<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 1999
REGISTRATION NO. 333-68665
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
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 EDMUND S. RUFFIN, JR.
PAUL E. HURDLOW DANIEL W. BURKE
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........... 4,025,000 Shares $16.00 $64,400,000 $17,904(2)
</TABLE>
(1) Estimated solely for the purposes of computing the registration fee in
accordance with Rule 457(o).
(2) $14,387 was paid upon the filing of the Registration Statement on Form S-1
No. 333-68665 as filed December 10, 1998.
--------------------------
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 28, 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-
---------------------------------------------
3,500,000 SHARES OF COMMON STOCK
----------------------------------------------------------------------
THE COMPANY:
- We develop, manufacture and sell research kits and provide services
designed to facilitate molecular biology research.
PROPOSED NASDAQ NATIONAL MARKET
SYMBOL: IVGN
THE OFFERING:
- Invitrogen is offering 3,000,000 shares and existing stockholders are
offering 500,000 shares.
- The underwriters have an option to purchase an additional 525,000 shares
from Invitrogen to cover over-allotments.
- This is our initial public offering and no public market currently exists
for our shares. We estimate the initial public offering price to be
between $14.00 and $16.00 per share.
- We plan to use the proceeds from this offering to redeem preferred stock
and pay accrued dividends on convertible preferred stock of Invitrogen, to
redeeem outstanding common stock of a subsidiary, to develop and
manufacture products and services and to acquire products, technologies or
companies.
- Closing: , 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
<S> <C> <C>
PER SHARE TOTAL
- ------------------------------------------------------------------------------------
Public offering price:
Underwriting fees:
Proceeds to Invitrogen:
Proceeds to selling stockholders:
- ------------------------------------------------------------------------------------
</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
WARBURG DILLON READ LLC
<PAGE>
PIPER JAFFRAY INC.
<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 as follows:
- 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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 13
Dividend Policy................................ 13
Capitalization................................. 14
Dilution....................................... 15
Selected Consolidated Financial Data........... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 17
Business....................................... 23
<CAPTION>
PAGE
<S> <C>
Management..................................... 42
Certain Transactions........................... 50
Principal and Selling Stockholders............. 51
Description of Capital Stock................... 53
Shares Eligible for Future Sale................ 55
Underwriting................................... 57
Legal Matters.................................. 58
Experts........................................ 58
Additional Information......................... 59
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:
- GIVES EFFECT TO THE CONVERSION OF ALL OUTSTANDING SHARES OF INVITROGEN'S
CONVERTIBLE PREFERRED STOCK INTO COMMON STOCK AND REDEEMABLE PREFERRED
STOCK UPON THE CLOSING OF THIS OFFERING
- GIVES EFFECT TO THE REDEMPTION OF REDEEMABLE PREFERRED STOCK AND THE
PAYMENT OF ACCRUED DIVIDENDS ON THE CONVERTIBLE PREFERRED STOCK FOR AN
AGGREGATE OF APPROXIMATELY $15.0 MILLION
- ASSUMES THE UNDERWRITERS' 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 (see
"Business--Scientific Overview"). These techniques and activities are used to
study how a cell is regulated by its genetic material, known as functional
genomics, and to search for drugs that can treat diseases. Our kits allow
researchers to perform these activities more accurately, efficiently and with
greater reproducibility compared to conventional 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 1998 we began
marketing our recently developed "high-throughput" gene cloning and expression
technology, which allows us to clone and expression-test genes on an industrial
scale. We are utilizing this high-throughput technology to generate additional
license, service and product opportunities for Invitrogen. Our leading position
in gene cloning and expression has led to significant historical revenue and net
income growth. From 1995 through 1998, we have experienced compound annual
growth in revenue of 28% and net income of 50%.
Based on independent market studies, in 1997 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. Based on
independent market studies, we project sales of gene cloning and expression kits
to grow approximately 21% in 1999, compared to approximately 15% 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 (the study of genetic
material) and molecular biology research
- - Increasing availability of new data from the Human Genome Project, a federally
funded effort to identify all human genes, 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. Our kits make molecular biology techniques easier, faster
and more accessible to an increasingly broad community of researchers. For
example, as compared to conventional cloning methods, our cloning method, known
as TOPO TA Cloning, 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%. Based on our 1997
3
<PAGE>
sales of these kits, we estimate that researchers who used TOPO TA Cloning Kits
in 1997 saved over 2.5 million hours compared to standard cloning methods.
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 own or control over 15 issued and pending patents. 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 have recently developed a high-throughput gene cloning and expression
system by scaling up our TOPO TA Cloning technology and automating much of the
cloning and expression process. We are commercializing this technology under the
name Invitrogenomics. We are using this new technology to rapidly clone and
patent full-length genes, which we are licensing and selling. To date, we have
assembled a collection of over 1,700 full-length cloned human genes that
correctly express their specific proteins. 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.
Our principal offices are located at 1600 Faraday Avenue, Carlsbad,
California 92008. Our telephone number is (760) 603-7200. Our website address is
www.invitrogen.com.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered:
By Invitrogen.................................... 3,000,000 shares
By the selling stockholders...................... 500,000 shares
Total.......................................... 3,500,000 shares
Common stock to be outstanding after this
offering......................................... 12,624,210 shares (see
"Capitalization")
Use of proceeds.................................... -Up to $16.5 million for the redemption
of redeemable preferred stock, and
payment of accrued dividends on
convertible preferred stock
- Approximately $1.7 million for the
redemption of redeemable common stock
of a subsidiary of Invitrogen
- Continued development and manufacture
of existing Invitrogen products and
services
- Research and development of
additional products and services
- Working capital and general corporate
purposes, including potential
acquisitions of products,
technologies or companies
Proposed Nasdaq National Market symbol............. IVGN
</TABLE>
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The tables below summarize financial data of Invitrogen set forth in more
detail in the Consoldiated Financial Statements at the end of this prospectus.
The financial data below is based on the following assumptions:
- The Pro Forma Balance Sheet data as of December 31, 1998, has been
adjusted to reflect the conversion of convertible preferred stock into
common stock and redeemable preferred stock at the closing of this
offering.
- The As Adjusted Balance Sheet data as of December 31, 1998, has been
adjusted to reflect the sale of 3,000,000 shares of common stock by
Invitrogen at an assumed price of $15.00 per share, and the application of
the net proceeds from such sale. See "Use of Proceeds."
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................................. $ 19,121 $ 24,965 $ 31,414
Cost of revenues..................................................... 5,818 7,989 8,642
---------- ---------- ----------
Gross margin......................................................... 13,303 16,976 22,772
Operating expenses:
Sales and marketing................................................ 4,236 4,959 6,976
General and administrative......................................... 3,880 3,763 4,212
Research and development........................................... 2,659 4,416 7,209
---------- ---------- ----------
Total operating expenses............................................. 10,775 13,138 18,397
Income from operations............................................... 2,528 3,838 4,375
Net income........................................................... $ 1,744 $ 2,633 $ 3,118
---------- ---------- ----------
---------- ---------- ----------
Earnings per share:
Basic.............................................................. $ 0.19 $ 0.22 $ 0.21
---------- ---------- ----------
---------- ---------- ----------
Diluted............................................................ $ 0.16 $ 0.19 $ 0.18
---------- ---------- ----------
---------- ---------- ----------
Weighted average shares used in per share calculation:
Basic.............................................................. 8,356 8,938 9,626
Diluted............................................................ 10,080 10,611 11,208
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................... $ 6,011 $ 6,011 $ 32,084
Total assets........................................................ 22,815 22,815 48,888
Long-term capital leases............................................ 83 83 83
Non-voting redeemable common stock of Invitrogen B.V................ 1,599 1,599 1,599
Redeemable preferred stock.......................................... -- 15,027 --
Convertible preferred stock......................................... 16,141 -- --
Total stockholders' equity.......................................... 449 1,563 42,664
</TABLE>
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.
FAILURE TO MANAGE GROWTH COULD IMPAIR OUR BUSINESS
Our business has grown rapidly. Our net revenues increased from $19.1
million in 1996 to $31.4 million in 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, 1996 to approximately 221
as of December 31, 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 our
Invitrogenomics products and services. 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 Invitrogenomics or other areas of our business.
REDUCTION IN RESEARCH AND DEVELOPMENT BUDGETS AND GOVERNMENT FUNDING MAY IMPACT
OUR SALES
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 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
6
<PAGE>
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.
FAILURE TO LICENSE NEW TECHNOLOGIES COULD IMPAIR OUR NEW PRODUCT DEVELOPMENT
Many of our products are manufactured or sold pursuant to license
agreements. As a result 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 develop new products and services depends in part on our
ability to convince inventors that we can successfully commercialize their new
technologies. Further, 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 a patented technology, we may need to stop selling certain of our
products or redesign our products or 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. See "Business--Technology
Licensing" regarding our current licenses.
DEPENDENCE ON NEW PRODUCT INTRODUCTIONS
The markets for our products and services are characterized by rapid
technological change and frequent new product introductions. 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. An inability, for technological or
other reasons, to successfully develop and introduce new products could reduce
our growth rate or damage our business.
7
<PAGE>
We have made a substantial investment in developing the technology
underlying Invitrogenomics products and services. 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
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. 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 LIFE SCIENCES RESEARCH PRODUCTS MARKET
The markets for our products are very competitive, and we expect the
intensity of competition to increase. Many other life sciences research products
suppliers 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.
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."
8
<PAGE>
RISKS OF 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 37% of product revenues in 1998, 35% in
1997 and 33% in 1996. 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.
There are a number of risks arising from our international business,
including:
- - General economic and political conditions in the markets in which we operate
- - Potential increased costs associated with overlapping tax structures
- - Potential trade restrictions and exchange controls
- - More limited protection for intellectual property rights in some countries
- - Difficulties and costs associated with staffing and managing foreign
operations
- - Uncertain effects of the movement in Europe to a unified currency
- - Slower growth in the European market before the unified currency is adopted
- - 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
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."
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 to the extent the factors
affecting the region begin to affect other geographic locations, our business
could be damaged.
DEPENDENCE ON LIFE SCIENCE PATENTS AND PROPRIETARY TECHNOLOGIES
Our success depends to a significant degree upon our ability to develop
proprietary products and technologies. However, the assertion of patent
protection involves complex legal and factual determinations and is therefore
uncertain. We cannot assure you that patents will be granted on 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. Furthermore,
the laws governing the scope of patent coverage and the periods of
enforceability of patent protection continue to evolve,
9
<PAGE>
particularly in the areas of molecular biology of interest to us. See
"Business--Patents and Proprietary Technologies" regarding our existing and
pending patents.
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 are, 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. 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 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.
The intellectual property rights of others could require us to discontinue
an important product or product line, 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.
NO PRIOR PUBLIC MARKET; STOCK PRICE VOLATILITY
There has been no public market for our common stock prior to this offering.
We and the underwriters of this 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 price of our
common stock may fluctuate substantially due to a variety of factors, including:
- - Quarterly fluctuations in our operating and earnings per share 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
10
<PAGE>
During the quarter in which this offering is expected to close, we expect to
record a charge to equity to reflect the accounting for a beneficial conversion
feature attributable to our convertible preferred stock. This transaction will
have no impact on future results of operations or cash flows, however, it could
have an up to $15 million impact on earnings available to common stockholders
(or a $13.5 million impact at an offering price of $15.00 per share), which
could directly affect per share amounts we expect to report in the first quarter
of 1999 and for the year ending December 31, 1999. Our stock price could drop
due to a reaction in the marketplace to reported per share amounts. See
"Management's Discussion and Analysis--Liquidity and Capital Resources" and Note
12 to Consolidated Financial Statements.
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 CURRENTLY OUTSTANDING SHARES COULD AFFECT OUR STOCK PRICE
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 3,500,000 shares sold in this
offering will be freely tradable, while the 9,124,210 other shares outstanding
after this offering, based on the number of shares outstanding on December 31,
1998, will be "restricted securities" as defined in Rule 144 of the Securities
Act of 1933, as amended. Of these restricted securities approximately 9,043,000
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 Rule 144. Donaldson Lufkin &
Jenrette can release shares from one or more of the lock-up agreements without
our approval. In addition, holders of 1,702,942 shares will have the right to
request that we register those shares for sale in the public market. See "Shares
Eligible for Future Sale."
DILUTION
You will experience immediate dilution of $11.72 per share in pro forma net
tangible book value. The exercise of outstanding options may result in further
dilution.
CONTROL BY EXISTING STOCKHOLDERS
After this offering, our executive officers and directors collectively will
beneficially own approximately 65.7% of the outstanding common stock (63.1% if
the underwriters' overallotment option is exercised in full). They will
therefore continue to control Invitrogen and, if they act together, could elect
a majority of the directors, appoint management and control important matters
submitted to our stockholders for a vote, including matters related to a change
of control of Invitrogen. Such a concentration of ownership may have the effect
of delaying or preventing transactions resulting in a change of control of
Invitrogen, including transactions where stockholders might otherwise receive a
premium for their shares over current market prices. See "Principal
Stockholders."
OUR USE OF 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,
11
<PAGE>
which could seriously damage our business. Additionally, an accident could
damage our research and manufacturing facilities and operations.
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.
POSSIBLE ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS ON STOCK PRICE
Certain provisions of our certificate of incorporation, bylaws 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. These provisions
could discourage potential takeover attempts and could adversely affect the
market price of our common stock. See "Description of Capital Stock--Delaware
Anti-takeover Law and Certain Charter Provisions."
ABSENCE OF DIVIDENDS
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any future earnings for funding growth and,
therefore, we do not currently anticipate paying cash dividends on our common
stock in the foreseeable future. See "Dividend Policy" and "Dilution."
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus including the above risk factors
section, 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," "project," and
"continue" or similar words. You should read statements that contain these words
carefully because they:
- - Discuss our future expectations
- - Contain projections of our future results of operations or of our financial
condition
- - 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 above, 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.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to Invitrogen from the sale of the 3,000,000 shares of
common stock we are offering will be approximately $41,100,000 ($48,423,750 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.
We expect to use approximately $13.5 million of the net proceeds for
redemption of the redeemable preferred stock issuable upon the conversion of the
convertible preferred stock upon the closing of this offering assuming an
initial public offering price of $15.00 per share and approximately $1.5 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 maximum redemption
price of the redeemable preferred stock is $15 million.
We intend to use the remainder of the net proceeds of this offering for:
- - The redemption of the redeemable subsidiary common stock of our subsidiary,
Invitrogen B.V., on April 7, 1999 in the amount of Netherlands Guilder ("NLG")
3,150,000 (USD $1,676,000 at December 31, 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
acquisitions of products, technologies or companies
While we from time to time engage in preliminary discussions with respect to
acquisitions, we are not a party to any agreements, understandings or
commitments with respect to such transactions. We will invest the net proceeds
in short-term, interest bearing, investment grade securities.
Based on our current operating plan, we anticipate that the net proceeds of
this offering, together with our available cash, expected interest income and
funds from operations, should be sufficient to finance our capital requirements
for the next two years. 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
We have never declared or paid any cash dividends on our common stock and do
not anticipate paying such cash dividends in the foreseeable future. We
currently anticipate that we will retain all of our future earnings for use in
the development and expansion of our business and for general corporate
purposes. Any determination to pay dividends in the future will be at the
discretion of our Board of Directors and will depend upon our results of
operation, financial condition and other factors as the Board of Directors, in
its discretion, deems relevant.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Invitrogen as of
December 31, 1998. The Pro Forma column gives effect to the conversion of each
outstanding share of convertible preferred stock into a share of common stock
and a share of redeemable preferred stock upon the closing of this offering. The
As Adjusted column gives effect to the receipt of the net proceeds from the sale
of 3,000,000 shares of common stock at an assumed initial public offering price
of $15.00 per share, and the application of an expected $13.5 million of such
net proceeds to the redemption of the redeemable preferred stock and an expected
$1.5 million to the payment of accrued dividends on the convertible preferred
stock. In addition, the As Adjusted calculations in the table reflect none of
the 3,182,402 shares of common stock issuable upon exercise of outstanding
options at December 31, 1998 at an average exercise price of $4.13. See
"Management--Stock Option Plans".
This table should be read in conjunction with our Consolidated Financial
Statements and related notes thereto included elsewhere in this prospectus. Also
see "Use of Proceeds" and "Certain Transactions."
