications which claim priority from
the above-referenced US Patents and patent applications and access to which is
necessary for INVITROGEN to manufacture, use and sell the ROCHE PATENTED ENZYMES
specifically listed in Schedule 2 hereto. For the convenience of INVITROGEN,
Roche shall provide to INVITROGEN, from time to time as appropriate, an up-dated
list of its worldwide patent portfolio directed to POLYMERASE PATENT RIGHTS.
Enzyme/PCR Research Products 28 v.2061097
<PAGE>
S C H E D U L E 2
ROCHE PATENTED ENZYMES(1) licensed herein:
a) native Taq DNA Polymerase, full length, unmutated
b) recombinant Taq DNA Polymerase, full length, unmutated
c) Tth DNA Polymerase, full length, unmutated (native or recombinant)
- ----------------
(1) To the extent that any of the enzymes listed above may be covered by third
party patent rights, no rights under such third party patent are hereby
granted or implied.
Enzyme/PCR Research Products 29 v.2061097
<PAGE>
A P P E N D I X A
APPLICATIONS FIELDS
FORENSICS AND HUMAN IDENTITY APPLICATIONS
1. "Forensic and Human Identity Applications" shall mean the forensic
analysis of human genetic material for use in, or in preparation for,
legal proceedings, but shall exclude parentage determination except in
cases of sexual assault investigation. This field specifically excludes
tissue typing.
2. *
ENVIRONMENTAL TESTING APPLICATIONS
1. "Environmental Testing Applications" shall mean testing and monitoring
environmental samples, including, without limitation, for the purpose of
detecting the presence or absence or amount of any organism or
microorganism (including, without limitation, viruses and bacteria),
whether living, dead or extinct, or their remains.
2. *
AGRICULTURAL PLANT APPLICATIONS
1. "Agricultural Plant Applications" shall mean diagnostic applications in
plants, including, without limitation, the diagnosis of a disease or
condition, the diagnosis of susceptibility or resistance to a disease or
condition, or a choice of treatment of a disease or condition, the
determination of genetic traits for breeding purposes, or the
identification of a particular plant species.
2. *
ANIMAL IDENTITY TESTING AND POSITIVE TRAIT BREEDING APPLICATIONS
1. "Animal Identity Testing Applications" shall mean identity testing for
animals (other than humans) whether living, dead or extinct, or their
remains, including, without limitation, parentage determination.
"Positive Trait Breeding Applications" shall mean the determination of
genetic traits other than disease-related traits for breeding purposes.
2. *
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 30 v.2061097
<PAGE>
FOOD TESTING APPLICATIONS
1. "Food Testing Applications" shall mean the detection and/or analysis of
microorganisms in food or food/samples for quality assurance and quality
control purposes.
2. *
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 31 v.2061097
<PAGE>
APPENDIX B
ASSAY TO DETERMINE UNITS OF ENZYME
1. Taq DNA polymerase
Taq DNA polymerase manufactured by INVITROGEN ("INVITROGEN-Taq") shall be
assayed under the following conditions, in parallel with an assay of
Roche Molecular Systems' AmpliTaq-Registered Trademark- DNA polymerase
(P-E catalogue numbers N-801-0060, N-801-1012). The activity of
INVITROGEN-Taq and AmpliTaq thus measured by INVITROGEN shall be
normalized to the concentration stated by RMS for the AmpliTaq.
Unit Definition: One unit of enzyme is defined as the amount that
will incorporate 10nmoles of dNTPs into acid
insoluble material per 30 minutes at 74 deg. C under
the analysis conditions below.
Analysis conditions: 25mM TAPS (tris-(hydroxymethyl)-methyl-amino-
propane-sulfonic acid, sodium salt) pH 9.3 (at
25 deg. C); 50mM KCl; 2mM MgCl(2);
1mM Beta-mercaptoethanol; 200muM each dATP, dGTP,
dTTP; 100muM [infinity - (32)P]-dCTP (0.05 to
0.1 Ci/mmole); activated salmon sperm DNA, mixed in
a final volume of 50mul and incubated at 74 deg. C
for 10 minutes. The salmon sperm DNA is activated by
a modification of the methods in reference 1.
The assay mixture (without enzyme) is prepared fresh daily and 45mul
aliquots (0 deg. C) are mixed with 5mul of Taq DNA polymerase diluted in
25mM Tris-HCl pH 8, 50mM KCl, 100mug/ml autoclaved gelatin, 1mM
Beta-mercaptoethanol, 0.5% (w/v) NP40 and 0.5% (w/v) Tween20.
Reactions are initiated with addition of enzyme and placed at 74 deg. C.
Reactions are quenched after 10 minutes with the addition of 10mul of
60mM EDTA and placed at 0 deg. C. Aliquots (50mul) are diluted with 1ml
of 2mM EDTA containing 50mug/ml sheared salmon sperm DNA, and precipitated
by the addition of 1 ml 20% (w/v) trichloroacetic acid and 2% (w/v)
sodium pyrophosphate, and incubated at 0 deg. C for 15 min. Precipitated
DNA is collected on GF/C filter discs (2.4 cm) and washed extensively
with 5% trichloroacetic acid and 2% sodium pyrophosphate (7 x 5 ml), then
95% ethanol (5ml), dried and counted.
- ------------------------
(1) Richardson, C.C. 1966. DNA Polymerase from Escherichi coli. in PROCEDURES
IN NUCLEIC ACID RESEARCH eds. Cantoni G.L. and Davies, D.R. Harper &
Row, New York. p. 264.
Enzyme/PCR Research Products 32 v.2061097
<PAGE>
Activity concentration is determined from replicate assays (at least 3)
of replicate parallel, serial dilutions (at least 3) that yield 20-90
pMoles dCMP incorporation in the assay.
Activated salmon sperm DNA is used at a concentration that provides
linear incorporation values with 20-100 mU of enzyme. This DNA
concentration usually represents 12.5-20mug/assay.
II. INVITROGEN ENZYMES AND ROCHE PATENTED ENZYMES OTHER THAN TAQ DNA
POLYMERASE
INVITROGEN ENZYMES shall be assayed in reference to AmpliTaq DNA
polymerase (or another enzyme manufactured by ROCHE which is more
comparable to the particular INVITROGEN ENZYME) in a manner similar to
that described above. The analysis conditions shall be adapted to
reflect the optimal activity conditions for each such INVITROGEN ENZYME.
Further, the effectiveness of such enzyme in producing amplified DNA in
the PCR PROCESS shall be determined in comparison with AmpliTaq DNA
polymerase under the optimal conditions for each enzyme. This
determination shall be performed as follows:
TEMPLATE: Bacteriophage Lambda DNA
TARGET: The 500 basepair fragment of bacteriophage lambda DNA extending
from nucleotides 7131 to 7630 will be the target for amplification.
Note: The template and primers are available in the GeneAmp-Registered
Trademark- Lambda Control Reagents (Part No. N808-0008) from Perkin-Elmer.
PRIMERS:
5'-GATGAGTTCGTGTCCGTACAACTGG-3' (complement of - strand: Nucleotides
7131-7155)
5'-GGTTATCGAAATCAGCCACAGCGCC-3' (complement of + strand: Nucleotides
7606-7630)
CONDITIONS:
200muM each dATP, dCTP, dGTP, dTTP, 1ng/100mul. template, 1muM each primer.
For AmpliTaq DNA polymerase other components are: 10mM Tris-HCl pH8.3,
1.5mM MgCl(2) and 50mM KCl.
For INVITROGEN Enzyme, buffer pH and concentration, and MgCl(2) and KCl
concentrations should be optimized for the INVITROGEN enzyme.
Enzyme/PCR Research Products 33 v.2061097
<PAGE>
The PCR should be carried out for 25 cycles.
From the comparative yield of specific 500 basepair fragment, a "PCR
Effectiveness Ratio" will be derived to be used in determining the
ROYALTY UNIT as specified in Section 1.16. The Parties agree that
calculation of such a ratio is complex and the data supporting the
determination of the ratio must be reviewed and approved by ROCHE on a
case by case basis.
III. *
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
Enzyme/PCR Research Products 34 v.2061097
<PAGE>
APPENDIX C
NOTICES TO PURCHASER
1. LICENSE STATEMENT FOR USE ON ROCHE PATENTED ENZYMES AND INVITROGEN ENZYMES
DESIGNED AND SOLD FOR USE IN AMPLIFICATION PATENT RIGHTS AND/OR SEQUENCING
PATENT RIGHTS.
NOTICE TO PURCHASER: LIMITED LICENSE
A license under U.S. Patents 4,683,202, 4,683,195, 4,965,188, and 5,075,216
or their foreign counterparts, owned by Roche Molecular Systems, Inc. and
F. Hoffmann-La Rouche Ltd ("Roche"), has an up-front fee component and a
running-royalty component. The purchase price of this product includes
limited, nontransferable rights under the running-royalty component to use
only this amount of the product to practice the Polymerase Chain Reaction
("PCR") and related processes described in said patents solely for the
research and development activities of the purchaser when this product is
used in conjunction with a thermal cycler whose use is covered by the
up-front fee component. Rights to the up-front fee component must be
obtained by the end user in order to have a complete license to use this
product in the PCR process. These rights under the up-front fee component
may be purchased from Perkin-Elmer or obtained by purchasing an Authorized
Thermal Cycler. No right to perform or offer commercial services of any
kind using PCR, including without limitation reporting the results of
purchaser's activities for a fee or other commercial consideration, is
hereby granted by implication or estoppel. Further information on
purchasing licenses to practice the PCR Process may be obtained by
contacting the Director of Licensing at The Perkin-Elmer Corporation, 850
Lincoln Centre Drive, Foster City, California 94404 or at Roche Molecular
Systems, Inc., 1145 Atlantic Avenue, Alameda, California 94501.
2. LICENSED RESEARCH PRODUCTS DESIGNED AND SOLD FOR USE IN AMPLIFICATION
PATENT RIGHTS BUT NOT SUITABLE FOR USE IN SEQUENCING PATENT RIGHTS
NOTICE TO PURCHASER: LIMITED LICENSE
A license under U.S. Patents 4,683,202, 4,683,195 and 4,965,188 or their
foreign counterparts, owned by Roche Molecular Systems, Inc. and F.
Hoffmann-La Roche Ltd ("Roche"), has an up-front fee component and a
running-royalty component. The purchase price of this product includes
limited, nontransferable rights under the running-royalty component to use
only this amount of the product to practice the Polymerase Chain Reaction
("PCR") and related processes described in said patents solely for the
research and development activities of the purchaser when this product is
used in conjunction with a thermal cycler whose use is covered by the
up-front fee component. Rights to the up-front fee component must be
obtained by the end user in order to have a complete license. These rights
under the up-front fee component may be purchased from Perkin-Elmer or
obtained by purchasing an Authorized Thermal Cycler. No right to perform
or offer commercial services of any kind using PCR, including without
limitation reporting the results of
Enzyme/PCR Research Products 35 v.2061097
<PAGE>
purchaser's activities for a fee or other commercial consideration, is
hereby granted by implication or estoppel. Further information on
purchasing licenses to practice the PCR Process may be obtained by
contacting the Director of Licensing at The Perkin-Elmer Corporation, 850
Lincoln Centre Drive, Foster City, California 94404 or at Roche Molecular
Systems, Inc., 1145 Atlantic Avenue, Alameda, California 94501.
3. LICENSED RESEARCH PRODUCTS DESIGNED AND SOLD FOR USE IN SEQUENCING RIGHTS
NOTICE TO PURCHASER: LIMITED LICENSE
The purchase price of this product includes a limited, nontransferable
license under U.S. Patent 5,075,216 or its foreign counterparts, owned by
Roche Molecular Systems, Inc. and F. Hoffmann-La Roche Ltd ("Roche"), to
use only this amount of the product for DNA Sequencing and related
processes described in said patent solely for the research and development
activities of the purchaser. No license under these patents to use the PCR
process is conveyed expressly or by implication to the purchaser by the
purchase of this product. A license to use the PCR Process for certain
research and development activities accompanies the purchase of certain
reagents from licensed suppliers such as INVITROGEN when used in
conjunction with an Authorized Thermal Cycler, or is available from The
Perkin-Elmer Corporation. Further information on purchasing licenses to
practice the PCR Process may be obtained by contacting the Director of
Licensing at The Perkin-Elmer Corporation, 850 Lincoln Centre Drive, Foster
City, California 94404 or at Roche Molecular Systems, Inc., 1145 Atlantic
Avenue, Alameda, California 94501.
4. FOR USE ON RESEARCH PRODUCTS WHICH ARE NOT LICENSED RESEARCH PRODUCTS BUT
WHICH ARE SUPPORTED FOR USE IN PCR AND/OR WITH LICENSED RESEARCH PRODUCTS
NOTICE TO PURCHASER
This product is optimized for use in the Polymerase Chain Reaction ("PCR")
covered by patents owned by Roche Molecular Systems, Inc. and F.
Hoffmann-La Roche Ltd ("Roche"). No license under these patents to use the
PCR Process is conveyed expressly or by implication to the purchaser by the
purchase of this product. A license to use the PCR Process for certain
research and development activities accompanies the purchase of certain
reagents from licensed suppliers such as INVITROGEN when used in
conjunction with an authorized thermal cycler, or is available from The
Perkin-Elmer Corporation. Further information on purchasing licenses to
practice the PCR Process may be obtained by contacting the Director of
Licensing at The Perkin-Elmer Corporation, 850 Lincoln Centre Drive, Foster
City, California 94404 or at Roche Molecular Systems, Inc., 1145 Atlantic
Avenue, Alameda, California 94501.
5. Similar notices for use on products for RT and RT-PCR and for Licensed
Application Products will be provided as appropriate.
Enzyme/PCR Research Products 36 v.2061097
<PAGE>
SUMMARY ROYALTY REPORT APPENDIX D
for the Period _______ to ________ US or x-US: ___________
<TABLE>
<CAPTION>
Licensee: Invitrogen Corporation Field of Use: Enzyme/PCR Research Products
Effective Date: July 1, 1998 Royalty Rate: 15.5 cents/unit or 15% of Net Sales
- ------------------------------------------------------------------------------------------------------------------------------------
Units of Gross Invoice Discounts Number Royalty
Licensed Product Enzyme in Price of Allowed Net Sales of Product Determined on Royalty Due
Product Product (Explain) of Product Units Sold Enzyme or Net
Sales
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Check here if there were no sales for this period _______ TOTAL ROYALTY EARNED
-----------------------------------------------------
*Please attach supporting or supplemental data to this sheet. APPLICABLE CREDIT
-----------------------------------------------------
ROYALTY PAYMENT DUE
- ------------------------------------------------------------------------------------------------------------------------------------
I hereby certify the information set forth above is correct and complete with respect to the amounts due under
the applicable license agreement.
</TABLE>
By: Title: Date:
------------------------------ ---------------------- ---------
(authorized signature)
Name (PLEASE PRINT):
--------------------------------
Send to: Applied Biosystems Division, The Perkin-Elmer Corporation, 850 Lincoln
Centre Dr., Foster City, CA 94404
copy to: Roche Molecular Systems, Inc., 1145 Atlantic Avenue, Suite 100,
Alameda, CA 94501
Enzyme/PCR Research Products 37 v.2061097
<PAGE>
LICENSE AGREEMENT
This Agreement made this 10 day of May, 1990 by and between Molecular
Chimerics Corporation, a Wisconsin corporation doing business at 3802 Packers
Avenue, Madison, Wisconsin 53704 (hereinafter referred to as "LICENSOR"), and
Invitrogen, a California corporation having offices at 11588 Sorrento Valley
Road #20, San Diego, California 92121 (hereinafter referred to as "LICENSEE").
WHEREAS, LICENSOR has developed a proprietary cloning system for cloning
the products of PCR (polymerase chain reaction) procedures and maintains the
proprietary rights to this system;
WHEREAS, LICENSOR desires to have the technology incorporated in their
products sold throughout the world and recognizes that a successful marketing
effort requires advertising, manufacturing, warehousing, sales, distribution,
and customer service capability;
WHEREAS, LICENSEE manufactures, sells, and services products for molecular
biology research and has an established world-wide sales network and
distribution network; and
WHEREAS, LICENSEE desires to be licensed to sell the products which
incorporate the propietary cloning system developed by LICENSOR;
Therefore, in consideration of the mutual covenants contained herein,
LICENSOR and LICENSEE agree as follows:
ARTICLE 1 - DEFINITIONS
The following terms, when used in this Agreement, shall have the following
meanings:
1.1 "TA cloning" shall mean the proprietary direct cloning system
developed by LICENSOR for cloning the products of PCR processes including, but
not limited to, the preparation of vectors with a single thymidine overhang on
both ends to prevent self ligation and to accept DNA that has been synthesized
by Taq polymerase leaving a single adenine overhang.
1.2 "Know-how" and "trade secret" shall mean all information presently
known to LICENSOR which is necessary to manufacture and service kits for direct
TA cloning of PCR amplified DNA.
1.3 "Kit" shall mean a combination of reagents, enzymes, prepared vectors,
and instructions for TA cloning PCR amplified DNA directly without the addition
of linkers thereto.
<PAGE>
1.4 "Patent" shall mean any patents currently being considered, written,
or applied for based on the composition, process for manufacture, or
applications of the TA cloning technology.
1.5 "Net Domestic Sales" shall mean the revenues generated by sales of
LICENSOR's product in the United States less any legitimate refunds, returns,
or uncollectible bills derived from or resulting from sales of the kit.
1.6 "Net Foreign Sales" shall mean the revenues generated by sales of
LICENSOR's product outside of the United States less any legitimate refunds,
returns, or uncollectible bills derived from or resulting from the sales of the
kit.
ARTICLE 2 - GRANT OF RIGHTS
LICENSOR hereby grants to LICENSEE a field-of-use exclusive license to use
the TA cloning technology including the know-how and trade secrets appurtenant
thereto for the manufacture and sale of TA cloning products and kits anywhere in
the world. The field of use for which the license is granted is for kits and
reagents for the cloning of PCR amplified DNA products, *
LICENSOR specifically reserves the right to
*
If a
patent is filed or obtained through the procedure described in this Agreement,
such patent shall also be subject to the same field-of-use exclusive license
granted herein to the know-how and trade secret TA cloning technology.
ARTICLE 3 - PAYMENTS
3.1 Payment Schedule.
In consideration for the delivery of the know-how and trade secret
information relating to TA cloning to LICENSEE, and the grant of right to
manufacture and sell kits for TA cloning as described above, LICENSEE will
pay an initial licensing fee to LICENSOR of * , due and
payable in four (4) installments, * upon
delivery of the trade secret and know-how information to LICENSEE, and an
additional amount equal to * * due each successive
thirty (30) days thereafter. In addition, LICENSEE shall pay to LICENSOR a
royalty equal to * of net domestic sales of any reagents or kits
incorporating the TA cloning technology as described herein and *
* foreign sales of such regents or kits. The initial
licensing fee shall not be applied against subsequent royalty obligations.
If a patent is obtained covering the TA
* "Confidential portion has been omitted and filed separately with the
Commission."
-2-
<PAGE>
cloning technology, the royalty rate shall be * * of net
domestics sales and * * of net foreign sales of any such
reagents or kits during the term of said patent.
3.2 Payment of Royalties.
Royalty payments shall be made quarterly within sixty (60) days of the end
of each calendar quarter of the license.
3.3 Royalty Reports.
LICENSEE shall furnish to LICENSOR a written report stating the quantity
and description of kits sold by LICENSEE and the nature of sales, domestic or
foreign, and the returns, refunds, and uncollected bills resulting from or
derived from sales of said kits and such reports shall accompany each royalty
payment delivered from LICENSEE to LICENSOR.
ARTICLE 4 - PATENT
LICENSEE, at its discretion, may request LICENSOR to file an
application for a patent in the United Sates or Canada on the TA cloning
technology. If LICENSEE desires that such a patent be filed, LICENSEE agrees
to pay to LICENSOR the reasonable costs of their attorney's fees and expenses
in procuring said patent, said fees to be credited against royalties
otherwise due from LICENSEE to LICENSOR. If a patent actually issues in the
United States covering this product, the royalty amount for all kits covered
by the claims of any such U.S. patent owed by LICENSEE to LICENSOR shall be
adjusted as per Article 3 during the term of such patent.
ARTICLE 5 - DUTIES OF LICENSOR
LICENSOR agrees to inform LICENSEE in a confidential basis of any
innovations or improvements to TA cloning that could improve the kit or would
result in additional products. Should any additional products result from the
research conducted by LICENSOR relating to TA cloning in the field of use
described herein, LICENSOR shall grant to LICENSEE the right to negotiate in
good faith the right to market those products.
ARTICLE 6 - ATTRIBUTION
LICENSOR reserves the right to and intends to submit for publication a
scientific paper describing the TA cloning technology. If such a paper is
published, LICENSEE agrees, upon the written request of LICENSOR, to include a
citation to the published paper in any printed advertisements or printed
promotional pieces which LICENSEE may choose to print about its reagents or kits
for the TA cloning technology.
-3-
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
ARTICLE 7 - PATENTS TO OTHERS
LICENSOR expressly disclaims any warranty, express or implied, as to
whether the making, using or selling of reagents and kits using the TA
cloning technology might infringe any patents owned by any other entities.
ARTICLE 8 - TERM AND TERMINATION
8.1 Term
The term of this Agreement shall commence as of the date thereof and shall
expire on *
8.2 Termination
This Agreement may be terminated by either party effective immediately upon
written notice if:
(a) The other party has committed a material breach of the terms and
provisions of this Agreement, unless such breach has been cured within
thirty (30) days following written notice of said breach.
(b) The other party dissolves or liquidates, makes a general
assignment for the benefit of creditors, files a voluntary petition under
the federal estate bankruptcy or insolvency laws, or has filed against it a
petition which is not dismissed within ninety (90) days after filing.
8.3 Effects of Termination
Upon the termination or expiration of this Agreement the obligations of
LICENSEE and LICENSOR shall immediately terminate provided that LICENSEE shall
have the right to continue to sell kits and components of kits as described
herein.
ARTICLE 9 - RELATIONSHIP OF THE PARTIES
Each party shall act as an independent contractor in carrying out its
obligations under this Agreement. Nothing contained in this Agreement shall
be construed to imply a joint venture, partnership, or a principal-agent
relationship between the parties, and neither party by virtue of the
Agreement shall have the right, power, or authority to act or create any
obligation, express or implied, on behalf of the other party. This Agreement
shall not be construed to create rights, express or implied, on behalf of or
for the use of any party aside from LICENSEE and LICENSOR.
-4-
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
ARTICLE 10 - ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties and
supersedes all written, oral or prior agreements and understandings. This
Agreement shall be construed in accordance with the laws of the State of
Wisconsin.
LICENSOR:
Molecular Chimerics Corporation
By: /s/ David Mead
--------------------------------
Title: Research Director
-----------------------------
LICENSEE:
Invitrogen
By: [Illegible] 5/30/90
--------------------------------
Title: President
-----------------------------
-5-
<PAGE>
[Invitrogen LOGO]
PURCHASE AGREEMENT
THIS AGREEMENT is made and is effective this 1st day of, JULY 1994, (the
"Effective Date") by and between CAYLA having its technical offices located at
Centre Commercial de Gros, Avenue de Larrieu, 31094 Toulouse Cedex, France and
INVITROGEN CORPORATION, a California corporation having a principal place of
business at 3985-B Sorrento Valley Blvd, San Diego, CA 92121.
RECITALS
WHEREAS, Cayla has the knowledge and facilities for the production of
Phleomycin, Zeomycin, Zeocin, and Neocin (G418).
WHEREAS, Invitrogen desires to develop the Materials as products for
research markets, and desires thereafter to market and distribute the Materials
as widely as possible.
1. DEFINITIONS
1.1 "Materials" means the antibiotics Phleomycin, Zeomycin, Zeocin, and
Neocin (G418) produced by Cayla.
1.2 "Affiliate" means Invitrogen and any company or other legal entity
other than Invitrogen in whatever country organized, which directly controls, is
controlled by, or is under common control with Invitrogen. The term "control"
means possession, direct or indirect, of the powers to direct or cause the
direction of the management and policies of Invitrogen, whether through the
ownership of voting securities, by contract or otherwise.
1
<PAGE>
2. GRANT
2.1 Cayla hereby grants to Invitrogen and its Affiliates a *
worldwide market with * under Cayla's Rights to use the Materials to
make and/or sell Licensed Products.
2.2 *
3. TECHNOLOGY PRICING
3.1 Invitrogen will buy Phleomycin, Zeomycin, Zeocin, and Neocin (G418)
solely from Cayla for a price to be determined. Discounted price structure
dependent upon quantity purchased.
3.2 Invitrogen shall be granted * pricing on Phleomycin,
Zeomycin, and Zeocin. *
4. PURCHASE ORDERS
4.1 Purchase orders for the Material placed by Invitrogen will be subject
to the terms and conditions stated in the Purchase Order Form (Appendix I).
5. AGREEMENT TERM
5.1 This Agreement shall be in full force and effect from the Effective
Date and shall remain in effect for * unless terminated earlier in
accordance with other provisions in this Agreement or by operation of law.
5.2 In the event that Invitrogen shall at any time fail to perform any
term of this Agreement, then Cayla may give written notice of such default
(Notice of Default) to Invitrogen. If Invitrogen should fail to repair the
default within ninety (90) days of the effective date of such notice, Cayla
shall have the right to terminate this Agreement by a second written notice
(Notice of Termination) to Invitrogen. If a Notice of Termination is sent to
Invitrogen, this Agreement shall automatically terminate on the effective date
of such notice.
5.3 This Agreement may be terminated by Cayla at its option and without
prejudice to any other remedy to which it may be entitled at law or in equity,
or elsewhere under this Agreement, by giving written notice of termination to
Invitrogen if the latter should:
5.3(a) be adjudicated a voluntary or involuntary bankrupt upon
which necessary strains and protocols shall be and continue
to be provided to Invitrogen in order to continue sales
and/or custom work of Licensed Material.
2
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
<PAGE>
5.3(b) institute or suffer to be institute any proceeding for a
reorganization or rearrangement of its affairs; or
5.3(c) make an assignment for the benefit of creditors; or
5.3(d) become insolvent or have a receiver of its assets or
property appointed; or
5.3(e) allow any money judgment against it to remain unsatisfied
for a period of thirty (30) days or longer
5.4 Invitrogen will be allowed to renew this non-exclusivity purchase
agreement under most favored conditions provided sales have reached significant
values at the termination date.
6. NOTICES
6.1 Any notice required on permitted to be given under this Agreement
shall be deemed to have been properly given for all purposes if mailed by
first-class certified or registered mail to the addresses given:
To Invitrogen:
Invitrogen Corporation
3985-B Sorrento Valley Blvd.
San Diego, CA 92121
Attention: Mr. Joseph Fernandez
Vice-President, Business Development
To Cayla:
Centre Commercial de Gros
Avenue de Larrieu
31094 Toulouse, Cedex
France
Attention: Jean-Louis Bousque
Gerant
3
<PAGE>
IN WITNESS WHEREOF, both Cayla and Invitrogen have executed this Agreement,
in duplicate originals, by their respective officers.
INVITROGEN CORPORATION
By /s/ Joseph Fernandez
---------------------------------
Signature
Name: Joseph Fernandez
Title: Vice President, Business Development
Date: 6/10/94
CAYLA
By /s/ Jean-Louis Bousque
---------------------------------
Signature
Name: Jean-Louis Bousque
Title: Gerant
Date: 6/24/94
4
<PAGE>
AMENDMENT TO PURCHASE AGREEMENT
Effective as of 5/31/96, 1996, INVITROGEN CORPORATION ("INVITROGEN") a
corporation organized and existing under the laws of the State of California
and having its principal place of business at 3985 B Sorrento Valley
Boulevard, San Diego, California, 92121 and CAYLA, a corporation of the state
of France, with its technical offices located at ZI Nontaudran-5 rue Jean
Rodier, 31400 Toulouse Cedex, France, agree as follows:
ARTICLE I
BACKGROUND
SECTION 1.1. INVITROGEN and CAYLA are parties to a purchase agreement made
effective July 1, 1994 (the "Purchase Agreement") under which CAYLA granted
INVITROGEN rights to purchase certain materials * and to use these
materials to make and/or sell products.
SECTION 1.2. INVITROGEN and CAYLA wish to amend the Purchase Agreement and
desire to hereby document the amendments.
SECTION 1.3. Terms used in this agreement have the same meanings in the
Purchase Agreement except as amended hereby.
ARTICLE II
AMENDMENTS
SECTION 2.1. AMENDMENTS TO ARTICLE 2.1. The Purchase Agreement is
hereby amended by changing ARTICLE 2.1. of the Purchase Agreement to read in its
entirety as follows:
2.1. CAYLA hereby grants to Invitrogen and its Affiliates a *
* worldwide market with * under CAYLA's Rights to
use the Materials to make and/or sell Licensed Products.
SECTION 2.2. AMENDMENT TO ARTICLE 5.1. The Purchase Agreement is hereby
amended by changing ARTICLE 5.1. of the Purchase Agreement to read in its
entirety as follows:
5.1. This Agreement shall be in full force and effect from the
Effective Date and shall remain in effect for * * unless
terminated earlier in accordance with other provisions in this
Agreement or by operation of law.
SECTION 2.3. AMENDMENT TO ARTICLE 5.4. The Purchase Agreement is hereby
amended by changing ARTICLE 5.4 of the Purchase Agreement to read in its
entirety as follows:
5.4 Invitrogen will be allowed to renew this * purchase
agreement with * for an additional * years provided
(a) revenues payable to CAYLA (including royalties, licensing fees,
and purchases of materials, excluding hygromycin B) reaches
AMENDMENT TO PURCHASE AGREEMENT Page 1 of 2
INVITROGEN AND CAYLA
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
*
(b) revenues payable to CAYLA (including royalties, licensing fees,
and purchases of materials, excluding hygromycin B) reaches *
(C) Revenues payable to CAYLA including royalties, licensing fees,
and purchases of materials, excluding hygromycin B) *
revenues payable the preceding year of *
SECTION 2.4. The Purchase Agreement is hereby amended by adding ARTICLE
5.5 of the Purchase Agreement to read in its entirety as follows:
5.5 In the event that Invitrogen does not reach one of the targets
indicated in Article 5.4 a, b and c, Invitrogen will be allowed to
renew this * purchase agreement with *
IN WITNESS WHEREOF, the parties have caused this Amendment to the License
Agreement to be executed by their duly authorized representatives.