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term portion of capital lease obligations............................... $ 83 $ 83 $ 83
--------- ----------- -----------
Non-voting redeemable common stock of Invitrogen B.V., 18,000 authorized and
issued; full liquidation value, $1,676,000................................. 1,599 1,599 1,599
--------- ----------- -----------
Convertible preferred stock, $0.01 par value per share: 2,202,942 shares
authorized; 2,202,942 shares issued and outstanding actual; no shares
authorized, issued or outstanding pro forma and as adjusted................ 16,141 -- --
--------- ----------- -----------
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................................................................... -- 15,027 --
--------- ----------- -----------
Stockholders' equity:
Preferred stock, $0.01 par value: 2,000,000 shares authorized; no shares
issued and outstanding, actual, pro forma and as adjusted................ -- -- --
Common stock, $.01 par value: 50,000,000 shares authorized and 7,421,268
shares issued and outstanding actual; 9,624,210 shares issued and
outstanding pro forma; 50,000,000 shares authorized and 12,624,210 shares
issued and outstanding as adjusted....................................... 74 96 126
Additional paid-in capital................................................... 251 1,343 42,414
Retained earnings (deficit).................................................. 57 57 57
Total stockholders' equity (deficit)..................................... 449 1,563 42,664
--------- ----------- -----------
Total capitalization..................................................... $ 18,272 $ 18,272 $ 44,346
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
14
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1998 was
approximately $245,000 or $0.03 per share. Pro forma net tangible book value per
share represents the amount of Invitrogen's pro forma stockholders' equity, less
intangible assets, divided by the pro forma number of shares of common stock
outstanding as of December 31, 1998. The as adjusted pro forma net tangible book
value of Invitrogen as of December 31, 1998 would have been $41,345,000, or
$3.28 per share after giving effect to:
- - The automatic conversion of all convertible preferred stock into common stock
and redeemable preferred stock upon the closing of this offering
- - The sale of 3,000,000 shares of common stock offered by Invitrogen 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 us
- - The redemption of the redeemable preferred stock and payment of accrued
dividends on the convertible preferred stock
This represents an immediate increase in pro forma net tangible book value
of $3.25 per share to existing stockholders and an immediate dilution in pro
forma net tangible book value of $11.72 per share to investors purchasing common
stock in this offering, as illustrated in the following table:
<TABLE>
<CAPTION>
ASSUMING NO
EXERCISE OF
OVER-ALLOTMENT OPTION
---------------------
<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................................. 3.25
As adjusted pro forma net tangible book value per share after this
offering......................................................................... 3.28
------
Dilution per share to new investors................................................ $ 11.72
------
------
</TABLE>
The table below summarizes on a pro forma basis, the differences between the
existing stockholders and the new investors purchasing common stock in this
offering with respect to the total number of shares purchased from Invitrogen,
the total consideration paid and the average price per share paid (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............................ 9,624,210 76.2% $ 1,790,000 3.8% $ 0.19
New investors.................................... 3,000,000 23.8 45,000,000 96.2 15.00
------------ ----- ------------- -----
Total........................................ 12,624,210 100.0% $ 46,790,000 100.0%
------------ ----- ------------- -----
------------ ----- ------------- -----
</TABLE>
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data of Invitrogen presented
below as of December 31, 1994, 1995, 1996, 1997 and 1998 are derived from the
consolidated financial statements of Invitrogen and its subsidiaries. The 1996,
1997 and 1998 financial statements have been audited by Arthur Andersen LLP,
independent public accountants. The consolidated financial statements as of
December 31, 1997 and 1998, and for each of the years in the three-year period
ended December 31, 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. In particular, see Note 14 to Consolidated Financial Statements for
an explanation of the calculations of earnings per share and per share amounts.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................ $ 11,754 $ 14,342 $ 19,121 $ 24,965 $ 31,414
Cost of revenues.............................. 4,554 4,743 5,818 7,989 8,642
--------- --------- --------- --------- ---------
Gross margin.................................. 7,200 9,599 13,303 16,976 22,772
Operating expenses:
Sales and marketing........................... 2,685 3,646 4,236 4,959 6,976
General and administrative.................... 2,245 2,542 3,880 3,763 4,212
Research and development...................... 1,623 2,043 2,659 4,416 7,209
--------- --------- --------- --------- ---------
Total operating expenses.................... 6,553 8,231 10,775 13,138 18,397
Income from operations.......................... 647 1,368 2,528 3,838 4,375
Other income (expense), net..................... (83) (6) 155 268 457
--------- --------- --------- --------- ---------
Income before taxes............................. 564 1,362 2,683 4,106 4,832
Benefit (provision) for income taxes............ 45 (206) (939) (1,473) (1,714)
--------- --------- --------- --------- ---------
Net income...................................... $ 609 $ 1,156 $ 1,744 $ 2,633 $ 3,118
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per share:
Basic......................................... $ 0.05 $ 0.10 $ 0.19 $ 0.22 $ 0.21
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted....................................... $ 0.05 $ 0.10 $ 0.16 $ 0.19 $ 0.18
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average shares used in per share
calculation:
Basic......................................... 9,268 9,602 8,356 8,938 9,626
Diluted....................................... 9,268 9,602 10,080 10,611 11,208
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments..... $ 631 $ 587 $ 1,381 $ 9,152 $ 6,011
Total assets.......................................... 4,642 5,992 8,258 18,056 22,815
Long-term capital leases.............................. 838 433 110 144 83
Non-voting redeemable common stock of
Invitrogen B.V...................................... -- 1,143 1,306 1,295 1,599
Convertible preferred stock........................... -- -- -- 15,242 16,141
Total stockholders' equity (deficit).................. 1,111 2,298 3,779 (1,913) 449
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since Invitrogen's inception in 1987, we have been engaged primarily in the
development, manufacturing and marketing of research kits used to conduct
molecular biology research. Substantially all of our revenue to date has come
from the sale of research kits and related products. We have 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. Our
research kits are sold primarily in the United States, Europe and Japan. Our
products are used for research purposes and their use is not regulated by the
United States Food and Drug Administration or by any comparable international
organization.
We manufacture the majority of our research kits in our manufacturing
facility in Carlsbad, California. In addition, we maintain selected arrangements
with third party manufacturers.
The majority of our sales activities are conducted through a dedicated
direct sales organization located in the United States and Europe. We also
conduct marketing and distribution activities at our facility in the United
States and at a facility we own in the Netherlands. We also complete a small
proportion of sales to international distributors who resell Invitrogen kits to
researchers. These distributors are located in selected territories in Europe,
as well as in Japan and other territories in Asia. We currently have no plans to
establish a direct sales force in these territories, although we may choose in
the future to establish a direct sales organization in additional territories.
We conduct research activities in the United States and business development
activities in the United States and Europe. As part of these activities we
actively seek to license intellectual property from academic, government and
commercial institutions relating to gene cloning, expression and analysis
technologies. To date, Invitrogen has obtained a total of 80 licenses, which
provide us with access to over 200 patents covering gene cloning, expression and
analysis materials and techniques.
In June 1998, we began commercializing our high-throughput cloning and
expression technology under the name Invitrogenomics. We will provide licenses
to our full-length clones to corporate development partners, as well as sell
selected clones as part of new research kits. In addition, we will use our
Invitrogenomics technology to provide large-scale, high-throughput gene cloning
and expression services to corporate customers. Invitrogenomics products and
services have generated limited revenues to date. We expect research and
development and sales and marketing expenditures related to Invitrogenomics to
increase as we continue to conduct activities to commercialize our
high-throughput gene cloning and expression technology.
Our revenues have increased significantly since our inception, and from 1995
to 1998, Invitrogen has experienced compound annual revenue growth of 28%. The
increase in our revenues has been due to several factors, including the
continued growth of the market for gene cloning and expression kits, increasing
market acceptance of our gene cloning and expression kits, our introduction of
new research kits for gene cloning, expression and analysis, and the expansion
of our direct sales and marketing efforts. We plan to continue to introduce new
research kits, as we believe 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 our long-term competitive position, we anticipate that we will continue
to increase expenditures in sales and marketing, manufacturing and research and
development.
We currently manufacture products for inventory and ship products shortly
after the receipt of orders, and anticipate that we will do so in the future.
Accordingly, we have not developed a significant backlog and do not anticipate
we will develop a material backlog in the future.
17
<PAGE>
In 1998, Invitrogen 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 our high-throughput gene cloning and
expression technology. We anticipate that research and development expenses will
decline as a percentage of sales in future periods to approach historical
levels.
Invitrogen 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 our research kits and the Invitrogenomics
technologies. We have historically paid and are obligated to pay in the future
to such third parties royalties relating to sales of certain of our research
kits and selected services. Royalty expense is recognized as a cost of revenues
as the related royalties are earned.
We anticipate that our results of operations may fluctuate from quarter to
quarter and will be difficult to predict. The timing and degree of fluctuation
will depend upon several factors, including:
- - Changes in customer research budgets (which are influenced by the timing of
this research and commercialization efforts and their receipt of government
grants)
- - Competitive product introductions
- - Our ability to successfully introduce or transition the market to new products
- - Market acceptance of existing or new products
- - Our ability to manufacture our products efficiently
- - Our ability to control or adjust research and development, marketing, sales
and general and administrative expenses in response to changes in revenues
In addition, our results of operations could be affected by the timing of orders
from distributors and the mix of sales among distributors and our direct sales
force. Although we have experienced growth in recent years, there can be no
assurance that, in the future, we will sustain revenue growth or remain
profitable on a quarterly or annual basis or that our growth will be consistent
with predictions made by securities analysts. Additionally, quarter to quarter
comparisons of operating results are not necessarily indicative of future
results.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUE. Revenue increased $6.4 million, or 26%, from $25.0 million in 1997
to $31.4 million in 1998. For these same periods, revenues in the United States
increased $3.8 million, or 23%, from $16.5 million to $20.3 million, and revenue
outside the United States increased $2.5 million, or 31%, from $8.5 million to
$11.1 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 1998 our new products contributed approximately $2.5
million in revenue. We expect that future revenues will be affected by new
product introductions, competitive conditions, customer research budgets, and
the rate of expansion of our customer base.
GROSS MARGIN. Our gross margin increased from $17.0 million in 1997 to
$22.8 million in 1998. Gross margin as a percentage of revenues increased from
68% to 72% for these periods. Gross margin improvements during the period were
primarily a result of absorbing certain manufacturing labor and overhead costs
over an increased revenue base. We believe 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
18
<PAGE>
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.
Large increases or decreases in these currency fluctuations could also impact
gross margin and reported profits.
RESEARCH AND DEVELOPMENT. Research and development expenses increased 63%
from $4.4 million in 1997 to $7.2 million in 1998. As a percentage of revenues,
research and development expenses increased from 18% to 23% for these periods.
The increases resulted primarily from the development of our high-throughput
gene cloning and expression technology and greater personnel and research
supplies expense as we continued the expansion of our gene cloning, expression,
analysis and related products. We believe that our research and development
expenditures as a percentage of revenues will generally decline toward
historical levels. There can be no assurance that our 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 41% from $5.0
million in 1997 to $7.0 million in 1998. As a percentage of revenues, sales and
marketing expenses increased from 20% to 22% for these periods. These increases
resulted from growth of our field sales force in the United States and Europe.
We expect to continue the expansion of our field sales force in both the United
States and Europe.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
12% from $3.8 million in 1997 to $4.2 million in 1998. As a percentage of
revenues, general and administrative expenses decreased from 15% to 13% for
these periods. The absolute increase resulted from the continued expansion of
administrative resources to support our growth. The decline as a percentage of
revenues occurred as a fixed portion of our general and administrative expenses
was spread over a larger revenue base. We expect our 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 $0.2 million, from $0.3 million in 1997, to $0.5 million in 1998. This
increase resulted primarily from the larger average balances of cash and cash
equivalents during the later period.
PROVISION FOR INCOME TAXES. Our effective tax rate decreased slightly from
36% in 1997 to 35% in 1998. We currently receive 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 we have 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 our new products contributed $2.1 million in
revenue.
GROSS MARGIN. Our 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.
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
19
<PAGE>
increased from 14% to 18% for these periods. These increases resulted primarily
from greater personnel and research supplies expense as we continued the
expansion of our gene cloning and expression products and the development of our
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 expenses 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, Invitrogen 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. Our effective tax rate increased slightly from
35% in 1996 to 36% in 1997, reflecting changes in the utilization of tax
credits.
LIQUIDITY AND CAPITAL RESOURCES
We generated net cash from operating activities of approximately $3.1
million in 1998. We used approximately $6.5 million in our investing activities,
which included the construction of a new building for our 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 Invitrogen's inception we have funded our 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 December 31, 1998 we had cash and cash equivalents and short-term
investments of approximately $1.8 million and $4.2 million, respectively, and
working capital of approximately $9.5 million. We had lines of credit totaling
approximately $10 million, of which none was utilized as of December 31, 1998.
Our 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, we 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. We expect to
record a charge to equity to reflect the up to $15 million impact of this
transaction. The redemption price of the redeemable preferred stock, the dollar
amount of the accumulated dividends on the convertible preferred stock and the
amount of the charge 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 this public offering in February 1999, the aggregate
redemption price for the redeemable preferred stock will be $13.5 million and
the accumulated preferred dividends will be $1.5 million. The transaction will
have no impact on future results of operations or cash flows; however, it will
directly affect per share amounts we expect to report in the first quarter of
1999 as well as for the year ending December 31, 1999.
Our 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 ($1,676,000 at
December 31, 1998 exchange rates). Other than a reduction in dividend
requirements, the redemption of the preferred stock will not have a material
impact on results of operations upon conversion. See Note 12 to Consolidated
Financial Statements.
We expect that the proceeds from this offering, our funds from operations
and our existing funds and interest income earned thereon, will be sufficient to
fund our operations for at least two years. Our
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future capital requirements and the adequacy of our available funds will depend
on many factors, including scientific progress in our research and development
programs, the magnitude of those programs, our ability 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 with its subsidiary in the
Netherlands and with its foreign distributors, including those in Asia, in U.S.
Dollars. 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.
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. We have 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. We
do not expect adoption of this SOP to have a material impact on our financial
statements.
We 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 our 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 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
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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. We do not anticipate that the
adoption of SFAS 133 will have a material impact on our financial position or
results of operations.
YEAR 2000 EFFECT ON COMPUTER SYSTEMS
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. Some businesses may be financially affected by such
computer problems.
We believe our existing 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 that will also be 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. These
assessments have not been independently verified.
If we discover year 2000 errors or defects in our internal systems, we could
incur substantial costs in making repairs. These errors may result in the
temporary failure of our manufacturing, accounting and financial systems, which
in turn would delay the taking and processing of orders for perhaps 3-5 days. In
case of such errors we plan to rely upon our current computer systems which we
will maintain as a backup system after our new system is installed.
ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION
On January 1, 1999, certain member states of the European Economic Community
(the "EEC"), including the Netherlands, fixed their respective currencies to a
new currency, the Euro. On that day, the Euro became 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. We are still assessing the impact that the Euro
will have on our internal systems and products. While we believe our
enterprise-wide financial and manufacturing information system will be Euro
compliant, this system has not yet been tested by us. We have not determined the
costs related to any problems that may arise in the future. Any such problems
may materially adversely affect our business, operating results and financial
condition.
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BUSINESS
THE COMPANY
Invitrogen develops, manufactures and markets research tools in kit form and
provides research services to corporate, academic and government entities. Our
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. Our kits allow researchers to perform experiments
more accurately, efficiently and with greater reproducibility compared to
conventional research methods. As a result, 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 1998 we developed a high-throughput gene
cloning and expression technology. Invitrogenomics will seek to utilize this
technology to generate additional license, service and product opportunities.
Our leadership position in gene cloning and expression has led to significant
historical revenue and net income growth. From 1995 to 1998, we experienced
compound annual growth in revenues and net income of 28% and 50%, respectively.
In 1997, based on 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.
Based on independent market studies, we project sales of gene cloning and
expression kits to grow approximately 21% in 1999, compared to approximately 15%
growth in 1999 for the overall molecular biology product and supply market. We
believe that the market for gene cloning, expression and analysis kits will
continue to expand due to several factors, including:
- - Increasing levels of government funding for genomics and molecular biology
research
- - The increasing availability of new genomics data from the Human Genome Project
and other genome sequencing projects
- - The proliferation of high-throughput molecular biology techniques
- - Accelerated investment in commercial research activities
We offer over 250 research kits that researchers use to conduct key
molecular biology research activities. We design 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, our 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%. We estimate that researchers who used our TOPO TA Cloning Kits in 1997
saved over 2.5 million hours relative to standard cloning methods.