For and on behalf of: For and on behalf of:
INVITROGEN CORPORATION CAYLA
By: /s/ [ILLEGIBLE] By: /s/ Jean-Louis Bousque
---------------------------------- ---------------------------------
Title: V.P. Business Development Title: Gerant
------------------------------- ------------------------------
Date: 5/14/96 Date: 5/31/96
---------------------------------- ---------------------------------
AMENDMENT TO PURCHASE AGREEMENT Page 2 of 2
INVITROGEN AND CAYLA
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
[LOGO]
8 September 1998
Mr. Jean-Louis Bousque
CAYLA
5 rue Jean Rodier
31400 Toulouse
FRANCE
RE: ZEOCIN-TM- AND RELATED PRODUCTS
Dear Mr. Bousque,
I am writing to confirm the points we have agreed on with respect to the
Zeocin-TM- purchase agreement and the Ble gene license:
Notwithstanding anything in our prior agreements and amendments, we now agree as
follows:
1) Royalties payable on plasmids containing the Ble gene shall be * per
plasmid. Minimum royalty payments to maintain exclusivity for the Ble gene
shall be * for 1998. The license will continue to be exclusive as long as
Invitrogen makes minimum royalty payments which increase by * annually.
2) Minimum payments to CAYLA * in the Zeocin-TM- supply agreement
shall be as follows:
a) minimum payments shall increase annually by the lesser of i) * or ii)
* . The minimum for 1998 is *
b) the following shall be credited against these minimums:
i) All antibiotic purchases from CAYLA, excluding Hygromycin B;
ii) *
iii) Royalties paid under the Ble license;
iv) Price of Zeocin/mg x 5mg x number of pouches of FastMedia products
containing Zeocin;
v) * purchases (if any).
3) The price of Zeocin shall be * from September 1, 1998 to September 1,
1999.
Sincerely, ACCEPTED & AGREED TO:
/s/ Warner R. Broaddus /s/ Jean-Louis Bousque, Gerant
Warner R. Broaddus Jean-Louis Bousque, Gerant
General Counsel CAYLA SARL
[LETTERHEAD]
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
LICENSE AGREEMENT
(SK# 2302)
This Agreement, effective on the date signed by the last party to sign below
(the "Effective Date"), is made by and between
SLOAN-KETTERING INSTITUTE FOR CANCER RESEARCH, a not-for-profit corporation
organization under the law of New York state and having its principal place of
business at 1275 York Avenue, New York, NY 10021 (hereinafter "SKI"), and
INVITROGEN, a business corporation having offices at 3985 B Sorrento Valley
Blvd., San Diego, California 92121 (hereinafter "Invitrogen").
In consideration of the mutual covenants contained herein, both parties AGREE AS
FOLLOWS:
ARTICLE 1
BACKGROUND
1.1 SKI owns certain patent rights and technical information relating to Novel
Approaches to Molecular Cloning and Polynucleotide Synthesis using Vaccinia
DNA Topoisomerase (TECHNOLOGY) developed by Dr. Stewart Shuman at Memorial
Sloan-Kettering Cancer Center.
1.2 Invitrogen wishes to obtain a license from SKI to practice LICENSED PATENTS
relating to TECHNOLOGY.
ARTICLE 2
DEFINITIONS
2.1 FIELD OF USE of this agreement is all uses in all markets.
2.2 LICENSED PATENTS shall mean the United States patent application Serial No.
08/358,344, the inventions described and claimed therein, and any division,
continuations, continuations-in-part to the extent that their claims are
dominated by existing LICENSED PATENTS, and patents issuing thereof, and
any and all foreign patents and patents applications corresponding thereto;
all of which will be automatically incorporated in and to this Agreement
and shall periodically be added to Appendix A attached to this Agreement
and made a part hereof.
2.3 LICENSED PRODUCTS shall mean any products claimed in LICENSED PATENT or
products made or services provided in accordance with or by means of the
processes claimed in LICENSED PATENTS.
2.4 NET SALES shall mean the total of all charges billed or invoiced for sales
or lease of LICENSED PRODUCTS; less normal trade discount actually allowed;
credit allowed for returned or damaged goods; transportation costs; and
sales and other excise taxes paid directly with respect to the sale of
LICENSED PRODUCTS.
ARTICLE 3
LICENSE GRANT
3.1 SKI hereby grants to Invitrogen an exclusive, world-wide license, to use
and practice LICENSED PATENTS within the FIELD OF USE.
<PAGE>
3.2 SKI grants to Invitrogen the right to sublicense third parties, providing
that, prior to signing any sublicense agreement;
A. SKI is fully informed of proposed terms of the sublicense agreement
and proposed terms of all collateral agreements (such as cross-licensing or
supply agreements that are related to the sublicense and which have cash
and/or non-cash value), so that SKI will have knowledge of the full value
received by Invitrogen from each sublicensee whether in the form of fees,
royalties or other compensation of whatever form;
B. each sublicense agreement includes a provision that it subject to the
terms of this Agreement; and
C. SKI approves of the sublicense agreement, which approval shall not be
unreasonably withheld.
3.3 All grants under this Article 2 are subject to rights of the U.S.
government under 35 USC Sections 200 and 212.
3.4 SKI explicitly retains the right to use and practice the LICENSED PATENTS
for any purpose.
ARTICLE 4
PAYMENTS
4.1 Within 30 days after the Effective Date, Invitrogen shall pay to SKI *
* as a fully paid, non-refundable license fee. *
of this fee is fully creditable against royalties to be paid according to
section 4.3 accrued in the first twelve (12) months of this Agreement.
4.2 In consideration of the exclusivity of this license, Invitrogen agrees to
pay * * commencing with the second
royalty period as defined in paragraph 4.3(c). * payments shall
be made at the same intervals as regular royalty payments, on a PRO RATA
basis. Failure to made such payments will constitute a material breach and
be subject to termination as defined in Article 7.2 herein.
4.3 For the license granted in Article 2, Invitrogen shall pay to SKI the
amount of royalty of NET SALES indicated as follows:
a). LICENSED PRODUCTS sold alone: * of NET SALES
b). LICENSED PRODUCTS sold in combination such as a Kit:
* for annual NET SALES under *
* for annual NET SALES between *
* for annual NET SALES greater than *
c). All royalties are payable annually for the period of January 1 -
December 31. They shall be due sixty (60) days after the end of the
year.
d). Where Invitrogen sells LICENSED PRODUCTS together with third-party
licensed technology, the royalty rate due hereunder shall be reduced
by * for every * of royalty due to third parties.
However, the royalty payable will never be lower than *
* of the then running royalty rate.
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
COMMISSION."
<PAGE>
4.4 If the LICENSED PRODUCTS is sold in a kit in combination with other active
products or components that are not LICENSED PRODUCTS, NET SALES for
purposes of determining royalties shall be the unit equivalent price of
the LICENSED PRODUCTS if sold separately.
4.5 For purposes of determining royalties on foreign (Non-U.S.) sales of
LICENSED PRODUCTS, NET SALES shall be determined by multiplying the U.S.
catalog price for each such LICENSED PRODUCTS by the number of such
LICENSED PRODUCTS sold during the period for which royalties are due
(i.e., NET SALES = Foreign Units Sold x U.S. catalog price). Such
determination of NET SALES shall only be valid as long as LICENSED
PRODUCTS are substantially manufactured in the United States.
4.6 In the case of sublicense, Invitrogen shall pay SKI * of the non-royalty
sublicense income (e.g. License issue fees, license maintenance fee,
etc.), and * of royalty sublicense income. Any non-cash consideration
received by Invitrogen from such sublicense shall be valued at its fair
market value as of the date of receipt by Invitrogen.
4.7 Within Thirty (30) Days of the Effective Date Invitrogen shall reimburse
SKI * * , for documented out of pocket expenses
reasonably incurred by SKI for the preparation, prosecution and
maintenance of LICENSED PATENTS prior to the Effective Date. Such costs
will be fully creditable against royalties payable in *
* increments over three (3) years beginning with the second royalty
period as defined in paragraph 4.3(c).
Invitrogen shall take over control of the preparation, filing, prosecution
and maintenance of LICENSED PATENTS as of the Effective Date and shall pay
all related expenses reasonably incurred thereafter. SKI shall promptly
execute any documents reasonably requested by Invitrogen or its counsel in
connection with such preparation, filing, prosecution or maintenance.
Such control shall be exercised exclusively by Invitrogen and includes,
without limitation the right to decide what to claim, in what
jurisdictions to prosecute, and the choice of attorneys, except that the
attorneys prosecuting the U.S. patents as of Effective Date shall not be
changed absent good cause. Invitrogen shall consult with SKI as to the
preparation, filing, prosecution and maintenance and shall use prudent and
sound business judgment in all decisions relevant thereto.
In the event Invitrogen elects not to file an application, or elects to
abandon an application in any jurisdiction, SKI may, at its option file or
continue prosecution of such application at its own expense and under its
exclusive control. Such applications that become issued patents will not
be part of LICENSED PATENTS.
4.8 Payment shall be made by remittance to Sloan-Kettering Institute for
Cancer Research. Payment shall show "payment, contract SK# 2302" on the
check stub, and shall be sent to
Office of Industrial Affairs
Memorial Sloan-Kettering for Cancer Research
1275 York Avenue
New York, New York 10021
ARTICLE 5
INFRINGEMENT
5.1 SKI reserves the right to take action, in its own name and its own
expense to enforce LICENSED PATENTS against infringement or
threatened infringement. In the event that SKI takes action against
infringers, Invitrogen shall give reasonable assistance (not to
exceed 40 hours labor) to
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
SKI and any damages recovered shall belong to SKI. However, Invitrogen
shall have the right to join in such action in order to recover damages
for injury to Invitrogen resulting from said infringement, and in that
event, each party's expenses shall be reimbursed from their respective
recovered damages.
5.2 In the event that SKI decide not to take action against infringer, SKI
shall notify Invitrogen and Invitrogen may initiate legal proceeding
against infringer at Invitrogen's expense. Failure of SKI to provide such
notice within thirty (30) days of letter request from Invitrogen shall be
deemed the equivalent of such notice. Invitrogen, may at its' option join
SKI as a plaintiff. SKI shall give reasonable assistance (not to exceed 40
hours labor) to Invitrogen and damages recovered shall belong to
Invitrogen. However, SKI shall have the right to join in such action in
order to recover damages for injury to SKI resulting from said
infringement, and in that event, each party's expenses shall be reimbursed
from their respective recovered damages.
ARTICLE 6
CONFIDENTIALITY
6.1 Invitrogen shall not disclose any information to third parties furnished
to Invitrogen and marked "Confidential" by SKI or by third parties on
behalf of SKI related to LICENSED PATENTS or know-how related to the
LICENSED PATENTS ("Confidential Information") during the term of this
Agreement.
6.2 Obligations of confidentiality shall not apply to information:
a) for which disclosure was authorized by both parties in writing;
b) in Invitrogen's possession at the time of disclosure by SKI and
not directly or indirectly obtained from SKI;
c) which is or may hereafter be publicly available through no
wrongful act of Invitrogen:
d) lawfully received by Invitrogen from a third party under no
obligation of confidentially; or,
e) required to be disclosed by law, government regulations or court
order with prior notice to SKI.
ARTICLE 7
TERM AND TERMINATION
7.1 The term of this agreement is from the Effective Date until *
* unless earlier terminated according to this article 7.
7.2 Failure by Invitrogen or SKI to comply with any of their respective
obligations and conditions contained in this Agreement shall entitle the
other party to the party in default written notice requiring it to cure
such fault. If such default is not cured within sixty (60) days after
receipt of such notice, the notifying party shall be entitled (without
prejudice to any of its other rights conferred on it by this Agreement) to
terminate this Agreement by giving notice to take effect immediately. The
right of either party to terminate this Agreement shall not be affected in
any way by its waiver of, or failure to take action with respect to, any
previous default.
7.3 Should the U.S. patent application(s) under LICENSED PATENTS be ultimately
rejected for any reason this agreement shall terminate.
If at any time all or substantially all claims within the LICENSED PATENTS
are declared invalid, void or unenforceable by any court of final resort or
in a judgment from which no appeal is taken, no royalty shall thereafter be
payable hereunder in the relevant jurisdiction. If at any time, such
claims are declared invalid, void or unenforceable by any court, and review
by a
* "CONFIDENTIAL PORTION HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION."
<PAGE>
higher court is sought, then royalties shall continue to accrue, but shall
not become due unless and until the court's judgment is reversed
7.4 Upon termination of this License for any reason, all rights granted
hereunder shall revert to SKI for the solo benefit of SKI.
7.5 At least forty five (45) days prior to filing a petition in bankruptcy,
each party must inform the other of its intention to file the petition or
of another's intent to file an involuntary petition in bankruptcy. Failure
to conform to this be deemed to be a material, pre-petition incurable
breach.
7.6 Obligations under Article 5, 6 and 8 shall survive termination of this
agreement
ARTICLE 8
PRODUCT LIABILITY
8.1 Invitrogen shall at all times, during the term of this Agreement and
thereafter, indemnify and hold SKI and its affiliates and their directors,
officers, agents and employees, harmless against all claims and expenses,
including legal expenses and reasonable attorneys' fees, arising out of the
death of or injury to any person or persons or out of any damage to
property and against any other claim, proceeding, demand, expense and
liability of any kind whatsoever resulting from the action of Invitrogen
hereunder in the production, manufacture, sales, use, consumption or
advertisement of LICENSED PRODUCTS, subject to SKI giving Invitrogen prompt
notice of any such claims, giving Invitrogen full control of the defense or
settlement of any such claims.
8.2 Nothing in this Agreement shall be construed as a warranty or
representation that anything made, used, sold or otherwise disposed of any
license granted in this Agreement is or will be free from infringement of
patents of third parties.
8.3 Invitrogen shall not use the name of SKI or any affiliate, inventor,
employee or agent of SKI, nor any variant of any of them, for advertising,
publicity, offering, promotion or sales purposes without the prior written
consent of SKI.
ARTICLE 9
MISCELLANEOUS
9.1 Any notice given by either party hereunder shall be given in writing by
registered or certified mail addressed to the party for whom it is intended
at the address set forth below or such other address as such party may
subsequently designate in writing.
For SKI For Invitrogen
Mr. James S. Quirk Mr. Joseph M. Fernandez
Senior Vice President Vice President
Sloan-Kettering Institute for Cancer Invitrogen Corporation
Research Business Development
1275 York Avenue 3985 B Sorrento Valley Boulevard
New York, NY 10021 San Diego, CA 92121
9.2 The construction, validity, and performance of this Agreement shall be
governed in all respects by the laws of the State of New York, but the
scope and validity of any LICENSED PATENTS shall be governed by the
applicable laws of the country granting such patent.
9.3 Neither party may assign this Agreement or any rights granted hereunder in
whole or in part without the prior written consent of the other party
except to the successor to, or assignee of, all
<PAGE>
or substantially all of the business, assets, and goodwill of the assigning
party with prior written notice to the other party.
9.4 This Agreement sets forth the entire Agreement and understanding between
the parties and to the subject matter of this Agreement, and merges all
prior discussions between them and this Agreement may not be superseded,
amended, or modified except by written agreement between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers as of the day and year first above
written, all in duplicate original.
SLOAN-KETTERING INSTITUTE INVITROGEN CORPORATION
FOR CANCER RESEARCH
By: /s/ James S. Quirk By: /s/ Joseph M. Fernandez
------------------------------- -------------------------------
James S. Quirk Joseph M. Fernandez
Senior Vice President Vice President
Research Resources Management Business Development
Date: 1/22/97 Date: 1/16/97
------------------------------ -----------------------------
<PAGE>
APPENDIX A
The following comprise LICENSED PATENTS:
U.S. patent application serial No. 08/358,344, filed December 19, 1994
PCT International application No. PCT/US95/16099, filed December 12, 1995
<PAGE>
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET
(DO NOT USE THIS FORM FOR MULTI-TENANT PROPERTY)
1. BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only, November 1, 1995, is made by and between CRC, A California General
Partnership ("LESSOR") and Invitrogen, a California Corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all
improvements therein or to be provided by Lessor under the terms of this
Lease, and commonly known by the street address of Lot 100 NE Side of Faraday
N. of College, Carlsbad located in the County of San Diego, State of
California, and generally described as (describe briefly the nature of the
property) an industrial building totaling approximately 59,860 square feet
("PREMISES"). (See Paragraph 2 for further provisions.)
1.3 TERM: Ten (10) years and zero months ("ORIGINAL TERM")
commencing upon occupancy ("COMMENCEMENT DATE") and ending 120 months
thereafter ("EXPIRATION DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION:__ N/A __ ("EARLY POSSESSION DATE").
(See Paragraphs 3.2 and 3.3 for further provisions.)
1.5 BASE RENT: $37,113.00 per month ("BASE RENT"), payable
on the first (1st) day of each month commencing see Addendum (See
Paragraph 4 for further provisions.)
/X/ If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $37,113.00 as Base Rent for the
period first month.
1.7 SECURITY DEPOSIT: $37,113.00 ("SECURITY DEPOSIT"). (See
Paragraph 5 for further provisions.)
1.8 PERMITTED USE: General office, manufacturing, assembly,
packaging, warehousing and distribution of biomedical products (See
Paragraph 6 for further provisions.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS: The following real estate brokers
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
_______ NA ________ represents / / Lessor exclusively ("LESSOR'S BROKER");
/ / both Lessor and Lessee, and _________ NA __________ represents
/ / Lessee exclusively ("LESSEE'S BROKER"); / / both Lessee and Lessor.
(See Paragraph 15 for further provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are
to be guaranteed by _______ NA _______ ("GUARANTOR"). (See Paragraph 37 for
further provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 1 through 11 and Exhibits 1-4 all of which
constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental, is an approximation
which Lessor and Lessee agree is reasonable and the rental based thereon is
not subject to revision whether or not the actual square footage is more or
less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean
and free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning,
heating, and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the
Commencement Date. If a non-compliance with said warranty exists as of the
Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of any
non-compliance with this warranty within 180 days after the Commencement
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE.
Lessor warrants to Lessee that the improvements on the Premises comply with
all applicable covenants or restrictions of record and applicable building
codes, regulations and ordinances in effect on the Commencement Date. Said
warranty does not apply to the use to which Lessee will put the Premises or
to any Alterations or Utility Installations (as defined in Paragraph 7.3(a))
made or to be made by Lessee. If the Premises do not comply with said
warranty, Lessor shall, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee setting forth with specificity
the nature and extent of such non-compliance, rectify the same at Lessor's
expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that
it has been advised by the Lessor to satisfy itself with respect to the
present and future suitability of the Premises for Lessee's intended use, and
(c) that neither Lessor, nor any of the Lessor's agents, has made any oral or
written representations or warranties with respect to said matters other than
as set forth in this Lease.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early possession. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Real Property Taxes and insurance premiums and to maintain the Premises)
shall be in effect during such period. Any such early possession shall not
affect nor advance the Expiration Date of the Original Term.
Initials /s/ LT
-------
/s/ GH
NET PAGE 1 -------
- -C-1990--AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION FORM 204N-R-12/91
<PAGE>
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 1.4, or, if no Early Possession Date
is specified, by the Commencement Date, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease,
or the obligations of Lessee hereunder, or extend the term hereof, but in
such case, Lessee shall not, except as otherwise provided herein, be
obligated to pay rent or perform any other obligation of Lessee under the
terms of this Lease until Lessor delivers possession of the Premises to
Lessee. If possession of the Premises is not delivered to Lessee within sixty
(60) days after the Commencement Date, Lessee may, at its option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease, in
which event the Parties shall be discharged from all obligations hereunder;
provided, however, that if such written notice by Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
shall terminate and be of no further force or effect. Except as may be
otherwise provided, and regardless of when the term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee
does not terminate this Lease, as aforesaid, the period free of the
obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed
shall run from the date of delivery of possession and continue for a period
equal to what Lessee would otherwise have enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other
rent or charges, as the same may be adjusted from time to time, to be
received by Lessor in lawful money of the United States, without offset or
deduction, on or before the day on which it is due under the terms of this
Lease. Base Rent and all other rent and charges for any period during the
term hereof which is for less than one (1) full calendar month shall be
prorated based upon the actual number of days of the calendar month involved.
Payment of Base Rent and other charges shall be made to Lessor at its address
stated herein or to such other persons or at such other addresses as Lessor
may from time to time designate in writing to Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys' fees) which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all
or any portion of said Security Deposit, Lessee shall within ten (10) days
after written request therefor deposit moneys with Lessor sufficient to
restore said Security Deposit to the full amount required by this Lease. Any
time the Base Rent increases during the term of this Lease, Lessee shall,
upon written request from Lessor, deposit additional moneys with Lessor
sufficient to maintain the same ratio between the Security Deposit and the
Base Rent as those amounts are specified in the Basic Provisions. Lessor
shall not be required to keep all or any part of the Security Deposit
separate from its general accounts. Lessor shall, at the expiration or
earlier termination of the term hereof and after Lessee has vacated the
Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not
used or applied by Lessor. Unless otherwise expressly agreed in writing by
Lessor, no part of the Security Deposit shall be considered to be held in
trust, to bear interest or other increment for its use, or to be prepayment
for any moneys to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
purposes set forth in Paragraph 1.8, or any other use which is comparable
thereto, and for no other purpose. Lessee shall not use or permit the use of
the Premises in a manner that creates waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to, neighboring premises or
properties. Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessees assignees or subtenants,
and by prospective assignees and subtenants of the Lessee, its assignees and
subtenants, for a modification of said permitted purpose for which the
premises may be used or occupied, so long as the same will not impair the
structural integrity of the improvements on the Premises, the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises and the improvements thereon, and is otherwise permissible pursuant
to this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall
within five (5) business days give a written notification of same, which
notice shall include an explanation of Lessor's objections to the change in
use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected to
be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment or the Premises, (ii) regulated or
monitored by any governmental authority, or (iii) a basis for liability of
Lessor to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substance shall include, but not be limited
to, hydrocarbons, petroleum, gasoline, crude oil or any products, by-products
or fractions thereof. Lessee shall not engage in any activity in, on or
about the Premises which constitutes a Reportable Use (as hereinafter
defined) of Hazardous Substances without the express prior written consent of
Lessor and compliance in a timely manner (at Lessee's sole cost and expense)
with all Applicable Law (as defined in Paragraph 6.3). "REPORTABLE USE"
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority. Reportable Use shall also
include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises
or neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in
the normal course of Lessee's business permitted on the Premises, so long as
such use is not a Reportable Use, and does not expose the Premises or
neighboring properties to any meaningful risk of contamination or damage or
expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to the use or presence
of any Hazardous Substance, activity or storage tank by Lessee upon Lessee's
giving Lessor such additional assurances as Lessor, in its reasonable
discretion, deems necessary to protect itself, the public, the Premises and
the environment against damage, contamination or injury and/or liability
therefrom and therefor, including, but not limited to, the installation (and
removal on or before Lease expiration or earlier termination) of reasonably
necessary protective modifications to the Premises (such as concrete
encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the
Premises, other than as previously consented to by Lessor, Lessee shall
immediately give written notice of such fact to Lessor. Lessee shall also
immediately give Lessor a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action or
proceeding given to, or received from, any governmental authority or private
party, or persons entering or occupying the Premises, concerning the
presence, spill, release, discharge of, or exposure to, any Hazardous
Substance or contamination in, on, or about the Premises, including but not
limited to all such documents as may be involved in any Reportable Uses
involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend
and hold Lessor, its agents, employees, lenders and ground lessor, if any,
and the Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, costs, claims, liens, expenses, penalties,
permits and attorney's and consultant's fees arising out of or involving any
Hazardous Substance or storage tank brought onto the Premises by or for
Lessee or under Lessee's control. Lessee's obligations under this Paragraph 6
shall include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created or suffered by Lessee,
and the cost of investigation, (including consultant's and attorney's fees
and testing), removal, remediation, restoration and/or abatement thereof, or
of any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances or storage
tanks, unless specifically so agreed by Lessor in writing at the time of such
agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in
this Lease, Lessee shall, at Lessee's sole cost and expense, fully,
diligently and in a timely manner, comply with all "APPLICABLE LAW," which
term is used in this Lease to include all laws, rules, regulations,
ordinances, directives, covenants, easements and restrictions of record,
permits, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or
consultants, relating in any manner to the Premises (including but not
limited to matters pertaining to (i) industrial hygiene, (ii) environmental
conditions on, in, under or about the Premises, including soil and
groundwater conditions, and (iii) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage,
spill or release of any Hazardous Substance or storage tank), now in effect
or which may hereafter come into effect, and whether or not reflecting a
change in policy from any previously existing policy. Lessee shall, within
five (5) days after receipt of Lessor's written request, provide Lessor with
copies of all documents and information, including, but not limited to,
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by Lessor,
and shall immediately upon receipt, notify Lessor in writing (with copies of
any documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as
defined in Paragraph 8.3(a)) shall have the right to enter the Premises at
any time, in the case of an emergency, and otherwise at reasonable times, for
the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease and all Applicable Laws (as defined in
Paragraph 6.3), and to employ experts and/or consultants in connection
therewith and/or to advise Lessor with respect to Lessee's activities,
including but not limited to the installation, operation, use, monitoring,
maintenance, or removal of any Hazardous Substance or storage tank on or from
the Premises. The costs and expenses of any such inspections shall be paid
by the party requesting same, unless a Default or Breach of this Lease,
violation of Applicable Law, or a contamination, caused or materially
contributed to by Lessee is found to exist or be imminent, or unless the
inspection is requested or ordered by a governmental authority as the result
of any such existing or imminent violation or contamination. In any such
case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the
case may be, for the costs and expenses of such inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's
warranty as to condition), 2.3 (Lessor's warranty as to compliance with
covenants, etc.),
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as a result of Lessee's use, any prior use, the elements or the age of such
portion of the Premises), including, without limiting the generality of the
foregoing, all equipment or facilities serving the Premises, such as
plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities, boilers, fired or unfired pressure vessels, fire sprinkler and/or
standpipe and hose or other automatic fire extinguishing system, including
fire alarm and/or smoke detection systems and equipment, fire hydrants,
fixtures, walls (interior and exterior), foundations, ceilings, roofs,
floors, windows, doors, plate glass, skylights, landscaping, driveways,
parking lots, fences, retaining walls, signs, sidewalks and parkways located
in, on, about, or adjacent to the Premises. Lessee shall not cause or permit
any Hazardous Substance to be spilled or released in, on, under or about the
Premises (including through the plumbing or sanitary sewer system), and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of, the Premises, the elements surrounding same, or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance and/or storage tank
brought onto the Premises by or for Lessee or under its control. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises
and all improvements thereon or a part thereof in good order, condition and
state of repair. If Lessee occupies the Premises for seven (7) years or
more, Lessor may require Lessee to repaint the exterior of the buildings on
the Premises as reasonably required, but not more frequently than once every
seven (7) years.
(b) Lessee shall, at Lessee's sole cost and expense, procure
and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in, the
inspection, maintenance and service of the following equipment and
improvements, if any, located on the Premises: (i) heating, air conditioning
and ventilation equipment, (ii) boiler, fired or unfired pressure vessels,
(iii) fire sprinkler and/or standpipe and hose or other automatic fire
extinguishing systems, including fire alarm and/or smoke detection, (iv)
landscaping and irrigation systems, (v) roof covering and drain maintenance
and (vi) asphalt and parking lot maintenance.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and
agreements of Lessor contained in Paragraphs 2.2 (relating to condition of
the Premises), 2.3 (relating to compliance with covenants, restrictions and
building code), 9 (relating to destruction of the Premises) and 14 (relating
to condemnation of the Premises), it is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain
the Premises, the improvements located thereon, or the equipment therein,
whether structural or non structural, all of which obligations are intended
to be that of the Lessee under Paragraph 7.1 hereof. It is the intention of
the Parties that the terms of this Lease govern the respective obligations of
the Parties as to maintenance and repair of the Premises. Lessee and Lessor
expressly waive the benefit of any statute now or hereafter in effect to the
extent it is inconsistent with the terms of this Lease with respect to, or
which affords Lessee the right to make repairs at the expense of Lessor or to
terminate this Lease by reason of, any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all carpeting, window
coverings, air lines, power panels, electrical distribution, fire protection
systems, lighting fixtures, heating, ventilating, and air conditioning
equipment, plumbing, and fencing in, on or about the Premises. The term
"TRADE FIXTURES" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "ALTERATIONS"
shall mean any modification of the improvements on the Premises from that
which are provided by Lessor under the terms of this Lease, other than
Utility Installations or Trade Fixtures, whether by addition or deletion.
"LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor as defined in Paragraph 7.4(a). Lessee shall not make any
Alterations or Utility Installations in, on, under or about the Premises
without Lessor's prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises
(excluding the roof), as long as they are not visible from the outside, do
not involve puncturing, relocating or removing the roof or any existing
walls, and the cumulative cost thereof during the term of this Lease as
extended does not exceed $25,000.
(b) CONSENT. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with proposed detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by
subsequent specific consent, shall be deemed conditioned upon: (i) Lessee's
acquiring all applicable permits required by governmental authorities, (ii)
the furnishing of copies of such permits together with a copy of the plans
and specifications for the Alteration or Utility Installation to Lessor prior
to commencement of the work thereon, and (iii) the compliance by Lessee with
all conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Lessee shall promptly
upon completion thereof furnish Lessor with as-built plans and specifications
therefor. Lessor may (but without obligation to do so) condition its consent
to any requested Alteration or Utility Installation that costs $10,000 or
more upon Lessee's providing Lessor with a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such Alteration
or Utility Installation and/or upon Lessee's posting an additional Security
Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims
for labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by
any mechanics' or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises.
If Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorney's fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal or become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee
shall be the property of and owned by Lessee, but considered a part of the
Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee Owned
Alterations and Utility Installations. Unless otherwise instructed per
subparagraph 7.4(b) hereof, all Lessee Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon and be surrendered by Lessee
with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease,
notwithstanding their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any Lessee
Owned Alterations or Utility Installations made without the required consent
of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the
Premises by the end of the last day of the Lease term or any earlier
termination date, with all of the improvements, parts and surfaces thereof
clean and free of debris and in good operating order, condition and state of
repair, ordinary wear and tear excepted. "ORDINARY WEAR AND TEAR" shall not
include any damage or deterioration that would have been prevented by good
maintenance practice or by Lessee performing all of its obligations under
this Lease. Except as otherwise agreed or specified in writing by Lessor,
the Premises, as surrendered, shall include the Utility Installations. The
obligation of Lessee shall include the repair of any damage occasioned by the
installation, maintenance or removal of Lessee's Trade Fixtures, furnishings,
equipment, and Alterations and/or Utility Installations, as well as the
removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or ground water
contaminated by Lessee, all as may then be required by Applicable Law and/or
good practice. Lessee's Trade Fixtures shall remain the property of Lessee
and shall be removed by Lessee subject to its obligation to repair and
restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or
Lessee is the Insuring Party, Lessee shall pay for all insurance required
under this Paragraph 8 except to the extent of the cost attributable to
liability insurance carried by Lessor in excess of $1,000,000 per occurrence.