We believe we have assembled one of the broadest portfolios of gene cloning
and expression-related intellectual property in the industry. To date, we have
obtained 80 licenses, providing us with access to over 200 patents covering gene
cloning, expression and analysis materials and techniques. In addition, we own
or control over 15 issued and pending patents. We believe that these licenses
and patents have 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 this position derives from our
ability to enhance the value of licensed technologies by combining them with our
existing products and licensed technologies.
We established Invitrogenomics to commercialize the high-throughput, gene
cloning and expression technology we developed by scaling up our TOPO TA Cloning
technology. Invitrogenomics is using this high-throughput technology to rapidly
clone and patent full-length expression-tested genes which we
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license and sell to academic, governmental and corporate customers. To date, we
have assembled a collection of over 1,700 full-length cloned human genes that
express their encoded proteins. In addition, we plan to use this 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.
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 segment of DNA that is used as a template to
produce a particular protein; in scientific terminology, a gene is said to
express its encoded 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 protein expression 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
that 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 are
genes that code for proteins. 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
Based on 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. A substantial number of scientists
perform their research using the conventional methods they were taught during
their training, assembling their own reagents and developing their own
protocols. Because not all scientists replace their familiar methods rapidly,
even with improved methods, a large number of scientists using molecular biology
techniques are not currently using kits.
Gene cloning, expression and analysis kits represent a rapidly emerging
segment of the overall molecular biology product and supply market. Based on
independent market studies, Invitrogen projects that sales of gene cloning and
expression kits will grow approximately 21% in 1999, compared to approximately
15% 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 ten 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.
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- - 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 1990 to
determine the DNA sequence of the estimated 3 billion nucleotide base pairs
contained in the human genome and to identify its estimated 100,000 genes. To
date, $1.9 billion has been spent and approximately 4% of the genome has been
fully sequenced. In order to complete the project as scheduled in 2005, the
number of nucleotide base pairs sequenced and genes identified needs to grow
at a rate of 59% 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. Invitrogen 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. We believe 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, we believe 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
We believe 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. We have 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, our
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. Our 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%. Invitrogen'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
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two days to complete and required the use of hazardous reagents, our method is
completed in only three hours and does not involve the use of any hazardous
materials. Our broad portfolio of gene expression vectors and systems also
provide scientific as well as ease-of-use advantages to researchers.
Specifically, we offer complete protocols with all of our expression vectors,
which enables researchers to perform their experiments more easily. In addition,
we offer a broad line of expression systems, a number of which can only be
obtained from Invitrogen.
We have developed significant expertise in identifying molecular biology
techniques that could be simplified and improved by their development as
research kits. We have 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.
We have an established business development group of four professionals, each
with significant molecular biology research expertise. In addition, our sales
and technical service representatives are experienced molecular biologists who
work with our customers to identify emerging molecular biology techniques or
potential new product and service opportunities. Specifically, our business
development, sales and technical service groups have identified and obtained
rights to over 200 patents to date. Since the beginning of 1997, our new product
development teams have 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. Our business strategy includes the following key
elements:
- - MAINTAIN AND ENHANCE LEADERSHIP POSITION IN GENE CLONING AND GENE
EXPRESSION. Based on our market shares, we believe we are a worldwide leader
in gene cloning and gene expression technologies. We believe that the
competitive advantages offered by our innovative products and technologies for
gene cloning and expression and the comprehensive nature of our product line
will allow us to continue to increase our market share. We seek to enhance our
position by investing significant resources in research and development and
in-licensing efforts to continually introduce novel products and expand our
product line. In addition, we are actively expanding our direct worldwide
sales force to increase market penetration of our products.
- - DEVELOP NEW PRODUCTS AND MARKETS BASED UPON CORE EXPERTISE. We 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,
we have utilized our capabilities in cloning and expression to launch our
GeneStorm product line, which facilitates functional genomics studies. By
continuing to introduce new, complementary products we believe we can enhance
our position in our current core markets while targeting additional
high-growth market segments.
- - CAPTURE ADDITIONAL VALUE THROUGH SERVICES AND OUT-LICENSING. We believe our
technologies in gene cloning and expression provide significant opportunities
to develop high margin services and out-licensing arrangements. Through
Invitrogenomics, we will continue to use our 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, we plan to utilize our
high-throughput capabilities to rapidly clone and expression-test thousands of
genes for corporate customers in drug development and agriculture.
Invitrogen seeks to carry out its business strategies by identifying and
in-licensing, or by developing on its own, promising technologies that can be
rapidly commercialized as products or services. We also intend to out-license
our technologies to customers wishing to use them in other fields of use, as
well as combine our own research and development expertise with the technologies
of corporate partners to participate in processes such as drug discovery. In
addition, we will consider acquisitions of complementary companies or
technologies.
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INVITROGEN PRODUCTS AND SERVICES
We currently offer over 250 gene identification, gene cloning, gene
expression and gene analysis products and services. The following table
describes our top ten products, as well as the leading product lines in our 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.
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 as
desired.
</TABLE>
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<TABLE>
<S> <C>
GENE ANALYSIS PRODUCTS
GeneStorm Expression- Researchers can purchase the gene they wish to study, cloned
Ready Clones 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 protein-RNA 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.
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.
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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.
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%.
Invitrogen 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.
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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 polymerases 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.
GENE EXPRESSION PRODUCTS
EXPRESSION VECTORS. We provide 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. We
offer broad line of expression vectors, providing researchers with the ability
to perform various types of experiments in different hosts to reach a
conclusion. In addition, several of our vectors contain elements that are
available exclusively from Invitrogen.
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.
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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. We have created a large collection of
cloned yeast and human genes with our 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. We are 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 we have 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 we sell to our
customers and use in Invitrogenomics research.
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. We
offer 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
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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 our PCR Cloning Kits. The popularity of One Shot products stems in
great part from researchers first using One Shot cells in our 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 we sell 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
We have developed a high-throughput gene cloning and expression technology
by scaling up our proprietary TOPO TA Cloning technology. We believe this
technology can provide significant opportunities to develop new licenses,
services and products, which we will market under the name Invitrogenomics.
Through Invitrogenomics, we plan to utilize our high-throughput capabilities to
rapidly clone and expression-test thousands of genes for corporate customers in
drug development and agriculture. To date, we have assembled a collection of
over 1,700 full-length cloned human genes that express their encoded proteins.
We will continue 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.
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We intend 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 our library of patented cloned full-length genes and expression
vectors for use in drug and agricultural biotechnology discovery efforts, we
expect licensing and research kit revenue opportunities to increase.
Our 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
We are focusing our technology and product development on expanding our
existing product lines and developing innovative new products in areas where we
have expertise and have identified substantial unmet market needs. Invitrogen
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. In addition to our internal technology
and product development programs, we aggressively in-license and acquire
technology and intellectual property. Research institutions seeking to license
their technologies are attracted to our ability to package innovations as
convenient and cost-effective research kits and to rapidly introduce those kits
to the market. Our employees also actively stay abreast of industry developments
to identify and acquire innovative technologies from researchers and research
institutions throughout the world.
We spent $7.2 million, $4.4 million and $2.7 million on research and
development activities in 1998, 1997 and 1996, respectively. No material portion
of this investment in research and development was sponsored by our customers.
SALES AND MARKETING
We currently market our products in over 30 countries throughout the world.
Invitrogen and our subsidiary, Invitrogen B.V., sell our products directly to
customers in the United States, Canada, Germany, France, the United Kingdom and
15 other countries throughout the world. In addition, Invitrogen utilizes
specialized distributors to market products in more than 13 other countries. For
more information regarding foreign sales and revenues, see Note 1 to
Consolidated Financial Statements. As of December 31, 1998 we employed 54 highly
trained and skilled people in our sales and marketing department to market our
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 our
technical sales representatives. Due to the highly technical nature of our
products, we believe 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 our sales representatives to become
advisors, acting in a consultative role with their customers. Our use of
technical sales representatives also enables us to better identify unmet market
needs and new technologies that we can license and develop into new products.
Our marketing departments in our U.S. and European headquarters combine
various types of media and methods to inform customers of new product
developments and enhancements to existing
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products. We advertise in the most prominent scientific journals, publish a
yearly catalog, a bi-monthly newsletter and conduct direct mail campaigns to
researchers in the U.S. and Europe. We also reach a broad range of scientists by
hosting an annual symposium, presenting at scientific seminars and exhibiting at
scientific meetings. Our website allows researchers to view an on-line catalog,
place orders, download all of our technical manuals and vector sequences, read
our newsletter and participate in interactive forums and discussion groups.
MANUFACTURING
Our U.S. manufacturing facilities occupy approximately 15,000 square feet of
our Carlsbad, California facility. Seven manufacturing cells are responsible for
the complete production, quality testing and process improvements of our various
product lines. 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 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 or exclusivity rights expire at various times during the next fifteen
years. These licenses include:
TA CLONING. Invitrogen 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 reagents and kits which incorporate the TA Cloning method.
TOPO CLONING. This patented technology significantly accelerates gene
cloning and is an enhancement to Invitrogen's TA Cloning products, among others.
The technology was invented by Dr. Stewart Shuman working at the Sloan-Kettering
Institute for Cancer Research (SKI), which owns the patent. In 1997 Invitrogen
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 upon approval by SKI with a portion of the
sublicense income payable to SKI. SKI retains rights to use and practice the
technology for any purpose. Additionally, we have reimbursed SKI for 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 that confers
resistance to certain antibiotics including Zeocin. Invitrogen paid an up-front
fee to CAYLA, and pays royalties on sales of kits and vectors containing this
gene. Invitrogen 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,
we purchase the Zeocin and certain
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<PAGE>
additional antibiotics exclusively 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. 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 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 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 non-exclusive 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 TAQ-based
products and the 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. If F. Hoffmann-La Roche does not exercise its right to negotiate
the foregoing license, we have agreed that F. Hoffmann-La Roche shall
nonetheless be entitled to a license to make, use and sell any such competing
enzyme of Invitrogen under the same terms and conditions as the most favorable
nonexclusive license granted by us. 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 other undertakings by us, such as a
commitment to diligently pursue development and marketing of commercial products
utilizing the licensed technology.
There can be no assurance that we will be able to continue to successfully
identify 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
discontinue selling certain of our products, redesign our products or 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 do not
receive significant indemnification from a licensor against third party claims
of intellectual property infringement.
39
<PAGE>
PATENTS AND PROPRIETARY TECHNOLOGIES
Invitrogen considers the protection of our proprietary technologies and
products for molecular and cellular biology research to be important to the
success of our business. We rely on a combination of patents, licenses and
trademarks to establish and protect our proprietary rights to our technologies
and products. We currently own two issued patents in the United States and four
issued patents in other major industrialized nations, and own or control 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. Our two issued United States patents will expire in 2013 and
our four foreign patents will expire in 2011.
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 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, there can be no assurance that patents will issue from any of our
patent applications or from applications licensed to us. There can be no
assurance 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. Employees and consultants also
sign agreements to assign to Invitrogen their interests in patents and
copyrights arising from their work for us. Employees also agree not to compete
unfairly with us after their employment by using confidential information,
soliciting employees or soliciting customers. 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.
COMPETITION
The markets for our products are very competitive. We expect the intensity
of competition to increase. Currently, we compete primarily with other life
sciences research products suppliers. Many of our competitors have greater
financial, operational, sales and marketing resources, and more experience in
research and development than us. These competitors and other companies may have
developed or could in the future develop new technologies that compete with our
products or which could render our products obsolete.
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, we may experience
40
<PAGE>
difficulties in generating sales to customers who initially purchased products
from competitors. Similarly, 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 that we
are unable to be the first to develop and supply new products, our competitive
position will suffer. See "Risk Factors--Highly Competitive Market."
GOVERNMENT REGULATION
We are not subject to direct governmental regulation other than the laws and
regulations generally applicable to businesses in the jurisdictions in which we
operate, 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 we believe that our 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, we could be
held liable for resulting damages; such liability could have a material adverse
effect on Invitrogen. However, we do not expect that compliance with the
governmental regulations to which we are subject will have a material effect on
our capital expenditures, earnings or competitive position.
EMPLOYEES
As of December 31, 1998, Invitrogen employed 221 persons, of whom 33 hold
Ph.D. or M.D. degrees and 22 hold other advanced degrees. Approximately 57
employees are engaged in research and development, 54 in sales and marketing, 64
in manufacturing and 46 in supporting business development, intellectual
property, finance and other administrative functions.
Our success will depend in large part upon our ability to attract and retain
employees. Invitrogen faces competition in this regard from other companies,
research and academic institutions, government entities and other organizations.
We believe that we maintain good relations with our employees.
FACILITIES
We lease an approximately 60,000 square foot facility in Carlsbad,
California for our headquarters, as well as the base for marketing and product
support operations, research and development and manufacturing activities. Under
the terms of the lease, Invitrogen presently pays rent of approximately $40,000
per month with predetermined cost-of-living rent increases at annual intervals.
The lease expires in February 2007. See Note 10 to Consolidated Financial
Statements. We believe that adequate facilities will be available upon the
conclusion of our lease. We also own an approximately 17,000 square foot
facility in the Netherlands to support sales and distribution in Europe.
LEGAL PROCEEDINGS
From time to time Invitrogen has been and expects to be involved in legal
proceedings arising from our ordinary business operations. None of the
proceedings that are currently pending are expected to have a material adverse
effect on Invitrogen or our business operations.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table provides information concerning directors and executive
officers of Invitrogen as of December 31, 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 Invitrogen, 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 Invitrogen 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 Invitrogen, 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 Invitrogen 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 Invitrogen 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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<PAGE>
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 Invitrogen. 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 a Director of Invitrogen since June 1998. From
September 1995 to March 1998 Mr. Grimm was Managing Director, West Coast for
Copenhagen Capacity, a Danish trade group focused on biotechnology and medical
devices. Since June 1995 he has served as Chairman of the Board and President of
Strategic Design, a strategic planning and consulting company. He was Chairman
of the Board of MedNet M.P.C. Corp., a medical services company from November
1997 to December 1997. Mr. Grimm retired from Eli Lilly & Company, a
research-based pharmaceutical company, in 1993 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. For
the six month period between June 1994 and December 1994, Mr. Grimm served as
President, CEO and Director of Telios Pharmaceuticals ("Telios"), a
pharmaceutical and medical device company. Telios and MedNet filed petitions for
bankruptcy after Mr. Grimm's resignation from those companies. 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 Invitrogen 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
B.S. and M.S. degrees in Electrical Engineering, and an M.B.A. 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 Invitrogen since November
1998. Mr. Lorimier has been retired since July 1997. From March 1994 to June
1997 Mr. Lorimier served as Senior Vice President, Business Development and
Director of Human Genome Sciences, Inc., a biotechnology 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 a Director of Invitrogen since February 1995.
From September 1994 to the present Dr. Short has served 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.
LEWIS J. SHUSTER has served as a Director of Invitrogen 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.
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<PAGE>
Invitrogen currently has authorized nine directors. In accordance with the
terms of our certificate of incorporation, 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
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 Invitrogen.
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 our independent
auditors to review our 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 our general and
specific compensation policies and practices and administers our 1997 Stock
Option Plan and 1995 Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In March 1997 Invitrogen made an initial investment of $500,000 to acquire
shares of preferred stock and a warrant to purchase 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. Short, a member of the Board of
Directors of Invitrogen. During 1997, Invitrogen performed research services for
MorphaGen for which it was paid approximately $81,000. In November 1998, we
acquired all of the outstanding shares of MorphaGen not already owned by
Invitrogen in exchange for a grant of an option to purchase 50,000 shares of
Invitrogen 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 Invitrogen's executive officers and directors that are
required to be disclosed under applicable executive compensation disclosure
requirements.
COMPENSATION OF DIRECTORS
We do not currently provide cash compensation to directors for services in
such capacity, other than to Dr. 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 Invitrogen will receive annual grants of options to
purchase 10,000 shares of common stock in accordance with the 1997 Plan. Options
to purchase 30,000 shares of common stock were granted to non-employee directors
of Invitrogen during our fiscal year ended December 31, 1998. See "Stock Option
Plans".
44
<PAGE>
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
Pursuant to provisions of Delaware General Corporation Law ("DGCL"), we have
adopted provisions in our certificate of incorporation, which provide that
directors of Invitrogen shall not be personally liable for monetary damages to
Invitrogen or its stockholders for breach of fiduciary duty as a director,
except for liability:
- For any breach of the director's duty of loyalty to us or our stockholders
- For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
- Under Section 174 of the DGCL relating to improper dividends or
distributions
- 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.
Our bylaws authorize us to indemnify our officers, directors, employees and
agents to the extent permitted by the DGCL. Pursuant to Section 145 of the DGCL,
which empowers us to enter into indemnification agreements with our officers,
directors, employees and agents, we have entered into separate indemnification
agreements with our 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 us, 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 Invitrogen where indemnification will be
required or permitted and we are not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
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<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned by our
Chief Executive Officer and our other three 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 .................................... 1998 $ 285,601 $ 270,998 --
President and Chief Executive Officer
Theodore J. DeFrank ............................... 1998 142,780 19,179 70,000
Chief Operations Officer
Joseph M. Fernandez ............................... 1998 172,098 106,141 --
Senior Vice President of Business Development and --
Secretary
James R. Glynn(1) ................................. 1998 136,146 123,125 250,000
Senior Vice President and Chief Financial Officer
</TABLE>
- ------------------------------
(1) Mr. Glynn joined Invitrogen on July 1, 1998.
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 our 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 Invitrogen during 1998
to employees of and consultants to Invitrogen, 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 these columns 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 on 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 Invitrogen's common stock.
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<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...................... 61,000 178,000 $ 794,300 $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
Invitrogen and Mr. DeFrank entered into an employment agreement effective
September 28, 1995. The employment agreement is not for a set term and may be
terminated by Mr. DeFrank or Invitrogen at any time with or without notice. If
we terminate Mr. DeFrank's employment with or without cause, Mr. DeFrank will be
entitled to one month of severance pay for each year of his employment with
Invitrogen.
STOCK OPTION PLANS
We have 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. 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
since its adoption we have been granting all options 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 Invitrogen or any subsidiary, all
directors who are not employees of Invitrogen or any subsidiary and any
independent contractor or advisor who performs services for Invitrogen 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 Invitrogen, 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 Invitrogen 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
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<PAGE>
directors (including outside directors that were formerly employees of
Invitrogen) will be automatically granted an option to purchase 10,000 shares of
common stock at each annual meeting of 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 Invitrogen, 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 Invitrogen 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.
As of December 31, 1998, there were outstanding options to purchase an
aggregate of 3,182,402 shares of common stock at exercise prices ranging from
$.8357 to $12.00 per share, or a weighted average exercise price per share of
$4.13 under the 1995 Plan and the 1997 Plan. Options to acquire 265,005 shares
have been exercised. As of December 31, 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 Invitrogen, 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
Invitrogen of shares subject to repurchase.
EMPLOYEE STOCK OWNERSHIP PLAN
In 1988 the Board of Directors adopted the Invitrogen Corporation Employee
Stock Ownership Plan (ESOP), as amended January 1, 1993, amended and restated
January 1, 1996 and as amended August 31, 1997 and November 24, 1998. The ESOP's
purpose is to reward eligible employees for service to Invitrogen 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.
Each year Invitrogen makes certain contributions to a trust fund whose assets
are invested primarily in Invitrogen common stock.
Under the ESOP, we make two types of contributions to the ESOP Trust:
discretionary stock bonus contributions determined annually by the Board of
Directors and fixed money purchase pension contributions, 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 have historically been made in the
form of common stock, as valued by an independent valuation firm. Contributions
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 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.
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Distributions from the ESOP Trust to vested employees occur upon their
retirement, death, total and permanent disability or termination. An employee
may elect to receive distributions in the form of cash or Invitrogen stock and
may elect to receive the distribution in a lump sum or in installments, not to
exceed his/her assumed life expectancy for the combined life expectancy of the
participant and his/ her beneficiary, if such distribution is exercised.
Invitrogen stock distributed to beneficiaries is subject to a right of first
refusal by Invitrogen and the ESOP Trust. Participants receive two 60-day put
options with respect to Invitrogen 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
Invitrogen stock received from the ESOP back to us at a value determined by an
independent valuation firm. The put option does not apply if our 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 Invitrogen stock held by the ESOP Trust, except that individual
beneficiaries may direct the voting of stock allocated to their accounts with
respect to any merger, recapitalization, dissolution, sale of substantially all
of the Company's assets, and the like and with respect to all corporate matters
if Invitrogen stock is a "registration-type" class of security. The ESOP may be
amended or terminated by us at any time, subject to certain restrictions, the
Code and ERISA.
As of December 31, 1998 the ESOP Trust held 1,195,717 shares of Invitrogen
stock as well as approximately $464,000 invested in various mutual and
money-market funds. We terminated contributions to the ESOP Trust as of December
31, 1998, thereby accelerating vesting of all participants. A $100,000 ESOP
contribution was approved for the calendar year ended December 31, 1998. Shares
will be issued in 1999 based upon the fair market value.
1998 EMPLOYEE STOCK PURCHASE PLAN
A total of 250,000 shares of Invitrogen common stock have been reserved for
issuance under our 1998 Employee Stock Purchase Plan, none of which has been
issued. The employee stock purchase plan permits eligible employees to purchase
common stock at a discount through payroll deductions, during 24-month offering
periods. Unless the Board of Directors establishes different periods, each
offering period will be divided into eight consecutive three-month purchase
periods. Unless the Board of Directors establishes a higher purchase price, the
price at which stock is purchased under the employee stock purchase plan shall
be 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, Invitrogen adopted a 401(k) tax-deferred savings
plan for the benefit of its employees. The 401(k) Plan is intended to be a
qualified retirement plan under section 401(a) of the Code. Our employees are
eligible to make salary deferral contributions to the 401(k) Plan upon the
completion of three months of employment and to participate in employer
non-elective and matching contributions to the 401(k) Plan upon the completion
of 1,000 hours of service. We may, but are not required to, make matching
contributions to the 401(k) Plan based on the participants' salary deferral
contributions. Our contributions are subject to a graduated vesting schedule
based upon an employee's years of service with Invitrogen. All contributions to
the 401(k) Plan are held in a trust which is intended to be exempt from income
tax under Section 501(a) of the Code. The 401(k) 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 401(k)
Plan may be amended or terminated by us at any time, subject to certain
restrictions imposed by the Code and ERISA.
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CERTAIN TRANSACTIONS
In June 1997, we 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 Invitrogen, is a Managing Director of
TA Associates. Concurrently with the sale of the convertible preferred stock, we
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 Invitrogen. 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 out of
proceeds of this offering at an expected cost of approximately $13.5 million.
Additionally, holders of the convertible preferred stock will receive
accumulated dividends of approximately $1.5 million. See "Description of Capital
Stock."
At January 1, 1997, we had notes receivable from Mr. Turner and Mr.
Fernandez, executive officers of Invitrogen, in the amount of $323,000 and
$92,000, respectively. These full recourse notes were secured by pledges of
common stock and paid interest of 6.0% and 6.37%, respectively. The notes were
repaid in 1997. At December 8, 1998, we accepted a note receivable from Mr.
Turner, an executive officer of Invitrogen, 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 March 1997, Invitrogen made an initial investment of $500,000 to acquire
shares of preferred stock and a warrant to purchase 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. Short, a member of our board of
directors. During 1997, Invitrogen performed research services for MorphaGen for
which it was paid approximately $81,000. In November 1998, Invitrogen acquired
all of the outstanding shares of MorphaGen not already owned by Invitrogen in
exchange for a grant of an option to purchase 50,000 shares of our 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.
Dr. Short's father, Roy Short, receives royalties of approximately $100,000
per year from sales relating to Invitrogen's DNA DipStick product line and
electroporation cuvettes.
During 1997 and 1998, we leased an airplane from Turner Aviation, a company
controlled by Mr. Turner, for $7,200 per month. We had also advanced $150,000 to
Turner Aviation to assist in the acquisition of the plane. The lease agreement
will terminate effective upon the closing of this offering. The advance was
repaid through the December 8, 1998 note receivable described above.
We have entered into indemnification agreements with each of our officers
and directors containing provisions which may require us, among other things, to
indemnify our 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. We also intend to execute such agreements with our
future directors and executive officers. See "Management--Limitations on
Liability and Indemnification Matters."
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information concerning the beneficial
ownership of the shares of our common stock as of December 31, 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 Invitrogen's outstanding shares of
convertible preferred stock into common stock and (b) no exercise of the
underwriters' over-allotment option, by:
- Each person Invitrogen knows to be the beneficial owner of 5% or more of
the outstanding shares of common stock (together with the affiliates of
such person)
- Each Named Executive Officer listed in the Summary Compensation Table
- Each director of Invitrogen (who, where applicable, is listed under the
name of the principal stockholder with which he is affiliated)
- All officers and directors of Invitrogen as a group
- Each of the selling stockholders
Except pursuant to applicable community property laws or as indicated in the
footnotes to this table, Invitrogen 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 Invitrogen appearing on the cover
of the registration statement of which this prospectus is part.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES BEING OWNED AFTER THE OFFERING
BENEFICIAL OWNER OFFERING OFFERED
- ------------------------------------------------ ------------------------- ------------ -------------------------
<S> <C> <C> <C> <C> <C>
NUMBER PERCENT(1) NUMBER PERCENT(1)
TA Associates(2) ............................... 2,202,942 22.9% 500,000 1,702,942 13.5%
Kurt R. Jaggers
TA Associates, Inc.
125 High Street Tower
Suite 2500
Boston, Massachusetts
02110
ESOP Trust Fund(3) ............................. 1,195,717 12.4 0 1,195,717 9.5
1600 Faraday Avenue
Carlsbad, California 92008
Lyle C. Turner(4)............................... 4,678,096 48.6 0 4,678,096 37.1
Joseph M. Fernandez(5).......................... 1,888,338 19.3 0 1,888,338 15.0
Theodore F. DeFrank(6).......................... 90,000 * 0 90,000 *
Bradley G. Lorimier(7).......................... 2,500 * 0 2,500 *
Jay M. Short(8)................................. 117,400 1.2 0 117,400 *
Donald W. Grimm(9).............................. 10,000 * 0 10,000 *
Lewis J. Shuster(10)............................ 7,500 * 0 7,500 *
James R. Glynn(11).............................. 87,500 * 0 87,500 *
All Directors and Officers as a group
(ten persons)(12)............................. 9,085,542 90.2% 500,000 8,585,542 65.7%
</TABLE>
- ------------------------------
* Less than 1%.
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(1) Percentage of ownership is based on: (i) before the offering, 9,624,210
shares of common stock outstanding, including 7,421,268 shares of common
stock outstanding on December 31, 1998 and 2,202,942 shares of common stock
issuable upon conversion of convertible preferred stock, and (ii) after the
offering, 12,624,210 shares of common stock outstanding (assuming no
exercise of the underwriters' 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 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.
(2) Includes 1,824,382 shares held by TA/Advent VIII, L.P. before the offering
and 1,410,304 shares held after the offering, 342,072 shares held by Advent
Atlantic and Pacific III, L.P. before the offering and 264,432 shares held
after the offering, and 36,488 shares held by TA Venture Investors L.P.
before the offering and 28,206 shares held after the offering. TA/ Advent
VIII, L.P., Advent Atlantic and Pacific III, L.P. and TA Venture Investors
L.P. (collectively, the "selling stockholders") 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) 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 with respect to 6,334 shares of convertible preferred stock
that he holds through TA Venture Investors Limited Partnership as to which
Mr. Jaggers holds a pecuniary interest.
(3) As co-trustees of Invitrogen'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.
(4) Mr. Turner is President, Chief Executive Officer, and Chairman of the Board
of Directors of Invitrogen. Includes 162,599 shares held of record by the
ESOP as to which Mr. Turner holds a pecuniary interest.
(5) Mr. Fernandez is Senior Vice President of Business Development, Secretary
and a Director of Invitrogen. Includes 159,607 shares subject to options
which are exercisable within 60 days of January 29, 1999 and 113,390 shares
held of record by the ESOP as to which Mr. Fernandez holds a pecuniary
interest.
(6) Mr. DeFrank is Chief Operations Officer of Invitrogen. Includes 89,000
shares subject to options which are exercisable within 60 days of January
29, 1999.
(7) Mr. Lorimier is a Director of Invitrogen. Consists of 2,500 shares subject
to options which are exercisable within 60 days of January 29, 1999.
(8) Dr. Short is a Director of Invitrogen. Includes 92,400 shares subject to
options which are exercisable within 60 days of the date of this offering.
These 117,400 shares include options to purchase 5,000 shares held of
record by Dr. Short's spouse, which are exercisable within 60 days of
January 29, 1999.
(9) Mr. Grimm is a Director of Invitrogen. Consists of 10,000 shares subject to
options which are exercisable within 60 days of January 29, 1999.
(10) Mr. Shuster is a Director of Invitrogen. Consists of 7,500 shares subject
to options which are exercisable within 60 days of January 29, 1999.
(11) Mr. Glynn is Senior Vice President, Chief Financial Officer and a Director
of Invitrogen. Consists of 87,500 shares subject to options which are
exercisable within 60 days of January 29, 1999.
(12) Includes 449,772 shares subject to options which are exercisable within 60
days of January 29, 1999. Includes 275,989 shares held by entities
affiliated with certain directors as described in Note (4) above.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Invitrogen 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 Invitrogen does not purport to be complete and is subject to, and
qualified in its entirety by, the certificate of incorporation and bylaws of
Invitrogen 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 December 31, 1998 there were 7,421,268 shares of common stock
outstanding held by 19 stockholders of record. 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 Invitrogen,
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
Invitrogen. See Note 12 to Consolidated Financial Statements for a description
of the currently outstanding preferred stock.
REGISTRATION RIGHTS
After this offering and pursuant to a Stock Purchase and Stockholders'
Agreement dated June 20, 1997, the holders of approximately 1,702,942 shares of
common stock issuable upon conversion of our convertible preferred stock, (the
"Registrable Shares"), or their permitted transferees, will be entitled to
certain rights with respect to the registration of such shares under the
Securities Act. If we propose to register any of our securities under the
Securities Act, either for our 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 our expense, such Registrable
Shares therein, provided, among other conditions, that the underwriters of any
such offering have the right to limit the number of shares included in such
registration. In addition, beginning 180 days after the effective date of this
offering, holders of
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<PAGE>
at least 50% of the Registrable Shares then outstanding may require us to
prepare and file a registration statement under the Securities Act, at our
expense, covering such Registrable Shares, and we are required to use our best
efforts to effect such registration, subject to certain conditions and
limitations. We are not obligated to effect more than two of these
stockholder-initiated registrations. Further, holders of Registrable Shares may
require us to file additional registration statements on Form S-3, subject to
certain conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
We are 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 Invitrogen without further actions by the stockholders.
Effective upon the closing of this offering, Invitrogen's certificate of
incorporation will provide that any action permitted to be taken by stockholders
of Invitrogen 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 Invitrogen 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. Our
certificate of incorporation will also require the approval of at least
two-thirds of the total number of authorized directors in order to adopt, amend
or repeal our bylaws. In addition, our certificate of incorporation will
similarly permit the stockholders to adopt, amend or repeal our 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. Also, a director will
be removable by stockholders only for cause. Vacancies on the Board of Directors
resulting from death, resignation, removal (other than the removal by a vote of
the stockholders) or other reason may be filled by a majority of the directors
or a majority of the shares entitled to vote. In general, other vacancies are to
be filled by a majority of the directors. Lastly, the foregoing provisions of
the certificate of incorporation 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 Invitrogen, which could have an
adverse effect on the market price of the our common stock.
Upon the closing of this offering, Invitrogen's bylaws will also contain
certain of the above provisions found in Invitrogen's certificate of
incorporation. Our bylaws will not permit stockholders to call a special
meeting. In addition, our bylaws will establish an advance notice procedure with
regard to matters to be brought before an annual or special meeting of
stockholders of Invitrogen, including the election of directors. 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.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for the common stock
of Invitrogen. 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 Invitrogen
in the public market after the restrictions lapse could adversely affect the
prevailing market price at such time and the ability of Invitrogen to raise
equity capital in the future.