Premiums for policy periods commencing prior to or extending beyond the
Lease term shall be prorated to correspond to the Lease term. Payment shall
be made by Lessee to Lessor within ten (10) days following receipt of an
invoice for any amount due.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee and Lessor (as an additional insured) against
claims for bodily injury, personal injury and property damage based upon,
involving or arising out of the ownership, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be on
an occurrence basis providing single limit coverage in an amount not less
than $1,000,000 per occurrence with an "Additional Insured-Managers or
Lessors of Premises" Endorsement and contain the "Amendment of the Pollution
Exclusion" for damage caused by heat, smoke or fumes from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
persons or organizations, but shall include coverage for liability assumed
under this Lease as an "insured contract" for the performance of Lessee's
indemnity obligations under this Lease. The limits of said insurance required
by this Lease or as carried by Lessee shall not, however, limit the liability
of Lessee nor relieve Lessee of any obligation hereunder. All insurance to be
carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring
Party, Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and not in lieu of, the insurance required to
be maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 PROPERTY INSURANCE--BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall
obtain and keep in force during the term of this Lease a policy or policies
in the name of Lessor, with loss payable to Lessor and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("LENDER(S)"),
insuring loss
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or damage to the Premises. The amount of such insurance shall be equal to
the full replacement cost of the Premises, as the same shall exist from time
to time, or the amount required by Lenders, but in no event more than the
commercially reasonable and available insurable value thereof if, by reason
of the unique nature or age of the improvements involved, such latter amount
is less than full replacement cost. If Lessor is the Insuring Party,
however, Lessee Owned Alterations and Utility Installations shall be insured
by Lessee under Paragraph 8.4 rather than by Lessor. If the coverage is
available and commercially appropriate, such policy or policies shall insure
against all risks of direct physical loss or damage (except the perils of
flood and/or earthquake unless required by a Lender), including coverage for
any additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Premises
required to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a covered cause of
loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U.S.
Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per
occurrence, and Lessee shall be liable for such deductible amount in the
event of an Insured Loss, as defined in Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition,
obtain and keep in force during the term of this Lease a policy or policies
in the name of Lessor, with loss payable to Lessor and Lender(s), insuring
the loss of the full rental and other charges payable by Lessee to Lessor
under this Lease for one (1) year (including all real estate taxes, insurance
costs, and any scheduled rental increases). Said insurance shall provide
that in the event the Lease is terminated by reason of an insured loss, the
period of indemnity for such coverage shall be extended beyond the date of
the completion of repairs or replacement of the Premises, to provide for one
full year's loss of rental revenues from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, property taxes, insurance premium costs
and other expenses, if any, otherwise payable by Lessee, for the next twelve
(12) month period. Lessee shall be liable for any deductible amount in the
event of such loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any increase in
the premiums for the property insurance of such bulding or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring
Party, the Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease. If Lessee is the Insuring Party, the
policy carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Lessee Owned
Alterations and Utility Installations in, on, or about the Premises similar
in coverage to that carried by the Insuring Party under Paragraph 8.3. Such
insurance shall be full replacement cost coverage with a deductible of not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be
used by Lessee for the replacement of personal property or the restoration of
Lessee Owned Alterations and Utility Installations. Lessee shall be the
Insuring Party with respect to the insurance required by this Paragraph 8.4
and shall provide Lessor with written evidence that such insurance is in
force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or other such rating as may be required by a
Lender having a lien on the Premises, as set forth in the most current issue
of "Best's Insurance Guide". Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in this
Paragraph 8. If Lessee is the Insuring Party, Lessee shall cause to be
delivered to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of such insurance with the
insureds and loss payable clauses as required by this Lease. No such policy
shall be cancellable or subject to modification except after thirty (30) days
prior written notice to Lessor. Lessee shall at least thirty (30) days prior
to the expiration of such policies, furnish Lessor with evidence of renewals
or "insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. If the Insuring Party shall fail to
procure and maintain the insurance required to be carried by the Insuring
Party under this Paragraph 8, the other Party may, but shall not be required
to, procure and maintain the same, but at Lessee's expense.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and relieve
the other, and waive their entire right to recover damages (whether in
contract or in tort) against the other, for loss of or damage to the Waiving
Party's property arising out of or incident to the perils required to be
insured against under Paragraph 8. The effect of such releases and waivers
of the right to recover damages shall not be limited by the amount of
insurance carried or required, or by any deductibles applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor's master or ground lessor,
partners and Lenders, from and against any and all claims, loss of rents
and/or damages, costs, liens, judgments, penalties, permits, attorney's and
consultant's fees, expenses and/or liabilities arising out of, involving, or
in dealing with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees, and out of any Default or Breach by
Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. THe foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding be brought against Lessor
by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory
to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor
need not have first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be
liable for injury or damage to the person or goods, wares, merchandise or
other property of Lessee, Lessee's employees, contractors, invitees,
customers, or any other person in or about the Premises, whether such damage
or injury is caused by or results from fire, steam, electricity, gas, water
or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether the said injury or damage
results from conditions arising upon the Premises or upon other portions of
the building of which the Premises are a part, or from other sources or
places, and regardless of whether the cause of such damage or injury or the
means of repairing the same is accessible or not. Lessor shall not be liable
for any damages arising from any act or neglect of any other tenant of
Lessor.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is less
than 50% of the then Replacement Cost of the Premises immediately prior to
such damage or destruction, excluding from such calculation the value of the
land and Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or more
of the then Replacement Cost of the Premises immediately prior to such damage
or destruction, excluding from such calculation the value of the land and
Lessee Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible
amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or
rebuild the improvements owned by Lessor at the time of the occurrence to
their condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable building
codes, ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence
or discovery of a condition involving the presence of, or a contamination by,
a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE--INSURED LOSS. If a Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense,
repair such damage (but not Lessee's Trade Fixtures or Lessee Owned
Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect; provided, however, that
Lessee shall, at Lessor's election, make the repair of any damage or
destruction the total cost to repair of which is $10,000 or less, and, in
such event, Lessor shall make the insurance proceeds available to Lessee on a
reasonable basis for that purpose. Notwithstanding the foregoing, if the
required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, the Insuring Party shall promptly
contribute the shortage in proceeds (except as to the deductible which is
Lessee's responsibility) as and when required to complete said repairs. In
the event, however, the shortage in proceeds was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor
shall have no obligation to pay for the shortage in insurance proceeds or to
fully restore the unique aspects of the Premises unless Lessee provides
Lessor with the funds to cover same, or adequate assurance thereof, within
ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance
thereof within said ten (10) day period, the party responsible for making
the repairs shall complete them as soon as reasonably possible and this Lease
shall remain in full force and effect. If Lessor does not receive such funds
or assurance within said period, Lessor may nevertheless elect by written
notice to Lessee within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect. If
in such case Lessor does not so elect, then this Lease shall terminate sixty
(60) days following the occurrence of the damage or destruction. Unless
otherwise agreed, Lessee shall in no event have any right to reimbursement
from Lessor for any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be
subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that
there may be some insurance coverage, but the net proceeds of any such
insurance shall be made available for the repairs if made by either Party.
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9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful
act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense and this Lease shall continue in full force and effect, but subject
to Lessor's rights under Paragraph 13), Lessor may at Lessor's option,
either: (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect,
or (ii) give written notice to Lessee within thirty (30) days after receipt
by Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of
such notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten
(10) days after the receipt of such notice to give written notice to Lessor
of Lessee's commitment to pay for the repair of such damage totally at
Lessee's expense and without reimbursement from Lessor. Lessee shall provide
Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following Lessee's said commitment. In such event this
Lease shall continue in full force and effect, and Lessor shall proceed to
make such repairs as soon as reasonably possible and the required funds are
available. If Lessee does not give such notice and provide the funds or
assurance thereof within the times specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs (including any destruction required by
any authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an Insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's damages
from Lessee except as released and waived in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six
(6) months of the term of this Lease there is damage for which the cost to
repair exceeds one (1) month's Base Rent, whether or not an Insured Loss,
Lessor may, at Lessor's option, terminate this Lease effective sixty (60)
days following the date of occurrence of such damage by giving written notice
to Lessee of Lessor's election to do so within thirty (30) days after the
date of occurrence of such damage. Provided, however, if Lessee at that time
has an exercisable option to extend this Lease or to purchase the Premises,
then Lessee may preserve this Lease by, within twenty (20) days following the
occurrence of the damage, or before the expiration of the time provided in
such option for its exercise, whichever is earlier ("EXERCISE PERIOD"), (i)
exercising such option and (ii) providing Lessor with any shortage in
insurance proceeds (or adequate assurance thereof) needed to make the
repairs. If Lessee duly exercises such option during said Exercise Period
and provides Lessor with funds (or adequate assurance thereof) to cover any
shortage in insurance proceeds, Lessor shall, at Lessor's expense repair such
damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option and provide such
funds or assurance during said Exercise Period, then Lessor may at Lessor's
option terminate this Lease as of the expiration of said sixty (60) day
period following the occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the
expiration of the Exercise Period, notwithstanding any term or provision in
the grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage--Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues, shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired.
Except for abatement of Base Rent, Real Property Taxes, insurance premiums,
and other charges, if any, as aforesaid, all other obligations of Lessee
hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this Paragraph 9 and shall not commence, in
a substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) days following the giving of such notice. If Lessee gives such notice
to Lessor and said Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after receipt of such notice, this Lease shall continue in full force and
effect. "COMMENCE" as used in this Paragraph shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by
Applicable Law and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 13), Lessor may at Lessor's option
either (i) investigate and remediate such Hazardous Substance Condition, if
required, as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) if the estimated
cost to investigate and remediate such condition exceeds twelve (12) times
the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge
of the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of
such notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten
(10) days after the receipt of such notice to give written notice to Lessor
of Lessee's commitment to pay for the investigation and remediation of such
Hazardous Substance Condition totally at Lessee's expense and without
reimbursement from Lessor except to the extent of an amount equal to twelve
(12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such investigation and remediation as soon as
reasonably possible and the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within
the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance
Condition occurs for which Lessee is not legally responsible, there shall be
abatement of Lessee's obligations under this Lease to the same extent as
provided in Paragraph 9.6(a) for a period of not to exceed twelve months.
9.8 TERMINATION--ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by
Lessor under the terms of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property
Taxes, as defined in Paragraph 10.2, applicable to the Premises during the
term of this Lease. Subject to Paragraph 10.1(b), all such payments shall be
made at least ten (10) days prior to the delinquency date of the applicable
installment. Lessee shall promptly furnish Lessor with satisfactory evidence
that such taxes have been paid. If any such taxes to be paid by Lessee shall
cover any period of time prior to or after the expiration or earlier
termination of the term hereof, Lessee's share of such taxes shall be
equitably prorated to cover only the period of time within the tax fiscal
year this Lease is in effect, and Lessor shall reimburse Lessee for any
overpayment after such proration. If Lessee shall fail to pay any Real
Property Taxes required by this Lease to be paid by Lessee, Lessor shall have
the right to pay the same, and Lessee shall reimburse Lessor therefor upon
demand.
(b) ADVANCE PAYMENT. In order to insure payment when due and
before delinquency of any or all Real Property Taxes, Lessor reserves the
right, at Lessor's option, to estimate the current Real Property Taxes
applicable to the Premises, and to require such current year's Real Property
Taxes to be paid in advance to Lessor by Lessee, either: (i) in a lump sum
amount equal to the installment due, at least twenty (20) days prior to the
applicable delinquency date, or (ii) monthly in advance with the payment of
the Base Rent. If Lessor elects to require payment monthly in advance, the
monthly payment shall be that equal monthly amount which, over the number of
months remaining before the month in which the applicable tax installment
would become delinquent (and without interest thereon), would provide a fund
large enough to fully discharge before delinquency the estimated installment
of taxes to be paid. When the actual amount of the applicable tax bill is
known, the amount of such equal monthly advance payment shall be adjusted as
required to provide the fund needed to pay the applicable taxes before
delinquency. If the amounts paid to Lessor by Lessee under the provisions of
this Paragraph are insufficient to discharge the obligations of Lessee to pay
such Real Property Taxes as the same become due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums as are necessary to pay such
obligations. All moneys paid to Lessor under this Paragraph may be
intermingled with other moneys of Lessor and shall not bear interest. In the
event of a Breach by Lessee in the performance of the obligations of Lessee
under this Lease, then any balance of funds paid to Lessor under the
provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1(a), at the option of Lessor, be treated as an additional
Security Deposit under Paragraph 5.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed upon the Premises by
any authority having the direct or indirect power to tax, including any city,
state or federal government, or any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, levied against any
legal or equitable interest of Lessor in the Premises or in the real property
of which the Premises are a part, Lessor's right to rent or other income
therefrom, and/or Lessor's business of leasing the Premises. The term "REAL
PROPERTY TAXES" shall also include any tax, fee, levy, assessment or charge,
or any increase therein, imposed by reason of events occurring, or changes in
applicable law taking effect, during the term of this Lease, including but
not limited to a change in the ownership of the Premises or in the
improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately
assessed, Lessee's liability shall be an equitable proportion of the Real
Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from
the respective valuations assigned in the assessor's work sheets or such
other information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
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10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause its Trade Fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property
of Lessor. If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Lessee's property or, at Lessor's option, as
provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law
assign, transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this Lease or
in the Premises without Lessor's prior written consent given under and
subject to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, refinancing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of
Lessee, as hereinafter defined, by an amount equal to or greater than
twenty-five percent (25%) of such Net Worth of Lessee as it was represented
to Lessor at the time of the execution by Lessor of this Lease or at the time
of the most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transaction or transactions constituting such
reduction, at whichever time said Net Worth of Lessee was or is greater,
shall be considered an assignment of this Lease by Lessee to which Lessor may
reasonably withhold its consent. "NET WORTH OF LESSEE" for purposes of this
Lease shall be the net worth of Lessee (excluding any guarantors) established
under generally accepted accounting principles consistently applied.
(d) An assignment or subletting Lessee's interest in this
Lease without Lessor's specific prior written consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unconsented to assignment or subletting as a
noncurable Breach, Lessor shall have the right to either: (i) terminate this
Lease, or (ii) upon thirty (30) days written notice ("Lessor's Notice"),
increase the monthly Base Rent to fair market rental value or one hundred ten
percent (110%) of the Base Rent then in effect, whichever is greater.
Pending determination of the new fair market rental value, if disputed by
Lessee, Lessee shall pay the amount set forth in Lessor's Notice, with any
overpayment credited against the next installment(s) of Base Rent coming due,
and any underpayment for the period retroactively to the effective date of
the adjustment being due and payable immediately upon the determination
thereof. Further, in the event of such Breach and market value adjustment,
(i) the purchase price of any option to purchase the Premises held by Lessee
shall be subject to similar adjustment to the then fair market value (without
the Lease being considered an encumbrance or any deduction for depreciation
or obsolescence, and considering the Premises at its highest and best use and
in good condition), or one hundred ten percent (110%) of the price previously
in effect, whichever is greater, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled
during the remainder of the Lease term shall be increased in the same ratio
as the new market rental bears to the Base Rent in effect immediately prior
to the market value adjustment.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not: (i) be effective without the express written assumption
by such assignee or sublessee of the obligations of Lessee under this Lease,
(ii) release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under the Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval
of an assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent or performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the Default
or Breach by Lessee of any of the terms, covenants or conditions of this
Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by Lessee
or to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignment of the
sublease or any amendments or modifications thereto without notifying Lessee
or anyone else liable on the Lease or sublease and without obtaining their
consent, and such action shall not relieve such persons from liability under
this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's
obligations under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the Lessee's
obligations under this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not
limited to the intended use and/or required modification of the Premises, if
any, together with a non-refundable deposit of $1,000 or ten percent (10%) of
the current monthly Base Rent, whichever is greater, as reasonable
consideration for Lessor's considering and processing the request for
consent. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be
deemed, for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation herein to
be observed or performed by Lessee during the term of said assignment or
sublease, other than such obligations as are contrary to or inconsistent with
provisions of an assignment or sublease to which Lessor has specifically
consented in writing.
(g) The occurrence of a transaction described in Paragraph
12.1(c) shall give Lessor the right (but not the obligation) to require that
the Security Deposit be increased to an amount equal to six (6) times the
then monthly Base Rent, and Lessor may make the actual receipt by Lessor of
the amount required to establish such Security Deposit a condition to
Lessor's consent to such transaction.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease of all
or a portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward Lessee's
obligations under this Lease, provided, however, that until a Breach (as
defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided in
this Lease, receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of
such sublease to Lessor, nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under
such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and
shall pay such rents and other charges to Lessor without any obligation or
right to inquire as to whether such Breach exists and notwithstanding any
notice from or claim from Lessee to the contrary. Lessee shall have no right
or claim against said sublessee or, until the Breach has been cured, against
Lessor, for any such rents and other charges so paid by said sublessee to
Lessor.
(b) In the event of a Breach by Lessee in the performance of
its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
prior Defaults or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to cure said Default. A "DEFAULT" is
defined as a failure by the Lessee to observe, comply with or perform any of
the terms, covenants, conditions or rules applicable to Lessee under this
Lease. A "BREACH" is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is
specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, and shall entitle Lessor to pursue
the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to
reoccupy same, or the abandonment of the Premises.
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(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other monetary
payment required to be made by Lessee hereunder, whether to Lessor or to a
third party, as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) days following written notice thereof by or on behalf of
Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with Applicable Law
per Paragraph 6.3, (ii) the inspection, maintenance and service contracts
required under Paragraph 7.1(b), (iii) the recission of an unauthorized
assignment or subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per
Paragraphs 16 or 37, (v) the subordination or non-subordination of this Lease
per Paragraph 30, (vi) the guaranty of the performance of Lessee's
obligations under this Lease if required under Paragraphs 1.11 and 37, (vii)
the execution of any document requested under Paragraph 42 (easements), or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice by or on
behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40
hereof, that are to be observed, complied with or performed by Lessee, other
than those described in subparagraphs (a), (b) or (c), above, where such
Default continues for a period of thirty (30) days after written notice
thereof by or on behalf of Lessor to Lessee; provided, however, that if the
nature of Lessee's Default is such that more than thirty (30) days are
reasonably required for its cure, then it shall not be deemed to be a Breach
of this Lease by Lessee if Lessee commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The
making by Lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. Section
101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where possession is not restored to Lessee within thirty (30) days; or
(iv) the attachment, execution or other judicial seizure of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days;
provided, however, in the event that any provision of this subparagraph (e)
is contrary to any applicable law, such provision shall be of no force or
effect, and not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement given
to Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed, (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurance or security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the guarantors that
existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made under this
Lease by Lessee to be made only by cashier's check. In the event of a Breach
of this Lease by Lessee, as defined in Paragraph 13.1, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises
to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i)
the worth at the time of the award of the unpaid Rent which had been earned
at the time of termination; (ii) the worth at the time of award of the amount
by which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that the Lessee
proves could have been reasonably avoided; (iii) the worth at the time of
award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of the leasing
commission paid by Lessor applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision (iii) of
the prior sentence shall be computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right to
recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor shall
have the right to recover in such proceeding the unpaid rent and damages as
are recoverable therein, or Lessor may reserve therein the right to recover
all or any part thereof in a separate suit for such rent and/or damages. If a
notice and grace period required under subparagraph 13.1(b), (c) or (d) was
not previously given, a notice to pay rent or quit, or to perform or quit, as
the case may be, given to Lessee under any statute authorizing the forfeiture
of leases for unlawful detainer shall also constitute the applicable notice
for grace period purposes required by subparagraph 13.1(b), (c) or (d). In
such case, the applicable grace period under subparagraph 13.1(b), (c) or (d)
and under the unlawful detainer statute shall run concurrently after the one
such statutory notice, and the failure of Lessee to cure the Default within
the greater of the two such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in
effect (in California under California Civil Code Section 1951.4) after
Lessee's Breach and abandonment and recover the rent as it becomes due,
provided Lessee has the right to sublet or assign, subject only to reasonable
limitations. See Paragraphs 12 and 3G for the limitations on assignment and
subletting which limitations Lessee and Lessor agree are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under the Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the
Premises are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by
Lessor for free or abated rent or other charges applicable to the Premises,
or for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease, all
of which concessions are hereinafter referred to as "INDUCEMENT PROVISIONS,"
shall be deemed conditioned upon Lessee's full and faithful performance of
all of the terms, covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach of this Lease by Lessee, as defined in Paragraph
13.1, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor as additional rent due
under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph shall not be deemed a waiver by
Lessor of the provisions of this Paragraph unless specifically so stated in
writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5)
days after such amount shall be due, then, without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%)
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. In the event that a late charge
is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt
by Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after
such notice are reasonably required for its performance, then Lessor shall
not be in breach of this Lease if performance is commenced within such thirty
(30) day period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "CONDEMNATION"), this Lease shall
terminate as to the part taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than ten percent (10%)
of the floor area of the Premises, or more than twenty-five percent (25%) of
the land area not occupied by any building, is taken by condemnation, Lessee
may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
shall
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have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the Base Rent
shall be reduced in the same proportion as the rentable floor area of the
Premises taken bears to the total rentable floor area of the building located
on the Premises. No reduction of Base Rent shall occur if the only portion of
the Premises taken is land on which there is no building. Any award for the
taking of all or any part of the Premises under the power of eminent domain
or any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution in value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Lessee shall be entitled to any
compensation separately awarded to Lessee for Lessee's relocation expenses
and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above the legal and other expenses
incurred by Lessor in the condemnation matter, repair any damage to the
Premises caused by such condemnation, except to the extent that Lessee has
been reimbursed therefor by the condemning authority. Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKERS' FEE.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay
to said Brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate written agreement
between Lessor and said Brokers (or in the event there is no separate written
agreement between Lessor and said Brokers, the sum of $ NA) for brokerage
services rendered by said Brokers to Lessor in this transaction.
15.3 Unless Lessor and Brokers have otherwise agreed in writing,
Lessor further agrees that: (a) if Lessee exercises any Option (as defined in
Paragraph 39.1) or any Option subsequently granted which is substantially
similar to an Option granted to Lessee in this Lease, or (b) if Lessee
acquires any rights to the Premises or other premises described in this Lease
which are substantially similar to what Lessee would have acquired had an
Option herein granted to Lessee been exercised, or (c) if Lessee remains in
possession of the Premises, with the consent of Lessor, after the expiration
of the term of this Lease after having failed to exercise an Option, or (d)
if said Brokers are the procuring cause of any other lease or sale entered
into between the Parties pertaining to the Premises and/or any adjacent
property in which Lessor has an interest, or (e) if Base Rent is increased,
whether by agreement or operation of an escalation clause herein, then as to
any of said transactions. Lessor shall pay said Brokers a fee in accordance
with the schedule of said Brokers in effect at the time of the execution of
this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed
to have assumed Lessor's obligation under the Paragraph 15. Each Broker shall
be a third party beneficiary of the provisions of this Paragraph 15 to the
extent of its interest in any commission arising from this Lease and may
enforce that right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that
it has had no dealings with any person, firm, broker or finder (other than
the Brokers, if any named in Paragraph 1.10) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity
other than said named Brokers is entitled to any commission or finder's fee
in connection with said transaction. Lessee and Lessor do each hereby agree
to indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party, including any costs, expenses, attorneys'
fees reasonably incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT.
16.1 Each Party (as "RESPONDING PARTY") shall within ten (10)
days after written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "TENANCY STATEMENT" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, or the building of which the Premises are a part, Lessee
and all Guarantors of Lessee's performance hereunder shall delivery to any
potential lender or purchaser designated by Lessor such financial statements
of Lessee and such Guarantors as may be reasonably required by such lender or
purchaser, including but not limited to Lessee's financial statements for the
past three (3) years. All such financial statements shall be received by
Lessor and such lender or purchaser in confidence and shall be used only for
the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or,
if this is a sublease, of the lessee's interest in the prior lease. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but
not exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding
shall be effective. Lessor and Lessee each represents and warrants to the
Brokers that it has made, and is relying solely upon, its own investigation
as to the nature, quality, character and financial responsibility of the
other Party to this Lease and as to the nature, quality and character of the
Premises. Brokers have no responsibility with respect thereto or with respect
to any default or breach hereof by either Party.
23. NOTICES.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or courier
service) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The addresses noted adjacent to a Party's
signature on this Lease shall be that Party's address for delivery or mailing
of notice purposes. Either Party may by written notice to the other specify a
different address for notice purposes, except that upon Lessee's taking
possession of the Premises, the Premises shall constitute Lessee's address
for the purpose of mailing or delivering notices to Lessee. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given twenty-four (24) hours
after delivery of the same to the United States Postal Service or courier. If
any notice is transmitted by facsimile transmission or similar means, the
same shall be deemed served or delivered upon telephone confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Sunday or legal holiday, it
shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition thereof, or of any subsequent Default or Breach
by Lessee of the same or of any other term, covenant or condition hereof.
Lessor's consent to, or approval of, any act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any
subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. Regardless of Lessor's knowledge of a Default or Breach at the time
of accepting rent, the acceptance of rent by Lessor shall not be a waiver of
any preceding Default or Breach by Lessee of any provision hereof, other than
the failure of Lessee to pay the particular rent so accepted. Any payment
given Lessor by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or conditions
made by Lessee in connection therewith, which such statements and/or
conditions shall be of no force or effect whatsoever unless specifically
agreed to in writing by Lessor at or before the time of deposit of such
payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
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28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"), now
or hereafter placed by Lessor upon the real property of which the Premises
are a part, to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Lessee agrees that the Lenders holding any such Security Device shall have no
duty, liability or obligation to perform any of the obligations of Lessor
under this Lease, but that in the event of Lessor's default with respect to
any such obligation, Lessee will give any Lender whose name and address have
been furnished Lessee in writing for such purpose notice of Lessor's default
and allow such Lender thirty (30) days following receipt of such notice for
the cure of said default before invoking any remedies Lessee may have by
reason thereof. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall
give written notice thereof to Lessee, this Lease and such Options shall be
deemed prior to such Security Device, notwithstanding the relative dates of
the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or
(iii) be bound by prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered
into by Lessor after the execution of this Lease, Lessee's subordination of
this Lease shall be subject to receiving assurance (a "NON-DISTURBANCE
AGREEMENT") from the Lender that Lessee's possession and this Lease,
including any options to extend the term hereof, will not be disturbed so
long as Lessee is not in Breach hereof and attorns to the record owner of the
Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection
with a sale, financing or refinancing of the Premises, Lessee and Lessor
shall execute such further writings as may be reasonably required to
separately document any subordination or non-subordination, attornment and/or
non-disturbance agreement as is provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) or Broker in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorney's fees.
Such fees may be awarded in the same suit or recovered in a separate suit,
whether or not such action or proceeding is pursued to decision or judgment.
The term, "PREVAILING PARTY" shall include, without limitation, a Party or
Broker who substantially obtains or defeats the relief sought, as the case
may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorney's fee award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorney's fees reasonably incurred. Lessor
shall be entitled to attorney's fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's
agents shall have the right to enter the Premises at any time, in the case of
an emergency, and otherwise at reasonable times for the purpose of showing
the same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part, as Lessor may reasonably deem necessary.
Lessor may at any time place on or about the Premises any ordinary "FOR SALE"
signs and Lessor may at any time during the last one hundred twenty (120)
days of the term hereof place on or about the Premises any ordinary "FOR
LEASE" signs. All such activities of Lessor shall be without abatement of
rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises without
first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the
roof) such signs as are reasonably required to advertise Lessee's own
business. The installation of any sign on the Premises by or for Lessee
shall be subject to the provisions of Paragraph 7 (Maintenance, Repairs,
Utility Installations, Trade Fixtures and Alterations). Unless otherwise
expressly agreed herein, Lessor reserves all rights to the use of the roof
and the right to install, and all revenues from the installation of, such
advertising signs on the Premises, including the roof, as do not unreasonably
interfere with the conduct of Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the
mutual termination or cancellation hereof, or a termination hereof by Lessor
for Breach by Lessee, shall automatically terminate any sublease or lesser
estate in the Premises; provided, however, Lessor shall, in the event of any
such surrender, termination or cancellation, have the option to continue any
one or all of any existing subtenancies. Lessor's failure within ten (10)
days following any such event to make a written election to the contrary by
written notice to the holder of any such lesser interest, shall constitute
Lessor's election to have such event constitute the termination of such
interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to
an act by or for the other Party, such consent shall not be unreasonably
withheld or delayed. Lessor's actual reasonable costs and expenses
(including but not limited to architects', attorneys', engineers' other
consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent pertaining to this Lease or the
Premises, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, practice or
storage tank, shall be paid by Lessee to Lessor upon receipt of an invoice and
supporting documentation therefor. Subject to Paragraph 12.2(e) (applicable
to assignment or subletting), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering
and responding to Lessee's request. Except as otherwise provided, any unused
portion of said deposit shall be refunded to Lessee without interest.
Lessor's consent to any act, assignment of this Lease or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this
Lease are acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude the
imposition by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter for
which consent is being given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph,
1.11, the form of the guaranty to be executed by each such Guarantor shall be
in the form most recently published by the American Industrial Real Estate
Association, and each said Guarantor shall have the same obligations as
Lessee under this Lease, including but not limited to the obligation to
provide the Tenancy Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease
if any such Guarantor fails or refuses, upon reasonable request by Lessor to
give: (a) evidence of the due execution of the guaranty called for by this
Lease, including the authority of the Guarantor (and of the party signing on
Guarantor's behalf) to obligate such Guarantor on said guaranty, and
including in the case of a corporate Guarantor, a certified copy of a
resolution of its board of directors authorizing the making of such guaranty,
together with a certificate of incumbency showing the signatures of the
persons authorized to sign on its behalf, (b) current financial statements of
Guarantor as may from time to time be requested by Lessor, (c) a Tenancy
Statement, or (d) written confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "OPTION"
has the following meaning: (a) the right to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal to lease the Premises or
the right of first offer to lease the Premises or the right of first refusal
to lease other property of Lessor or the right of first offer to lease other
property of Lessor; (c) the right to purchase the Premises, or the right of
first refusal to purchase the Premises, or the right of first offer to
purchase the Premises, or the right to purchase other property of Lessor, or
the right of first refusal to purchase other property of Lessor, or the
right of first offer to purchase other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph
1.1 hereof, and cannot be voluntarily or involuntarily assigned or exercised
by any person or entity other than said original Lessee while the original
Lessee is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any, herein
granted to Lessee are not assignable, either as a part of an assignment of
this Lease or separately or apart therefrom, and no Option may be separated
from this Lease in any manner, by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised unless
the prior Options to extend or renew this Lease have been validly exercised.