- Upon the closing of this offering, we will have outstanding an aggregate
of approximately 12,624,210 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 3,500,000 shares of common stock to be sold in this
offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are held by
"affiliates" of Invitrogen as such term is defined in Rule 144 of the
Securities Act
- All remaining shares held by our existing stockholders were issued and
sold by Invitrogen 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
Invitrogen's directors, executive officers and certain stockholders, who
will collectively hold an aggregate of approximately 9,043,000 shares of common
stock (after the offering and 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 Securities Corporation. 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:
- Approximately 27,559 shares will be eligible for immediate sale on the
date of this prospectus
- Approximately 46,900 additional shares of common stock will be eligible
for sale from time after the date date of this prospectus but before the
expiration of the Lock-up Period
- Approximately 9,098,040 additional outstanding shares of common stock will
be eligible for sale upon expiration of the Lock-up Period
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, a number of shares that does not exceed the greater of (i) 1% of the
then outstanding shares of common stock (126,242 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 the filing of a
notice on Form 144 with respect to such sale. Sales under Rule 144 are also
subject to prescribed requirements regarding the manner of sale, notice and
availability of current public information about Invitrogen. Under Rule 144(k),
a person who is not deemed to have been an "affiliate" of Invitrogen 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 without complying with the manner of sale, public information, volume
limitation or notice
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<PAGE>
requirements described above. Therefore, unless otherwise restricted, "144(k)
shares" may be sold immediately following completion of the offering without
limitations as to volume.
In general, under Rule 701 of the Securities Act as currently in effect, any
employee, consultant or advisor of Invitrogen who purchased shares from us 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, by complying with the applicable
requirements of Rule 144 other than the holding period conditions. On the date
90 days after 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.
We intend to file registration statements on Form S-8 under the Securities
Act to register approximately 6,000,000 shares of common stock issued under our
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 Invitrogen or the lock-up restrictions described above.
Beginning 180 days after this offering, the holders of approximately
1,702,942 shares of common stock issued upon the conversion of the convertible
preferred stock will be entitled to certain rights to cause Invitrogen 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 "Risk Factors--Future Sales of Shares,"
"Management--Stock Option Plans," "Management--Employee Stock Ownership Plan,"
"Management--1998 Employee Stock Purchase Plan," and "Description of Capital
Stock--Registration Rights".
56
<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,
Warburg Dillon Read LLC and Piper Jaffray Inc. (the "Representatives"), have
severally agreed to purchase from Invitrogen and the selling stockholders 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..............................
Warburg Dillon Read LLC..........................................................
Piper Jaffray Inc................................................................
----------
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.
Invitrogen 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 525,000 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.
Invitrogen and the selling stockholders have 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 Invitrogen, its executive officers and directors and certain
stockholders of Invitrogen (including the selling stockholders) 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
57
<PAGE>
such other securities, in cash or otherwise) for a period of 180 days after the
date of this prospectus without the prior written consent of DLJ. In addition,
during such period, we have also agreed 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 without DLJ's prior written
consent. Each of our executive officers, directors and particular stockholders
(including the selling stockholders) have 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 Invitrogen,
representatives of the selling stockholders 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 Invitrogen competes, the
past and present operations of Invitrogen, the historical results of operations
of Invitrogen, the prospects for future earnings of Invitrogen, 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 Invitrogen, the
selling stockholders 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 the 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
Invitrogen 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
1998 and for the three years in the period ended December 31, 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.
58
<PAGE>
ADDITIONAL INFORMATION
Invitrogen 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 SEC. For further information with respect to
Invitrogen 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
SEC 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 SEC 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, Invitrogen 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
SEC. Reports, registration statements, proxy statements, and other information
filed by Invitrogen with the SEC can be inspected and copied at the public
reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the SEC'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 SEC, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The SEC maintains a World Wide Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is http://www.sec.gov.
Invitrogen 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. Invitrogen intends to furnish such other reports
as it may determine or as may be required by law.
59
<PAGE>
INVITROGEN CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998............................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1996 1997 and 1998...................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Income for the Years Ended
December 31, 1996, 1997 and 1998......................................................................... F-6
Consolidated Statement of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998.................. F-7
Notes to Consolidated Financial Statements................................................................. F-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Invitrogen Corporation:
We have audited the accompanying consolidated balance sheets of Invitrogen
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1997
and 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, 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 the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Invitrogen Corporation and
subsidiaries as of December 31, 1997 and 1998 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Diego, California
January 15, 1999
F-2
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PROFORMA
DECEMBER 31,
1997 1998 1998
<S> <C> <C> <C>
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Line of credit............................................................. $ -- $ --
Current portion of obligations under capital leases........................ 121 54
Accounts payable........................................................... 1,275 2,257
Accrued expenses........................................................... 1,334 1,378
Income taxes payable....................................................... 559 854
--------- ---------
Total current liabilities................................................ 3,289 4,543
--------- ---------
Obligations Under Capital Leases, Less Current Portion....................... 143 83
--------- ---------
Commitments and Contingencies
Non-voting Redeemable Common Stock of Invitrogen B.V.:
Subsidiary common stock: authorized and issued--18,000 shares.
Full liquidation value of $1,676 (NLG 3,150)............................. 1,295 1,599
--------- ---------
Convertible Redeemable Preferred Stock:
Preferred stock; $0.01 par value; 4,202,942 shares authorized; 2,202,942
issued and outstanding in 1997 and 1998, 6% redeemable convertible,
liquidation value of $16,375,000; no shares authorized, issued or
outstanding pro forma.................................................... 15,242 16,141 --
--------- --------- ------
Series A 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...................................................................... -- -- 15,027
--------- --------- ------
Stockholders' Equity (Deficit):
Common stock; $0.01 par value, 20,000,000 and 50,000,000 shares authorized;
in 1997 and 1998, respectively, 7,426,702 and 7,421,268 shares issued and
outstanding in 1997 and 1998, respectively, 9,624,210 shares proforma.... 74 74 96
Additional paid-in-capital................................................. -- 251 1,343
Value of common stock designated pursuant to Employee Stock Ownership
Plan..................................................................... 100 100 100
Foreign currency translation adjustment.................................... (130) (33) (33)
Retained earnings (deficit)................................................ (1,957) 57 57
--------- --------- ------
Total stockholders' equity (deficit)..................................... (1,913) 449 1,563
--------- --------- ------
Total liabilities and stockholders' equity (deficit)..................... $ 18,056 $ 22,815
--------- ---------
--------- ---------
</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, 1996, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Revenues................................................................. $ 19,121 $ 24,965 $ 31,414
Cost of Revenues......................................................... 5,818 7,989 8,642
------------ ---------- ------------
Gross margin......................................................... 13,303 16,976 22,772
------------ ---------- ------------
Operating Expenses:
Sales and marketing.................................................... 4,236 4,959 6,976
General and administrative............................................. 3,880 3,763 4,212
Research and development............................................... 2,659 4,416 7,209
------------ ---------- ------------
Total operating expenses............................................. 10,775 13,138 18,397
------------ ---------- ------------
Income from operations............................................. 2,528 3,838 4,375
------------ ---------- ------------
Other Income (Expense):
Gain on foreign currency transactions.................................. 172 145 61
Interest expense....................................................... (87) (88) (35)
Interest and other income.............................................. 70 211 431
------------ ---------- ------------
155 268 457
------------ ---------- ------------
Income before provision for income taxes........................... 2,683 4,106 4,832
Provision for Income Taxes............................................... 939 1,473 1,714
------------ ---------- ------------
Net income......................................................... $ 1,744 $ 2,633 $ 3,118
Less: Preferred stock dividends.................................... -- (475) (900)
Accretion of non-voting redeemable common stock............... (171) (175) (204)
------------ ---------- ------------
Income available to common stockholders............................ $ 1,573 $ 1,983 $ 2,014
------------ ---------- ------------
------------ ---------- ------------
Basic earnings per share................................................. $ 0.19 $ 0.22 $ 0.21
------------ ---------- ------------
------------ ---------- ------------
Diluted earnings per share............................................... $ 0.16 $ 0.19 $ 0.18
------------ ---------- ------------
------------ ---------- ------------
Weighted average shares used in basic earnings per share calculation..... 8,356,270 8,938,719 9,626,333
------------ ---------- ------------
------------ ---------- ------------
Weighted average shares used in diluted earnings per share calculation... 10,079,755 10,610,928 11,208,016
------------ ---------- ------------
------------ ---------- ------------
</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, 1996, 1997 AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------------- EMPLOYEE
COMMON STOCK SERIES A SERIES B ADDITIONAL OWNERSHIP
----------------------- ---------------------- ---------------------- PAID-IN PLAN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL CONTRIBUTION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995........................ -- $ -- 7,142,758 $ -- 1,188,040 $ -- $ 1,170 $ 199
Issuance of common stock
pursuant to Employee Stock
Ownership Plan.............. -- -- 111,552 -- -- -- 199 (199)
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan........................ -- -- -- -- -- -- -- 100
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 -- 1,263 100
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 (100)
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan........................ -- -- -- -- -- -- -- 100
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 -- -- -- -- -- 100
Issuance of common stock
pursuant to Employee Stock
Ownership Plan.............. 12,920 -- -- -- -- -- 100 (100)
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan........................ -- -- -- -- -- -- -- 100
Exercise of stock options..... 16,050 -- -- -- -- -- 16 --
Tax effect of exercise of
stock options............... -- -- -- -- -- -- 138 --
Repurchase of common stock.... (34,404) -- -- -- -- -- (150) --
Issuance of stock options to
acquire
MorphaGen, Inc.............. -- -- -- -- -- -- 147 --
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,
1998........................ 7,421,268 $ 74 -- $ -- -- $ -- $ 251 $ 100
----------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
----------- ---------- ---------- ---------- ---------- ---------- ---------- ------------
<CAPTION>
FOREIGN RETAINED STOCKHOLDERS'
CURRENCY EARNINGS EQUITY COMPREHENSIVE
TRANSLATION (DEFICIT) (DEFICIT) INCOME
<S> <C> <C> <C> <C>
Balance at December 31,
1995........................ $ 57 $ 872 $ 2,298 $ 1,123
Issuance of common stock
pursuant to Employee Stock
Ownership Plan.............. -- -- -- --
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan........................ -- -- 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........................ (29) 2,445 3,779 1,658
-------------
-------------
Recapitalization of stock..... -- -- -- --
Issuance of common stock
pursuant to Employee Stock
Ownership Plan.............. -- -- -- --
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan........................ -- -- 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........................ (130) (1,957) (1,913) 2,532
-------------
-------------
Issuance of common stock
pursuant to Employee Stock
Ownership Plan.............. -- -- -- --
Value of common stock
designated pursuant to
Employee Stock Ownership
Plan........................ -- -- 100 --
Exercise of stock options..... -- -- 16 --
Tax effect of exercise of
stock options............... -- -- 138 --
Repurchase of common stock.... -- -- (150) --
Issuance of stock options to
acquire
MorphaGen, Inc.............. -- -- 147 --
Preferred stock dividends
declared and accretion of
redemption value over stated
value on subsidiary common
stock issued to NOM......... -- (1,104) (1,104) --
Foreign currency translation
adjustment.................. 97 -- 97 97
Net income.................... -- 3,118 3,118 3,118
----------- --------- ------------- -------------
Balance at December 31,
1998........................ $ (33) $ 57 $ 449 $ 3,215
----------- --------- ------------- -------------
----------- --------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 1,744 $ 2,633 $ 3,118
Adjustments to reconcile net income to net cash provided by operating activities,
net of businesses acquired:
Depreciation and amortization.................................................. 737 732 1,052
Loss on disposal of property and equipment..................................... -- 11 --
Non-cash write-off of investments.............................................. -- 330 --
Employee stock ownership plan contribution..................................... 100 100 100
Foreign currency translation adjustment........................................ (86) (101) 96
Deferred income taxes.......................................................... (63) (543) 129
Deferred rent expense.......................................................... (13) -- --
Changes in operating assets and liabilities:
Accounts receivable.......................................................... (284) (452) (1,276)
Inventories.................................................................. (722) (13) (592)
Prepaid expenses and other current assets.................................... (185) (77) (781)
Other assets................................................................. 42 (302) (50)
Accounts payable............................................................. 280 459 982
Accrued expenses............................................................. 592 204 55
Income taxes payable......................................................... 396 (57) 295
--------- --------- ---------
Net cash provided by operating activities.................................. 2,538 2,924 3,128
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.............................................. (742) (1,642) (5,553)
Proceeds from sale of property and equipment..................................... -- 25 --
Payments for intangible assets................................................... (381) (186) (542)
Purchase of short term investments............................................... -- (3,777) (438)
Advances made on notes receivable from officers.................................. (150) -- --
Principal payments received on notes receivable from officers.................... 125 415 --
Investment in related party...................................................... -- (500) --
--------- --------- ---------
Net cash used in investing activities...................................... (1,148) (5,665) (6,533)
--------- --------- ---------
</TABLE>
(CONTINUED)
F-7
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of preferred stock............................................ -- 14,766 --
Principal payments on capital lease obligations.................................. (432) (157) (127)
Repurchase of common stock....................................................... (174) (7,834) (150)
Proceeds from exercise of stock options.......................................... 68 160 16
Principal payments on line of credit, net........................................ (50) (190) --
--------- --------- ---------
Net cash provided by (used in) financing activities........................ (588) 6,745 (261)
--------- --------- ---------
Effect of exchange rate changes on cash............................................ (8) (10) 88
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents............................... 794 3,994 (3,578)
Cash and cash equivalents, beginning of year....................................... 587 1,381 5,375
--------- --------- ---------
Cash and cash equivalents, end of year............................................. $ 1,381 $ 5,375 $ 1,797
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest........................................................... $ 85 $ 88 $ 35
--------- --------- ---------
--------- --------- ---------
Cash paid for income taxes....................................................... $ 117 $ 1,266 $ 920
--------- --------- ---------
--------- --------- ---------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Preferred dividends declared..................................................... $ -- $ 475 $ 900
--------- --------- ---------
--------- --------- ---------
Accretion of redemption value for redeemable common stock........................ $ 171 $ 175 $ 204
--------- --------- ---------
--------- --------- ---------
Converted deposit to note receivable--officer.................................... $ -- $ -- $ 150
--------- --------- ---------
--------- --------- ---------
Net assets acquired through purchase of MorphaGen, Inc........................... $ -- $ -- $ 147
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996, 1997 AND 1998
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 operates in one business segment
which 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. In connection with the Company's recapitalization, all of the Series A
common stock and Series B common stock of the former California Corporation were
converted to the common stock of the new Delaware corporation; accordingly,
Series A common stock and Series B common stock ceased to exist.
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 100% controlled subsidiaries, Invitrogen B.V. and Invitrogen Export
Company, Ltd. All significant intercompany accounts and transactions have been
eliminated in consolidation.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET PRESENTATION
The unaudited pro forma consolidated balance sheet is presented to show the
effects on the December 31, 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 $15,027,000 which will occur upon filing of the
Company's proposed initial public offering as if the conversion took place on
December 31, 1998.
CONCENTRATIONS OF RISKS
REVENUES (EXCLUSIVE OF GRANTS AND ROYALTIES)
Revenues for each of the three years ended December 31, 1998, were earned
from sales to customers in the following geographic regions (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
North America................................................ $ 12,496 $ 15,751 $ 19,105
Europe....................................................... 4,620 6,286 8,453
Pacific Rim.................................................. 1,570 2,257 2,632
--------- --------- ---------
Total revenue................................................ $ 18,686 $ 24,294 $ 30,190
--------- --------- ---------
--------- --------- ---------
</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
F-9
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 $6,800,000, $8,300,000 and $10,193,000, or 36%, 34% and 34% of
the Company's revenues during the years ended December 31, 1996, 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, 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.
The Company does not receive material upfront fees; those that are received are
deferred and recognized upon shipment to the customers. Grant revenue is
recorded as earned, as defined within the specific agreements and is not
refundable. Grant revenue was $435,000, $671,000 and $649,000 in 1996, 1997 and
1998, respectively. Cost of grant revenue is included in research and
development.
Royalty revenue is recognized when earned, generally upon the receipt of
cash, and is not refundable.