Initials /s/ LT
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/s/ GH
NET PAGE 9 -------
<PAGE>
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i)
during the period commencing with the giving of any notice of Default under
Paragraph 13.1 and continuing until the noticed Default is cured, or (ii)
during the period of time any monetary obligation due Lessor from Lessee is
unpaid (without regard to whether notice thereof is given Lessee), or (iii)
during the time Lessee is in Breach of this Lease, or (iv) in the event that
Lessor has given to Lessee three (3) or more notices of Default under
Paragraph 13.1, whether or not the Defaults are cured, during the twelve (12)
month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding
Lessee's due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (i) Lessee fails to pay Lessor a monetary
obligation of Lessee for a period of thirty (30) days after such obligation
becomes due (without any necessity of Lessor to give notice thereof to
Lessee), (ii) Lessor gives to Lessee three (3) or more notices of Default
under Paragraph 13.1 during any twelve month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of
buildings controlled by Lessor, Lessee agrees that it will abide by, keep and
observe all reasonable rules and regulations which Lessor may make from time
to time for the management, safety, care and cleanliness of the grounds, the
parking and unloading of vehicles and the preservation of good order, as well
as for the convenience of other occupants or tenants of such other buildings
and their invitees, and that Lessee will pay its fair share of common
expenses incurred in connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time,
to grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general
or limited partnership, each individual executing this Lease on behalf of
such entity represents and warrants that he or she is duly authorized to
execute and deliver this Lease on its behalf. If Lessee is a corporation,
trust or partnership, Lessee shall, within thirty (30) days after request by
Lessor, deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee.
This Lease is not intended to be binding until executed by all Parties
hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional, insurance company, or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee,
the obligations of such multiple Parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL. FURTHER, EXPERTS SHOULD BE
CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE
PRESENCE OF ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO
THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY
IS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE
STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above to their respective signatures.
<TABLE>
<S> <C>
Executed at: El Cajon, California Executed at: San Diego
-------------------------------------- -------------------------------------
on: 11/22/95 on:
---------------------------------------------- ----------------------------------------------
By LESSOR: By LESSEE:
CRC, a California General Partnership Invitrogen
- ------------------------------------------------- -------------------------------------------------
- ------------------------------------------------- -------------------------------------------------
By: /s/ Jeffrey C. Hamann By: /s/ Lyle Turner
---------------------------------------------- ----------------------------------------------
Name Printed: Jeffrey C. Hamann Name Printed: Lyle Turner
------------------------------------- -------------------------------------
Title: General Partner Title: President
------------------------------------------- -------------------------------------------
By: By:
---------------------------------------------- ----------------------------------------------
Name Printed: Name Printed:
------------------------------------- -------------------------------------
Title: Title:
-------------------------------------------
Address: Address:
----------------------------------------- -----------------------------------------
- ------------------------------------------------- -------------------------------------------------
Tel. No. (619) 440-7424 Fax No. (619) 440-8914 Tel. No. (619) 597-6200 Fax No. (619) 597-6201
--------------- ---------------- --------------- ----------------
</TABLE>
NET PAGE 10
NOTICE: These forms are often modified to meet changing requirements of law
and industry needs. Always write or call to make sure you are utilizing
the most current form: American Real Estate Association, 345 South
Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213) 687-8777.
Fax No. (213) 687-8616.
- -C-COPYRIGHT 1990--BY AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION. ALL RIGHTS
RESERVED.
<PAGE>
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") is made by and between CRC, a California
General Partnership, ("LESSOR") and INVITROGEN, INC., a California
Corporation ("LESSEE") and is intended to supplement that certain Standard
Industrial/Commercial Single-Tenant Lease-Net between LESSOR and LESSEE dated
November 1, 1995 ("Lease") to which this Addendum is annexed. If there is any
inconsistency between this Addendum and the Lease, the terms of this Addendum
shall supersede and control. LESSOR and LESSEE agree as follows:
1 BUILDING AND PREMISES DESCRIPTION. The Building shall be designed
and constructed substantially in accordance with the general design
elements shown on that certain "Site Plan" and "Elevation" drawings
prepared by Ken Smith, Architect ("Architect"), which LESSEE hereby
approves ("Approved Drawings"); a copy of the Approved Drawings is
attached as EXHIBIT "1" to this Addendum. The components of the Building
Construction shall substantially conform to the specifications attached
as EXHIBIT "2" to this Addendum ("Specifications").
1.1 PLANNED SIZE AND FINAL MEASUREMENT. It is planned that the
Premises will contain approximately 59,860 rentable square feet.
All square footage measurements shall be from the roof "drip
line" and in accordance with other industry standards for
industrial/commercial projects. Following substantial completion
of the Building and Premises, LESSOR will, in good faith,
certify the actual rentable square feet of the Premises to
establish the exact rentable square feet for purposes of the
Lease.
1.2 MODIFICATIONS. LESSEE agrees that LESSOR may make modifications
to the Building design on account of government or lender
requirements and otherwise as reasonably determined by LESSOR;
provided, however any such modification shall not: (a) increase
or decrease the area of the Premises by more than 2%; (b)
materially relocated the Premises from the area shown on the
Approved Drawings; or (c) materially change the Specifications.
2 BASE RENT. The Base Rent stated in section 1.5 of the Lease for the
first year of the Lease is based on a per rentable square foot rate of
$.62 multiplied by the estimated 59,860 rentable square feet of the
Premises. If there is a variance in the rentable square footage of the
Premises, the Base Rent for the first year shall be adjusted based on
the actual rentable square feet, as certified by LESSOR, within the
Premises multiplied times $.62 per rentable square foot.
3 COST OF LIVING INCREASE. At the beginning of the second year of the
Lease, and at the beginning of each lease year thereafter during the
term of the Lease, the base monthly rent payable under Paragraph 1.5 of
the Lease, shall by increased by an amount equal to 4% of the Base Rent
in effect during the immediately preceding Lease year.
4 LESSEE'S PAYMENT OF TRIPLE-NET EXPENSES. LESSEE shall pay LESSOR
directly for any and all triple net charges including but not limited
to maintenance, insurance premiums, real property taxes, reserves,
management and association dues as additional rent in twelve equal
monthly installments based upon the actual expenses. LESSOR's good faith
estimate of the Common Area Operating Expenses for the first year is a
monthly cost of approximately $.13 per rentable square foot per month
provided actual amounts may vary. An estimate of these expenses for
1996 is attached as EXHIBIT "3" to this Addendum; categories of expense
may vary in future years as the Building ages. The amount of the
monthly NNN charge will be reconciled and adjusted on an annual basis.
Lessor shall deliver to Lessee within ninety (90) days after the
expiration of each calendar year, a reasonably detailed statement
showing Lessee's Share of Common Area Operating Expenses. Copies of all
related invoices will be made available to the Lessee upon request.
5 COMMENCEMENT DATE. The Commencement Date of the Lease shall be the
date following substantial completion of the Building Shell and Tenant
Improvements when LESSOR obtains permission from the City of Carlsbad
and all other necessary government authorities for the tenant to
occupy the Building, provided, the Commencement Date shall not be
earlier than October 1, 1996 nor later than January 1, 1997, except (a)
with LESSEE'S consent, (b) on account of delays caused by LESSEE as
described in paragraph 6 of this Addendum, or (c) for delays caused by
fire, earthquake or other unavoidable casualties or inclement weather
conditions not reasonably anticipatable, extraordinary governmental
action other than usual permit and inspection procedures or any other
causes beyond the control of the LESSOR.
6 BUILDING SHELL AND TENANT IMPROVEMENTS. LESSOR, at its expense, shall
construct the Building Shell. The phrase "Building Shell" means the
improvements to be constructed as shown in the Approved Drawings and
Specifications, including (a) roofing, fascia, exterior walls, doors
and windows, (b) footings and concrete floors, (c) fire sprinkler
system (d) conduits and pipes for telephone, electricity, water, fire
sprinklers and sewer brought to "stub out" termination points in or
above a perimeter wall of the Premises, (e) a main electrical
termination panel for the Building, (f) paving and finish of parking
areas, entrance areas and walkways, and (g) landscaping as reasonably
determined by LESSOR.
6.1 TENANT IMPROVEMENTS DESCRIPTION. The Costs of completing the
Tenant Improvements will be shared by LESSOR and LESSEE as
described in subparagraph 6.4 of this Addendum. The phrase
"Tenant Improvements" means all interior improvements which are
not a part of the Building Shell, including (1) partitions,
walls, doors, (b) all surface finishes, including wall
coverings, paint, floor coverings, suspended ceilings and other
similar items, (c) duct work, heat pumps, vents, filters,
diffusers, terminal boxes and accessories for completion of
heating, ventilation and air conditioning systems within the
Premises, (d)
<PAGE>
electrical distribution systems (including panels, subpanels,
wires and outlets), lighting fixtures, outlets, switches and
other electrical work to be installed in the Premises, (e)
plumbing lines, fixtures and accessories, (f) all fire and life
safety control systems such as fire walls, fire alarms
(including piping, wiring and accessories) to be located in the
Premises, (g) entrance door signage and directory listings, as
authorized by LESSOR, (h) improvements required for compliance
with Title 24, and (i) other improvements described in the "Cost
Breakdown Tenant Improvement" attached to this Addendum as
EXHIBIT "4"; provided, LESSEE's trade fixtures, equipment and
personal property (including telephone systems, chairs, tables,
furniture, movable partitions and other equipment used in
LESSEE's business) shall not be considered part of the Tenant
Improvements.
6.2 DESIGN OF TENANT IMPROVEMENTS. LESSEE shall furnish to LESSOR,
a complete set of plans and specifications detailing all Tenant
Improvements no later than February 1, 1996 ("Tenant Improvement
Plans"). Unless otherwise approved by LESSOR, the Tenant
Improvement Plans will be prepared by Architect, who shall also
obtain permits for the plans. If LESSEE delays in providing the
Tenant Improvement Plans, such delay shall not change the
Commencement Date of the Lease, which shall be the date the
Premises would have been available for occupancy, but for any
such delay. The Tenant Improvement Plans shall be subject to
LESSOR's prior approval, which will not be unreasonably withheld;
provided, however, LESSOR shall have the absolute right of
disapproval, in its sole discretion, of any Tenant Improvements
which (a) alter or otherwise affect any structural component of
the Building, (b) are visible from the exterior of the Premises,
(c) in the case of office improvements, are not comparable in
quality to similar improvements at the premises of Tactyl
Technologies, 2595 Commerce Way, Vista or (d) do not provide for
the construction of a minimum of 40,000 square feet of improved
office/production area. LESSOR shall have thirty (30) days after
receipt of Tenant Improvement Plans in which to approve or
disapprove the Tenant Improvement Plans. If LESSOR does not
disapprove the Tenant Improvement Plans within such thirty (30)
day period, LESSOR shall be deemed to have approved the Tenant
Improvement Plans. If LESSOR reasonably disapproves the Tenant
Improvement Plans, LESSEE, at its expense, shall promptly cause
the Tenant Improvement Plans to be revised and resubmitted to
LESSOR for its review and approval within fifteen (15) days from
notice of LESSOR'S disapproval. Following LESSOR'S approval,
LESSOR will have the Architect submit the Tenant Improvement
Plans for government plan checking and a building permit, if
required, provided, LESSOR shall have the right to approve any
changes required by such governmental authorities. The final
Tenant Improvement Plans shall be subject to any changes
required by governmental authorities.
6.3 APPROVED CONTRACTOR. Hamann Construction, a licensed general
contractor, will be the general contractor for construction
of the Building Shell and Tenant Improvements. LESSOR and LESSEE
hereby approve Hamann Construction acting as the general
contractor ("Contractor").
6.4 PAYMENT OF TENANT IMPROVEMENT COSTS. The phrase "Tenant
Improvement Costs" means all direct and indirect costs of
furnishing, constructing and installing the Tenant Improvements,
including (a) costs for design and/or architectural services of
the Architect in preparing the Tenant Improvement Plans, (b)
government permit costs applicable to the Tenant Improvements,
(c) amounts payable to the Contractor for overhead/profit, job
site supervision, cleanup, trash and janitorial services as
shown in the Cost Breakdown Tenant Improvement (EXHIBIT "4"),
and (d) the actual "hard costs" of construction of the Tenant
Improvements.
6.4.1 LESSOR'S CONTRIBUTION. LESSOR agrees to pay a maximum of
$780,550 for the Tenant Improvement Costs ("Allowance").
The Allowance shall be applied solely to pay the cost of
the Tenant Improvements. Under no circumstances shall
LESSEE be entitled to any payment on account of any
unused portion of the Allowance following completion of
the Tenant Improvements.
6.4.2 EXCESS COSTS. LESSEE will be responsible for payment of
any excess Tenant Improvement Costs which exceed the
Allowance. LESSEE shall deposit funds with LESSOR (or
make such other arrangement to guaranty payment of such
excess costs as are acceptable to LESSOR) in an amount
equal to such excess prior to the issuance of the building
permit for construction of the Tenant Improvements, except
in the case of excess costs resulting from changes during
construction. Any construction changes shall be subject
to LESSOR's approval and LESSEE shall deposit funds with
LESSOR to pay such costs within 3 days following notice
of the Contractor's estimated cost for any change; if the
actual cost of the change is less than the estimate,
LESSOR shall refund the difference to LESSEE upon
LESSEE's occupancy, and if the actual cost is more than
the estimate, LESSEE shall pay the difference within ten
(10) days of a notice from LESSOR documenting such actual
costs.
6.5 COMPLETION OF TENANT IMPROVEMENT. The Commencement Date of this
Lease shall not occur until substantial completion of
construction of the Tenant Improvements, except if substantial
completion is delayed on account of LESSEE's failure to timely
submit the Tenant Improvement Plans (or any revisions thereto),
LESSEE's request for special materials, finishes or
installations other than those readily available and customarily
and
<PAGE>
ordinarily used in similarly situated construction work,
changes to the approved Tenant Improvement Plans. LESSEE's
failure to make timely pay amounts required to be paid by
LESSEE in connection with such construction or other delays
caused by LESSEE. If such delays are encountered, the
Commencement Date of this Lease shall occur prior to substantial
completion of the Tenant Improvements and as of the date such
Tenant Improvements would have been substantially complete but
for such delays.
7 CONTINUING RIGHT OF FIRST REFUSAL. LESSEE, so long as LESSEE has not
committed a default under the Lease, shall have a continuing right of
first refusal to lease and/or purchase Lots 99 and 101 currently owned
by the LESSOR during the Original Term of the Lease strictly on the
terms and conditions described in this subparagraph.
7.1 NOTICE OF INTENT. If LESSOR desires to lease or sell Lots 99
or 101 to a third party ("Thirty Party Lease or Sale"). LESSOR
shall provide LESSEE a written notice ("Notice of Intent")
setting forth the material terms of the Third Party Lease or
Sale. The giving of such Notice of Intent shall constitute an
offer to LESSEE to lease or purchase Lot 99 and/or Lot 101 on
the same material terms as the Third Party Lease or Sale.
7.2 NOTICE OF ELECTION. For a period of 10 days following the
delivery of a Notice of Intent, LESSEE shall have an option to
elect to lease or buy Lot 99 and/or Lot 101, which option is
exercisable by LESSEE giving written notice of LESSOR of the
exercise of the option ("Notice of Election"), and, thereafter,
executing and delivering to LESSOR a lease or, in the case of a
sale, signed escrow instructions within 10 days from LESSOR's
delivery of a written lease or escrow instructions, which conform
to the material terms described in the Notice of Intent and are
otherwise on such terms as required by LESSOR.
7.3 TERMINATION OF FIRST REFUSAL RIGHTS. If LESSEE fails or
declines to timely give Notice of Election or fails to timely
return an executed lease or escrow instructions for such space,
LESSOR shall be free to complete the proposed Third Party
Lease or Sale described in the Notice of Intent, subject to such
reasonable adjustments as LESSOR may reasonably approve;
provided, however, LESSOR shall not cause or permit any change
greater than 5% in the rental rates, lease term or the amount of
any tenant improvement allowance from the terms described in the
Notice of Intent.
8. LESSOR'S CONTINGENCIES. LESSOR's obligations under the Lease are
subject to satisfaction of the following contingencies on or before
February 1, 1996: (a) LESSOR procures a commitment for a construction
loan and permanent loan on terms and conditions reasonably acceptable
to LESSOR; (b) LESSOR reasonably determines that the total cost of all
governmental fees, exactions and charges for development of the Building
will not exceed $355,000. LESSOR agrees to use its reasonable best
efforts to satisfy such contingencies on or before February 1, 1996 and
LESSOR will promptly give LESSEE notice as and when each contingency is
satisfied. If LESSOR does not give notice to LESSEE that all
contingencies have been satisfied on or before February 1, 1996, then
either LESSOR or LESSEE shall have the right to terminate the Lease by
giving the other notice of such decision. If the Lease is so terminated,
LESSOR shall return the Security Deposit to LESSEE and neither party
will have any further obligations under the Lease.
9. RENT ADJUSTMENT. Subject to all other provisions of section 9 of the
Lease, and except as provided in subparagraph 9.1 below, if LESSEE
subleases or assigns more than 49% the Premises (regardless of whether
such sublease or assignment is consented to by LESSOR), the rental due
under this Lease shall be increased, at LESSOR's option, as follows:
(a) in the case of an assignment, the Base Rent shall be increased by
an amount equal to the total value of the consideration received by
LESSEE on account of such assignment, less an amount equal to any real
estate commissions payable by LESSEE on account of such assignment;
and (b) in the case of a sublease, the Base Rent shall be increased by
an amount equal to the total rental or other consideration payable
under such sublease less the costs of any real estate commissions
payable by LESSEE. LESSEE acknowledges and agrees that LESSEE is
entering into this Lease to acquire the right to occupy and possess
the Premises for the operation of its business and not for the purpose
of or with a view to realizing a speculative economic return from
an increase in the value of the Premises by subleasing or assignment.
LESSEE agrees that any such increase in value shall belong to and
constitute the property of LESSOR and, thus, this provision providing
for an adjustment in rent upon assignment or subleasing is fair, just
and equitable and a part of the negotiated bargain between LESSOR and
LESSEE. In no event shall this provision be construed or applied to
reduce the Base Rent or other charges payable by LESSEE under this Lease.
9.1 EXCEPTIONS: ASSIGNMENT. The preceding provisions permitting
LESSOR to increase the Base Rent on account of an assignment
shall not apply to any of the following transactions, so long
as LESSEE has complied with the requirements for LESSOR's
consent to the transaction, and any additional conditions, as
described below, which are applicable to a particular
transaction are fully and strictly satisfied:
9.1.1 an assignment to a successor corporation into which or
with which LESSEE is merged or consolidated in accordance
with applicable statutory provisions for the merger or
consolidation of corporations so long as no less than
fifty percent (50%) of the voting common stock of the
successor corporation is owned by shareholders owning the
share of LESSEE as of the date of execution of the Lease;
9.1.2 an assignment to a wholly-owned subsidiary of LESSEE;
9.1.3 an assignment of the Lease to another entity, which is
not affiliated with LESSEE ("Unaffiliated Transferee") in
conjunction with the concurrent good faith sale and
transfer to such Unaffiliated Transferee of substantially
all of LESSEE's assets or 50% or more of LESSEE's stock so
long as such Unaffiliated Transferee meets the
<PAGE>
following financial qualifications: (a) immediately
prior to the sale and transfer of assets or stock to such
Unaffiliated Transferee, such Unaffiliated Transferee has
a net worth, determined in accordance with Generally
Accepted Accounting Principles, which exceeds the net
worth of LESSEE; and (b) for the fiscal year immediately
preceding the sale and transfer of such assets or stock
to such Unaffiliated Transferee, such Unaffiliated
Transferee has realized a net profit of at least 150% of
LESSEE's net profit during the immediately preceding
fiscal year.
9.1.4 the transfer of more than twenty-five percent (25%) of
the voting common stock of LESSEE pursuant to a public
offering of such stock in compliance with the
registration requirements of the Securities Act of 1933.
9.1.5 the transfer of more than twenty-five percent (25%) of
the voting common stock of LESSEE on account of the death
of one or more of the shareholders of LESSEE, who owned
shares as of the date of execution of the Lease so long
as such transfer is to one of the other shareholders, who
owned shares as of the date of execution of the Lease, or
to a member of the Immediate Family (as defined below) of
the deceased shareholder, provided, however, any
subsequent transfer of such shares by a member of the
deceased shareholder's family shall be taken into account
in determining whether more than twenty-five (25%) of the
shares have been transferred, except to the extent such
subsequent transfer is also to a member of the deceased
shareholder's Immediate Family:
9.1.6 the transfer of more than twenty-five percent (25%) of
the voting common stock of LESSEE by one or more of the
shareholders of LESSEE, who owned shares as of the date
of execution of the Lease so long as such transfer is to:
(a) one of the other shareholders, who owned shares as of
the date of execution of the Lease, or (b) to a member of
the Immediate Family (as defined below) of the
transferring shareholder so long as the transferring
shareholder either (aa) retains the right to vote the
shares so transferred, or (bb) continues to be an officer
and a member of the board of directors of LESSEE; provided,
however, any subsequent transfer of such shares by a
member of the transferring shareholder's Immediate Family
shall be taken into account in determining whether more
than twenty-five percent (25%) of the shares have been
transferred, except to the extent such subsequent transfer
is also to a member of the transferring shareholder's
Immediate Family;
9.1.7 the transfer of more than twenty-five percent (25%) of
the voting common stock of LESSEE pursuant to an employee
stock ownership plan qualified under the Internal Revenue
Code of 1986, as amended; and
9.1.8 the term "Immediate Family" means, with respect to an
individual or revocable trust of which an individual is
trustor, his or her ancestors, descendants, or spouse, or
any voluntarily appointed custodian, trustee, or personal
representative for the benefit of such individual, his
or her ancestors, descendants, or spouse, or any trust
for the benefit of the individual and/or any other person
who is a member of his or her "Immediate Family."
10 FREE RENT. LESSEE shall pay first and last month's rent upon
execution of Lease. Month two and month three shall be rent free. LESSEE
shall be required to pay only Triple-Net Expenses for month two and
three of the Lease and full rent will commence in the fourth month of
the Lease.
11 ADDITION TO PARAGRAPH 7.1(a). Lessee's obligations hereunder
regarding restoration, replacement or renewal shall be subject to
exceptions for ordinary wear and tear associated with the gradual
deterioration of real property and its improvements over the period of
time. Nothing herein shall be deemed to require that Lessee return the
building to Lessor upon the termination hereof or, at any time during
the period hereof, in a condition other than that modified by ordinary
wear and tear associated with a well-maintained building.
12 ADDITION TO PARAGRAPH 9.2. If Lessor increases the rent as provided
in this Paragraph 9 and thereafter Lessee is required to pay any amount
under this Lease as a result of the default by the assignee or subtenant
of Lessee, the rent due hereunder shall be decreased to that which would
have been due had Lessee never assigned or sublet its interest in this
Lease. The decrease shall be applied retroactively to the date of
commencement of the increased rent. The difference between the increased
rent collected by the Lessor and the rent which would have been due in
the absence of a sublet or assignment shall be applied against Lessee's
obligations to decrease or eliminate as much as possible the payments
required to be made by Lessee from the date of the default by the
subtenant or assignee.
13 CORPORATE RESOLUTION. LESSEE shall supply LESSOR with copies of a
Corporate Resolution authorizing Lyle Turner to sign Leases on the
behalf of Invitrogen within ten (10) days of Lease execution.
"LESSOR" "LESSEE"
CRC, Invitrogen, Inc.
a California General Partnership a California Corporation
Dated: 11/22 , 1995 Dated: 11/22 , 1995
----------- -----------
By: /s/ Jeffrey C. Hamann By: /s/ Lyle Turner
---------------------------------- ---------------------------
Jeffrey C. Hamann, General Partner Lyle Turner, President
<PAGE>
FIRST AMENDMENT TO
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
This FIRST AMENDMENT TO STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT
LEASE-NET ("Amendment") is made effective as of July ___, 1996, by and between
CRC PROJECT ONE LP, a California limited partnership ("LESSOR") and INVITROGEN,
a California corporation ("LESSEE"), and is made with reference to the following
facts, which are a material part of this Amendment.
A. LESSEE entered into that certain Standard Industrial/Commercial
Single-Tenant Lease-Net, dated November 1, 1995, with CRC, a California general
partnership, which provides for CRC to develop, and LESSEE to lease, a planned
approximately 59,680 sq. ft. office and warehouse facility located on land
commonly referred to as Lot 100 of Carlsbad Tract No. 85-24 Unit 5 Carlsbad
Research Center in the City of Carlsbad, County of San Diego, State of
California, according to map thereof No. 12815, filed in the Office of the
County Recorder of San Diego County, May 16, 1991.
B. For purposes of reference in this Amendment, the term "Original Lease"
means and refers to the lease described in paragraph A above, and the term
"Lease" means and refers to the Original Lease as modified by this Amendment.
Any words or phrases constituting defined terms in the Original Lease shall have
the same meaning and effect when used in this Amendment, except as otherwise
expressly provided.
C. Pursuant to that certain Assignment and Assumption of Leases dated
July 8, 1996, CRC, a California general partnership, assigned its rights, duties
and responsibilities under the Original Lease to LESSOR.
D. LESSOR and LESSEE now desire to amend and modify the Original Lease to
provide for an extension of the "Commencement Date" of the Lease as set forth in
this Amendment.
NOW, THEREFORE, in consideration of the promises and conditions contained
herein, the parties hereby agree as follows:
1. CHANGE IN COMMENCEMENT DATE. Paragraph 5 of the Addendum to Original
Lease, which is annexed to and part of the Original Lease, is hereby deleted
and replaced with the following provision:
"5. COMMENCEMENT DATE. The Commencement Date of the Lease shall be
the Date following substantial completion of the Building Shell and Tenant
Improvements when LESSOR obtains permission from the City of Carlsbad and
all other necessary government authorities for the LESSEE to occupy the
Building, provided, the Commencement
-1-
<PAGE>
Date shall not be earlier than November 1, 1996 nor later than January 1,
1997, except (a) with LESSEE's consent, (b) on account of delays caused by
LESSEE as described in paragraph 6 of this Addendum, or (c) for delays
caused by fire, earthquake or other unavoidable casualties or inclement
weather conditions not reasonably anticipatable, extraordinary governmental
action other than usual permit and inspection procedures or any other
causes beyond the control of the LESSOR.
5.1 UNEXCUSABLE DELAYS. In the event that the Commencement Date
is delayed past January 1, 1997 on account of the fault of LESSOR,
LESSOR shall pay to LESSEE, upon LESSEE's taking possession of the
Premises, the following amounts: (a) for delays occurring during the
period from January 1, 1997 to February 15, 1997, the amount of
$400.00 per day; and (b) for delays occurring after February 15, 1997,
the amount of $800.00 per day.
5.2 LIQUIDATED DAMAGES/REMEDIES. LESSOR AND LESSEE AGREE THAT
IT WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE
DAMAGES WHICH LESSEE MAY SUFFER AS A RESULT OF DELAYS IN THE
COMMENCEMENT DATE CAUSED BY LESSOR. THEREFORE, LESSOR AND LESSEE
AGREE THAT THE AMOUNTS PROVIDED IN SUBSECTION 5.1 ABOVE REPRESENT A
FAIR AND REASONABLE ESTIMATE OF LESSEE'S DAMAGES AND THAT LESSEE SHALL
BE ENTITLED TO RECEIVE AND RETAIN SUCH LIQUIDATED DAMAGES ON ACCOUNT
OF LESSOR'S DEFAULT AS LESSEE'S SOLE AND EXCLUSIVE REMEDY. LESSEE
WAIVES AND DISCLAIMS ANY OTHER RIGHT, CLAIM AND/OR REMEDY ARISING FROM
ANY SUCH UNEXCUSABLE DELAYS CAUSED BY LESSOR, INCLUDING, WITHOUT
LIMITATION, ANY CLAIMS FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AND/OR
ANY RIGHT TO TERMINATE THIS LEASE IN ACCOUNT OF SUCH DELAYS SO LONG AS
LESSOR TENDERS PAYMENT OF SUCH LIQUIDATED DAMAGES IN ACCORDANCE WITH
THE PRECEDING PROVISIONS.
GH LT
----------------- -----------------
LESSOR'S Initials LESSEE's Initials
5.3 EARLY COMPLETION CONTRIBUTION. At the request of LESSEE,
LESSOR has agreed to pay the Contractor described in section 6 of the
Addendum to the Original Lease, a completion bonus in an amount of
$400.00 per day for each day prior to January 1, 1997 that such
Contractor causes the substantial completion of the Tenant
Improvements so that the Premises are available for LESSEE's occupancy
("Early Completion Bonus"). Notwithstanding any other provision in
the Lease, LESSEE
-2-
<PAGE>
agrees to pay to LESSOR an amount equal to the amount of the Early
Completion Bonus paid by LESSOR to the Contractor on account of the
Contractor's causing substantial completion of the Tenant Improvements
prior to January 1, 1997."
2. INCORPORATION OF ORIGINAL LEASE. Except as expressly provided in this
Amendment, all terms and conditions of the Original Lease will remain in full
force and effect and are deemed incorporated in this Amendment by this reference
to the same extent as if set forth in this Amendment in full.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
on the day and year first above written.
"LESSOR"
CRC PROJECT ONE LP, a California
limited partnership,
By its General Partner
By: HAMANN CONSOLIDATED, INC.,
a California corporation,
By: /s/ Gregg Hamann
------------------------
Gregg Hamann, Secretary
"LESSEE"
INVITROGEN, a California
corporation
By: /s/ Lyle Turner
-----------------------------
Lyle Turner, President
-3-
<PAGE>
INVITROGEN CORPORATION
----------------------------------
STOCK PURCHASE
AND STOCKHOLDERS AGREEMENT
As of June 20, 1997
<PAGE>
INVITROGEN CORPORATION
Stock Purchase
and Stockholders Agreement
As of June 20, 1997
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. PURCHASE AND SALE OF SHARES; REDEMPTION . . . . . . . . . . . . . 1
1.1 Description of Securities . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase; Redemption . . . . . . . . . . . . . . . . . . 1
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . 2
2.1 Organization and Corporate Power. . . . . . . . . . . . . . . . . 2
2.2 Authorization and Non-Contravention . . . . . . . . . . . . . . . 3
2.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Subsidiaries; Investments . . . . . . . . . . . . . . . . . . . . 5
2.5 Financial Statements and Matters. . . . . . . . . . . . . . . . . 5
2.6 Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . 5
2.7 Absence of Certain Developments . . . . . . . . . . . . . . . . . 5
2.8 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.9 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Certain Contracts and Arrangements. . . . . . . . . . . . . . . . 7
2.14 Intellectual Property Rights; Employee Restrictions . . . . . . . 9
2.15 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . .10
2.17 Labor Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.18 Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.19 Hazardous Waste, Etc. . . . . . . . . . . . . . . . . . . . . . .11
2.20 Business; Compliance with Laws. . . . . . . . . . . . . . . . . .11
2.21 Investment Banking; Brokerage . . . . . . . . . . . . . . . . . .11
2.22 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.23 Transactions with Affiliates. . . . . . . . . . . . . . . . . . .11
2.24 Customers and Distributors. . . . . . . . . . . . . . . . . . . .11
2.25 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.26 Qualified Small Business Stock. . . . . . . . . . . . . . . . . .12
SECTION 2A. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS . . . . . . . . .12
SECTION 3. CONDITIONS OF PURCHASE. . . . . . . . . . . . . . . . . . . . . .13
3.1 Satisfaction of Conditions. . . . . . . . . . . . . . . . . . . .13
(i)
<PAGE>
3.2 Director Election; Indemnification. . . . . . . . . . . . . . . .14
3.3 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . .14
3.4 Reincorporation . . . . . . . . . . . . . . . . . . . . . . . . .14
3.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.6 Investors' Fees . . . . . . . . . . . . . . . . . . . . . . . . .14
3.7 No Violation or Injunction. . . . . . . . . . . . . . . . . . . .14
3.8 Consents and Waivers. . . . . . . . . . . . . . . . . . . . . . .14
3.9 Repurchase Agreement. . . . . . . . . . . . . . . . . . . . . . .15
3.10 Repayment of Company Loans. . . . . . . . . . . . . . . . . . . .15
3.11 Agreement of Spouse . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 4. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.1 Financial Statements and Budgetary Information; Inspection. . . .15
4.2 Indemnification; Insurance. . . . . . . . . . . . . . . . . . . .15
4.3 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . .16
4.4 Restrictive Covenants . . . . . . . . . . . . . . . . . . . . . .16
4.5 Redemption; Use of Proceeds . . . . . . . . . . . . . . . . . . .17
4.6 Key Person Insurance. . . . . . . . . . . . . . . . . . . . . . .17
4.7 Stock Awards. . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.9 Termination of Airplane Arrangement . . . . . . . . . . . . . . .18
SECTION 5. TRANSFER RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . .18
5.1 General Restriction . . . . . . . . . . . . . . . . . . . . . . .18
5.2 Right of First Refusal. . . . . . . . . . . . . . . . . . . . . .19
5.3 Right of Co-Sale. . . . . . . . . . . . . . . . . . . . . . . . .20
5.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 6. RIGHTS TO PURCHASE. . . . . . . . . . . . . . . . . . . . . . . .22
6.1 Right to Participate in Certain Sales of
Additional Securities . . . . . . . . . . . . . . . . . . . . . .22
6.2 Assignment of Rights. . . . . . . . . . . . . . . . . . . . . . .23
SECTION 7. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . .23
7.1 Optional Registrations. . . . . . . . . . . . . . . . . . . . . .23
7.2 Required Registrations. . . . . . . . . . . . . . . . . . . . . .24
7.3 Registrable Securities. . . . . . . . . . . . . . . . . . . . . .26
7.4 Further Obligations of the Company. . . . . . . . . . . . . . . .26
7.5 Indemnification; Contribution . . . . . . . . . . . . . . . . . .28
7.6 Rule 144 and Rule 144A Requirements . . . . . . . . . . . . . . .31
7.7 Transfer of Registration Rights . . . . . . . . . . . . . . . . .31
7.8 "Market Stand-off" Agreement. . . . . . . . . . . . . . . . . . .32
SECTION 8 ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . .32
8.1 Advent VIII . . . . . . . . . . . . . . . . . . . . . . . . . . .32
(ii)
<PAGE>
8.2 Voting for Directors. . . . . . . . . . . . . . . . . . . . . . .32
SECTION 9 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
9.1 Amendments, Waivers and Consents. . . . . . . . . . . . . . . . .32
9.2 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . .33
9.3 Survival of Representations; Warranties and Covenants;
Assignability of Rights . . . . . . . . . . . . . . . . . . . . .33
9.4 Legend on Securities. . . . . . . . . . . . . . . . . . . . . . .33
9.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.6 Section Headings and Gender . . . . . . . . . . . . . . . . . . .34
9.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . .34
9.8 Notices and Demands . . . . . . . . . . . . . . . . . . . . . . .34
9.9 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . .34
9.10 Remedies; Severability. . . . . . . . . . . . . . . . . . . . . .35
9.11 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . .35
</TABLE>
EXHIBITS
A. Investors
B. Preferred Stock Terms
C. Common Stock Redemptions
D. Projections
E. Indemnification Agreement
F-1. Opinion of Counsel (Company)
F-2. Opinion of Counsel (Subsidiaries)
G. Agreement of Spouse
(iii)
<PAGE>
STOCK PURCHASE
AND STOCKHOLDERS AGREEMENT
STOCK PURCHASE AND STOCKHOLDERS AGREEMENT made as of this 20th day of June,
1997, by and among Invitrogen Corporation, a Delaware corporation (together with
any predecessors or successors thereto and subject to Section 2, the "Company"),
Lyle C. Turner and Joseph Fernandez (collectively the "Stockholders" and
individually a "Stockholder"), and the investment partnerships named in EXHIBIT
A hereto (together with their successors and assigns, collectively the
"Investors," and each individually an "Investor").
WHEREAS, the majority of the outstanding shares of the Company's capital
stock prior to the date hereof are owned by the Stockholders; and
WHEREAS, the Company has authorized the issuance and sale to the Investors
of a total of 2,202,942 shares of Series A Convertible Redeemable Preferred
Stock, par value $.01 per share ("Convertible Preferred Stock"), having the
rights and preferences set forth in EXHIBIT B for an aggregate purchase price of
$15 million;
WHEREAS, the Company has agreed to redeem and the stockholders of the
Company have agreed to sell to the Company an aggregate of 1,101,471 shares of
the Company's Common Stock, par value $.01 per share ("Common Stock"), for an
aggregate purchase price of $7.5 million; and
WHEREAS, the parties hereto desire to set forth the terms of their ongoing
relationship in connection with the Company.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
SECTION 1. PURCHASE AND SALE OF SHARES; REDEMPTION
1.1 DESCRIPTION OF SECURITIES. The Company's authorized capital stock
consists of Common Stock, Convertible Preferred Stock and Redeemable Preferred
Stock, par value $.01 per share (the "Redeemable Preferred Stock"). The
Convertible Preferred Stock and the Redeemable Preferred Stock have the rights,
preferences and other terms set forth in EXHIBIT B. For purposes of this
Agreement, the shares of Convertible Preferred Stock to be acquired by the
Investors from the Company hereunder are referred to as the "Convertible
Preferred Shares," the shares of Redeemable Preferred Stock and Common Stock
issuable upon conversion of the Convertible Preferred Shares are referred to as
the "Conversion Shares," and the Convertible Preferred Shares and the Conversion
Shares are sometimes referred to herein as the "Securities."
1.2 SALE AND PURCHASE; REDEMPTION. Upon the terms and subject to the
conditions herein, and in reliance on the representations and warranties set
forth in Section 2, (a) the Investors shall jointly and severally purchase from
the Company, and the Company shall issue and sell to each of the Investors, at
the Closing (as defined in Section 1.3), the number of shares of
<PAGE>
Convertible Preferred Stock set forth opposite the name of such Investor in
EXHIBIT A for the purchase price of $6.8091 per share, or an aggregate of
2,202,942 shares of Convertible Preferred Stock for an aggregate purchase price
of $15,000,000, and the Company shall without further action grant the Investors
the rights set forth herein. Concurrently therewith, the Company shall acquire
from stockholders of the Company, including the Stockholders, and each such
stockholder shall sell to the Company, 1,101,471 shares of Common Stock for a
price of $6.8091 per share, (the "Redemption Shares") for an aggregate
redemption price of $7.5 million, pursuant to the Repurchase Agreement (the
"Repurchase Agreement") and disclosure documents in the form attached hereto as
EXHIBIT C. All purchase and redemption payments hereunder shall be made by wire
transfer of next day available funds.
1.3 CLOSING. The closing of the purchases and sales of the Convertible
Preferred Shares and the redemption of Common Stock from the stockholders of the
Company contemplated by Section 1.2 (the "Closing") shall take place at 1:00
p.m. Pacific Time on June 20, 1997 or such later date as each of the conditions
set forth in Section 3 hereof shall have been satisfied or waived by the
Investors (the "Closing Date"); provided, however, that the Investors shall have
the right, exercisable in their sole discretion, to terminate this Agreement if
the conditions set forth in Section 3 hereof shall not have been satisfied by
June 30, 1997, and this Agreement shall automatically terminate if the
conditions set forth in Section 3 hereof shall not have been satisfied by June
30, 1997 and the Investors have not waived such conditions by July 31, 1997.
SECTION 2. REPRESENTATIONS AND WARRANTIES
In order to induce the Investors to enter into this Agreement, the Company,
and with respect to Section 2.2(b) below, each Stockholder, severally as to
himself or herself, represents and warrants to each of the Investors the
following, except as set forth in the schedule of exceptions attached hereto
(the "Disclosure Schedule"). For purposes of this Section 2, references to the
"Company" shall mean and refer to Invitrogen Corporation, a Delaware
corporation, and its subsidiaries (including without limitation with respect to
Section 2.12 hereof) and predecessors, as the context requires, except that
references to the "Company" in the first two sentences of Section 2.2(a) and in
Sections 2.3 and 2.26 shall refer to Invitrogen Corporation. Facts, documents,
matters and other items disclosed in the Disclosure Schedule shall be disclosed
for all purposes once included therein and regardless of section references in
such Disclosure Schedule.
2.1 ORGANIZATION AND CORPORATE POWER. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to do business as a foreign corporation in
each jurisdiction in which the failure to be so qualified would have a material
adverse effect on its assets, liabilities, condition (financial or other),
business, results of operations or prospects (a "Material Adverse Effect"). The
Company has all required corporate power and authority to carry on its business
as presently conducted, to enter into and perform this Agreement and the
agreements contemplated hereby to which it is a party and to carry out the
transactions contemplated hereby and thereby, including the issuance of the
Securities and the redemption of the Redemption Shares. The copies of the
Certificate of Incorporation and By-laws of the Company, as amended to date
(the "Certificate of Incorporation"
2
<PAGE>
and the "Bylaws," respectively), which have been furnished to the Investors
by the Company, are correct and complete at the date hereof. The Company is
not in violation of any term of its Certificate of Incorporation or By-laws.
2.2 AUTHORIZATION AND NON-CONTRAVENTION.
(a) The execution, delivery and performance by the Company of
this Agreement and all other agreements, documents and instruments to be
executed and delivered by the Company as contemplated hereby (including, without
limitation, the Repurchase Agreement) and the issuance and delivery of (i) the
Convertible Preferred Shares, and (ii) upon the conversion of the Convertible
Preferred Shares, the Conversion Shares, have been duly authorized by all
necessary corporate and other action of the Company. This Agreement and all
documents executed by the Company pursuant hereto (including, without
limitation, the Repurchase Agreement) are valid and binding obligations of the
Company, enforceable in accordance with their terms. The execution, delivery
and performance by the Company of this Agreement and all other agreements,
documents and instruments to be executed and delivered by the Company as
contemplated hereby (including, without limitation, the Repurchase Agreement)
and the issuance and delivery of (i) the Convertible Preferred Shares and
(ii) upon the conversion of the Convertible Preferred Shares, the Conversion
Shares, do not and will not: (A) violate, conflict with or result in a default
(whether after the giving of notice, lapse of time or both) under any contract
or obligation to which the Company is a party or by which it or its assets are
bound, or any provision of the Certificate of Incorporation or By-laws of the
Company, or cause the creation of any encumbrance upon any of the assets of the
Company except as contemplated herein or in the Certificate of Incorporation;
(B) to the Company's knowledge, violate or result in a violation of, or
constitute a default under, any provision of any law, regulation or rule, or any
order of, or any restriction imposed by, any court or governmental agency
applicable to the Company; (C) to the Company's knowledge, require from the
Company any notice to, declaration or filing with, or consent or approval of any
governmental authority or third party; or (D) accelerate any obligation under,
or give rise to a right of termination of, any agreement, permit, license or
authorization to which the Company is a party or by which the Company is bound.
(b) Each Stockholder has full right, authority, power and (if
applicable) capacity to enter into this Agreement and each agreement, document
and instrument to be executed and delivered by or on behalf of such Stockholder
pursuant to or as contemplated by this Agreement (including, without limitation,
the Repurchase Agreement) and to carry out the transactions contemplated hereby
and thereby. This Agreement and each agreement, document and instrument
executed and delivered by each Stockholder pursuant to or as contemplated by
this Agreement (including, without limitation, the Repurchase Agreement)
constitute, or when executed and delivered will constitute, valid and binding
obligations of such Stockholder enforceable in accordance with their respective
terms. The execution, delivery and performance by each Stockholder of this
Agreement and each such other agreement, document and instrument (including,
without limitation, the Repurchase Agreement), and the performance by such
Stockholder of the transactions contemplated hereby and thereby do not and will
not: (A) violate, conflict with or result in a default (whether after the
giving of notice, lapse of time or both) under
3
<PAGE>
any contract or obligation to which such Stockholder or the Company is a party
or by which he or its assets are bound, or any provision of the Certificate of
Incorporation or By-laws of the Company, or cause the creation of any
encumbrance upon any of the assets of such Stockholder or the Company; (B)
violate or result in a violation of, or constitute a default under, any
provision of any law, regulation or rule, or any order of, or any restriction
imposed by, any court or other governmental agency applicable to the Company or
such Stockholder; (C) require from such Stockholder or the Company any notice
to, declaration or filing with, or consent or approval of any governmental
authority or other third party; or (D) accelerate any obligation under, or give
rise to a right of termination of, any agreement, permit, license or
authorization to which such Stockholder or the Company is a party or by which
such Stockholder or the Company is bound.
2.3 CAPITALIZATION. As of the Closing and after giving effect to
the transactions contemplated hereby, the authorized capital stock of the
Company will consist of 20,000,000 shares of Common Stock, of which 7,355,194
shares will be issued and outstanding, including 1,360,352 shares of Common
Stock issued to the Company's Employee Stock Ownership Plan (the "ESOP"),
2,202,942 shares of Convertible Preferred Stock, of which 2,202,942 shares
will be issued and outstanding, and 2,202,942 shares of Redeemable Preferred
Stock, of which no shares will be issued and outstanding. In addition, the
Company has authorized and reserved for issuance upon conversion of the
Convertible Preferred Shares up to 2,202,942 shares of Common Stock and
2,202,942 shares of Redeemable Preferred Stock (subject to adjustment for
stock splits, stock dividends and the like) and has reserved for issuance
upon exercise of options under the Company's 1995 and 1997 Stock Option Plans
(the "Option Plans," and together with the ESOP, the "Plans") 3,125,794 and
609,685 shares of Common Stock, respectively (subject in each case to
adjustments for stock splits, stock dividends and the like). Except for the
1,907,794 shares of Common Stock issuable upon conversion of outstanding
options under the 1995 Stock Option Plan and the Conversion Shares, the
Company has not issued or agreed to issue and is not obligated to issue any
outstanding warrants, options or other rights to purchase or acquire any
shares of its capital stock, nor any outstanding securities convertible into
such shares or any warrants, options or other rights to acquire any such
convertible securities. As of the Closing, and after giving effect to the
transactions contemplated hereby, all of the outstanding shares of capital
stock of the Company (including without limitation the Convertible Preferred
Shares) will have been duly and validly authorized and issued and will be
fully paid and nonassessable and, assuming the accuracy of the Investors'
representations herein, will have been offered, issued, sold and delivered in
compliance with applicable federal and state securities laws and not subject
to any preemptive rights. The Conversion Shares issuable upon conversion of
the Convertible Preferred Shares will upon issuance be duly and validly
authorized and issued, fully paid and nonassessable and not subject to any
preemptive rights and, assuming the accuracy of the Investors'
representations herein, will be issued in compliance with federal and state
securities laws. The relative rights, preferences and other provisions
relating to the Convertible Preferred Shares and the Redeemable Preferred
Stock are as set forth in EXHIBIT B attached hereto. Except as set forth in
Section 2.3 of the Disclosure Schedule, there are no preemptive rights,
rights of first refusal, put or call rights or obligations or anti-dilution
rights with respect to the issuance, sale or redemption of the Company's
capital stock, other than rights to which the Investors and Stockholders are
entitled as set forth in this Agreement and the Certificate of Incorporation,
and except as described in the
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Repurchase Agreement. Except as set forth herein, there are no rights to have
the Company's capital stock registered for sale to the public under the laws of
any jurisdiction, no agreements relating to the voting of the Company's voting
securities, and no restrictions on the transfer of the Company's capital stock,
except as set forth in Section 2.3 of the Disclosure Schedule. After giving
effect to the transactions contemplated hereby, the outstanding shares of the
Company's capital stock are held beneficially and of record by the persons
identified in Section 2.3 of the Disclosure Schedule in the amounts indicated
thereon.
2.4 SUBSIDIARIES; INVESTMENTS. The Company has no subsidiaries or
interests in any corporation, joint venture, partnership or other entity, except
for Invitrogen Holland, B.V., a Dutch corporation and Invitrogen Export Company,
Ltd., a U.S. Virgin Islands corporation (collectively, the "Subsidiaries").
2.5 FINANCIAL STATEMENTS AND MATTERS.
(a) The Company has previously furnished to the Investors copies
of its audited financial statements for the fiscal years ended December 31, 1995
and 1996 together with copies of its unaudited financial statements for the
three-month periods ended March 31, 1997 and March 31, 1996. Such financial
statements referred to in this Section 2.5(a) were prepared in conformity with
generally accepted accounting principles applied on a consistent basis, are
complete, correct and consistent in all material respects with the books and
records of the Company and fairly and accurately present the financial position
of the Company as of the dates thereof and the results of operations and cash
flows of the Company for the periods shown therein (subject to the absence of
footnotes and normal year-end adjustments in the case of the unaudited
statements).
(b) The projections which have been separately disclosed in
writing to the Investors in the 1997 Business Plan Draft of March 7, 1997, 6:37
p.m. represent good faith objectives for the Company's performance for 1997
based upon assumptions which were in good faith believed to be reasonable when
made and which the Company believes continue to be reasonable as of the date
hereof.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
reflected or reserved against in the unaudited balance sheet of the Company at
April 30, 1997 contained in the financial statements referred to in Section
2.5(a) (the "Base Balance Sheet"), the Company does not have and is not subject
to any material liability or obligation of any nature, whether accrued,
absolute, contingent or otherwise.
2.7 ABSENCE OF CERTAIN DEVELOPMENTS. Since the date of the Base
Balance Sheet, there has not been any: (i) material adverse change in the
financial condition of the Company or in the assets, liabilities, condition
(financial or other), business, results of operations or prospects of the
Company (a "Material Adverse Change"), (ii) declaration, setting aside or
payment of any dividend or other distribution with respect to, or any direct or
indirect redemption or acquisition of, any of the capital stock of the Company,
(iii) waiver of any valuable right of the Company or cancellation of any debt or
claim held by the Company, (iv) loss, destruction or damage to any
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property which is material to the assets, liabilities, condition (financial or
other), properties, business, results of operations or prospects of the Company,
whether or not insured, (v) acquisition or disposition of any assets or other
transaction by the Company other than in the ordinary course of business, (vi)
material transaction or agreement involving the Company and any officer,
director, employee or stockholder of the Company, (vii) material increase,
direct or indirect, in the compensation paid or payable to any officer, key
employee or director of the Company or any establishment or creation of any
employment or severance agreement or employee benefit plan with respect to such
persons, (viii) material loss of personnel of the Company, material change in
the terms and conditions of the employment of the Company's key personnel or any
labor trouble involving the Company, (ix) arrangements relating to any royalty,
dividend or similar payment based on the sales volume of the Company, whether as
part of the terms of the Company's capital stock or by any separate agreement,
(x) agreement with respect to the endorsement of the Company's products, (xi)
loss or any development that is reasonably likely to result in a loss of any
significant customer, account or employee of the Company, (xii) incurrence of
indebtedness or any lien, (xiii) transaction not occurring in the ordinary
course of business, or (xiv) any agreement with respect to any of the foregoing
actions.
2.8 ORDINARY COURSE. Since the date of the Base Balance Sheet, the
Company has conducted its business only in the ordinary course and consistent
with its prior practices.
2.9 INVENTORIES. All of the Company's inventory items are of a quality
and quantity salable in the ordinary course of its business and the Company
maintains adequate inventory reserves. The inventories stated in the Base
Balance Sheet reflect the normal inventory valuation policies of the Company and
are based on and consistent with the Company's inventory records, and in the
best judgment of the Company are properly valued.
2.10 ACCOUNTS RECEIVABLE. All of the accounts receivable of the
Company, whether shown or reflected on the Base Balance Sheet or otherwise,
represent bona fide completed sales made in the ordinary course of business, are
valid and enforceable claims, are subject to no known set-offs or counterclaims,
and are, in the best judgment of the Company, fully collectible in the normal
course of business after deducting the reserve set forth in the Base Balance
Sheet and adjusted since that date, which reserve is a reasonable estimate of
the Company's uncollectible accounts.
2.11 TITLE TO PROPERTIES. Section 2.11 of the Disclosure Schedule sets
forth the addresses and uses of all real property that the Company owns, leases
or subleases. The Company has good, valid and (if applicable) marketable title
to all assets material to its business including without limitation all rights
to the Company's facility located in Carlsbad, California and to those assets
reflected on the Base Balance Sheet or acquired by it after the date thereof
(except for properties disposed of since that date in the ordinary course of
business), free and clear of all liens, claims or encumbrances of any nature,
other than liens for taxes not yet due and payable, minor liens and encumbrances
that do not materially detract from the value of the property subject thereto or
materially impair the operations of the Company, and liens that have otherwise
arisen in the ordinary course of business. All equipment included in such
properties which is necessary
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to the business of the Company is in good condition and repair (ordinary wear
and tear excepted) and all leases of real or personal property to which the
Company is a party are fully effective and afford the Company peaceful and
undisturbed possession of the subject matter of the lease. The property and
assets of the Company are sufficient for the conduct of its business as
presently conducted. The Company is not in violation of any zoning, building or
safety ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties, which violation
would have a Material Adverse Effect, nor has it received any notice of any such
violation. There are no defaults by the Company or to the best knowledge of the
Company, by any other party, which might curtail in any material respect the
present use of the Company's property. The performance by the Company of this
Agreement will not result in the termination of, or in any increase of any
amounts payable under, any of its leases.
2.12 TAX MATTERS. The Company has filed all federal, state, local and
foreign income, excise and franchise tax returns, real estate and personal
property tax returns, sales and use tax returns and other tax returns required
to be filed by it where the failure to file such returns would have a Material
Adverse Effect and has paid all taxes owing by it, except taxes which have not
yet accrued or otherwise become due, for which adequate provision has been made
in the pertinent financial statements referred to in Section 2.5 above or which
will not have a Material Adverse Effect. The provision for taxes on the Base
Balance Sheet is sufficient as of its date for the payment of all accrued and
unpaid federal, state, county and local taxes of any nature of the Company, and
any applicable taxes owing to any foreign jurisdiction, whether or not assessed
or disputed. All taxes and other assessments and levies which the Company is
required to withhold or collect have been withheld and collected and have been
paid over to the proper governmental authorities except where the failure to
withhold or collect and pay over would not have a Material Adverse Effect. With
regard to the federal income tax returns of the Company, the Company has never
received notice of any audit or of any proposed deficiencies from the Internal
Revenue Service. There are in effect no waivers of applicable statutes of
limitations with respect to any taxes owed by the Company for any year. Neither
the Internal Revenue Service nor any other taxing authority is now asserting or,
to the best knowledge of the Company, threatening to assert against the Company
any deficiency or claim for additional taxes or interest thereon or penalties in
connection therewith.
2.13 CERTAIN CONTRACTS AND ARRANGEMENTS. Except as set forth in Section
2.13 of the Disclosure Schedule (with true and correct copies delivered to the
Investors), the Company is not a party or subject to or bound by:
(a) any plan or contract providing for collective bargaining or
the like, or any contract or agreement with any labor union;
(b) any contract, lease or agreement creating any obligation of
the Company to pay to any third party $100,000 or more with respect to any
single such contract or agreement;
(c) any contract or agreement for the sale, license, lease or
disposition of products in excess of $100,000;
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(d) any contract containing covenants directly or explicitly
limiting the freedom of the Company to compete in any line of business or with
any person or entity;
(e) any license agreement (as licensor or licensee) material to
the Company's business or projected business;
(f) any contract or agreement for the purchase of any leasehold
improvements, equipment or fixed assets for a price in excess of $100,000;
(g) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for borrowing in excess of $100,000 or
any pledge or security arrangement;
(h) any material joint venture, partnership, manufacturing,
development or supply agreement;
(i) any endorsement or any other advertising, promotional or
marketing agreement;
(j) any employment contracts, or agreements with officers, key
employees, directors or stockholders of the Company or persons or organizations
related to or affiliated with any such persons;
(k) any stock redemption or purchase agreements or other
agreements affecting or relating to the capital stock of the Company, including
without limitation any agreement with any stockholder of the Company which
includes without limitation, anti-dilution rights, registration rights, voting
arrangements, operating covenants or similar provisions;
(l) any pension, profit sharing, retirement or stock options
plans;
(m) any material royalty, dividend or similar arrangement based
on the sales volume of the Company;
(n) any acquisition, merger or similar agreement;
(o) any contract with a governmental body under which the
Company may have an obligation for renegotiation;
(p) any agreement with any stockholder of the Company or any
affiliate of any such stockholder; or
(q) any other contract not executed in the ordinary course of
business.
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All of the Company's contracts and commitments are in full force and effect
and neither the Company, nor, to the knowledge of the Company, any other party
is in default thereunder (nor, to the knowledge of the Company, has any event
occurred which with notice, lapse of time or both would constitute a default
thereunder), except to the extent that any such default would not have a
Material Adverse Effect, and the Company has not received notice of any alleged
default under any such contract, agreement, understanding or commitment.
2.14 INTELLECTUAL PROPERTY RIGHTS; EMPLOYEE RESTRICTIONS. Except as set
forth in SCHEDULE 2.14:
(a) The Company has exclusive ownership of, with the exclusive
right to use, sell, license, dispose of, and bring actions for infringement of,
all Intellectual Property Rights (as hereinafter defined) material to the
conduct of its business as presently conducted, including without limitation all
rights to the Company name "Invitrogen" and to the trademarks and product names
listed on Schedule 2.14 hereof (the "Company Rights").
(b) The business of the Company as presently conducted and the
manufacturing and marketing of the products of the Company do not violate any
agreements which the Company has with any third party or infringe any patent,
trademark, copyright or trade secret or, to the best knowledge of the Company,
any other Intellectual Property Rights of any third party.
(c) No claim is pending or, to the best knowledge of the
Company, threatened against the Company nor has the Company received any notice
or claim from any person asserting that any of the Company's present or
contemplated activities infringe or may infringe any Intellectual Property
Rights of such person, and the Company is not aware of any infringement by any
other person of any rights of the Company under any Intellectual Property
Rights.
(d) The Company has taken all commercially reasonable steps
required to establish and preserve its ownership of all of the Company Rights;
each current and former employee of the Company, and each of the Company's
consultants and independent contractors involved in development of any of the
Company Rights, has executed an agreement regarding confidentiality, proprietary
information and assignment of inventions and copyrights to the Company, and, to
the best knowledge of the Company, none of such employees, consultants or
independent contractors is in violation of any agreement or in breach of any
agreement or arrangement with former or present employers relating to
proprietary information or assignment of inventions.
As used herein, the term "Intellectual Property Rights" shall mean all
intellectual property rights, including, without limitation, all of the
registered rights set forth on Section 2.14 of the Disclosure Schedule and all
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service mark applications, copyrights, copyright
applications, computer programs and other computer software, inventions,
designs, samples, specifications, schematics, know-how, trade secrets,
proprietary processes and formulae, including production technology and
processes, all source and object code, algorithms, promotional
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materials, customer lists, supplier and dealer lists and marketing research, and
all documentation and media constituting, describing or relating to the
foregoing, including without limitation, manuals, memoranda and records.
Section 2.14 of the Disclosure Schedule contains a list and brief description of
all Intellectual Property Rights owned by or registered in the name of the
Company or of which the Company is the licensor or a licensee of a material
right or in which the Company has any material right and, in each case, a brief
description of the nature of the right.
2.15 LITIGATION. There is no litigation or governmental proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against the Company or affecting any of its properties or assets or against any
officer, director or key employee of the Company in his or her capacity as an
officer, director or employee of the Company, which litigation, proceeding or
investigation is reasonably likely to have a Material Adverse Effect, or which
may call into question the validity or hinder the enforceability of this
Agreement or any other agreements or transactions contemplated hereby; nor to
the best knowledge of the Company has there occurred any event nor does there
exist any condition on the basis of which any such litigation, proceeding or
investigation might be properly instituted or commenced.
2.16 EMPLOYEE BENEFIT PLANS. The Company does not maintain or
contribute to any employee benefit plan, stock option, bonus or incentive plan,
severance pay policy or agreement, deferred compensation agreement, or any
similar plan or agreement (an "Employee Benefit Plan") other than the Employee
Benefit Plans identified and described in Section 2.16 of the Disclosure
Schedule. The terms and operation of each Employee Benefit Plan comply in all
material respects with all applicable laws and regulations relating to such
Employee Benefit Plans. There are no unfunded obligations of the Company under
any retirement, pension, profit-sharing, deferred compensation plan or similar
program. The Company is not required to make any payments or contributions to
any Employee Benefit Plan pursuant to any collective bargaining agreement or, to
the knowledge of the Company, any applicable labor relations law, and all
Employee Benefit Plans are terminable at the discretion of the Company without
liability to the Company upon or following such termination. The Company has
never maintained or contributed to any Employee Benefit Plan providing or
promising any health or other nonpension benefits to terminated employees. With
respect to any Employee Benefit Plan, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law which could result,
directly or indirectly, in any taxes, penalties or other liability to the
Company. No litigation, arbitration or governmental administrative proceeding
(or investigation) or other proceeding (other than those relating to routine
claims for benefits) is pending or, to the best knowledge of the Company,
threatened with respect to any such Employee Benefit Plan.
2.17 LABOR LAWS. The Company employs approximately 137 employees and
generally enjoys good employer-employee relationships. The Company is not
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it as of the date hereof or amounts required to be reimbursed to such
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employees. The Company is in compliance in all material respects with all
applicable laws and regulations respecting labor, employment, fair employment
practices, terms and conditions of employment, and wages and hours. There are
no charges of employment discrimination or unfair labor practices or strikes,
slowdowns, stoppages of work or any other concerted interference with normal
operations existing, pending or, to the best knowledge of the Company,
threatened against or involving the Company.
2.18 KEY EMPLOYEES. Except as set forth in Section 2.18 of the
Disclosure Schedule, to the knowledge of the Company, no key employee of the
Company has any plan or intention to terminate his employment with the Company
and no supplier has any plan or intention to terminate or reduce its business
with the Company or to materially and adversely modify its relationship with the
Company.
2.19 HAZARDOUS WASTE, ETC. No hazardous wastes, substances or materials
or oil or petroleum products have been generated, transported, used, disposed,
stored or treated by the Company and no hazardous wastes, substances or
materials, or oil or petroleum products have been released, discharged,
disposed, transported, placed or otherwise caused to enter the soil or water in,
under or upon any real property owned, leased or operated by the Company.