CASH AND CASH EQUIVALENTS 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, 1997 and 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 June 1, 1999. Short term
investments are carried at cost.
INVENTORIES
Inventories are stated at lower of cost (first-in, first-out method) or
market. The Company reviews the components of its inventory on a quarterly basis
for excess, obsolete and impaired inventory and makes appropriate dispositions
as obsolete stock is identified.
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.
F-10
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets, representing primarily patents and license agreements,
are recorded at cost and amortized on a straight-line basis over estimated
useful lives of 5 to 17 years.
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.
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
F-11
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 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.
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.
F-12
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
1. BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 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.
The Company has adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" and, as
explained above, has determined that it operates in one business segment
dedicated to molecular biology research.
2. RELATED PARTY TRANSACTIONS
NOTE RECEIVABLE--OFFICER
The Company holds a note receivable of $150,000 from an officer of the
Company. The promissory note originated in December 1998, is collateralized by
16,000 shares of common stock of the Company, bears annual interest of 6.5
percent and is due in full on December 31, 1999.
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. On November 3, 1998, the Company acquired all of the outstanding common
stock of MorphaGen, Inc. which the Company did not already own for 50,000
options to purchase company stock at $8.50 per share. In connection with this
acquisition, the Company recorded $147,000 as additional paid-in capital
representing the estimated fair value of the options issued.
F-13
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
3. INVENTORIES
Inventories include material, labor and overhead costs and consist of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Raw materials and components............................................... $ 291 $ 574
Work in process............................................................ 503 636
Finished goods............................................................. 1,120 1,638
--------- ---------
$ 1,914 $ 2,848
--------- ---------
--------- ---------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Land..................................................................... $ -- $ 216
Building................................................................. -- 1,629
Machinery and equipment.................................................. 4,823 8,330
Leasehold improvements................................................... 223 538
Construction in process.................................................. 221 119
--------- ---------
5,267 10,832
Accumulated depreciation and amortization................................ (2,808) (3,742)
--------- ---------
$ 2,459 $ 7,090
--------- ---------
--------- ---------
</TABLE>
5. INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Licensing agreements (see Note 7)........................................... $ 574 $ 984
Patents and trademarks...................................................... 362 569
Other....................................................................... 10 49
--------- ---------
946 1,602
Accumulated amortization.................................................... (176) (283)
--------- ---------
$ 770 $ 1,319
--------- ---------
--------- ---------
</TABLE>
6. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Accrued purchases.......................................................... $ 240 $ 530
Accrued payroll and related................................................ 741 491
Accrued other.............................................................. 353 357
--------- ---------
$ 1,334 $ 1,378
--------- ---------
--------- ---------
</TABLE>
F-14
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
14. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
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>
In accordance with SAB Topic 4D, the Company considers any common stock
issuable upon the occurrence of an IPO for little or no consideration as a
nominal issuance. In accordance with the above bulletin, the Company has
considered 2,202,942 common shares issuable in connection with the conversion of
redeemable preferred stock to be a nominal issuance and outstanding for all
periods since the original issuance of the underlying security.
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 $100,000 were designated for the ESOP for the
years ended December 31, 1996, 1997 and 1998.
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 $111,000, $134,000 and
$179,000, for the years ended December 31, 1996, 1997 and 1998, respectively.
EMPLOYEE STOCK PURCHASE PLAN
In November 1998, the Company's Board of Directors approved an employee
stock purchase plan to become effective upon the filing of the Company's
proposed initial public offering. An aggregate of 250,000 shares of the
Company's common stock will be reserved for issuance under this plan.
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 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
F-21
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
16. STOCK OPTION PLANS (CONTINUED)
Directors on the date of grant; nonqualified stock options are granted at an
exercise price of no less than 85% of the fair market value of the common stock
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>
1996 1997 1998
<S> <C> <C> <C> <C>
Net income (loss): As reported............................ $ 1,744 $ 1,983 $ 2,014
Pro forma.............................. 1,664 1,825 1,429
EPS: As reported............................ $ 0.19 $ 0.25 $ 0.21
Pro forma.............................. 0.18 0.23 0.15
DEPS: As reported............................ $ 0.16 $ 0.19 $ 0.18
Pro forma.............................. 0.15 0.17 0.14
</TABLE>
The Company may grant up to 4,309,787 options, of which 3,182,402 have been
granted at December 31, 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.
A summary of the status of the Company's stock option plans at December 31,
1996, 1997 and 1998 and changes during the periods then ended is presented in
the tables below:
<TABLE>
<CAPTION>
1996 1997 1998
----------------------- ------------------------ -----------------------
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 1,970,152 $ 1.30
Granted...................... 581,000 $ 1.21 222,000 $ 3.80 1,233,500 $ 8.29
Exercised.................... (70,000) $ 0.98 (178,955) $ 0.90 (16,050) $ 1.02
Forfeited/expired............ -- -- (1,540,000) $ 0.84 (5,200) $ 1.40
---------- ----- ----------- ----- ---------- -----
Outstanding, end of year..... 3,467,107 $ 0.91 1,970,152 $ 1.30 3,182,402 $ 4.13
Exercisable, end of year..... 1,331,686 $ 0.89 1,297,152 $ 1.09 1,602,918 $ 1.44
Weighted average fair value
of options granted......... $ 0.35 $ 0.96 $ 2.30
</TABLE>
F-22
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1996, 1997 AND 1998
16. STOCK OPTION PLANS (CONTINUED)
At December 31, 1998:
<TABLE>
<CAPTION>
WTD. AVG.
REMAINING
OPTIONS OPTIONS EXERCISE CONTRACTUAL
OUTSTANDING EXERCISABLE PRICE LIFE IN YEARS
<S> <C> <C> <C> <C>
1,498,402 1,311,502 $ 0.84- $ 1.20 6.8
230,000 91,400 $ 1.20- $ 2.40 7.2
220,500 88,500 $ 3.60- $ 4.80 8.8
466,000 83,333 $ 4.80- $ 6.00 9.5
171,500 23,051 $ 6.00- $ 7.20 9.7
63,000 5,000 $ 8.40- $ 9.60 9.8
533,000 132 $ 10.80- $ 12.00 9.9
- ----------- ----------
3,182,402 1,602,918 $4.13 8.1
- ----------- ----------
- ----------- ----------
</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 5.4%,
respectively, with an expected life of 5, 9.2 and 9.3 years in 1996, 1997 and
1998, respectively. No dividend yield or stock price volatility was used in
these calculations.
F-23
<PAGE>
TRADEMARKS AND TRADENAMES
Discovery Line-TM-, DNA DipStick-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-
3,500,000 SHARES OF COMMON STOCK
-----------------
PROSPECTUS
-----------------
DONALDSON, LUFKIN & JENRETTE
WARBURG DILLON READ LLC
PIPER JAFFRAY INC.
------------------------------------------------------------
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. The Company is paying all of the expenses
incurred on behalf of the Selling Stockholders (other than underwriting
discounts and commissions). 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.................................................. $ 17,904
NASD filing fee................................................... 6,940
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
Fee for Custodian for Selling Stockholders........................ 10,000
Miscellaneous..................................................... 80,281
---------
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 of Incorporation 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 December 31, 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
II-1
<PAGE>
issued an aggregate of 22,939 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.
(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 December 31, 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 December 31, 1998,
13 employees had exercised options for an aggregate of 265,005 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 Bylaws of the Company
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 forms of Incentive Stock Option Agreement and
Nonstatutory Stock Option 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
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
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, between CRC and Invitrogen
10.10* Stock Purchase and Stockholders Agreement dated June 20, 1997 among
Invitrogen, Lyle C. Turner, Joseph Fernandez, TA/Advent VIII L.P.,
Advent Atlantic and Pacific III, L.P. and TA Venture Investors L.P.
10.11* Stock Purchase Agreement dated November 3, 1998, between MorphaGen, Inc.,
Heidi Short and Invitrogen Corporation
10.12 Employment Agreement between Theodore De Frank and Invitrogen dated
September 28, 1995
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>
- ------------------------
* Filed with the Registrant's Registration Statement on Form S-1 (File No.
333-68665) on December 10, 1998.
** To be filed by amendment.
(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.
II-3
<PAGE>
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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Carlsbad, County of San
Diego, State of California, on the 27th day of January, 1999.
<TABLE>
<S> <C> <C>
INVITROGEN CORPORATION
By: /s/ JAMES R. GLYNN
-----------------------------------------
James R. Glynn
Senior Vice President,
Chief Financial Officer and Director
</TABLE>
Pursuant to the requirements of the Securities Act, this Amendment to
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 January 27, 1999
/s/ LYLE C. TURNER* Officer and Chairman of
- ------------------------------ the Board
Lyle C. Turner (PRINCIPAL EXECUTIVE
OFFICER)
/s/ THEODORE J. DEFRANK*
- ------------------------------ Chief Operations Officer January 27, 1999
Theodore J. DeFrank
/s/ JOSEPH M. FERNANDEZ* Senior Vice President of January 27, 1999
- ------------------------------ Business Development,
Joseph M. Fernandez Secretary and Director
Senior Vice President, January 27, 1999
/s/ JAMES R. GLYNN Chief Financial Officer
- ------------------------------ and Director
James R. Glynn (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/s/ BRADLEY G. LORIMIER*
- ------------------------------ Director January 27, 1999
Bradley G. Lorimier
/s/ DONALD W. GRIMM*
- ------------------------------ Director January 27, 1999
Donald W. Grimm
/s/ KURT R. JAGGERS*
- ------------------------------ Director January 27, 1999
Kurt R. Jaggers
/s/ JAY M. SHORT*
- ------------------------------ Director January 27, 1999
Jay M. Short
/s/ LEWIS J. SHUSTER*
- ------------------------------ Director January 27, 1999
Lewis J. Shuster
*By: /s/ JAMES R. GLYNN
- ------------------------------
James R. Glynn
Attorney-in-Fact
</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 Bylaws of the Company
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 forms of Incentive Stock Option Agreement and Nonstatutory Stock Option
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* Stock Purchase and Stockholders Agreement dated June 20, 1997 among Invitrogen, Lyle C. Turner, Joseph
Fernandez, TA/Advent VIII L.P., Advent Atlantic and Pacific III, L.P. and TA Venture Investors L.P.
10.11* Stock Purchase Agreement dated November 3, 1998, between MorphaGen, Inc., Heidi Short and Invitrogen
Corporation
10.12 Employment Agreement between Theodore De Frank and Invitrogen dated September 28, 1995
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>
- ------------------------
* Filed with the Registrant's Registration Statement on Form S-1 (File No.
333-68665) on December 10, 1998.
** To be filed by amendment.
<PAGE>
3,500,000 Shares
INVITROGEN CORPORATION
Common Stock
UNDERWRITING AGREEMENT
_____________, 1999
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PIPER JAFFRAY INC.
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 to the several underwriters named in Schedule I hereto (the
"UNDERWRITERS") and certain stockholders of the Company named in Schedule II
hereto (the "SELLING STOCKHOLDERS") severally propose to sell to the several
Underwriters, an aggregate of 3,500,000 shares of Common Stock of the Company,
par value $0.01 per share (the "FIRM SHARES"), of which 3,000,000 shares are to
be issued and sold by the Company and 500,000 shares are to be sold by the
Selling Stockholders, each Selling Stockholder selling the amount set forth
opposite such Selling Stockholder's name in Schedule II hereto. The Company
also proposes to issue and sell to the several Underwriters not more than an
additional 525,000 shares of its common stock, par value $0.01 per share (the
"ADDITIONAL SHARES"), if requested by the Underwriters as provided in Section 2
<PAGE>
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." The Company and the Selling Stockholders are
hereinafter sometimes referred to collectively as the "SELLERS."
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, (i) the Company agrees to issue and sell
3,000,000 Firm Shares, (ii) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Stockholder's name in Schedule II hereto and (iii) each Underwriter agrees,
severally and not jointly, to purchase from each Seller at a price per Share of
$______ (the "PURCHASE PRICE") the number of Firm Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Firm Shares to be sold by such Seller as
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.
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
-2-
<PAGE>
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 name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
Each Seller 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 any of the Company's existing stock option plans or rights pursuant
to its existing stock purchase plan, (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, and (iii) the Company may issue, offer and sell
shares of its equity securities or securities convertible, exercisable or
exchangeable therefor in transactions not involving a public offering as
consideration for the acquisition (pursuant to merger or otherwise) of one or
more entities provided that each recipient of such securities agrees in writing
to be bound by the restrictions set forth in this paragraph. 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, except that the Company may file a registration
statement on Form S-8 under the Act to register the shares of Common Stock
issuable upon exercise of options granted under the Company's equity
compensation plans described in the Registration Statement. In addition,
each Selling Stockholder agrees that, for a period of 180 days after the date
of the Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation, it will not 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
-3-
<PAGE>
exercisable or exchangeable for Common Stock. The Company shall, prior to or
concurrently with the execution of this Agreement, deliver an agreement
executed by (i) each Selling Stockholder, (ii) each of the directors and
officers of the Company who is not a Selling Stockholder and (iii) 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 Sellers are 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
Shares shall be delivered by or on behalf of the Sellers, with any transfer
taxes thereon duly paid by the 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 Sellers 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 and payment 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 and payment for any Additional Shares are hereinafter referred to as
the "OPTION CLOSING DATE".
The documents to be delivered on the Closing Date or any Option Closing
-4-
<PAGE>
Date on behalf of the parties hereto pursuant to Section 9 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 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.
-5-
<PAGE>
(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 reasonable 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 reasonable 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 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 make generally available, in accordance with Section 11(a) of the
Act, 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 ending three years after the date of this Agreement,
to furnish to you as soon as available copies of all reports or other
-6-
<PAGE>
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
reasonable expenses incident to the performance of the Sellers' obligations
under this Agreement, including: (i) the reasonable fees, disbursements and
expenses of the Company's counsel, the Company's accountants and any Selling
Stockholder's counsel (in addition to the Company's counsel) in connection with
the registration and delivery of the Shares under the Act and all other
reasonable 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,
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 and the Selling Stockholder hereunder for which provision is not
otherwise made in this Section. The provisions of this Section shall not
supersede or otherwise affect any agreement that the Company and the Selling
Stockholders may otherwise have for allocation of such expenses among
themselves.
(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.
-7-
<PAGE>
(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.
(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 or through you expressly for use therein.
-8-
<PAGE>
(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 or 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 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 (including
the Shares to be sold by the Selling Stockholders) 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 to be issued and sold by the
Company 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
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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, except for such violations
or defaults which, singly or in the aggregate, 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.
(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 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 Material 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 Material Authorization, except for such
suspensions, terminations or revocations which, singly or in the aggregate,
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.
(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
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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 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.
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(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 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 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, other than those permits, licenses, consents, exemptions, franchises,
authorizations, approvals, filings and other notices which the failure to have
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, a "MATERIAL AUTHORIZATION"). Each
such Material 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)
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which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Material 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 Material Authorization; and such Material
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
Material 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.
(v) To the knowledge of the Company, Arthur Anderson L.L.P. are
independent certified 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 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
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Investment Company Act of 1940, as amended.
(y) Except as otherwise described in the Registration Statement, 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, to the knowledge of the
Company, 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, to the knowledge of the Company, 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
representation and warranty by the Company to the Underwriters as to the matters
covered thereby.
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. .
Each Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be sold
by such Selling Stockholder pursuant to this Agreement and has, and on the
Closing Date will have, good and clear title to such Shares, free of all
restrictions on transfer, liens, encumbrances, security interests, equities and
claims whatsoever.
(b) The Shares to be sold by such Selling Stockholder have been duly
authorized and are validly issued, fully paid and non-assessable.
(c) Such Selling Stockholder has, and on the Closing Date will have, full
legal right, power and authority, and all authorization and approval required by
law, to enter into this Agreement, the Custody Agreement signed by such Selling
Stockholder and ______________, as Custodian, relating to the deposit of the
Shares to be sold by such Selling Stockholder (the "CUSTODY AGREEMENT") and the
Power of Attorney of such Selling Stockholder appointing certain individuals
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as such Selling Stockholder's attorneys-in-fact (the "ATTORNEYS") to the extent
set forth therein, relating to the transactions contemplated hereby and by the
Registration Statement and the Custody Agreement (the "POWER OF ATTORNEY") and
to sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder in the manner provided herein and therein.