2.20 BUSINESS; COMPLIANCE WITH LAWS. The Company has all necessary
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its property and to conduct its business as it is presently or
contemplated to be conducted, except for those which the failure of the Company
to obtain would not have a Material Adverse Effect. The Company is currently
and has heretofore been in compliance in all material respects with all federal,
state, local and foreign laws and regulations, including without limitation all
laws and regulations administered by or promulgated by the Federal Trade
Commission and/or the Food and Drug Administration.
2.21 INVESTMENT BANKING; BROKERAGE. There are no claims for investment
banking fees, brokerage commissions, finder's fees or similar compensation
(exclusive of professional fees to lawyers and accountants) in connection with
the transactions contemplated by this Agreement payable by the Company or based
on any arrangement or agreement made by or on behalf of the Company or either of
the Stockholders.
2.22 INSURANCE. The Company has fire, casualty, product liability and
business interruption and other insurance policies, with extended coverage,
sufficient in amount to allow it to replace any of its material properties which
might be damaged or destroyed, and such types and amounts of other insurance
with respect to its business and properties, on both a per occurrence and an
aggregate basis, as are customarily carried by persons engaged in the same or
similar business as the Company. There is no default or event which could give
rise to a default under any such policy.
2.23 TRANSACTIONS WITH AFFILIATES. There are no loans, leases,
contracts or other transactions between the Company and any officer, director or
five percent (5%) stockholder of
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the Company or any family member or affiliate of the foregoing persons and there
have been no such transactions within the past five (5) years except as set
forth in Section 2.23 of the Disclosure Schedule.
2.24 CUSTOMERS AND DISTRIBUTORS. Section 2.24 of the Disclosure
Schedule sets forth each representative and distributor of the Company at the
date hereof (whether pursuant to a commission, royalty or other arrangement),
and each customer, distributor and/or broker of the Company who accounted for
more than 5% of the sales of the Company for the twelve (12) months ended
December 31, 1996 (collectively, the "Customers, Distributors and Brokers").
The relationships of the Company with its Customers, Distributors, and Brokers
are good commercial working relationships. No Customer, Distributor or Broker
of the Company has canceled or otherwise terminated its relationship with the
Company, or has during the last twelve months decreased materially its services,
supplies or materials to the Company or its usage or purchases of the services
or products of the Company. No Customer, Distributor or Broker has, to the best
knowledge of the Company, any plan or intention to terminate, to cancel or
otherwise materially and adversely modify its relationship with the Company or
to decrease materially or limit its services, supplies or materials to the
Company or its usage, purchase or distribution of the services or products of
the Company.
2.25 DISCLOSURE. The representations and warranties made or contained
in this Agreement, the schedules and exhibits hereto and the certificates and
statements executed or delivered in connection herewith, when taken together, do
not and shall not contain any untrue statement of a material fact and do not and
shall not omit to state a material fact required to be stated therein or
necessary in order to make such representations, warranties or other material
not misleading in light of the circumstances in which they were made or
delivered. There have been no events or transactions, or information which has
come to the attention of the management of the Company, having a direct impact
on the Company or its assets, liabilities, financial condition, business,
results of operations or prospects which, in the reasonable judgment of such
management, could be expected to have a Material Adverse Effect.
2.26 QUALIFIED SMALL BUSINESS STOCK. As of the Closing, (i) the
Company will be a domestic C Corporation, (ii) the Company will not have,
during the one-year period preceding the Closing, made any purchases of its
own stock (other than stock issued to employees pursuant to the Plans (as
defined in Section 4.7 hereof) and in connection with termination of
employment), (iii) the Company's (and any predecessor's) aggregate gross
assets, as defined by Section 1202(d)(2) of the Internal Revenue Code of
1986, as amended (the "Code"), at no time between the date of incorporation
of the Company and through the Closing have exceeded or will exceed
$50,000,000, taking into account the assets of any corporations required to
be aggregated with the Company in accordance with Section 1202(d)(3) of the
Code, and (iv) the Company will be an eligible corporation, as defined by
Section 1202(e)(4) of the Code.
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SECTION 2A. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
(a) Each Investor represents to the Company that it has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment contemplated by this Agreement
and making an informed investment decision with respect thereto. Each Investor
represents that it is an "accredited investor" as such term is defined in Rule
501 under the Securities Act of 1933, as amended (the "Securities Act"). Each
Investor represents to the Company that it is purchasing the Convertible
Preferred Shares for its own account, for investment only and not with a view
to, or any present intention of, effecting a distribution of such securities or
any part thereof except pursuant to a registration or an available exemption
under applicable law. Such Investor acknowledges that its respective
Convertible Preferred Shares have not been registered under the Securities Act
or the securities laws of any state or other jurisdiction and cannot be disposed
of unless they are subsequently registered under the Securities Act and any
applicable state laws or exemption from such registration is available.
(b) Each Investor has full right, authority and power under its
governing partnership agreement to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by or on behalf of such
Investor pursuant to or as contemplated by this Agreement and to carry out the
transactions contemplated hereby and thereby, and the execution, delivery and
performance by such Investor of this Agreement and each such other agreement,
document and instrument have been duly authorized by all necessary action under
such Investor's governing partnership agreement. This Agreement and each
agreement, document and instrument executed and delivered by each Investor
pursuant to or as contemplated by this Agreement constitute, or when executed
and delivered will constitute, valid and binding obligations of each of the
Investors enforceable in accordance with their respective terms. The execution,
delivery and performance by each Investor of this Agreement and each such other
agreement, document and instrument, and the performance of the transactions
contemplated hereby and thereby do not and will not: (A) violate, conflict with
or result in a default (whether after the giving of notice, lapse of time or
both) under any contract or obligation to which any Investor is a party or by
which it or its assets are bound, or cause the creation of any encumbrance upon
any of the assets of any Investor; (B) violate or result in a violation of, or
constitute a default under, any provision of any law, regulation or rule, or any
order of, or any restriction imposed by, any court or other governmental agency
applicable to such Investor; (C) require from such Investor any notice to,
declaration or filing with, or consent or approval of any governmental authority
or other third party; or (D) accelerate any obligation under, or give rise to a
right of termination of, any agreement, permit, license or authorization to
which any Investor is a party or by which such Investor is bound.
(c) Each Investor represents that there are no claims for
investment banking fees, brokerage commissions, finder's fees or similar
compensation (exclusive of professional fees to lawyers and accountants) in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of such Investor.
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SECTION 3. CONDITIONS OF PURCHASE
Each Investor's obligation to purchase and pay for the Convertible
Preferred Shares to be purchased by it shall be subject to compliance by the
Company and the Stockholders with their agreements herein contained and to the
fulfillment to the Investors' satisfaction, or the waiver by the Investors, on
or before and at the Closing Date of the following conditions:
3.1 SATISFACTION OF CONDITIONS. The representations and warranties of
the Company and the Stockholders contained in this Agreement shall be true and
correct on and as of the Closing Date; each of the conditions specified in this
Section 3 shall have been satisfied or waived in writing by the Investors; there
shall have been no Material Adverse Change since the date hereof; and, on the
Closing Date, certificates to such effect executed by the President and Chief
Financial Officer of the Company shall have been delivered to the Investors.
3.2 DIRECTOR ELECTION; INDEMNIFICATION. Kurt R. Jaggers, as the nominee
of the Investors, shall have been elected as a director of the Company (together
with any subsequent nominee of the Investors, the "Investors' Nominee") and the
Company shall have entered into an Indemnification Agreement with the Investors'
Nominee and the Investors in the form attached hereto as EXHIBIT E.
3.3 OPINIONS OF COUNSEL. The Investors shall have received from Gray
Cary Ware & Friedenrich an opinion dated as of the Closing Date substantially in
the form attached hereto as EXHIBIT F-1 and an opinion of foreign counsel to the
Company with respect to Invitrogen Holland, B.V. in the form attached hereto as
EXHIBIT F-2.
3.4 REINCORPORATION. The Company's predecessor, Invitrogen
Corporation, a California corporation, shall have been reincorporated under the
laws of Delaware pursuant to a Certificate of Incorporation in the form attached
hereto as EXHIBIT B and otherwise on terms and conditions satisfactory to the
Investors.
3.5 AUTHORIZATION. The Board of Directors of the Company shall have
duly adopted resolutions in the form reasonably satisfactory to the Investors
and shall have taken all action necessary for the purpose of authorizing the
Company to consummate the transactions contemplated hereby in accordance with
the terms hereof and to cause the Certificate of Incorporation establishing the
Convertible Preferred Shares in the form attached hereto as EXHIBIT B to become
effective; and the Investors shall have received a certificate of the Secretary
of the Company setting forth a copy of the resolution and the Certificate of
Incorporation and By-laws of the Company and such other matters as may be
reasonably requested by the Investors.
3.6 INVESTORS' FEES. The Company shall have paid on behalf of the
Investors all legal fees and related expenses incurred by the Investors in
connection with the transactions contemplated by this Agreement in an amount not
to exceed $20,000.
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3.7 NO VIOLATION OR INJUNCTION. The consummation of the transactions
contemplated by this Agreement shall not be in violation of any law or
regulation, and shall not be subject to any injunction, stay or restraining
order.
3.8 CONSENTS AND WAIVERS. The Company and the Stockholders shall have
obtained all consents or waivers necessary to execute this Agreement and the
other agreements and documents contemplated herein, to issue and sell the
Securities to be sold to the Investors hereunder, to redeem the shares of Common
Stock as contemplated by the Repurchase Agreement and to carry out the
transactions contemplated hereby and thereby and shall have delivered evidence
thereof to the Investors. All corporate and other action and governmental
filings necessary to effectuate the terms of this Agreement and other agreements
and instruments executed and delivered by the Company in connection herewith
shall have been made or taken.
3.9 REPURCHASE AGREEMENT. The Repurchase Agreement shall be executed
by stockholders of the Company who agree in the aggregate to the redemption of
1,101,471 shares of their Common Stock on the Closing Date (adjusted
appropriately for stock splits, stock dividends, recapitalizations and the
like).
3.10 REPAYMENT OF COMPANY LOANS. From the proceeds of the redemptions
of their Common Stock contemplated by the Repurchase Agreement, the Stockholders
shall repay in full the Promissory Notes issued by the Stockholders to the
Company in the aggregate amount of approximately $185,000.
3.11 AGREEMENT OF SPOUSE. The Spouse of each of the Stockholders shall
have executed an Agreement of Spouse in substantially the form attached hereto
as EXHIBIT G.
SECTION 4. COVENANTS
The Company and, with respect to Section 4.9 hereof, Lyle C. Turner, agree
for the benefit of the Investors that it and he shall comply with the following
covenants, provided that the covenants set forth in Sections 4.1, 4.3 (except to
the extent provided therein), 4.4 and 4.7 shall terminate as of the closing of
the Company's first Qualified Public Offering, unless earlier terminated as may
be agreed to in writing by two-thirds in interest of the Investors. A
"Qualified Public Offering" shall have the meaning provided in the Certificate
of Incorporation attached hereto as EXHIBIT B.
4.1 FINANCIAL STATEMENTS AND BUDGETARY INFORMATION; INSPECTION. So
long as the Investors hold at least 220,000 Convertible Preferred Shares or
shares of Common Stock (subject to adjustments for stock splits, stock dividends
and the like), the Investors shall have the rights, and the Company shall have
the obligations, set forth in this Section 4.1. The Company will deliver to TA
Associates, Inc. as representative of the Investors internally prepared
unaudited monthly and quarterly financial statements and audited annual
financial statements, as well as annual budgets and operating plans. The
monthly and quarterly financial information will be provided within 30 days
after the end of each month and quarter. The annual budget and
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operating plan will be presented at a Board of Directors' meeting at least one
month prior to the end of the fiscal year of the Company preceding the year
covered. An annual audit by an accounting firm of national recognition selected
by the Board of Directors will be provided within 90 days after each fiscal
year-end of the Company.
The Company will, upon reasonable prior notice to the Company and for
corporate purposes, permit authorized representatives of TA Associates, Inc. as
representative of the Investors 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 its affairs, finances and accounts with its
officers, administrative employees and independent accountants, all at such
reasonable times and as often as may be reasonably requested.
4.2 INDEMNIFICATION; INSURANCE. For so long as any of the Securities
remains outstanding, the Certificate of Incorporation or By-laws of the Company
will at all times during which any nominee of any of the Investors serves as
director of the Company provide for indemnification of the directors and
limitations on the liability of the directors to the fullest extent permitted
under applicable state law. Prior to any initial public offering, the Company
will purchase a directors and officers insurance policy on terms reasonably
acceptable to the Investors' Nominee (who shall be a third party beneficiary of
this Agreement) covering directors and officers of the Company in the amount of
at least $3 million, covering, among other things, violations of federal or
state securities laws.
4.3 BOARD OF DIRECTORS. The Board of Directors of the Company shall
consist of no more than seven (7) members including the Investors' Nominee. The
Company shall cause meetings of its Board of Directors to be held at least four
(4) times each year at intervals of not more than four (4) months and shall pay
all reasonable out-of-pocket expenses incurred by the Investors' Nominee in
connection with attending meetings or other functions of the Company's Board of
Directors or any committees thereof and shall pay the Investor's Nominee fees in
an amount equal to any fees that are paid to the other non-management directors
of the Company; provided, however, that prior to the Company's initial public
offering the Company shall not be obligated to issue options or related awards
to the Investor's Nominee that it issues to the other non-management directors
of the Company, but upon the closing of such offering the Investor's Nominee
shall, for purposes of compensation, be considered a new member of the Board of
Directors and receive compensation (including options and related awards)
consistent with the Company's policies for new non-management directors of the
Company and thereafter shall be compensated in the same manner as each of the
other non-management directors of the Company. Compensation (including option
and related awards) for members of management will be determined by a
Compensation Committee of the Board of Directors comprised of one member of
management who is also a director, the Investors' Nominee and one independent
director (the "Compensation Committee").
4.4 RESTRICTIVE COVENANTS. The Company will not, without the consent
of two thirds-in-interest of the Investors:
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(a) sell, lease or otherwise dispose of (whether in one
transaction or a series of related transactions) all or substantially all of its
assets or business, except in a transaction constituting a "Qualified
Extraordinary Transaction" (as such term is defined in the Certificate of
Incorporation in the form attached as EXHIBIT B),
(b) merge with or into or consolidate with another entity or
enter into or engage in any other transaction or series of related transactions,
in any such case in connection with or as a result of which the Company is not
the surviving entity or the owners of the Company's outstanding equity
securities prior to the transaction or series of related transactions do not own
at least a majority of the outstanding equity securities of the surviving,
resulting or consolidated entity, except in any such case in a transaction
constituting a Qualified Extraordinary Transaction,
(c) dissolve, liquidate or wind up its operations,
(d) directly or indirectly redeem, purchase, or otherwise
acquire for consideration any shares of its Common Stock or any other class of
its capital stock except (i) for redemption of Convertible Preferred Shares or
Redeemable Preferred Stock pursuant to and as provided in the Certificate of
Incorporation, (ii) as contemplated by Sections 1.2 and 4.5, or (iii) repurchase
of shares of Common Stock from employees and consultants pursuant to the
agreements described in Schedule 4.4 hereto,
(e) propose or adopt any amendment to Article IV of its
Certificate of Incorporation, or any other amendment to its Certificate of
Incorporation or By-Laws that eliminates, amends or restricts or otherwise
adversely affects the rights and preferences of the Convertible Preferred Stock
or the Redeemable Preferred Stock, or increase the authorized shares of
Convertible Preferred Stock or Redeemable Preferred Stock,
(f) declare or make dividend payments on any shares of its
Common Stock or any other class of its capital stock,
(g) create, or obligate itself to create, any class or series of
shares having preference over or being on a parity with the Convertible
Preferred Stock or the Redeemable Preferred Stock,
(h) increase the size of the Board of Directors to more than
seven (7) members,
(i) enter into any agreement or arrangement or take any other
action that eliminates, amends, restricts or otherwise adversely affects the
rights of the Investors hereunder or as holders of Securities of the relevant
class or its ability to perform its obligations hereunder; without limitation of
the foregoing, the Company shall take all commercially reasonable action
necessary or appropriate to remove promptly any impediment to the redemption of
the Securities as contemplated by the Certificate of Incorporation, or
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(j) except as provided in the Company's 1997 Management Bonus
Plan described in Section 2.16 of the Disclosure Schedule, pay any bonuses to
the Company's executive officers or unless any such bonus shall have been
unanimously approved by the Compensation Committee.
4.5 REPURCHASE; USE OF PROCEEDS. Immediately upon the sale of the
Convertible Preferred Shares, the Company shall complete the repurchase of
1,101,471 shares of Common Stock from the stockholders of the Company for
aggregate cash payments of $7.5 million pursuant to this Agreement, in each case
on terms reasonably satisfactory to the Investors and in accordance with EXHIBIT
C hereto. The Company shall use the remaining net proceeds from the sale of the
Convertible Preferred Stock for working capital purposes.
4.6 KEY PERSON INSURANCE. Within 120 days after the date hereof, the
Company will purchase and maintain "key person" term life insurance policies of
$1 million each on the lives of Lyle C. Turner and Joseph Fernandez, with the
Company named as beneficiary. The Company hereby agrees that such policy shall
not be assigned, borrowed against or pledged.
4.7 STOCK AWARDS. Except for (i) the issuance of option and stock
awards with respect to up to an aggregate 609,685 shares of Common Stock
pursuant to the 1997 Stock Option Plan as in effect as of the date hereof, (ii)
the reissuance under the 1997 Stock Option Plan of 1,218,000 canceled,
terminated or expired options which were originally granted under the 1995 Stock
Option Plan and the issuance of stock upon the exercise of such options, and
(iii) the reissuance under the 1997 Stock Option Plan, upon cancellation,
termination or expiration, of up to 1,907,794 options that were originally
granted under the 1995 Stock Option Plan and which are currently outstanding and
the issuance of stock upon the exercise of such options, the Company will not
grant or award options, stock or other equity-based or quasi-equity rights
(collectively, "Equity") to officers, employees, advisers, consultants,
directors or the ESOP without the consent of the Investors' Nominee, and the
Company will in no event grant Equity to either of the Stockholders without the
consent of the Investors' Nominee. The Plans and grant awards thereunder may
not be amended, revised or waived after the date hereof without the consent of
the Investors' Nominee. In no event shall additional option or stock awards be
made under the 1995 Stock Option Plan.
4.8 ASSIGNMENT. Each Investor shall have the right to assign its
rights under this Section 4 in connection with any transaction or series of
related transactions involving the Transfer (as defined in Section 5.1) to one
or more transferees of at least 220,000 shares of capital stock of the Company
(subject to adjustments for stock splits, stock dividends and the like and
aggregating all contemporaneous Transfers by two or more Investors), or to any
fund managed by or associated with TA Associates, Inc. ("TA Funds"). Upon any
such Transfer such transferee or TA Fund thereupon shall be deemed an "Investor"
for purposes of this Section 4.
4.9 TERMINATION OF AIRPLANE ARRANGEMENT. Lyle C. Turner shall, within
thirty days of the Closing Date, cause Turner Management Corporation ("Turner
Management") to repay in full all outstanding indebtedness with respect to the
1995 Piper Malibu Mirage N711BQ
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referenced in the Terms for Airplane Lease dated May 21, 1997 between Turner
Management and the Company (the "Airplane Lease") and shall cause the Company to
be released from any and all guarantees with respect to such indebtedness. The
Company shall exercise its right under the Airplane Lease to terminate the
Airplane Lease upon the Company's first firm commitment public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended.
SECTION 5. TRANSFER RESTRICTIONS
The following provisions of this Section 5 (other than the provision set
forth in the first sentence of Section 5.1 (a)) shall terminate immediately
prior to a Qualified Public Offering and shall not apply with respect to any
Qualified Public Offering.
5.1 GENERAL RESTRICTION.
(a) The Company and the Stockholders hereby agree that all
rights and obligations of the Company and such Stockholders under the Agreement
Among the Shareholders of Invitrogen Corporation and the Corporation, dated
October 1, 1989, shall terminate as of the date hereof and shall be of no
further force or effect. Each Stockholder agrees that neither he nor any of his
permitted transferees as contemplated below will directly or indirectly offer,
transfer, donate, sell, assign, pledge, hypothecate or otherwise dispose of (any
such action a "Transfer") all or any portion of the shares of capital stock of
the Company now owned or hereafter acquired by him or them, except (i) to
permitted transferees as permitted by Section 5.1(b) and (ii) in bona fide sales
to third parties for value following compliance with Section 5.
(b) Permitted Transfers by a Stockholder shall include Transfers
(i) to the Stockholder's spouse or children (including adopted children), to a
trust of which he is the settlor or a trustee for the benefit of his spouse or
children (including adopted children) or to charitable institutions, (ii)
Transfers upon a Stockholder's death to his heirs, executors or administrators
or to a trust under his or her will or to his or her guardian or conservator,
and (iii) Transfers aggregating less than ten percent (10%) of the Common Stock
held by such Stockholder; PROVIDED that in any such case the transferee shall
have entered into an enforceable written agreement providing that all shares so
Transferred shall continue to be subject to all provisions of this Agreement as
if such shares were still held by the Stockholder, and provided further that
such permitted transferee shall not be permitted to make any further Transfers
without complying with the provisions of this Section 5. Anything to the
contrary in this Agreement notwithstanding, Transfers under this Section 5.1(b)
shall not be subject to Section 5.2 or 5.3 and transferees permitted by this
Section 5.1(b) shall take any shares so Transferred subject to all obligations
under this Agreement as if such shares were still held by the Stockholder
whether or not they so expressly agree.
5.2 RIGHT OF FIRST REFUSAL. If at any time on or after the date hereof
a Stockholder (including for all purposes of this Section 5.2, any permitted
transferee of his shares pursuant to Section 5.1(b)) receives a bona fide offer
to purchase any or all of his shares (the "Offer") from
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an unaffiliated third party (the "Offeror") which such Stockholder wishes to
accept, the Stockholder may Transfer such shares pursuant to and in accordance
with the following provisions of this Section 5.2:
(a) Such Stockholder shall cause the Offer to be reduced to
writing and shall notify the Company, the Investors and the other Stockholder in
writing of his desire to accept the Offer and otherwise comply with the
provisions of this Section 5. The Stockholder's notice shall constitute an
irrevocable offer to sell such shares to the Company, the Investors and the
other Stockholder, at a purchase price equal to the price contained in, and on
the same terms and conditions of, the Offer. The notice shall be accompanied by
a true copy of the Offer (which shall identify the Offeror).
(b) The Company shall have the right to offer to purchase all,
but not less than all of the shares covered by the Offer. To exercise such
right, the Company shall, within ten (10) days of receipt of such written notice
(the "Company Notice Period"), communicate in writing such election to the
transferring Stockholder (with copies to the Investors). Such written election
to purchase shall constitute a valid, legally binding and enforceable agreement
for the sale and purchase of all of the shares covered by the Offer.
(c) In the event the Company does not exercise its right
pursuant to Section 5.2(b), the transferring Stockholder shall notify the
Investors in writing of such fact (the "Investor Notice"). At any time within
20 days after receipt by the Investors of the Investor Notice (the "Investor
Notice Period"), one or more of the Investors holding at least ten percent (10%)
of the Securities and the other Stockholder may, subject to the terms hereof,
choose to accept the Offer with respect to all of the shares covered thereby by
giving written notice to the Stockholder proposing to sell to such effect;
provided that if two or more of the Investors and/or the other Stockholder
choose, in the aggregate, to accept such Offer with respect to an aggregate
number of shares which exceeds the number of shares subject to such Offer and
available for purchase, the number of shares for which the Offer may be accepted
by each such Investor and Stockholder shall, in each case, be reduced by the
smallest number of shares as shall be necessary to reduce the aggregate number
of shares for which the Offer may be accepted by the electing Investors and
Stockholder as contemplated herein to the number of shares for which the Offer
was made and which are available for purchase by them; provided further, that
the number of shares for which any Investor or Stockholder may accept such Offer
as contemplated herein shall in no event be reduced to less than the number of
shares which bears the same proportion to the total number of shares which are
available for purchase as the number of shares of Common Stock then held by such
Investor or Stockholder (on an as converted basis as contemplated by the
Certificate of Incorporation) bears to the total number of shares of Common
Stock then held by all Investors and Stockholders (on an as converted basis as
contemplated by the Certificate of Incorporation) accepting such Offer.
(d) If shares covered by any Offer are purchased pursuant to
Sections 5.2(b) or (c) , such purchase shall be (i) at the same price and on the
same terms and conditions as the Offer if the Offer is for cash and/or notes or
(ii) if the Offer includes any consideration other than
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cash and notes, then at the equivalent all cash price for such other
consideration. The closing of the purchase of the shares subject to an Offer
pursuant to this Section 5.2 shall take place within 15 days after the
expiration of the Company Notice Period or Investor Notice Period, as
applicable, or upon satisfaction of any governmental approval requirements, if
later, by delivery by the respective purchasers of the purchase price for shares
being purchased as provided above to the selling Stockholder against delivery of
the certificates representing the shares so purchased, appropriately endorsed
for Transfer by such Stockholder.
5.3 RIGHT OF CO-SALE.
(a) In the event either Stockholder (including for all purposes
of this Section 5.3 any permitted transferees of a Stockholder as contemplated
by Section 5.1(b)) proposes to sell any shares or receives an Offer and any of
such shares are not purchased pursuant to Section 5.2, such Stockholder (a
"Transferring Stockholder") may Transfer the shares subject thereto only
following compliance with this Section 5.3 and Section 5.4 below. In such
event, immediately following the last day of the Notice Period, the Transferring
Stockholder shall give an additional notice of the proposed sale to the
Investors and other Stockholder, once again enclosing a copy of the Offer, if
applicable, which shall identify the Offeror and the number of shares proposed
to be sold (the "Co-Sale Notice"). Upon the election of an Investor or
Investors holding at least ten percent (10%) of the Securities or such other
Stockholder, each of the Investors and such other Stockholder shall have the
right, exercisable upon written notice to the Transferring Stockholder and any
such permitted transferee within 20 days after delivery to it of the Co-Sale
Notice (the "Co-Sale Notice Period"), to participate in the sale on the terms
and conditions stated in the Co-Sale Notice, except that any Investor who holds
Convertible Preferred Shares shall be permitted to sell to the relevant
purchaser shares of Common Stock acquired upon conversion thereof or, at its
election, either (i) an option to acquire such Common Stock when it receives the
same upon such conversion at the election of such Investor or as otherwise
provided in the Company's Certificate of Incorporation with the same effect as
if Common Stock were being conveyed, or (ii) shares of Convertible Preferred
Stock provided the acquiror pays the full liquidation preference of the shares
being sold plus the relevant price per share for the underlying Common Stock.
Each of the Investors and such other Stockholder shall have the right to sell
all or any portion of its or his shares on the terms and conditions in the
Co-Sale Notice (subject to the foregoing), with the maximum number of shares
equal to the product obtained by multiplying the number of shares proposed to be
sold by the relevant Transferring Stockholder and any of his permitted
transferees as described in the Co-Sale Notice by a fraction, the numerator of
which is the number of shares of Common Stock owned by such Investor or other
Stockholder on the date of the Co-Sale Notice on an as converted basis, and the
denominator of which is the sum of the number of shares of Common Stock owned by
the Stockholders and their permitted transferees and the number of shares of
Common Stock owned by all of the Investors (including all assignees of the
Investors) as of the date of the Co-Sale Notice on an as converted basis. To
the extent one or more Investors elect not to sell the full amount of shares
which they are entitled to sell pursuant to this Section 5.3(a), the other
participating Investors' rights to sell shares shall be increased
proportionately to their relative holdings of Securities, such that the
Investors shall have the right to sell the full number of shares allocable to
them in any transaction subject to this Section 5.3(a)
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even if some Investors elect not to participate. Within five days after the
expiration of the Co-Sale Notice Period, the Transferring Stockholder shall
notify each participating Investor and Stockholder of the number of shares held
by such Investor or Stockholder that will be included in the sale and the date
on which the sale will be consummated, which shall be no later than the later of
(i) 30 days after the delivery of the Co-Sale Notice and (ii) the satisfaction
of all governmental approval requirements, if any. Each of the Investors and
Stockholders may effect its participation in any sale hereunder by delivery to
the purchaser, or to the Transferring Stockholder for transfer to the purchaser,
of one or more instruments, certificates and/or option agreements, properly
endorsed for transfer, representing the shares it elects to sell therein,
provided that no Investor or Stockholder shall be required to make any
representations or warranties or to provide any indemnities in connection
therewith other than with respect to title to the stock being conveyed. At the
time of consummation of the sale, the purchaser shall remit directly to each
Investor and Stockholder that portion of the sale proceeds to which each such
Investor or Stockholder is entitled by reason of its participation therein. No
shares may be purchased by a purchaser from the Transferring Stockholder or any
of his permitted transferees unless the purchaser simultaneously purchases from
the Investors and other Stockholder all of the shares that they have elected to
sell pursuant to this Section 5.3(a).
(b) Any shares held by a Transferring Stockholder or any of his
permitted transferees that the Transferring Stockholder or transferee desires to
sell following compliance with Section 5.3(a) may be sold to the purchaser only
during the 90-day period after the expiration of the Co-Sale Notice Period and
only on terms no more favorable to the Transferring Stockholder and such
transferees than those contained in the Co-Sale Notice. Promptly after such
sale, such Transferring Stockholder shall notify the Investors and other
Stockholder of the consummation thereof and shall furnish such evidence of the
completion and time of completion of such sale and of the terms thereof as may
reasonably be requested by the Investors and other Stockholder. So long as the
purchaser is neither a party, nor an affiliate or relative of a party, to this
Agreement, such purchaser shall take the shares so Transferred free and clear of
any further restrictions of this Section 5. If, at the end of such 90-day
period, such Transferring Stockholder and any of his transferees have not
completed the sale of such shares as aforesaid, all the restrictions on Transfer
contained in this Section 5 shall again be in effect with respect to such
shares.
5.4 ASSIGNMENT. If both Stockholders (and their permitted transferees,
if any) propose concurrent Transfers which are subject to Section 5.2 or Section
5.3, then the provisions of Sections 5.2 and Section 5.3 shall apply to each
such proposed Transfer independently. Each Investor and Stockholder shall have
the right to assign its rights under this Section 5 in connection with any
transaction or series of related transactions involving the Transfer to one or
more transferees of at least 220,000 shares of capital stock of the Company
(subject to adjustments for stock splits, stock dividends and the like and
aggregating all contemporaneous Transfers by two or more Investors), or to any
TA Funds or permitted transferees of a Stockholder. Upon any such Transfer such
transferee or TA Fund thereupon shall be deemed an "Investor" or "Stockholder,"
as the case may be, for purposes of this Section 5.
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SECTION 6. RIGHTS TO PURCHASE
Notwithstanding anything herein to the contrary, the following provisions
of this Section 6 shall terminate immediately prior to the closing of a
Qualified Public Offering and shall not apply with respect to any Qualified
Public Offering.
6.1 RIGHT TO PARTICIPATE IN CERTAIN SALES OF ADDITIONAL SECURITIES. The
Company agrees that it will not sell or issue any shares of capital stock of the
Company, or other securities convertible into or exchangeable for capital stock
of the Company, or options, warrants or rights carrying any rights to purchase
capital stock of the Company unless the Company first submits a written offer to
the Investors and the Stockholders (including for all purposes of this Section 6
each permitted transferee of a Stockholder pursuant to Section 5.1(b))
identifying the terms of the proposed sale (including price, number or aggregate
principal amount of securities and all other material terms), and offers to each
Investor and Stockholder the opportunity to purchase its Pro Rata Share (as
hereinafter defined) of the securities (subject to increase for over-allotment
if some Investors or Stockholders do not fully exercise their rights) on terms
and conditions, including price, not less favorable to the Investors and
Stockholders than those on which the Company proposes to sell such securities to
a third party or parties. Each Investor's or Stockholder's "Pro Rata Share" of
such securities shall be based on the ratio which the shares of Common Stock
held by he or it bears to all the issued and outstanding shares of Common Stock
calculated on a fully-diluted basis giving effect to the conversion of
convertible securities as of the date of such written offer. The Company's
offer to the Investors and Stockholders shall remain open and irrevocable for a
period of 30 days, and Investors and Stockholders who elect to purchase shall
have the first right to take up and purchase any shares or other securities
which other Investors or Stockholders do not elect to purchase, based on the
relative holdings of the electing purchasers. Any securities so offered which
are not purchased pursuant to such offer may be sold by the Company but only on
the terms and conditions set forth in the initial offer to the Investors and
Stockholders, at any time within 90 days following the termination of the
above-referenced 30-day period but may not be sold to any other person or on
terms and conditions, including price, that are more favorable to the purchaser
than those set forth in such offer or after such 90-day period without renewed
compliance with this Section 6.1.
Notwithstanding the foregoing, the Company may (i) issue options and shares
of its Common Stock to its officers, employees, advisors, consultants, directors
and the ESOP with respect to up to an aggregate 609,685 shares pursuant to the
1997 Stock Option Plan as in effect as of the date hereof, (ii) reissue to its
officers and employees under the 1997 Stock Option Plan 1,218,000 canceled,
terminated or expired options which were originally granted under the 1995 Stock
Option Plan and issue stock upon the exercise of such options, (iii) reissue to
its officers and employees under the 1997 Stock Option Plan, upon cancellation,
termination or expiration, up to 1,907,794 options that were originally granted
under the 1995 Stock Option Plan which are currently outstanding and issue stock
upon the exercise of such options and (iv) issue Conversion Shares upon the
conversion of the Convertible Preferred Shares, and this Section 6 shall not
apply with respect to such issuances.
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6.2 ASSIGNMENT OF RIGHTS. Each Investor or Stockholder may assign its
rights under this Section 6 in connection with any transaction or series of
related transactions involving the transfer to one or more transferees of at
least 220,000 shares of capital stock of the Company (subject to adjustments for
stock splits, stock dividends and the like and aggregating all contemporaneous
transfers by Investors), or to any TA Fund or permitted transferee of a
Stockholder. Upon any such transfer such transferee or TA Fund shall be deemed
an "Investor" or "Stockholder," as the case may be, for purposes of Sections 6.1
and 6.2 with the rights set forth in such Sections.
SECTION 7. REGISTRATION RIGHTS
7.1 OPTIONAL REGISTRATIONS. If at any time or times after the date
hereof, the Company shall seek to register any shares of its capital stock or
securities convertible into capital stock under the Securities Act (whether in
connection with a public offering of securities by the Company (a "primary
offering"), a public offering of securities by stockholders of the Company (a
"secondary offering"), or both), the Company will promptly give written notice
thereof to each Investor and Stockholder (including any permitted transferee
thereof) (the "Holders," subject to Section 7.7) holding Registrable Securities
as hereinafter defined in Section 7.3 below. If within 20 days after their
receipt of such notice one or more Holders request the inclusion of some or all
of the Registrable Securities owned by them in such registration, the Company
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which such Holders may request in a writing delivered
to the Company within 20 days after their receipt of the notice given by the
Company. In the case of the registration of shares of capital stock by the
Company in connection with any underwritten public offering, if the
underwriter(s) determines that marketing factors require a limitation on the
number of Registrable Securities to be offered, the Company shall not be
required to register Registrable Securities of the Holders in excess of the
amount, if any, of shares of the capital stock which the principal underwriter
of such underwritten offering shall reasonably and in good faith agree to
include in such offering in excess of any amount to be registered for the
Company; provided, however, that the number of shares of Registrable Securities
of the Holders included in any such offering subsequent to the Company's first
Qualified Public Offering shall in no event be less than thirty percent (30%) of
the aggregate number of shares of capital stock to be registered, unless the
aggregate number of shares of Registrable Securities the Holders requested in
writing to be in such offering is less than thirty percent (30%) of the
aggregate number of shares of capital stock to be registered. If any limitation
of the number of shares of Registrable Securities to be registered by the
Holders is required pursuant to this Section 7.1, the number of shares that may
be included in the registration on behalf of the Holders shall be allocated
among the Holders or the holders of any other registration rights in proportion,
as nearly as practicable, to the respective holdings of Registrable Securities
of all Holders requesting registration. The provisions of this Section will not
apply to a registration effected solely to implement (i) an employee benefit
plan, or (ii) a transaction to which Rule 145 or any other similar rule of the
Securities and Exchange Commission (the "SEC"or the "Commission") under the
Securities Act is applicable.
7.2 REQUIRED REGISTRATIONS.
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(a) DEMAND REGISTRATION. On one or more occasions at any time
after the earlier of June 16, 1999 or the effective date of the Company's first
registration statement under the Securities Act, an Investor or Investors
holding at least 50% of the Registrable Securities held by the Investors may
request that the Company register under the Securities Act all or a portion of
the Registrable Securities held by such requesting Investors.
(b) FORM S-3. After the first public offering of its securities
registered under the Securities Act, the Company shall use its best efforts to
qualify and remain qualified to register securities on Form S-3 (or any
successor form) under the Securities Act. Any Investor or Investors shall have
the right to request any number of registrations on Form S-3 (or any successor
form) for the Registrable Securities held by such requesting Investor, including
registrations for the sale of such Registrable Securities on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act. Such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of such
shares by such Investor or Investors.
(c) REGISTRATION REQUIREMENTS. Following a request pursuant to
Section 7.2(a) or (b) above, the Company will notify all of the Holders who
would be entitled to notice of a proposed registration under Section 7.1 above
and any other holder of piggyback registration rights of its receipt of such
notification from such Investor or Investors. Upon the written request of any
such Holder or other holder of the Company's securities delivered to the Company
within 20 days after receipt from the Company of such notification, the Company
will either (i) elect to make a primary offering, in which case the rights of
such Holders shall be as set forth in Section 7.1 above (in which case the
registration shall not count as one of the Investors' permitted demand
registrations hereunder), or (ii) use its best efforts to cause such of the
Registrable Securities as may be requested by any Holders and any other holders
of piggyback registration rights to be registered under the Securities Act in
accordance with the terms of this Section 7.2; provided, however, that the
number of shares of Registrable Securities of the Holders included in any such
offering shall in no event be less than thirty percent (30%) of the aggregate
number of shares of capital stock to be registered, unless the aggregate number
of shares of Registrable Securities the Holders requested in writing to be in
such offering is less than thirty percent (30%) of the aggregate number of
shares of capital stock to be registered.
(d) LIMITATIONS ON REGISTRATION OBLIGATIONS. The Company will
not be obligated pursuant to this Section 7.2 to effect more than two (2)
registration statements pursuant to Section 7.2(a), but shall be obligated to
file an unlimited number of registration statements on Form S-3. The Company
shall not be obligated to effect any registration on Form S-3 pursuant to
Section 7.2(a) if: (i) Form S-3 is not available for such offering by the
holders (in which case the Company shall be obligated to effect such
registration on either Form S-1 or S-2 and such registration shall not be
counted as a registration pursuant to Section 7.2(a) hereof for purposes of the
limitations set forth in the first sentence of this Section 7.2(d)), (ii) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public of less than $500,000 or (iii) if the Company has, within the four (4)
month period
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preceding the date of such request, already effected one (1) registration of its
securities either pursuant to Section 7.2(a) or pursuant to which the Holders
had rights (which they exercised) to include their shares in such registration
pursuant to Section 7.1.
(e) POSTPONEMENT. The Company may postpone the filing of any
registration statement required hereunder for a reasonable period of time, not
to exceed 90 days in the aggregate during any seven-month period, if the Company
has been advised by legal counsel that such filing would require a special audit
or the disclosure of a material impending transaction or other matter or the
Company's Board of Directors determines reasonably and in good faith that such
disclosure would have a Material Adverse Effect. The Company shall not be
required to cause a registration statement requested pursuant to this Section
7.2 to become effective prior to 90 days following the effective date of a
registration statement initiated by the Company, if the request for registration
has been received by the Company subsequent to the giving of written notice by
the Company, made in good faith, to the Investors that the Company is commencing
to prepare a Company-initiated registration statement (other than a registration
effected solely to implement an employee benefit plan or a transaction to which
Rule 145 or any other similar rule of the SEC under the Securities Act is
applicable); provided, however, that the Company shall use its best efforts to
achieve such effectiveness promptly.
(f) SUSPENSION. In the case of a registration for the sale of
Registrable Securities, upon receipt of any notice (a "Suspension Notice") from
the Company of the happening of any event which makes any statement made in the
registration statement or related prospectus untrue or which requires the making
of any changes in such registration statement or prospectus so that they 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 in light of the circumstances under which they were made not misleading,
each holder of Registrable Securities registered under such registration
statement shall forthwith discontinue disposition of such Registrable Securities
pursuant to such registration statement until such holder's receipt of the
copies of the supplemented or amended prospectus or until it is advised in
writing (the "Advice") by the Company that the use of the prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the prospectus; PROVIDED, HOWEVER, that the
Company shall not give a Suspension Notice until after the registration
statement has been declared effective and shall not give more than one
Suspension Notice to the Holders in respect to all Registrable Securities and
pursuant to this Section 7 during any period of twelve (12) consecutive months
and in no event shall the period from the date on which any Holder receives a
Suspension Notice to the date on which any Holder receives either the Advice or
copies of the supplemented or amended prospectus (the "Suspension Period")
exceed 90 days. In the event that the Company shall give any Suspension Notice,
the Company shall use its best efforts and take such actions as are reasonably
necessary to render the Advice and end the Suspension Period as promptly as
practicable.
7.3 REGISTRABLE SECURITIES. For the purposes of this Section 7, the
term "Registrable Securities" shall mean any shares of Common Stock held by a
Holder or subject to acquisition by a Holder upon conversion of Convertible
Preferred Shares, as applicable, including any shares
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issued by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; PROVIDED, HOWEVER, that if an Investor owns Convertible
Preferred Shares, the Investor may exercise its registration rights hereunder by
converting the shares to be sold publicly into Common Stock as of the closing of
the relevant offering and shall not be required to cause such Convertible
Preferred Shares to be converted to Common Stock until and unless such Closing
occurs, it being understood that the Company shall at the request of the
relevant Investor effect the reconversion of Common Stock and any Redeemable
Preferred Stock to Convertible Preferred Stock if such a conversion occurs
notwithstanding the foregoing and a public offering does not close; and
PROVIDED, FURTHER, that any Common Stock that is sold in a registered sale
pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144 thereunder, or that may be sold without restriction as to
volume or otherwise pursuant to Rule 144 under the Securities Act (as confirmed
by an unqualified opinion of counsel to the Company), shall not be deemed
Registrable Securities.
7.4 FURTHER OBLIGATIONS OF THE COMPANY. Whenever the Company is
required hereunder to register any Registrable Securities, it agrees that it
shall also do the following:
(a) Pay all expenses of such registrations and offerings
(exclusive of underwriting discounts and commissions) and the reasonable fees
and expenses of not more than one independent counsel for the Holders
satisfactory to the Investors in connection with any registrations pursuant to
Section 7.1, up to one registration on Form S-1 or S-2 designated by the
Investors and up to three registrations on Form S-3 designated by the Investors,
provided that the Investors shall pay all such expenses in connection with any
other demand registrations. Notwithstanding the foregoing, the Company shall
not be required to pay for expenses of any registration proceeding begun
pursuant to Section 7.2, the request for which has been subsequently withdrawn
by the initiating Holders, in which case, such expenses shall be borne by the
Holders requesting such withdrawal and such registration shall not be counted as
a registration pursuant to Section 7.2(a) hereof for purposes of the limitations
set forth in the first sentence of Section 7.2(d) hereof. The preceding
sentence shall not apply, and the Company shall bear the expenses of such
registration if, at the time of such withdrawal, (i) the Holder has learned of a
material adverse change in the condition, business or prospects of the Company
from that known to the Holder at the time of its request, and (ii) the Company
knew or had reason to know of the likelihood of such Material Adverse Change at
the time of its request and did not inform the Holder thereof;
(b) Use its best efforts (with due regard to management of the
ongoing business of the Company and the allocation of managerial resources)
diligently to prepare and file with the SEC a registration statement and such
amendments and supplements to said registration statement and the prospectus
used in connection therewith as may be necessary to keep said registration
statement effective for at least 180 days or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs, and to comply with the provisions of the
Securities Act with respect to the sale of securities covered by said
registration statement for the period necessary to complete the proposed public
offering;
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(c) Furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such Holder may
reasonably request to facilitate the public offering of its Registrable
Securities;
(d) Enter into any reasonable underwriting agreement required by
the proposed underwriter (which underwriter shall be selected by the selling
Investors in connection with any registration requested pursuant to Section
7.2), if any, in such form and containing such terms as are customary; PROVIDED,
HOWEVER, that no Holder shall be required to make any representations or
warranties other than with respect to its title to the Registrable Securities
and any written information provided by the Holder to the Company, and if the
underwriter requires that representations or warranties be made and that
indemnification be provided, the Company shall make all such representations and
warranties and provide all such indemnities, including, without limitation, in
respect of the Company's business, operations and financial information and the
disclosures relating thereto in the prospectus;
(e) Use its best efforts (with due regard to management of the
ongoing business of the Company and the allocation of managerial resources) to
register or qualify the securities covered by said registration statement under
the securities or "blue sky" laws of such jurisdictions as any selling Holder
may reasonably request, provided that the Company shall not be required to
register or qualify the securities in any jurisdictions which require it to
qualify to do business therein;
(f) Immediately notify each selling Holder, at any time when a
prospectus relating to his Registrable Securities is required to be delivered
under the Securities Act, of the happening of any event as a result of which
such prospectus contains an untrue statement of a material fact or omits any
material fact necessary to make the statements therein not misleading, and,
subject to Section 7.2(f) hereof, at the request of any such selling Holder,
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading;
(g) Cause all such Registrable Securities to be listed on each
securities exchange or quotation system on which similar securities issued by
the Company are then listed or quoted;
(h) Otherwise use its best efforts to comply with the securities
laws of the United States and other applicable jurisdictions and all applicable
rules and regulations of the SEC and comparable governmental agencies in other
applicable jurisdictions and make generally available to its holders, in each
case as soon as practicable, but not later than 45 days after the close of the
period covered thereby, an earnings statement of the Company which will satisfy
the provisions of Section 11(a) of the Securities Act;
(i) Obtain and furnish to each selling Holder, immediately prior
to the effectiveness of the registration statement (and, in the case of an
underwritten offering, at the time of delivery of any Registrable Securities
sold pursuant thereto), a cold comfort letter from the
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Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters as the Holders
of a majority of the Registrable Securities being sold may reasonably request;
and
(j) Otherwise cooperate with the underwriter or underwriters,
the Commission and other regulatory agencies and take all actions and execute
and deliver or cause to be executed and delivered all documents necessary to
effect the registration of any Registrable Securities under this Section 7.
7.5 INDEMNIFICATION; CONTRIBUTION.
(a) Incident to any registration statement referred to in this
Section 7, the Company will indemnify and hold harmless each underwriter, each
Holder who offers or sells any such Registrable Securities in connection with
such registration statement (including its partners (including partners of
partners and stockholders of any such partners), and directors, officers,
employees and agents of any of them (a "Selling Holder"), and each person who
controls any of them within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act") (a
"Controlling Person")), from and against any and all losses, claims, damages,
expenses and liabilities, joint or several (including any investigation, legal
and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claim asserted, as the same
are incurred), to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities arise out of or are based on (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement
(including any related preliminary or definitive prospectus, or any amendment or
supplement to such registration statement or prospectus), (ii) any omission or
alleged omission to state in such document a material fact required to be stated
in it or necessary to make the statements in it not misleading, or (iii) any
violation by the Company of the Securities Act, any state securities or "blue
sky" laws or any rule or regulation thereunder in connection with such
registration; PROVIDED, HOWEVER, that the Company will not be liable to the
extent that such loss, claim, damage, expense or liability arises from and is
based on an untrue statement or omission or alleged untrue statement or omission
made in reliance on and in conformity with information furnished in writing to
the Company by such underwriter, Selling Holder or Controlling Person expressly
for use in such registration statement. With respect to such untrue statement
or omission or alleged untrue statement or omission in the information furnished
in writing to the Company by such Selling Holder expressly for use in such
registration statement, such Selling Holder will indemnify and hold harmless
each underwriter, the Company (including its directors, officers, employees and
agents), each other Holder (including its partners (including partners of
partners and stockholders of such partners) and directors, officers, employees
and agents of any of them, and each person who controls any of them within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act),
from and against any and all losses, claims, damages, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise
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to the same extent provided in the immediately preceding sentence. The Company
shall not be obligated hereunder to indemnify any Holder for any amount paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld). In no event, however, shall the liability of a
Selling Holder for indemnification under this Section 7.5(a) exceed the lesser
of (i) that proportion of the total of such losses, claims, damages or
liabilities indemnified against equal to the proportion of the total securities
sold under such registration statement which is being sold by such Selling
Holder or (ii) the proceeds received by such Selling Holder from its sale of
Registrable Securities under such registration statement.
(b) If the indemnification provided for in Section 7.5(a) above
for any reason is held by a court of competent jurisdiction to be unavailable to
an indemnified party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
7.5, in lieu of indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the other
Selling Holders and the underwriters from the offering of the Registrable
Securities or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the other Selling Holders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Holders and the underwriters shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Holders and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the
Company, the Selling Holders and the underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Holders or the
underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Holders, and the underwriters agree that
it would not be just and equitable if contribution pursuant to this Section
7.5(b) were determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. In no event, however, shall
a Selling Holder be required to contribute any amount under this Section 7.5(b)
in excess of the lesser of (i) that proportion of the total of such losses,
claims, damages or liabilities indemnified against equal to the proportion of
the total Registrable Securities sold under such registration statement which
are being sold by such Selling Holder or (ii) the proceeds received by such
Selling Holder from its sale of Registrable Securities under such registration
statement. No person found guilty of fraudulent misrepresentation (within the
meaning of Section
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11(f) of the Securities Act) shall be entitled to contribution from any person
who was not found guilty of such fraudulent misrepresentation.
(c) The amount paid by an indemnifying party or payable to an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in this Section 7.5 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim, payable as the same are incurred. The indemnification and
contribution provided for in this Section 7.5 will remain in full force and
effect regardless of any investigation made by or on behalf of the indemnified
parties or any officer, director, employee, agent or controlling person of the
indemnified parties.
(d) NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to which the
indemnification obligations set forth in this Section 7.5 would apply, the
indemnified party shall give notice thereof in writing to the indemnifying
party, but the omission to so notify the indemnifying party promptly will not
relieve the indemnifying party from any liability except to the extent that the
indemnifying party shall have been prejudiced as a result of the failure or
delay in giving such notice. Such notice shall state the information then
available regarding the amount and nature of such claim, liability or expense
and shall specify the provision or provisions of this Agreement under which the
liability or obligation is asserted. If within twenty (20) days after receiving
such notice the indemnifying party gives written notice to the indemnified party
stating that (a) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful and (b) that it disputes
and intends to defend against such claim, liability or expense at its own cost
and expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party, which consent shall not
be unreasonably withheld) and the indemnified party shall not be required to
make any payment with respect to such claim, liability or expense as long as the
indemnifying party is conducting a good faith and diligent defense at its own
expense; PROVIDED, HOWEVER, that the assumption of defense of any such matters
by the indemnifying party shall relate solely to the claim, liability or expense
that is subject or potentially subject to indemnification. The indemnifying
party shall have the right, with the consent of the indemnified party, which
consent shall not be unreasonably withheld, to settle all indemnifiable matters
related to claims by third parties which are susceptible to being settled
provided its obligation to indemnify the indemnifying party therefor will be
fully satisfied. The indemnifying party shall keep the indemnified party
apprised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; PROVIDED, HOWEVER, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to
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dispute and defend is given by the indemnifying party, or if such diligent good
faith defense is not being or ceases to be conducted, the indemnified party
shall, at the expense of the indemnifying party, undertake the defense of (with
counsel selected by the indemnified party), and shall have the right to
compromise or settle (exercising reasonable business judgment), such claim,
liability or expense. If such claim, liability or expense is one that by its
nature cannot be defended solely by the indemnifying party, then the indemnified
party shall make available all information and assistance that the indemnifying
party may reasonably request and shall cooperate with the indemnifying party in
such defense.
(e) PROSPECTUS DELIVERY. The foregoing indemnity agreements of
the Company and Selling Holders are subject to the condition that, insofar as
they relate to any misstatement or omission in a preliminary prospectus that was
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to Rule 424(b) (the "Final Prospectus"),
such indemnity agreement shall not inure to the benefit of any person if a copy
of the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
7.6 RULE 144 AND RULE 144A REQUIREMENTS. In the event that the Company
becomes subject to Section 13 or Section 15(d) of the Exchange Act, the Company
shall use its best efforts to take all action as may be required as a condition
to the availability of Rule 144 or Rule 144A under the Securities Act (or any
successor or similar exemptive rules hereafter in effect). The Company shall
furnish to any Holder, within 15 days of a written request, a written statement
executed by the Company as to the steps it has taken to comply with the current
public information requirement of Rule 144 or Rule 144A or such successor rules.
7.7 TRANSFER OF REGISTRATION RIGHTS. The registration rights and
related obligations under this Section 7 of the Holders with respect to their
Registrable Securities may be assigned in connection with any transaction or
series of related transactions involving the Transfer to one or more transferees
of at least 220,000 shares of capital stock of the Company, other than pursuant
to an effective registration statement under the Securities Act or pursuant to
Rule 144 thereunder (subject to adjustments for stock splits, stock dividends
and the like and aggregating all contemporaneous transfers by Holders), or to
any TA Funds or permitted transferee, and upon any such transfer such transferee
or TA Fund shall be deemed to be included within the definition of a "Holder"
for purposes of this Section 7 with the rights set forth herein. The relevant
Holder as the case may be, shall notify the Company at the time of such
transfer.
7.8 "MARKET STAND-OFF" AGREEMENT. In connection with any underwritten
public offering by the Company, the Holders, if requested in good faith by the
Company and the managing underwriter of the Company's securities, shall agree
not to sell or otherwise transfer or dispose of any securities of the Company
held by them (except for any securities sold pursuant to such registration
statement) for a period following the effective date of the applicable
registration statement; PROVIDED, HOWEVER that in no event shall such period
exceed 180 days; and
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PROVIDED FURTHER that such agreement shall not be required unless all officers
and directors and one percent (1%) or greater stockholders of the Company and
all other persons with registration rights enter into similar agreements. In
order to enforce the foregoing, the Company may impose stop-transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares of securities of every other person subject to the foregoing restriction)
until the end of such period.
SECTION 8 ELECTION OF DIRECTORS
8.1 ADVENT VIII. Each Investor agrees that TA/Advent VIII L.P. as a
holder of Convertible Preferred Stock shall have the exclusive right to elect
the Director of the Company as contemplated under Article IV, Sections A.2 and
B.2 of the Company's Certificate of Incorporation (whether at an annual or
special meeting of stockholders or by written consent of the stockholders).
8.2 VOTING FOR DIRECTORS. The Investors hereby agree that, when voting
their shares of Convertible Preferred Stock, Redeemable Preferred Stock or
Common Stock for directors of the Company under the Company's Certificate of
Incorporation, they shall not vote to cause the election of a greater number of
individuals, including the Convertible Preferred Stock Director Designee or the
Redeemable Preferred Stock Director Designee, as applicable, who are employees
or partners of TA Associates, Inc., than could be elected by the Investors under
cumulative voting assuming all shares of Convertible Preferred Stock were
converted into Common Stock and Redeemable Preferred Stock under the Company's
Certificate of Incorporation and all such shares of Redeemable Preferred Stock
were automatically redeemed upon such conversion.
SECTION 9 GENERAL
9.1 AMENDMENTS, WAIVERS AND CONSENTS. For the purposes of this
Agreement and all agreements executed pursuant hereto, no course of dealing
between or among any of the parties hereto and no delay on the part of any party
hereto in exercising any rights hereunder or thereunder shall operate as a
waiver of the rights hereof and thereof. No provision hereof may be waived
otherwise than by a written instrument signed by the party or parties so waiving
such covenant or other provision. No amendment to this Agreement may be made
without the written consent of the Company and the Investors; provided that the
written consent of the Stockholders shall be required for any amendment of
Sections 5, 6, 7, 8.1 or 9 hereof. Any actions required to be taken or
consents, approvals, votes or waivers required or contemplated to be given by
the Investors or the Stockholders shall require a vote of a two-thirds in
interest of the Investors or two-thirds in interest of the Stockholders, as
applicable, based on the relative holdings of capital stock of the Company of
the Investors as a group or of the Stockholders as a group, as applicable, at
the relevant time, and any such action by such Investors or Stockholders, as
applicable, shall bind all of the Investors, or Stockholders, as applicable.
9.2 [INTENTIONALLY OMITTED]
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9.3 SURVIVAL OF REPRESENTATIONS; WARRANTIES AND COVENANTS;
ASSIGNABILITY OF RIGHTS. All covenants, agreements, representations and
warranties of the Company, the Stockholders and the Investors made herein and in
the certificates, lists, exhibits, schedules or other written information
delivered or furnished to any Investor in connection herewith (a) are material,
shall be deemed to have been relied upon by the party or parties to whom they
are made and shall survive the Closing regardless of any investigation or
knowledge on the part of such party or its representatives and (b) shall bind
the parties' successors and assigns (including without limitation any successor
to the Company by way of acquisition, merger or otherwise), whether so expressed
or not, and, except as otherwise provided in this Agreement, all such covenants,
agreements, representations and warranties shall inure to the benefit of the
Investors' successors and assigns and to their transferees of Securities,
whether so expressed or not, subject to the provisions of Sections 4.8, 5.4, 6.2
and 7.7, and any such transferee shall be deemed an "Investor" for purposes
hereof.
9.4 LEGEND ON SECURITIES. The Company, the Investors and the
Stockholders acknowledge and agree that the following legend shall be typed on
each certificate evidencing any of the securities issued hereunder held at any
time by an Investor or Stockholder:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES OR BLUE
SKY LAWS AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A STOCK
PURCHASE AND STOCKHOLDERS AGREEMENT DATED AS OF JUNE 20, 1997, INCLUDING THEREIN
CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY OF THIS AGREEMENT
IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE.
9.5 GOVERNING LAW. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws of the State of
Delaware, without giving effect to conflict of laws principles thereof.
9.6 SECTION HEADINGS AND GENDER. The descriptive headings in this
Agreement have been inserted for convenience only and shall not be deemed to
limit or otherwise affect the construction of any provision thereof or hereof.
The use in this Agreement of the masculine pronoun in reference to a party
hereto shall be deemed to include the feminine or neuter, and vice versa, as the
context may require.
34
<PAGE>
9.7 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which when so executed and delivered shall be
taken to be an original; but such counterparts shall together constitute but one
and the same document.
9.8 NOTICES AND DEMANDS. Any notice or demand which is required or
provided to be given under this Agreement shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand,
telecopy, telex or other method of facsimile, or five days after being sent by
certified or registered mail, postage and charges prepaid, return receipt
requested, or two days after being sent by overnight delivery providing receipt
of delivery, to the following addresses: if to the Company or the Stockholders,
Invitrogen Corporation, 1600 Faraday, Carlsbad, California 92008, or at any
other address designated by the Company or the Stockholders, respectively, to
the Investors and the other parties hereto in writing; if to an Investor, c/o TA
Associates, Inc. at its mailing address as shown on EXHIBIT A hereto, or at any
other address designated by TA Associates, Inc. to the Company and the
Stockholders in writing.
9.9 DISPUTE RESOLUTION. Except with respect to matters as to which
injunctive relief is being sought, any dispute arising out of or relating to
this Agreement that has not been settled within thirty (30) days (the
"Negotiation Period") by good faith negotiation between the parties to this
Agreement shall be submitted to an arbitrator mutually agreeable to the parties
for final and binding arbitration pursuant to arbitration rules to be determined
by the chosen arbitrator within the limits set forth below. In the event the
parties are unable to agree upon an arbitrator within ten (10) days of
expiration of the Negotiation Period, the Company and the Investors shall,
within five (5) days of the expiration of such ten day period each select one
arbitrator and such arbitrators shall select a third arbitrator within five (5)
days who shall be the arbitrator designated hereunder. Any such arbitration
shall be conducted in San Francisco, California. Such proceedings shall be
guided by the following agreed upon procedures:
(1) mandatory exchange of all relevant documents, to be
accomplished within forty-five (45) days of the
initiation of the procedure;
(2) no other discovery;
(3) hearings before the neutral advisor which shall consist
of a summary presentation by each side of not more than
three hours; such hearings to take place on one or two
days at a maximum; and
(4) decision to be rendered not more than ten (10) days
following such hearings.
9.10 REMEDIES; SEVERABILITY. Notwithstanding Section 9.9, it is
specifically understood and agreed that any breach of the provisions of this
Agreement by any person subject hereto will result in irreparable injury to the
other parties hereto, that the remedy at law alone will be an inadequate remedy
for such breach, and that, in addition to any other remedies which they may
have, such other parties may enforce their respective rights by actions for
specific performance
35
<PAGE>
(to the extent permitted by law). The Company may refuse to recognize any
unauthorized transferee as one of its stockholders for any purpose, including,
without limitation, for purposes of dividend and voting rights, until the
relevant party or parties have complied with all applicable provisions of this
Agreement. Whenever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be deemed prohibited or invalid
under such applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, and such prohibition or invalidity shall not
invalidate the remainder of such provision or the other provisions of this
Agreement.
9.11 INTEGRATION. This Agreement, including the exhibits, documents and
instruments referred to herein or therein, constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, including, without
limitation, the letter of intent between the parties hereto in respect of the
transactions contemplated herein, which letter of intent shall be completely
superseded by the representations, warranties and covenants of the Company
contained herein.