(d) This Agreement has been duly authorized, executed and delivered by or
on behalf of such Selling Stockholder.
(e) The Custody Agreement of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding agreement of such Selling Stockholder, enforceable in accordance
with its terms.
(f) The Power of Attorney of such Selling Stockholder has been duly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding instrument of such Selling Stockholder, enforceable in accordance
with its terms, and, pursuant to such Power of Attorney, such Selling
Stockholder has, among other things, authorized the Attorneys, or any one of
them, to execute and deliver on such Selling Stockholder's behalf this
Agreement and any other document that they, or any one of them, may deem
necessary or desirable in connection with the transactions contemplated hereby
and thereby and to deliver the Shares to be sold by such Selling Stockholder
pursuant to this Agreement.
(g) Upon delivery of and payment for the Shares to be sold by such Selling
Stockholder pursuant to this Agreement, good and clear title to such Shares will
pass to the Underwriters, free of all restrictions on transfer, liens,
encumbrances, security interests, equities and claims whatsoever.
(h) The execution, delivery and performance of this Agreement and the
Custody Agreement and Power of Attorney of such Selling Stockholder by or on
behalf of such Selling Stockholder, the compliance by such Selling Stockholder
with all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby 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
organizational documents of such Selling Stockholder, if such Selling
Stockholder is not an individual, or any indenture, loan agreement, mortgage,
lease or other agreement or instrument to which such Selling Stockholder is a
party or by which such Selling Stockholder or any property of such Selling
Stockholder is bound or (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 such Selling Stockholder or any property
of such Selling Stockholder.
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<PAGE>
(i) The information in the Registration Statement under the caption
"Principal and Selling Stockholders" which specifically relates to such Selling
Stockholder does not, and will not on the Closing Date, 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 the light of the
circumstances under which they were made, not misleading.
(j) At any time during the period described in Section 5(d), if there is
any change in the information referred to in Section 7(i), such Selling
Stockholder will immediately notify you of such change.
(k) Each certificate signed by or on behalf of such Selling Stockholder
and delivered to the Underwriters or counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Stockholder to the
Underwriters as to the matters covered thereby.
SECTION 8. INDEMNIFICATION.
(a) The Sellers, jointly and severally, agree 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 reasonable 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 or 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 Exchange Act, if such Underwriter failed to deliver
a Prospectus, as then amended or supplemented (so long as the Prospectus and any
amendment or supplement 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
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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; provided that each Selling Stockholder shall only be liable to
the extent and only to the extent that such untrue statement or omission or
alleged omission was made in the Registration Statement (or any amendment
thereto), the prospectus (or any amendment or supplement thereto) or any
preliminary prospectus in reliance upon and in conformity with written
information furnished to the Company by such selling Stockholder expressly for
use therein. Notwithstanding the foregoing, the aggregate liability of any
Selling Stockholder pursuant to this Section 8(a) shall be limited to an amount
equal to the total proceeds (before deducting underwriting discounts and
commissions and expenses) received by such Selling Stockholder from the
Underwriters for the sale of the Shares sold by such Selling Stockholder
hereunder.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, who controls such Selling Stockholder
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 Sellers 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 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 8(a) or 8(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 8(a) and 8(b), the Underwriter shall not be required to assume
the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
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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 reasonably
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 (i) the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) for all Underwriters, their officers and
directors nd all persons, if any, who control any Underwriter within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act, (ii) the fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) for the Company, its directors, its officers who sign the
Registration Statement and all persons, if any, who control the Company within
the meaning of either such Section and (iii) the fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) for all
Selling Stockholders and all persons, if any, who control any Selling
Stockholder within the meaning of either such Section, and all such fees and
expenses shall be reimbursed as they are incurred. In the case of any such
separate firm for the Underwriters, their officers and directors and such
control persons of any Underwriters, such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation. In the case of any such
separate firm for the Company and such directors, officers and control persons
of the Company, such firm shall be designated in writing by the Company. In
the case of any such separate firm for the Selling Stockholders and such
control persons of any Selling Stockholders, such firm shall be designated in
writing by the Attorneys. 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 the indemnifying party's written consent or (ii) effected without
the indemnifying party's 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 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
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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
Sellers 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 8(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 8(d)(i) above but also the
relative fault of the Sellers 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 Sellers 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 Sellers, 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 Sellers 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 Selling Stockholders on the one hand or the Underwriters on the other
hand and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided that each
Selling Stockholder shall only be liable to the extent and only to the extent
that such untrue statement or omission or alleged omission was made in the
Registration Statement (or any amendment thereto), the prospectus (or any
amendment or supplement thereto) or any preliminary prospectus in reliance upon
and in conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein.
The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8(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
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considerations referred to in the immediately preceding paragraph. The amount
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 reasonable 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 8, 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. Notwithstanding the
foregoing, the aggregate liability of any Selling Stockholder pursuant to this
Section 8(d) shall be limited to an amount equal to the total proceeds (before
deducting underwriting discounts and commissions and expenses) received by such
Selling Stockholder from the Underwriters for the sale of the Shares sold by
such Selling Stockholder hereunder. 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 8(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 8 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.
(f) Each Selling Stockholder hereby designates Invitrogen Corporation, a
Delaware corporation, 1600 Faraday Avenue, Carlsbad, California 92008, as its
authorized agent, upon which process may be served in any action which may be
instituted in any state or federal court in the State of New York by any
Underwriter, any director or officer of any Underwriter or any person
controlling any Underwriter asserting a claim for indemnification or
contribution under or pursuant to this Section 8, and each Selling Stockholder
will accept the jurisdiction of such court in such action, and waives, to the
fullest extent permitted by applicable law, any defense based upon lack of
personal jurisdiction or venue. A copy of any such process shall be sent or
given to such Selling Stockholder, at the address for notices specified in
Section 12 hereof.
SECTION 9. 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.
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<PAGE>
(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), 9(a) and 9(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.
(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 9(d)(i),
9(d)(ii) or 9(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) All the representations and warranties of each Selling Stockholder
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 and you shall
have received on the Closing Date a certificate dated the Closing Date from each
Selling Stockholder to such effect and to the effect that such Selling
Stockholder has complied with all of the agreements and satisfied all of the
conditions herein contained and required to be complied with or satisfied by
such Selling Stockholder on or prior to the Closing Date.
(f) 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 and the Selling Stockholders,
to the effect that:
(i) each of the Company and its subsidiaries has been duly
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<PAGE>
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
(including the Shares to be sold by the Selling Stockholders) 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 to be issued and sold by the Company hereunder 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
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 and by or on behalf of each Selling Stockholder;
(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 "Technology Licensing,"
"Patents and Proprietary Technologies," "Stock Option Plans," "Employee
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<PAGE>
Stock Ownership Plan," 1998 Employee Stock Purchase Plan," "Section 401(k)
Plan," "Limitations on Liability and Indemnification Matters," "Shares
Eligible for Future Sale" and "Description of Capital Stock" 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 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 known to such counsel 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 Material
Authorization of the Company or any of its subsidiaries or any other
impairment of the rights of the holder of any such Material 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
-23-
<PAGE>
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) each of the Company and its subsidiaries has such Material
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 Material 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 Material 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 Material 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 Material Authorization; 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;
(xiv) 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;
(xv) except as set forth in the Registration Statement, to 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;
(xvi) to such counsel's knowledge after due inquiry, the
Company and its subsidiaries own or possess all patents, patent
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<PAGE>
rights, licenses, 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 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;
(xvii) (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;
(xiii) each Selling Stockholder is the lawful owner of the Shares to
be sold by such Selling Stockholder pursuant to this Agreement and has good
and clear title to such Shares, free of all restrictions on transfer,
liens, encumbrances, security interests, equities and claims whatsoever;
(ix) each Selling Stockholder has full legal right, power and
authority, and all authorization and approval required by law, to enter
into this Agreement and the Custody Agreement and the Power of Attorney of
such Selling Stockholder and to sell, assign, transfer and deliver the
Shares to be sold by such Selling Stockholder in the manner provided herein
and
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<PAGE>
therein;
(xx) the Custody Agreement of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and is
a valid and binding agreement of such Selling Stockholder, enforceable in
accordance with its terms;
(xxi) the Power of Attorney of each Selling Stockholder has been
duly authorized, executed and delivered by such Selling Stockholder and is
a valid and binding instrument of such Selling Stockholder, enforceable in
accordance with its terms, and, pursuant to such Power of Attorney, such
Selling Stockholder has, among other things, authorized the Attorneys, or
any one of them, to execute and deliver on such Selling Stockholder's
behalf this Agreement and any other document they, or any one of them, may
deem necessary or desirable in connection with the transactions
contemplated hereby and thereby and to deliver the Shares to be sold by
such Selling Stockholder pursuant to this Agreement;
(xxii) upon delivery of and payment for the Shares to be sold by each
Selling Stockholder pursuant to this Agreement, good and clear title to
such Shares will pass to the Underwriters, free of all restrictions on
transfer, liens, encumbrances, security interests, equities and claims
whatsoever; and
(xxiii)the execution, delivery and performance of this Agreement and
the Custody Agreement and Power of Attorney of each Selling Stockholder by
such Selling Stockholder, the compliance by such Selling Stockholder with
all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby 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 various states), (B) conflict
with or constitute a breach of any of the terms or provisions of, or a
default under, the organizational documents of such Selling Stockholder, if
such Selling Stockholder is not an individual, or any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which such
Selling Stockholder is a party or by which any property of such Selling
Stockholder is bound or (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 such Selling
Stockholder or any property of such Selling Stockholder.
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 the Selling
Stockholder and shall so state therein.
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<PAGE>
(g) 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 9(f)(iv), 9(f)(vi) (but
only with respect to the Company), 9(f)(ix) (but only with respect to the
statements under the caption "Description of Capital Stock" and "Underwriting")
and 9(f)(xvii).
In giving such opinions with respect to the matters covered by Section
9(f)(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.
(h) 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.
(i) 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.
(j) The Shares shall have been duly listed for quotation on the Nasdaq
National Market.
(k) The Company and the Selling Stockholders 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 or the
Selling Stockholder, as the case may be, on or prior to the Closing Date.
(l) You shall have received on the Closing Date, a certificate of each
Selling Stockholder who is not a U.S. Person (as defined under applicable U.S.
federal tax legislation) to the effect that such Selling Stockholder is not a
U.S. Person, which certificate may be in the form of a properly completed and
executed United States Treasury Department Form W-8 (or other applicable form or
statement specified by Treasury Department regulations in lieu thereof).
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
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<PAGE>
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 10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Sellers 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
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<PAGE>
any Underwriter has agreed to purchase pursuant to Section 2 hereof be increased
pursuant to this Section 10 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 aggregate number of Firm Shares to be purchased by all
Underwriters and arrangements satisfactory to you, the Company and the Selling
Stockholders 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, the Company or the Selling Stockholders. In any
such case which does not result in termination of this Agreement, either you or
the Sellers 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 11. AGREEMENTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes payable in connection
with the transfer of the Shares to be sold by such Selling Stockholder to the
Underwriters.
(b) To do and perform all things to be done and performed by such Selling
Stockholder under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Shares to be sold by such Selling
Stockholder pursuant to this Agreement.
SECTION 12. 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, (ii) if to the
Selling Stockholders, to [NAME OF ATTORNEY-IN-FACT] c/o [ADDRESS OF
ATTORNEY-IN-FACT] and (iii) 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.
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<PAGE>
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Selling Stockholders 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, any person controlling the
Company, any Selling Stockholder or any person controlling such Selling
Stockholder, (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 any
Seller as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Sellers agree, jointly and severally, 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 to Section 5(i) hereof. The Sellers also
agree, jointly and severally, 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 8 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 Selling
Stockholders, 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:
---------------------------------
Lyle C. Turner, President and
Chief Executive Officer
THE SELLING STOCKHOLDERS
NAMED IN SCHEDULE II
HERETO, ACTING SEVERALLY
By:
-----------------------------------
[Name], Attorney-in-fact
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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SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
- ----------- ---------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities
Corporation
Piper Jaffray Inc.
Warburg Dillon Read LLC
[Names of other Underwriters]
Total: 3,000,000
</TABLE>
<PAGE>
SCHEDULE II
SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
Number of Firm Shares
Name being sold
---- ----------
<S> <C>
TA/Advent VIII, L.P. 414,078
Advent Atlantic and Pacific III, L.P. 77,640
TA Ventures Investors L.P. 8,282
Total: 500,000
-------
-------
</TABLE>
<PAGE>
ANNEX I
PERSONS TO BE SUBJECT TO
LOCK-UP AGREEMENTS
Advent Atlantic & Pacific III, L.P.
Glenn Davies
Theodore J. DeFrank
Pat Dillon
ESOP Trust Fund
Joseph M. Fernandez
Barry Glickman
James Glynn
Donald W. Grimm
James Hoeffler
Bradley G. Lorimier
Anthony Martin
Charles McAtee
Ann McCormick
Anh Nguyen
Wilfred S. Paul
Lewis J. Shuster
Heidi Short
Jay M. Short
TA Advent VIII L.P.
TA Venture Investors L.P.
Lyle C. Turner
<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
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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
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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
11
<PAGE>
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
<PAGE>
Exhibit 3.1
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 C.1 of Article IV of the Corporation's Certificate of
Incorporation be amended and restated in its entirety as follows:
"1. DESIGNATION; RANKING. A total of 50,000,000 shares of the
Corporation's common stock shall be designated as Common Stock, $.01 par
value per share (the "Common Stock")."
RESOLVED, that conditioned on the receipt of requisite stockholder
approval, Section C.2(a) of Article IV of the Corporation's Certificate of
Incorporation be amended and restated in its entirety as follows:
"(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
<PAGE>
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 be 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. 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 or
other cause (other than the 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. Directors so chosen shall
hold office for a term expiring at the next annual meeting of
stockholders at which the term of office to which they have been elected
expires, and until their respective successors are elected, except in
the case of death or resignation of any Director, in which case the
Director 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."
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 Stock then outstanding, a vacancy
resulting from the removal of a director by the stockholders as provided 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, Section 2 of Article V of the Certificate of Incorporation be amended
and restated in its entirety to read as follows:
-2-
<PAGE>
"2. Except as set forth in 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. Following the Corporation's
first QPO, the by-laws of the Corporation may be amended or repealed, and
new by-laws may be adopted, by the affirmative vote of the holders of at
least 66-2/3% of the voting power of all 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, or by a vote of at least
66-2/3% of the number of directors of the Corporation then authorized, in
the manner prescribed by the laws of the State of Delaware."
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."
RESOLVED, that conditioned on the receipt of requisite stockholder
approval, Article VI of the Certificate of Incorporation be amended and
restated in its entirety as follows:
"Meetings of the 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). Following the closing of the Corporation's first
QPO, the stockholders may no longer take action by written consent and may
act only at an annual or special meeting."
RESOLVED, that conditioned on the receipt of requisite stockholder
approval, Article IX of the Certificate of Incorporation be amended and restated
in its entirety as follows:
"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, PROVIDED, HOWEVER,
that following the Corporation's first QPO the affirmative vote of at
least 66-2/3% of the voting power of all 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 Article V, Article VI, Article VIII, or this
Article IX. All rights conferred upon stockholders herein are granted
subject to this reservation."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the consent of the stockholders of said corporation was duly solicited and
executed, pursuant to which the
-3-
<PAGE>
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 15th day of
January, 1999.