36
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
COMPANY:
INVITROGEN CORPORATION
By:
-------------------------------------
Lyle C. Turner, President
STOCKHOLDERS:
----------------------------------------
Lyle C. Turner
----------------------------------------
Joseph Fernandez
37
<PAGE>
INVESTORS:
TA/ADVENT VIII L.P.
By: TA Associates VIII LLC, its General Partner
By: TA Associates, Inc., its Manager
By:
-------------------------------------
Kurt R. Jaggers
Attorney-in-Fact
ADVENT ATLANTIC AND PACIFIC III, L.P.
By: TA Associates AAP III Partners,
its General Partner
By: TA Associates, Inc.
By:
-------------------------------------
Kurt R. Jaggers
Attorney-in-Fact
TA VENTURE INVESTORS L.P.
By:
-------------------------------------
Kurt R. Jaggers
Attorney-in-Fact
38
<PAGE>
EXHIBIT A
LIST OF INVESTORS
<TABLE>
<CAPTION>
Number of
Shares Aggregate
Name and Address Purchased Payment
- ---------------- --------- -------
<S> <C> <C>
TA/Advent VIII, L.P. 1,824,382 $12,422,399.48
Advent Atlantic and Pacific III, L.P. 342,072 2,329,202.46
TA Venture Investors 36,488 248,450.44
Limited Partnership
--------- --------------
Total 2,202,942 $15,000,052.38
--------- --------------
--------- --------------
</TABLE>
Notices to:
TA Associates, Inc.
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
39
<PAGE>
EXHIBIT G
CONSENT OF SPOUSE
I, , spouse of __________________, acknowledge
that I have read the Stock Purchase and Shareholders Agreement dated as of June
20, 1997, to which this Consent is attached as EXHIBIT G (the "Agreement") and
that I know its contents. I am aware that by its provisions, including without
limitation the provisions of Section 5 of the Agreement certain restrictions are
imposed upon the sale or other disposition of any shares of the Company of which
I may become possessed as a result of a gift from my spouse or a court decree
and/or any property settlement in any domestic litigation.
I hereby agree that my interest, if any, in the shares subject to the
Agreement will be irrevocably bound by the Agreement and further understand and
agree that any community property interest I may have in the shares will be
similarly bound by the Agreement.
I AM AWARE THAT THE LEGAL, FINANCIAL AND RELATED MATTERS CONTAINED IN THE
AGREEMENT ARE COMPLEX AND THAT I AM FREE TO SEEK INDEPENDENT PROFESSIONAL
GUIDANCE OR COUNSEL WITH RESPECT TO THIS CONSENT. I HAVE EITHER SOUGHT SUCH
GUIDANCE OR COUNSEL OR DETERMINED AFTER REVIEWING THE AGREEMENT CAREFULLY THAT I
WAIVE SUCH RIGHT.
Dated as of the day of June, 1997
---------------------------
Please Print Name:
40
<PAGE>
MORPHAGEN, INC.
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of November 3, 1998 by and between
MorphaGen, Inc., a Delaware corporation, with its principal office located at
320 Delage Dr., Encinitas CA 92024 (the "Company"), Heidi Short, an individual
residing at 320 Delage Dr., Encinitas CA 92024 (the "Seller") and Invitrogen
Corporation, a Delaware corporation with its principal offices at 1600 Faraday
Ave., Carlsbad CA 92008 (the "Purchaser").
WHEREAS the parties executed a Memorandum of Terms for the purchase of all
outstanding shares of the Company, dated October 1, 1998 and the parties wish to
more fully define their agreement, NOW THEREFORE in consideration of the mutual
promises, covenants and conditions set forth in that Memorandum and below, the
parties mutually agree as follows:
1. SALE OF COMPANY SHARES
1.1 SALE OF OUTSTANDING SHARES Subject to the terms and conditions of
this Agreement at the Closing (as defined below), the Seller will sell and
deliver to Purchaser and Purchaser will purchase from the Company 975,000 shares
of Common Stock (the "Shares") for and in consideration of the obligations of
Purchaser set out in this Agreement, which shares represent all of the
outstanding equity of the Company with the exception of 109,850 shares of
Series A Preferred Stock currently owned by Purchaser.
1.2 DELIVERY OF COMPANY ASSETS & RECORDS At the Closing, Seller
shall further deliver to Buyer all of the assets of Company, both tangible and
intangible, including without limitation all equipment & supplies, cash,
securities and intellectual property. Intellectual property shall include
patents, copyrights, trademarks, trade secrets and the like owned by, assigned
to or assignable by prior agreement to the Company, specifically but without
limitation, those items listed in Schedule B hereto, together with all documents
related to any of the above. Seller & Company shall deliver to Purchaser all
books and records of the Company. Seller shall execute such further documents as
may be reasonably requested by Purchaser or its counsel in connection with the
transfer of Company, its assets, governance and operations to Purchaser.
2. SECURITIES OF PURCHASER
2.1 At the Closing, Purchaser will grant to Seller a
"non-statutory" option to purchase 50,000 shares of Purchaser's common stock
whose exercise price shall be * Said option shall be for a term of ten years
and the right to purchase * of the 50,000 shares shall vest upon grant. The
remainder of the option shall vest upon achievement by Purchaser of either of
the following:
a) execution of an agreement with a third party, wherein the third party
provides at least * for research, development or improvement of, and/or
purchase of rights to the technology described in Schedule B hereto (the
"Subject Technology"); or
Page 1 of 15
* "Confidential portion has been omitted and filed
separately with the Commission."
<PAGE>
b) discovery or production of a "Morphatide," as that term is defined in
patent applications within Subject Technology, which reproducibly binds a
protein with a binding constant of * or better.
2.2 At or before the Closing, Purchaser will offer to replace all
outstanding options for shares of Company with options to purchase 13,000
common shares of Purchaser, distributed PRO RATA according to the relative
number of Company options held by its optionees. Said options shall have an
exercise price of *. The options shall be for a term of ten years and shall
be subject to time vesting over 2 years as follows: 50% of each option shall
vest one year from the Closing, the remaining 50% shall vest in equal monthly
installments over the subsequent 12 months.
3. ROYALTIES & FEES RELATED TO SUBJECT TECHNOLOGY
3.1 NET SALES For purposes of this Agreement, "Net Sales" means the
U.S. list price for products or services, less customary discounts and credits
or allowances given for rejected or returned products. If a product covered by a
Valid Claim within Subject Technology is sold in a kit in combination with other
significant active products or components that are not covered by such Valid
Claim and are not an integral part of the Morphatide application or use, Net
Sales for purposes of determining royalties shall be calculated by multiplying
Net Sales of the kit by the fraction A/(A+B), where A is the total U.S. list
price of the product if sold separately and B is the total of the U.S. list
prices of all other active products or components in the kit if sold separately.
If the component covered by a Valid Claim and the other significant active
components or products in the kit are not sold separately, Purchaser and Seller
shall agree on a Net Sales calculation for that kit. Net Sales for services
shall be calculated in the same manner where a service comprises steps or
materials which are covered by a Valid Claim and other significant, i.e.
value-added, steps which are not so covered and are not an integral part of the
Morphatide application or use.
3.2 VALID CLAIM For purposes of this Agreement, "Valid Claim" means
any pending or issued and enforceable claim within Subject Technology, including
claims which are supported by the specification(s) of any patent applications
listed in Schedule B and which may be legally prosecuted in the future, e.g. via
a continuation, continuation-in-part or divisional application.
3.3 RUNNING ROYALTIES Purchaser will pay to Seller the following
royalties on a quarterly basis on Net Sales of products and services sold which
are covered by a Valid Claim within Subject Technology:
(a) For two years from the Closing, * of Net Sales of products
covered by a Valid Claim; * thereafter.
(b) For two years from the Closing, * of revenue from licenses
issued for Subject Technology; * thereafter.
Page 2 of 15
* "Confidential portion has been omitted and filed
separately with the Commission."
<PAGE>
(c) * of net revenue from research and development contracts
for demonstrating feasibility of Subject Technology which use
products or methods covered by a Valid Claim, until the aggregate
of such income reaches $5 million. No royalties shall be payable
on any grant income.
(d) * of Net Sales from all other contracts (e.g. services;
research and development of specific applications of Subject
Technology at the request of a third party) covered by a Valid
Claim.
In the event that Purchaser realizes Net Sales or income from products, services
or contracts of the type described in a)-d) above which use or contain
technology claimed in a patent application listed in Schedule B, but which
technology is not covered by a Valid Claim, Purchaser shall pay to Seller a
royalty of * of such Net Sales or income. Such payments shall be made during
the term of the relevant patents, as if the claim or claims had issued (i.e. 20
years from the priority date of the relevant application). At the expiration of
this term, the Seller or Seller's representative and Purchaser shall meet to
discuss further compensation that may be appropriate under this paragraph.
3.4 PAYMENTS UPON SALE OF COMPANY OR SUBJECT TECHNOLOGY Should
Purchaser sell or transfer to a third party any portion of the shares
purchased hereunder or of the Subject Technology, either 1) the third party
shall agree to the same royalty payments (PRO RATA according to the
transferred portion) to Seller as outlined in paragraph 3.3; or 2) Purchaser
shall pay Seller the greater of a) * of the proceeds from such sale or
transfer or b) * (PRO RATA as above). * Should Purchaser conclude with a
third party an investment of equity whose purpose is substantially to support
or invest in Subject Technology, Seller and Purchaser shall meet and
negotiate in good faith a commercially reasonable compensation to Seller,
which may or may not exceed the terms outlined above.
3.5 AUDIT During the period for payment of any sums due under
paragraphs 3.3 or 3.4, and for 90 days after the termination of such period,
Seller shall have the right, not more than annually, to have the books and
records of Purchaser and/or Company relevant to such payments inspected by an
independent certified public accountant acceptable to Purchaser during normal
business hours. Seller shall bear the expense of any such inspection, unless
the inspection reveals an underpayment of at least 10%, in which case
Purchaser shall bear the cost of the inspection.
4. CONTINUED DEVELOPMENT OF MORPHATIDE TECHNOLOGY
4.1 Purchaser represents and warrants that for at least * from the
Closing, it will a) continue research and development of Morphatides at
commercially reasonable levels, but at a minimum shall maintain * * for such
efforts; and b) continue prosecution of patent applications listed in
Schedule B. Purchaser shall make commercially reasonable efforts to obtain
the broadest claims enabled by such applications and shall not arbitrarily or
for the purpose of reducing royalties under paragraph 3.3 abandon any
Page 3 of 15
* "Confidential portion has been omitted and filed
separately with the Commission."
<PAGE>
claim. Purchaser shall give timely notice to Seller regarding patent prosecution
decisions which will materially affect royalties payable under paragraph 3.3.
Purchaser and Seller or Seller's representative intend (without binding
themselves) to meet quarterly or at such other intervals as they may agree, to
discuss patent prosecution and research strategy for Subject Technology.
4.2 Following the two-year period in paragraph 4.1 if Purchaser
chooses not to continue research and development, or patent prosecution for all
or part of the Subject Technology, Seller shall have the right of first refusal
for any license offered for the development or commercialization of such
technology, to the extent not continued by Purchaser.
4.3 Purchaser will ensure that proper acknowledgement is made of the
inventor(s) of Subject Technology in any publications, in accordance with
scientific custom.
5. CLOSING DATE; DELIVERY
5.1 CLOSING DATE The closing of the purchase and sale of the Shares
to the Purchaser will be held at the offices of Invitrogen, 1600 Faraday Ave.,
Carlsbad, California, on November 3, 1998, or at such other time and place as
the Seller and the Purchaser may agree (the "Closing").
5.2 DELIVERY. Subject to the terms of this Agreement, at the Closing
the Company will deliver to Purchaser a stock certificate representing the
number of Common Shares set out above.
6. REPRESENTATIONS AND WARRANTIES OF SELLER & THE COMPANY. Except as set
forth on the Schedules attached to this Agreement, the Seller and the Company
jointly and severally represent and warrant to Purchaser as follows:
6.1 ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has the requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is qualified to do business as a foreign corporation
in California. The Company will deliver at the Closing originals of the
Company's Articles of Incorporation and Bylaws, each as amended to date, and
originals of all proceedings of the Company's Board of Directors and
shareholders together with originals of all material documents related to
Company.
6.2 CORPORATE POWER The Company & the Seller have all requisite legal
and corporate power to enter into this Agreement. The Seller has good title to
the Shares and the unencumbered power to sell the Shares hereunder, and to carry
out and perform her obligations under the terms of this Agreement.
6.3 SUBSIDIARIES. The Company does not control, directly or
indirectly, or have an interest in, any other corporation, association or
business entity.
Page 4 of 15
<PAGE>
6.4 CAPITALIZATION As of the date of the Closing, the authorized
capital stock of the Company will consist of 429,000 shares of of Preferred
Stock and 5,000,000 shares of Common Stock. The issued and outstanding capital
stock of the Company will consist of 109,850 shares of Series A Preferred stock
and 975,000 shares of Common Stock. As of the Closing, there will be no
outstanding rights, plans, options, warrants, conversion rights or agreements
for the purchase or acquisition from the Company of any shares of its capital
stock, except those set out herein and in Schedule A.
6.5 AUTHORIZATION
(a) The Shares are validly issued, fully paid and nonassessable,
and are free of any liens or encumbrances; provided, however, that the Shares
may be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein or otherwise required by such laws at the time a
transfer is proposed.
(b) Except for the rights specifically contemplated by the
transactions described herein and in the attachments, no entity has any right of
first refusal or any preemptive rights in connection with the Shares.
6.6 PATENTS, TRADEMARKS, ETC. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes owned by, or
assignable to it by prior agreement, specifically that described as "IP" in the
term sheet dated October 1, 1998, those listed in Schedule B, including all
rights and title to the Morphatide technology. Company & Seller have disclosed
to Purchaser all such intellectual property. Company & Seller have disclosed to
Purchaser all colorable conflicts with or infringement of the rights of others
with respect to the above-listed items of which it, its directors, employees or
shareholders are aware. Other than a previous license to Purchaser, there are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor are the Company or Seller bound by or a party to any options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity.
6.7 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of its Certificate of Incorporation or Bylaws, or in any material
respect of any mortgage, indenture, contract, agreement, instrument, judgment,
decree, order, statute, rule or regulation by which the Company is bound or to
which the Company's property is subject. Execution, delivery and performance of
this Agreement on the part of the Company, and the sale of the Shares pursuant
hereto, will not result in any such violation, will not accelerate performance
under the terms of any agreement, and will not constitute an event that, with
the lapse of time or action by a third party, will result in a default under any
of the foregoing.
Page 5 of 15
<PAGE>
6.8 MATERIAL AGREEMENTS
(a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.
(b) Other than as set forth in Schedule A, there are no
agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company is a party or by which
it is bound that may involve (i) obligations (contingent or otherwise) of, or
payments to or from the Company which in the aggregate exceed $5,000, or (ii)
the license of any patent, copyright, trade secret or other proprietary right to
or from the Company, (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services or (iv)
encumbrance or transfer restrictions on any of Company's assets.
6.9 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending or, to the Seller's and Company's knowledge, threatened
against the Company, nor, to their knowledge, is there any basis therefor,
which, either in any case or in the aggregate, might result in any material
adverse change in the business, prospects, affairs or operations of the Company
or in any of its properties or assets, or in any material impairment of the
right or ability of the Company to carry on its business as now conducted or as
proposed to be conducted, or in any material liability on the part of the
Company, and none which questions any action taken or to be taken in connection
herewith. Further, there is no action, suit, proceeding, or investigation
pending against the Company or any officer, director or employee of the Company,
or any threat thereof, by reason of the past employment relationships of such
officers, directors and employees. There is no action, suit, proceeding or
investigation by the Company currently pending or which the Company intends to
originate.
6.10 REGISTRATION RIGHTS. The Company has no obligation to register
any of its outstanding securities under the Securities Act of 1933, as amended
(the "Securities Act").
6.11 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares or the
consummation of any other transaction contemplated hereby.
6.12 SECURITIES ACT. Subject to the accuracy of the Purchaser's
representations in Section 7 hereof, the offer and sale of the Shares in
conformity with the terms of this Agreement constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act and the
requirements of Delaware Law.
6.13 DISCLOSURE. To the best of the Company's knowledge, Seller & the
Company have fully provided Purchaser with all the information that such
Purchaser has requested for deciding whether to purchase the Shares, including
complete disclosure of all tangible assets, cash & securities on Schedule D
hereof. This Agreement and the statements and certificates made or delivered in
connection herewith do not contain any untrue statement of a
Page 6 of 15
<PAGE>
material fact or omit to state a material fact necessary to make the statements
herein not misleading.
7. REPRESENTATIONS AND WARRANTIES OF PURCHASERS; INDEMNITY BY PURCHASERS;
RESTRICTIONS ON TRANSFER
7.1 REPRESENTATIONS AND WARRANTIES BY EACH PURCHASER. Purchaser
represents and warrants to the Company as follows:
(a) The Purchaser has such knowledge and experience in financial
and business matters that the Purchaser is capable of (i) evaluating the merits
and risks of the purchase of the Shares pursuant to the terms of this Agreement
and (ii) protecting the Purchaser's interests in connection therewith.
(b) The Purchaser has a preexisting personal or business
relationship with one or more of the officers and directors of the Company
consisting of personal or business contacts of a nature and duration to enable
Purchase to be aware of the character, business acumen and general business and
financial circumstances of the person(s) with whom such relationship(s) exists.
(c) The Purchaser and the Purchaser's representatives have been
solely responsible for such Purchaser's own "due diligence" investigation of the
Company and its management and business, for such Purchaser's own analysis of
the merits and risks of this investment, and for such Purchaser's own analysis
of the fairness and desirability of the terms of the investment; in taking any
action or performing any role relative to the arranging of the proposed
investment, the Purchaser has acted solely in the Purchaser's own interest, and
acknowledges that none of the other Purchasers (or any of their agents or
employees) has acted as an agent of such Purchaser.
(d) The Shares are being acquired for the Purchaser's own
account, in each case for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act.
(e) The Purchaser understands that the Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Section 4(2) of the Securities Act and/or Regulation
D promulgated under the Securities Act, that the Company has no present
intention of registering the Shares and that the Purchaser must bear the
economic risk of such investment indefinitely, unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from registration.
The Purchaser understands that the Shares are restricted securities within the
meaning of Rule 144 under the Securities Act, which allows limited resale of
such securities under certain conditions; that, in any event, such exemption
from registration under Rule 144 will not be available for at least two years,
and even then will not be available unless the other conditions of Rule 144 are
compiled with.
Page 7 of 15
<PAGE>
(f) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the
Purchaser is required in connection with the valid execution this Agreement.
7.2 LEGENDS Each certificate or instrument representing the Shares
will be endorsed with the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY,
STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
The Company need not register a transfer of any Shares, and may also
instruct its transfer agent not to register the transfer of the Shares, unless
the conditions specified in this Agreement are satisfied.
7.3 THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE PAYMENT OR RECEIPT OF ANY OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATIONS BY SECTIONS 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
8. CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATIONS OF THE PURCHASER. The obligation of
Purchaser to purchase Shares at the Closing is subject to the fulfillment on or
prior to the time of the Closing (except condition (c) which may be fulfilled up
to 30 days from the Closing) of the following conditions, any of which may be
waived by such Purchaser:
(a) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS The representations and warranties made by the Seller & the Company
in Section 6 hereof will be true and correct in all material respects when made,
and will be true and correct in all material respects on the date of the Closing
with the same force and effect as if they had been made on and as of the date of
the Closing, and the Company will have performed all obligations
Page 8 of 15
<PAGE>
and conditions herein required to be performed or observed by it on or prior to
the date of the Closing.
(b) LEGAL INVESTMENT. At the time of the Closing, the purchase of
the Shares by the Purchasers hereunder will be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.
(c) OPTIONS REPLACED. Within 30 days of the Closing, every
holder of options for Company's shares will have done one of the following:
executed an agreement based on an offer under paragraph 2.2 hereof, executed
another similar agreement agreeable to Purchaser; or executed a termination of
his or her option without further obligation on the part of Company or
Purchaser.
8.2 CONDITIONS TO OBLIGATIONS OF THE SELLER. The Seller's obligation
to sell the Shares at the Closing is subject to the fulfillment on or prior to
the date of the Closing of the following conditions, any of which may be waived
by the Company:
(a) INCORPORATION OF CONDITIONS. The condition set forth in
subsection (b) of section 8.1 will have been fulfilled.
(b) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS The representations and warranties made by the Purchaser in Section
7 hereof will be true and correct when made, and will be true and correct on the
date of the Closing with the same force and effect as if they had been made on
and as of the date of the Closing, and the Purchasers will have performed all
obligations and conditions herein required to be performed or observed by them
on or prior to the date of the Closing.
9. MISCELLANEOUS.
9.1 WAIVERS AND AMENDMENTS. With the written consent of the Purchaser
the representations, warranties or obligations of the Seller and the Company may
be waived (either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
the Seller, Company & Purchaser may enter into a supplementary written agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement. Neither this Agreement nor
any provision hereof may be changed, waived, discharged or terminated orally,
but only by a statement in writing signed by the party against which enforcement
of the change, waiver, discharge or termination is sought.
9.2 GOVERNING LAW. This Agreement will be governed in all respects by
the laws of the State of Delaware as such laws are applied to agreements between
Delaware residents entered into and to be performed entirely within Delaware.
Page 9 of 15
<PAGE>
9.3 SURVIVAL. The representations, warranties, covenants and
agreements made herein will survive the execution of this Agreement and the
Closing of the transactions contemplated hereby.
9.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the parties
hereto. Except as part of a merger or change of control, Purchaser may not
assign its rights to purchase the Shares.
9.5 ENTIRE AGREEMENT. This Agreement, the exhibits to this Agreement
and the other documents delivered pursuant hereto or incorporated by reference
herein constitute the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof and supersede all prior
oral and written understandings, agreements and commitments with regard to such
subjects by or among the parties hereto.
9.6 NOTICES, ETC. All notices and other communications required or
permitted hereunder will be in writing and will be mailed by certified or
registered mail, postage prepaid.
9.7 NO WAIVERS. No failure on the part of any party to exercise or
delay in exercising any right hereunder will be deemed a waiver thereof, nor
will any such failure or delay, or any single or partial exercise of any such
right, preclude any further or other exercise of such right or any other right.
9.8 SEPARABILITY. If any provision of this Agreement, or the
application thereof, is for any reason and to any extent determined by a court
of competent jurisdiction to be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other persons or
circumstances will be interpreted so as best to reasonably effect the intent of
the parties hereto. The parties agree to use their best efforts to replace such
void or unenforceable provision of this Agreement with a valid and enforceable
provision which will achieve, to the extent greatest possible, the economic,
business and other purposes of the void or unenforceable provision.
9.9 EXPENSES. The Company, Seller and Purchaser shall each bear its
respective expenses and legal fees incurred with respect to this Agreement and
the transactions contemplated hereby.
9.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be an original, but all of which together will
constitute one instrument.
Page 10 of 15
<PAGE>
9.12 EXTINGUISHES PRIOR AGREEMENTS Upon the Closing and satisfaction
of all conditions thereof, the Memorandum of Terms dated October 1, 1998 and
the Stock Purchase, Rights, Services and License Agreements dated on or about
March 25, 1997 between the parties will be extinguished.
The parties have executed this Agreement as of the day and year first
above written.
MORPHAGEN, INC. INVITROGEN CORPORATION
By: By:
/s/ Heidi Short /s/ Lyle C. Turner
- ----------------------------- ------------------------------
Heidi Short, CEO Lyle C. Turner, CEO
SELLER:
/s/ Heidi Short
- -----------------------------
Heidi Short
CONSENT OF SPOUSE:
I understand that I have a legal interest in the Shares and other items being
sold in this Agreement. I have had the opportunity to consult with a lawyer
about my rights concerning this Agreement. I consent to this sale and all of the
terms of the Agreement.
/s/ Jay Short
- -----------------------------
Jay Short
Page 11 of 15
<PAGE>
SCHEDULE A
AGREEMENTS
(on following 1 page)
Page 12 of 15
<PAGE>
<TABLE>
<CAPTION>
MORPHAGEN CONTRACTS/AGREEMENTS:
Date Agreement Terms Vesting Common Price Written
---- --------- ----- ------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Carolyn Erickson 1 Apr-97 Confidentiality Agreement * (do not use) Written
2 Jan-98 Consulting Agreement- * Written
*
Stock Option * * * Written
Barry Glickman, Ph.D. 1 Apr-97 Confidentiality Agreement * Written
2 Jan-98 Consulting Agreement- * Written
*
Stock Option * * * Written
Wolfgang Kusser, Ph.D. 1 Apr-97 Confidentiality Agreement * Written
2 Jun-97 Consulting Agreement- * Written
*
* * *
* *
* *
3 Employee Agreement- * Written
*
*
*
Rick Tullis, Ph.D. 1 Apr-97 Confidentiality Agreement * Written
2 Consulting Agreement- * Written
*
* * *
Verbal Agreement *
Grant *
*
Johan DeBoer, Ph.D. 1 Apr-97 Confidentiality Agreement * Written
2 Jun-97 Consulting Agreement- * Written
*
*
* * *
*
* * *
*
Heidi Short 1 Mar-97 *
*
Jay Short, Ph.D. 1 Mar-97 Patent Assignments *
2 *
RESEARCH - OTHER:
Dalton Chemical Co.;
Canada 1 May-97 Confidentiality Agreement * Written
2 Jun-97 Contract Services *
* * Written
Tri-link Corp.;
California 1 Jun-97 Contract Services Chemical synthesis performed
at their costs for hope
of future business Paid
LAW FIRMS:
Pillsbury, Madison,
& Sutro General Counsel
Patent Law Firm
NY. firm Patent Law Firm
MORPHAGEN RELATIONSHIPS:
Silicon Valley Bank Checking Account
</TABLE>
* "Confidential portion has been omitted and filed
separately with the Commission."
<PAGE>
SCHEDULE B
INTELLECTUAL PROPERTY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
TYPE TITLE/SERIAL NO. DATE STATUS
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Patent App. Novel Shape & Structure * Abandoned; Utility filed
Libraries claiming date
(provisional) *
- -----------------------------------------------------------------------------------------------
Patent App. Morphatides: Novel Shape & * Claims benefit of
Structure Libraries * * Pending;
Restriction requirement
received
- -----------------------------------------------------------------------------------------------
Patent App. Morphatides: Novel Shape & * Continuation in Part of
Structure Libraries * * Pending;
Office Action received
- -----------------------------------------------------------------------------------------------
Patent App. Morphatides: Novel Shape & * Continuation in Part of
Structure Libraries * * Pending;
Notice to File Missing
Parts
- -----------------------------------------------------------------------------------------------
PCT Patent App. Morphatides: Novel Shape & * Claims benefit of
Structure Libraries/ * Pending;
* Prelim. exam. received
- -----------------------------------------------------------------------------------------------
Patent App. * * Utility & PCT to be filed
*
*
- -----------------------------------------------------------------------------------------------
Trademark MORPHAGEN Reg. filed
- -----------------------------------------------------------------------------------------------
Trademark MORPHATIDE Reg. filed
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
Trade Secret/ *
Concept
- -----------------------------------------------------------------------------------------------
</TABLE>
* "Confidential portion has been omitted and filed
separately with the Commission."
Page 13 of 15
<PAGE>
SCHEDULE C
OUTSTANDING OBLIGATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TO WHOM DESCRIPTION AMOUNT
- --------------------------------------------------------------------------------
<S> <C> <C>
Seller Patent Costs *
- --------------------------------------------------------------------------------
Company's Patent Counsel PCT filing Costs *
- --------------------------------------------------------------------------------
Company's Patent Counsel Other *
- --------------------------------------------------------------------------------
Rick Tullis Consulting Agreement *
- -------------------------------------------------------------------------------
</TABLE>
Page 14 of 15
* "Confidential portion has been omitted and filed
separately with the Commission."
<PAGE>
SCHEDULE D
CASH, SECURITIES & TANGIBLE ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
TYPE DESCRIPTION APPOX. DEPRECIATED VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
Checking account Silicon Valley Bank, No.
3300054587
- --------------------------------------------------------------------------------
Equipment Chassis Thermocycler DNA *
Engine, Serial No. EN006592
- --------------------------------------------------------------------------------
Equipment Canon Copier *
- --------------------------------------------------------------------------------
Equipment HP Computer, Serial No. *
US73050806 w/ printer
- --------------------------------------------------------------------------------
Reagents Misc. N/A
- --------------------------------------------------------------------------------
Notebooks Misc. N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Page 15 of 15
* "Confidential portion has been omitted and filed
separately with the Commission."
<PAGE>
EXHIBIT 21.1
INVITROGEN CORPORATION SUBSIDIARIES
Invitrogen Export Company, Ltd.
Invitrogen B.V.
MorphaGen-TM-, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in or made part of this Registration Statement.
ARTHUR ANDERSEN LLP
San Diego, California
December 9, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INVITROGEN
CORPORATION FORM S-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR YEAR 9-MOS
9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 DEC-31-1997
DEC-31-1998
<PERIOD-START> JAN-01-1995 JAN-01-1996 JAN-01-1997 JAN-01-1997
JAN-01-1998
<PERIOD-END> DEC-31-1995 DEC-31-1996 DEC-31-1997 SEP-30-1997
SEP-30-1998
<CASH> 0 1,381 5,375 0
2,404
<SECURITIES> 0 0 3,777 0
3,464
<RECEIVABLES> 0 1,916 2,379 0
3,449
<ALLOWANCES> 0 113 124 0
124
<INVENTORY> 0 1,901 1,914 0
2,444
<CURRENT-ASSETS> 0 5,792 14,474 0
12,811
<PP&E> 0 4,443 5,267 0
10,151
<DEPRECIATION> 0 2,854 2,808 0
3,440
<TOTAL-ASSETS> 0 8,258 18,056 0
20,851
<CURRENT-LIABILITIES> 0 2,873 3,289 0
3,653
<BONDS> 0 110 144 0
96
0 1,306 1,295 0
1,541
0 0 15,242 0
15,916
<COMMON> 0 0 74 0
74
<OTHER-SE> 0 3,779 (1,987) 0
(429)
<TOTAL-LIABILITY-AND-EQUITY> 0 8,258 18,056 0
20,851
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 14,342 19,121 24,965 18,263
22,968
<CGS> 4,743 5,818 7,989 5,657
6,346
<TOTAL-COSTS> 8,231 10,775 13,138 9,478
13,411
<OTHER-EXPENSES> (6) 155 268 (17)
367
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 0 0 0 0
0
<INCOME-PRETAX> 1,362 2,683 4,106 3,111
3,578
<INCOME-TAX> 206 939 1,473 1,116
1,240
<INCOME-CONTINUING> 1,156 1,744 2,633 1,995
2,338
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 1,156 1,744 2,633 1,995
2,338
<EPS-PRIMARY> 0.10 0.19 0.25 0.20
0.20
<EPS-DILUTED> 0.10 0.16 0.21 0.16
0.17
</TABLE>