By: /s/ Joseph Fernandez
---------------------------------
Joseph Fernandez, Secretary
-4-
<PAGE>
AMENDED AND RESTATED
BY-LAWS
OF
INVITROGEN CORPORATION, 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. . . . . . . . . . . . . . . . . . . . . . . 5
2.5. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . 5
2.6. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.7. Participation in Meetings by Conference Telephone . . . . . . 5
2.8. Conduct of Business . . . . . . . . . . . . . . . . . . . . . 5
2.9. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.10. Compensation of Directors . . . . . . . . . . . . . . . . . . 6
2.11. Nomination of Director Candidates . . . . . . . . . . . . . . 6
ARTICLE III COMMITTEES. . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1. Committees of the Board of Directors. . . . . . . . . . . . . 8
3.2. Conduct of Business . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1. Generally . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2. Chairman of the Board . . . . . . . . . . . . . . . . . . . . 9
4.3. President . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4. Vice President. . . . . . . . . . . . . . . . . . . . . . . . 9
4.5. Chief Financial Officer . . . . . . . . . . . . . . . . . . . 9
4.6. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7. Delegation of Authority . . . . . . . . . . . . . . . . . . . 10
4.8. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.9. Action With Respect to Securities of Other Corporations . . . 10
-i-
<PAGE>
ARTICLE V STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1. Certificates of Stock . . . . . . . . . . . . . . . . . . . . 10
5.2. Transfers of Stock. . . . . . . . . . . . . . . . . . . . . . 10
5.3. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4. Lost, Stolen or Destroyed Certificates. . . . . . . . . . . . 11
5.5. Regulations . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1. Facsimile Signatures. . . . . . . . . . . . . . . . . . . . . 11
7.2. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . 12
7.3. Reliance Upon Books, Reports and Records. . . . . . . . . . . 12
7.4. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.5. Time Periods. . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . 12
8.1. Right to Indemnification. . . . . . . . . . . . . . . . . . . 12
8.2. Right of Indemnitee to Bring Suit . . . . . . . . . . . . . . 13
8.3. Indemnification of Employees and Agents . . . . . . . . . . . 13
8.4. Non-Exclusivity of Rights . . . . . . . . . . . . . . . . . . 13
8.5. Indemnification Contracts . . . . . . . . . . . . . . . . . . 14
8.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.7. Advance Payment of Expenses . . . . . . . . . . . . . . . . . 14
8.8. Effect of Amendment . . . . . . . . . . . . . . . . . . . . . 14
8.9. Savings Clause. . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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INVITROGEN CORPORATION, A DELAWARE CORPORATION
AMENDED AND RESTATED 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, or
(3) the President, 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.
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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) if, and only if, the notice of an annual meeting or
special meeting provides for business to be brought before the meeting by
stockholders, properly brought before the annual meeting or 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
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except in accordance with the procedures set forth in this Section 1.7. The
chairman of an annual 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
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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 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 be
set within a range 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
exist 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.
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 at which the term of office to which they have been elected
expires, and until their respective successors are elected, except in the case
of death or resignation in which case the 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
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generally in the election of directors, voting together as a single class.
Following an IPO, 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. 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 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.
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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
(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 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
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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 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 nominee 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.
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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.
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 Executive or Senior 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
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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. EXECUTIVE OR SENIOR VICE PRESIDENTS. In the absence or
disability of the President, the Executive or Senior 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 Director, 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 Executive or Senior
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.
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 depositaries 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.
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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.
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 an Executive or Senior 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.
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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 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
11
<PAGE>
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.
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
12
<PAGE>
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 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
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<PAGE>
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 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 VIII.
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.
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<PAGE>
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed, and new Bylaws may be adopted,
by 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, or by vote of at least 66-2/3% of the number of
directors of the Corporation then authorized, in the manner prescribed by the
laws of the State of Delaware.
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<PAGE>
Secretary's Certificate of Amendment and Restatement of
By-Laws of Invitrogen Corporation
I hereby certify:
That I am the duly elected Secretary of Invitrogen Corporation, a Delaware
corporation;
That the foregoing By-Laws comprising fifteen (15) pages, constitute the
amended and restated By-Laws of said corporation as duly adopted by the
Corporation on May 22, 1997 and as amended July 31, 1998, November 20, 1998 and
January 15, 1999.
IN WITNESS WHEREOF, I have hereunder subscribed my name this 15th day
of January, 1999.
/s/ Joseph M. Fernandez
------------------------------
Joseph M. Fernandez, Secretary
<PAGE>
EXHIBIT 4.1
[LOGO]
SHARES
INVITROGEN CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE IN SEE REVERSE FOR CERTAIN DEFINITIONS
BOSTON, MA OR NEW YORK, N. Y. CUSIP 46185R 10 0
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE U. S. $0.01
PER SHARE, OF Invitrogen Corporation, transferable on the books of the
Corporation by the holder hereof in person or by duly authorized Attorney
upon surrender of this certificate properly endorsed. This certificate is not
valid until countersigned by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
[SEAL]
Dated:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
- ----------------------------------- -------------------------------------
Senior Vice President and Secretary President and Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
BankBoston, N.A.
TRANSFER AGENT
AND REGISTRAR
BY /s/ [ILLEGIBLE]
------------------------
AUTHORIZED SIGNATURE
<PAGE>
INVITROGEN CORPORATION
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ........ Custodian .......
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act .........................
in common (State)
UNIF TRF MIN ACT - .......Custodian (until age.....)
(Cust)
..........under Uniform Transfers
(Minor)
to Minors Act ...................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------
- -------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated
---------------------------
X
-------------------------------------
X
-------------------------------------
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
By
--------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15
<PAGE>
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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<PAGE>
"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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
INVITROGEN CORPORATION
(A CALIFORNIA CORPORATION)
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE: ((name)) NO. OF SHARES OF STOCK: ((shares))
DATE OF GRANT: ((date issued)) OPTION PRICE: $12.47
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).
Invitrogen Incentive Stock Option Agreement
Page 1 of 8
<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 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.
Invitrogen Incentive Stock Option Agreement
Page 2 of 8
<PAGE>
"SEC" shall mean the Securities and Exchange Commission.
"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
Invitrogen Incentive Stock Option Agreement
Page 3 of 8
<PAGE>
(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
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.
Invitrogen Incentive Stock Option Agreement Page 4 of 8
<PAGE>
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>
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;
Invitrogen Incentive Stock Option Agreement Page 5 of 8
<PAGE>
(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 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) With 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
Invitrogen Incentive Stock Option Agreement Page 6 of 8
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(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).
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
Invitrogen Incentive Stock Option Agreement Page 7 of 8
<PAGE>
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.
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
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<PAGE>
INVITROGEN CORPORATION
(A CALIFORNIA CORPORATION)
NON-QUALIFIED STOCK OPTION AGREEMENT
OPTIONEE: ((name)) NO. OF SHARES OF STOCK: ((shares))
DATE OF GRANT: ((date issued)) OPTION PRICE: $5.85
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 pursuant to the Invitrogen Corporation 1995 Stock
Option Plan.
1.2 This Option Agreement is intended to constitute a non-qualified
stock option, meaning an option which is not 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 Non-Qualified 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.
"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.
"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.
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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 which number of shares
is set forth above at the beginning of this Agreement.
"Plan" shall mean the 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 no par 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
Invitrogen NQ Stock Option Agreement Page 2 of 8 _______
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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 Option Stock to be
paid upon the exercise of this Option shall be the Option Price which amount is
set forth above at the beginning of this Agreement.
3.3 RESTRICTIONS ON TRANSFER. This Option shall not be transferable by
Optionee other than by will; pursuant to the laws of descent and distribution;
or pursuant to a qualified domestic relations order as defined in the Code or
Title I of ERISA or the rules thereunder 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. 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), extend or renew
this Option (to the extent not previously exercised), or 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 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 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 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. CONDITION
4.1 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. Optionee shall be considered to be a Consultant of the Company as
long as Optionee is providing services pursuant to a written consulting
agreement with the Company or its Affiliates. The Board exclusively shall
determine whether or when there has been a termination of Optionee's employment,
Invitrogen NQ Stock Option Agreement Page 3 of 8 _______
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consulting engagement or term of corporate office; or 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 if
Optionee is an Employee of the Company or its Affiliates, 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 or expired) without further action by the Company. The restriction
contained in this Paragraph 4.2 shall only apply to Employees and not to
officers or directors who are not Employees or Consultants for the Company or
its Affiliates.
4.3 TERMINATION FOR CAUSE. Unless otherwise agreed to by the Board, if
Optionee's employment, consultancy engagement or his position as an officer or
director of the Company or its Affiliates 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, 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 2 years 20%
2 3 years 40%
3 4 years 60%
4 5 years 80%
5 Expiration Date 100%
</TABLE>
5.2 ADDITIONAL ADJUSTMENTS. Despite the terms of Paragraph 5.1, 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.
Invitrogen NQ Stock Option Agreement Page 4 of 8 _______
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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.
Vesting will be contingent upon reaching the profit targets set in the 1996
five-year business plan and continued employment at the end of each vesting
year. Vesting may be achieved according the table below.
<TABLE>
<CAPTION>
E.G. GRANT OF 25,000 OPTIONS ON 1/2/96
- -----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TARGET:
5 year cumulative after tax profit $3,652,773 $7,363,726 $12,104,406 $18,016,537 $25,406,701
STOCK VESTING CUMULATIVE SHARES VESTING
After tax profits LESS THAN OR EQUAL TO -------------------------------------------------------------------------
90% of target 0 shares 0 shares 0 shares 0 shares 0 shares
90.01 to 91% 1,000 shares 2,000 shares 3,000 shares 4,000 shares 5,000 shares
91.01 to 92% 2,000 shares 4,000 shares 6,000 shares 8,000 shares 10,000 shares
92.01 to 93% 3,000 shares 6,000 shares 9,000 shares 12,000 shares 15,000 shares
93.01 to 94% 4,000 shares 8,000 shares 12,000 shares 16,000 shares 20,000 shares
94.01 to 95% 5,000 shares 10,000 shares 15,000 shares 20,000 shares 25,000 shares
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
5.3 CUMULATIVE EXERCISE RIGHTS. If the Optionee does not exercise options
in any one 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.
5.5 FRACTIONAL SHARES. This Option shall not be exercisable with respect
to any fractional shares of 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(c) 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, Optionee's agreement with
the Company whereby a portion of the Options are canceled.
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The Board (in accordance with the terms of Paragraph 6(c) of the Plan)
may provide such assistance to the Optionee to facilitate the exercise of his
Option as it deems appropriate in its sole discretion. 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 other
taxes the Company is required to collect from Optionee because of the
exercise of the Option.
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 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 and 5.9, during Optionee's lifetime this Option shall be exercisable only
by Optionee either:
(a) While Optionee is employed by, is a Consultant of, or serves as
an officer or director of the Company or its Affiliates;
(b) Within thirty (30) days after the date on which Optionee's
employment, consultancy or term of corporate officer terminates; or
(c) Within one (1) year after the date on which the Optionee's
employment, or term of corporate office 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 date 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, consultancy, or
termination of his corporate office, the number of shares of Option Stock
Optionee may purchase shall be limited to the number of shares of Option Stock
Optionee was entitled to purchase as of the date of termination.
5.8 EXERCISE AFTER DEATH. If Optionee dies while employed by, engaged as
a Consultant or while serving as an officer or director of the Company or its
Affiliates or within a period of three (3) months after the date such
employment, consultancy or term of corporate office terminates, but prior to the
complete exercise of this Option, the Option may be exercised within the sooner
of one (1) year from the date of Optionee's death or the date of expiration of
the Option, 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 Option 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 or term of corporate office,
then Optionee shall not be deemed to have terminated his employment or term of
corporate office 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
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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.
5.10 NON-SEQUENTIAL EXERCISE PERMITTED. Subject to the exercise
limitations set forth herein, this Option shall be exercisable even if there is
outstanding any incentive stock option or non-qualified 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 purchase of Option 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 in this
Agreement, 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, Consultant, officer or
director of the Company.
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.
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9.4 INTEGRATION. This Agreement and the documents and instruments
referred to herein constitute 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 California Law.
9.6 COUNTERPARTS. This Agreement may be executed in counterparts and the
counterparts shall constitute the whole instrument.
9.7 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 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: INVITROGEN CORPORATION
- ------------------------------------
Signature By:
-----------------------------------
- ------------------------------------ Lyle C. Turner, President/CEO
Address 3985 B Sorrento Valley Blvd.
San Diego, CA 92121
- ------------------------------------
City State Zip Code
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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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(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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(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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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;
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(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 three hundred
fifty-nine thousand six hundred eighty-five (1,359,685) 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
<PAGE>
(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.
(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.
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<PAGE>
(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:
(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.
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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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 as of the first Offering Date following the commencement
of his/her service with a Participating Company.
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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<PAGE>
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 fifteen percent (15%). 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.
8
<PAGE>
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
9
<PAGE>
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 January 15, 1999.
/s/ Joseph M. Fernandez
----------------------------------
Joseph M. Fernandez
15
<PAGE>
PLAN HISTORY
November 20, 1998 Board adopts the Plan, with an initial reserve of 250,000
shares.
January 15, 1999 Stockholders approve Plan, with an initial reserve of
250,000 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>
EXHIBIT 10.12
[LETTERHEAD]
September 28, 1995
Theodore De Frank
2046 Winsome Way
Encinitas, CA 92024
Dear Mr. De Frank:
As a follow-up to our conversation last week, Invitrogen is pleased to
offer you the position of Chief Operations Officer at Invitrogen Corporation.
I am attaching a job description and a copy of Invitrogen's mission statement.
The position has an annualized salary of $110,000, Invitrogen's
medical, dental and vision insurance package, incentive stock options for
20,000 shares of Invitrogen stock, and the Executive Bonus Plan (see
enclosure). Your vacation time will accrue at a rate of 6.67 hours a month
(annualized at two weeks per year), plus one week during the holiday
shut-down between December 25 and January 2, and other paid holidays as will
be described in the New Hire Orientation. Invitrogen has also established a
401K matching - Employee Stock Ownership Plan (ESOP), and a corporate
profit-sharing plan as a benefit for employees; you will be provided with the
Summary Plan Description upon your employment.
This position will not be open until June 1, 1996, but we would like for
you to come on staff full-time with the salary and benefit package outlined
above as of January 1, 1996. During the five-month period, January 1 - June
1, we would like you to focus on developing and managing a plan to prepare
Invitrogen to move into our new facility. After that project is complete, but
no later than June 1, 1996, you will make the transition into the COO
position.
We sincerely hope you will decide to accept this offer and join our
Company. This offer expires December 1, 1995. Please contact me at your
earliest convenience to discuss the details of this offer, any additions or
corrections you may have, and to arrange a schedule for joining our team.
Sincerely.
/s/ LYLE TURNER
---------------
Lyle Turner
President/CEO
dh
This appointment is for no set term and may be terminated at any time and
for any reason with or without notice by either you or Invitrogen Corporation.
This letter, along with your signed Application for Employment, constitutes
our entire agreement regarding terms and conditions of employment. There are
no other agreements, oral or written, between us.
I accept the offer outlined above.
/s/ THEODORE DE FRANK 11/20/95
- ------------------------------- -------------------------
Signature Date
[I do not wish to use the car allowance option]
<PAGE>
Ted DeFrank November 6, 1995
Dear Mr. DeFrank [LETTERHEAD]
I have reviewed the severance package we have offered one other Executive at
Invitrogen and am prepared to modify your offer letter in the following way:
If Invitrogen terminates your employment between 1/1/96 and 12/31/96 you will
receive six months severance pay and will maintain your health benefits for
six months through cobra payments. If your employment is terminated by
Invitrogen from 1/1/97 to 12/31/97 you will receive four months severance and
four months of Cobra coverage. In the third year three months. In the fourth
year you will revert to the standard executive package of one month of
severance for each year of employment but no commitment to health benefits.
Regarding the signing bonus, Invitrogen will pay you a sign on bonus of
$5,000 upon satisfactory completion of 90 days of employment.
Profit sharing bonus - you will be on the executive profit bonus plan for
the full year of 1996 contingent upon accepting this offer and starting
consultations with the company regarding facilities planning before 12/1/95.
Regarding the beeper - this is a legitimate business expense and will be done
at your discretion and within your budget allowance.
Your salary will be adjusted to $104,000 annually but you will be given a
$500/month car allowance to cover car and mobile communications. (Declined)
Invitrogen will loan you up to $50,000 October 1, 1996, upon successful
completion of nine months of employment and assurance that you will remain
through 1997, guaranteed by a second mortgage on your new home purchase and
payable by garnishing all future bonus' until the principal and interest are
paid in full.
You will be allowed to sit on the board of directors of other non-competing
companies after completion of your third year of employment.
I think this addresses all of the points in your letter.
I look forward to hearing from you and having you join the Invitrogen family.
I will be in Europe until November 18 but will try to call you while I am
there to finish this offer.
Sincerely.
/s/ LYLE C. TURNER
- ------------------
Lyle C. Turner
President/CEO Invitrogen Corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
for Invitrogen Corporation and to all references to our Firm included in or
made a part of this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
San Diego, California
January 27, 1999
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